In 2011, state legislators in Arkansas passed Act 1203, effectively enacting performance-based funding models for all state-run institutions of higher education. Over a period of five years beginning in 2013-14, 25 percent of every institution's base funding will be allocated according to performance. Under the direction of the Arkansas Department of Higher Education (ADHE), the Arkansas Association of Two-Year Colleges (AATYC) is leading the development of performance measures for the state's network of two-year colleges. As readers continue to examine the viability of performance funding models in "The Natural State," this article discusses a number of lessons taken from the state's experience.