Performance funding--the linking of allocation of resources to accomplishment of certain desired outcomes--is an idea that is once again finding favor with policymakers. It has intuitive appeal; what's not to like about paying for results? While it is a notion that makes common sense to most decisionmakers, it is an idea with a very checkered past--it has been tried, found wanting, and with few exceptions abandoned. A review of past experiments suggests that it's not the idea that failed, but the design and implementation of the strategies that derived from the idea. This brief paper presents a set of first principles for putting in place an approach to performance funding that will help policymakers avoid many of the pitfalls that plagued prior efforts in this arena. The principles presented fall into two categories--those dealing with design of the system, and a separate set dealing with implementation.