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July 17, 2003

U-M budget protects students, increases financial aid

ANN ARBOR, Mich.—The University of Michigan Board of Regents today (July 17) approved a budget for the Ann Arbor campus that attempts to protect students as far as possible from the effects of the largest annual cut in state appropriations in the history of the University.

The University’s budget for FY2004 includes a tuition increase for in-state undergraduate students of 6.5 percent, the lowest in the state and significantly lower than last year’s increase, according to U-M Provost Paul N. Courant. The budget minimizes the impact on students of $36.4 million in state funding cuts and $43 million in necessary cost increases in two important ways, Courant said.

First, the University will increase its centrally funded financial aid for undergraduate students by $3.4 million or 8.3 percent, a rate greater than the increase in tuition. The University will award about $45 million in financial aid from central resources in the coming year; additional allocations for financial aid are made by the individual schools and colleges.
Second, U-M departments have cut expenditures by about $37 million in order to reduce pressure on tuition, but have focused those cuts in a way that preserves academic programs and priorities as much as possible.

“The fiscal challenge faced by the University in 2003-04 is the most difficult that we have seen in over 20 years,” Courant said. “The most important principle in this budget is to assure that our students continue to have access to an excellent education. An extraordinary amount of hard work has been done by our academic and administrative units to achieve needed budget cuts while still supporting the programs and services that have the greatest impact on students.

“We know the current economic climate has caused additional pressure on students and their families,” he added. “We have turned first to cutting costs so that students do not have to bear a disproportionate share of the burden in this budget.”

The total General Fund budget for the Ann Arbor campus—comprised of state appropriations, tuition and indirect cost recovery on sponsored research—will increase 2.6 percent from FY2003 to FY2004. The modest growth is accounted for by increases in activity levels, Courant said, as both sponsored research and student enrollment will grow to record levels again in 2003-04. The increasing amount of instruction and research brings corresponding costs, he noted.

Cost increases for FY2004, in additional to the investment in financial aid noted above, include: utilities (fueled in part by a sharp increase in natural gas prices), insurance, staff benefits, inflation on purchased supplies, and modest salary increases including those required by union contracts.

Budget cuts fell disproportionately on administrative units, although academic units also had to make tough budget decisions in order to keep pace with the costs of growing enrollment and research activity. These cuts add up to about $26 million in academic programs and academic support and $11 million in administrative areas. Courant cited a few examples among the hundreds of specific cuts made by campus units:

• Eliminating at least 275 staff positions and 50 faculty positions campuswide, many through attrition but some through layoffs.

• Increasing course sizes and eliminating some courses and course sections in various academic units.

• Reducing the number of courses taught by adjunct or visiting faculty.

• Deferring replacement of computers and other equipment.

• Reducing service hours in some units, such as libraries, campus computing sites and Property Disposition.

• Reducing or eliminating the use of temporary staff, ordinarily employed to help offices handle peak demand periods.

In addition, Courant said, the University is constantly looking for efficiencies in central operations. “These savings take years of planning to realize, and arise not so much as a result of the specific budgetary challenges of FY2004, but rather as a result of ongoing efforts to keep costs down,” he said.

The University’s ongoing efforts have led to savings in the FY2004 budget of approximately $7 million in energy costs, more than $7 million in purchasing activity, $1.3 million in debt service, more than $1 million in prescription drug benefits, and $1.3 million in other staff benefits. These savings represent avoidance of costs that otherwise would have been incurred, and are in addition to the $37 million in specific cuts made by University departments.

“Such efforts are continuing and will yield more fruit in future years, especially in the areas of travel management and health care benefits, where we are currently planning for changes that will lead to significant future reductions in University costs,” Courant said.

The annual tuition for an incoming freshman who is a Michigan resident entering the College of Literature, Science and the Arts—the largest undergraduate college on the Ann Arbor campus—will be $7,975 for 2003-04. That figure, which includes tuition and all required fees, is an increase of 6.5 percent or $490 over last year.

The Ann Arbor tuition increase is the lowest among Michigan public universities and among the lowest in the Big Ten. Over the past five years, Ann Arbor campus tuition has grown by an average of 5.3 percent per year, the lowest in the state and second lowest in the Big Ten.

Financial aid at the Ann Arbor campus has grown at a faster pace than tuition during that time period. The University has long pledged to meet the full, demonstrated financial need of every Michigan resident undergraduate admitted to U-M, Courant said.

Contact: Julie Peterson
Phone: (734) 936-5190