First their budgets came under the knife. And now the nation's colleges and universities are facing new scrutiny from legislators and governors who want assurances that scarce tax dollars aren't being wasted.

The message to higher education leaders is simple: "If you want more money, prove you deserve it."
In the jargon of policymakers, it's called performance funding.

And little by little, it's making its way into higher education budgets across the nation, with schools getting more or less money based on their graduation rates and a host of other variables. Missouri recently laid the groundwork for its version of performance funding, while Illinois is in the first year of its fledgling initiative.

Nationwide, the movement is driven by a combination of factors, including the widely held belief that higher education funding levels — which have fallen dramatically — won't recover for many years. That has budget-minded legislators and governors fretting over how to get the most out of dwindling resources and what they see as inefficient campuses, said Julie Davis Bell, education group director...