In this article we examine how the introduction of an output-based funding scheme in Norwegian public higher education in 2003 affects pass requirement standards. Based on a survey of faculty at the institutions concerned, we find that the propensity to expect that the new funding model will affect the failing/non-failing decision in exams is higher among faculty at the regional colleges than among traditional university faculty. This result is robust when we verify a range of individual characteristics of the respondents. (Contains 6 tables.)