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July 15, 2004

Budget, tuition increase contingent on state support

ANN ARBOR, Mich.—In the face of uncertain state funding, the University of Michigan Board of Regents today (July 15) approved a 2.8 percent tuition increase for in-state undergraduate students at the Ann Arbor campus.

This rate is consistent with the recent revision of the Detroit CPI at the state's May 13 revenue-estimating conference. However, the University made it clear that the tuition rate will be contingent both on the state's ability to restore a portion of the base funding that was cut in mid-year, and on the tuition restraint incentives formally established by the legislature.

Earlier this year, Gov. Jennifer Granholm proposed an appropriations incentive for universities that limit tuition increases to the rate of inflation. The state said it would return 3 percent of the mid-year funding cut to universities who adhere to the tuition increase guidelines. If the state follows through, it would mean that Michigan public universities, which saw a 10 percent cut in their base appropriation in FY2004, would experience an additional, but more moderate, cut of 2 percent for FY 2005. The impact would be a $43 million cumulative two-year funding cut for the Ann Arbor campus.

"We support the plans of the Governor and the Legislature to keep public higher education affordable for Michigan families, and we have worked hard to present a budget that includes additional spending cuts, a very low tuition increase, and a significant investment in financial aid," said U-M President Mary Sue Coleman.

"However, I have said before that the choices we are faced with this year cannot be an effective long-term model for funding higher education. We must work together with the state to find a more sustainable model that achieves not only affordability but also continued excellence," she said. "Tuition restraint must be coupled with more robust and more predictable state support, in addition to an emphasis on financial aid. We cannot let this serious erosion of funding endanger the quality that our partnership with the citizens of this state has built over the past 187 years."

Provost Paul Courant, in presenting the budget to the Board, noted that FY04 and FY05 together represent the most difficult budget climate the University has faced in more than 40 years. "Yet these budget pressures are happening at a time when our total volume of activity continues to rise. In the coming year we will teach more students and conduct a higher volume of research than ever before," he said.

Although University leaders hope that the state will be able to support the proposed level of funding, the appropriations bill for FY05 has not yet been passed. The provost told board members that if the state cannot provide the resources described in its budget proposal, or if it enacts another mid-year cut in FY05, he would come back to them with a request to increase tuition by the amount necessary to offset the shortfall. "After two years in base and one-time reductions, we simply do not have sufficient budgetary or program flexibility to sustain another cut without additional revenue," he said.

The Ann Arbor campus budget approved by the board includes a 2.8-percent tuition increase for resident undergraduate students, and a 5-percent increase in most other tuition rates including those for nonresidents. That means tuition and fees for a first-year student entering the College of Literature, Science, and the Arts (LS&A) will be $8,202.

Funding proposals currently under consideration in the legislature offer a range of tuition restraint provisions. The provost said he anticipates asking the board to approve an adjustment to the tuition rate for resident undergraduates if the state enacts a tuition restraint incentive at a level other than 2.8 percent.

U-M's resident tuition increase is by far the lowest among Big Ten universities this year, both in terms of percentage (2.8) and in dollar amount ($226). Under this budget, U-M's resident freshman tuition falls behind Northwestern, Penn State and Minnesota, Courant said. The University's five-year average tuition increase is the lowest among Michigan public universities and very close to lowest in the Big Ten.

Courant noted that this budget continues the University's practice of increasing financial aid by at least the same rate as tuition, and reaffirms its commitment to meet the full, demonstrated financial need of every in-state undergraduate student through a combination of grants, loans and work-study.

The total General Fund budget for the Ann Arbor campus---comprised of state appropriations, tuition, and indirect cost recovery on sponsored research---will increase 3 percent from FY04 to FY05. This modest growth is driven by increases in enrollment and research activity, Courant said. However, the increasing amount of instruction and research brings corresponding costs, he noted. For example, LS&A has increased sections for the most high-demand course offerings, to ensure students can get access to the classes they need to complete their degrees.

The budget encompasses $44.2 million in necessary cost increases and essential initiatives, including a modest salary program for faculty and staff, utilities, insurance, union contracts, staff benefits, inflation on purchased supplies, compliance with increasingly stringent research regulations, and responding to information technology security challenges. When combined with the $6.5 million cut in state funding to the Ann Arbor campus, Courant said, the campus is facing a budget gap of $50.7 million.

This gap has been closed by cutting $19.8 million in recurring expenditures from the General Fund budget in FY05, on top of $37.5 million in cuts that were made last year. Courant said these cuts were made with the goal of preserving the excellence of academic programs to the degree possible.

"The size of the faculty and staff will again be reduced in the coming fiscal year; some of the elements of a Michigan experience will be leaner, and will be experienced as such by our students," he said. "But the essential breadth and depth of excellence in our academic offerings will be maintained. We are grateful for the efforts of thousands of faculty and staff across the University who have stepped up to the challenge of finding innovative ways to eliminate tens of millions of dollars of recurring expenses with minimum impact on teaching, learning and tuition rates."

Examples of spending cuts in the FY05 budget include:

A total of 122 regular staff positions and 40 faculty positions have been eliminated across campus, most through attrition but with some staff layoffs. These cuts are on top of 275 staff positions and 50 faculty positions eliminated last year.

The University Library has reduced late-night reference hours and pared current journal holdings by 840 titles, and monograph purchases by 5,000 titles.

Information Technology Campus Initiatives (ITCI), which developed and encouraged information technology to improve the learning environment, is being dissolved for a savings of $1 million.

The 2004 Michigan Road Scholars Tour was suspended. The program was designed to educate the faculty to the unique characteristics of our state and its people, and to foster University-community partnerships around Michigan.

Building Services personnel are being moved to the day shift, and offices will be cleaned less frequently—every other week rather than weekly—to reduce overtime and shift premiums, saving $881,000 in Plant Operations.

The Business School reduced the number of sections of certain courses and raised enrollment caps on others. The result is 32 fewer sections of courses, 25 fewer adjunct supplemental faculty members, and a savings of $1.5 million. Similarly, other academic units across campus are reducing course sections, increasing course sizes, and reducing reliance on adjunct and visiting faculty.

Contact: Julie Peterson
Phone: (734) 936-5190
E-mail: juliep@umich.edu