Getting paid for actually doing your job isn’t a radical idea for most of us—but it’s a seismic shift for the Ivory Tower. Tennessee, however, stands out as one of the first states to base is public university and college funding amounts in part on performance. As the reports:

A one-of-a-kind state funding plan that pays Tennessee’s public universities only for moving students toward degrees — not for just letting them through the door — is starting to reveal disparities in schools’ ability to reach that goal. The goal is raising a lagging college graduation rate and increasing the percentage of residents with degrees, numbers that mean the difference in attracting employers. Tennessee ranks 42nd in the nation for both its rate of students who graduate in four years (20 percent) and in six years (46 percent).

Students at Austin Peay State University in Clarksville say they can see the school’s efforts to get them into a cap and gown — free tutoring, perks for honors students and calls and emails if they miss a few classes. Austin Peay finished at the top in the formula’s second year, increasing its funding 1.3 percent over the old, enrollment-based formula. …

About a third of the primary funding for Tennessee’s nine universities and 13 community colleges comes from the state, and the rest from tuition. To win a bigger share of $767 million in state funds, schools must figure out how to keep students enrolled and earning credit. The Complete College Act formula doesn’t pay out the first dime to a university student until he earns 24 credit hours.

Performance, or outcomes-based, funding is being considered in a growing number of states as a way to ensure a good return on investment for both students and taxpayers. It also puts powerful incentives in place for postsecondary institutions to keep costs down by setting clear priorities and trimming the fat on non-essentials.