Operating revenue for public higher education is derived from several sources, such as state appropriations, tuition, room and board, and contracts. State funding in particular constitutes a large share of revenue and is consequently critical for improving enrollment, completion, and labor market outcomes. However, states differ in how institutions are funded, and some approaches may be more effective than others. This report examines the ways in which 12 Midwestern states provide operating funding for public colleges and universities. An overview of possible tradeoffs and outcomes research on these approaches is provided to help policymakers craft more effective funding formulas. Although the level of state funding is important for improving student outcomes, a summary of research on funding models indicated that there is little research on policies other than performance-based funding. The research on performance funding shows generally no effects, modest positive effects, or modest negative effects on student outcomes.