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July 21, 2006

U-M budget includes moderate tuition increase, major investment in financial aid
     
 


General Fund Budget Table
(.xls MS Excel)

Tuition & Fees Table
(.xls MS Excel)

Summary of Budget Reallocation FY2007

Summary of New Expenditures, FY2007

Budget & Tuition Charts
(.pdf)

 

 
     

ANN ARBOR, Mich.—As the Michigan legislature gets closer to finalizing a welcome increase in the state appropriation to higher education, University of Michigan Regents today (July 21) approved a moderate increase in tuition for the Ann Arbor campus along with an increased investment in financial aid.

The budget recommended by U-M President Mary Sue Coleman and Provost Teresa Sullivan "strongly supports our commitment to both academic excellence and access," Coleman said.

"We continue to place a high priority on recruiting and retaining outstanding faculty, who are essential to our academic quality," she said. "This budget also includes strategic investments in new academic programs and research initiatives, as well as a continued focus on financial aid so that all talented students may aspire to attend U-M, regardless of their means."

Sullivan said the state's proposed funding increase of 3 percent for the Ann Arbor campus provides the University with some relief from the deep cuts of the past four years.

"Given the state's constrained fiscal circumstances, this increase shows strong support for higher education, for which we are very grateful. More importantly, this increase is an indication that the state recognizes the crucial role that higher education in general, and the state's research universities in particular, can play in transforming the state's economy," she said. That role was illustrated most recently with the decision by Google to locate a major new research and marketing facility in the Ann Arbor area, creating 1,000 new jobs in the region.

A 3 percent increase will bring the state's appropriation to the Ann Arbor campus to nearly $326 million for FY2007. That amount is still $37 million below the level of state funding to the University in 2002, Sullivan said.

The FY2007 budget includes a 5.5 percent increase in tuition for both resident and nonresident undergraduates in the College of Literature, Science, and the Arts (the largest U-M undergraduate college). That increases the total for tuition and all required fees to $9,724 (an increase of $510) for Michigan residents, and $29,132 (an increase of $1,530) for nonresidents—before calculating financial aid support.

Tuition for resident undergraduates in the College of Engineering will rise by 7 percent, and tuition for a few smaller academic units will rise by 6.5-6.6 percent. Tuition for upper-division students in the Ross School of Business will increase by 9.3 percent.

The weighted average tuition increase for all undergraduate students will be 5.8 percent. Most graduate tuition rates will increase by 5 percent.

Continuing its longstanding commitment to financial aid, the Ann Arbor campus will increase centrally budgeted financial aid by $5.7 million to a total of $91 million. Financial aid for undergraduate students is being increased by 7.7 percent, and graduate student financial aid will increase 5 percent. This central, General Fund allocation will be added to other University sources of financial aid including scholarships supplied by the schools and colleges and those supported by private funding.

For example, the M-PACT program, launched last year and funded through private donations, distributed nearly $3 million in grants to 3,190 students in FY2006. The University will invest an additional $4.8 million, in partnership with the Jack Kent Cooke Foundation, to offer greater opportunities for high-achieving, low-income community college students to transfer to U-M. These and other programs will assist the University in continuing its longstanding policy of meeting the full, demonstrated financial need of all resident undergraduates.

The total General Fund budget for the Ann Arbor campus—with revenues comprised primarily of state appropriations, tuition, and indirect cost recovery on sponsored research—will increase by about 6 percent from FY06 to FY07. The budget allocates the majority of new funds to the academic units, with smaller increases to the administrative units. The academic units whose budgets are growing more rapidly are those with the greatest growth in enrollment and research activities.

Sullivan said this year's budget is challenged by several factors including sharply rising utilities costs, a competitive recruiting environment for faculty, and flattening federal support for research. In particular, rapidly rising natural gas prices will contribute to a nearly 15 percent increase in utilities costs in FY2007. U-M schools and colleges continue to face a challenge in hiring to replace recent faculty losses and to support demand for courses created by growing enrollments.

The University is able to meet these cost pressures and invest in new academic initiatives only by focused attention on cost-cutting and business efficiencies, Sullivan said. A total of $18.3 million has been removed from this year's General Fund budget through a combination of increased efficiencies, elimination of lower-priority activities, and moving expenditures (such as faculty salaries) from the General Fund to other sources of funds. (See below for a detailed list of cost-cutting measures.)

New revenues and funds freed up by reallocations will support an ambitious set of programs and initiatives, including a new undergraduate degree program in the Gerald R.
Ford School of Public Policy; changes to the Bachelor of Business Administration degree program in the Stephen M. Ross School of Business; and a new Energy Research Initiative and the Graham Institute of Environmental Sustainability, which will have a positive impact on the economy through workforce training and the generation of start-up companies.

University of Michigan Ann Arbor Campus summary of budget reallocation FY2007

In putting together the FY2007 budget, the University has succeeded in removing $18.3 million in General Fund expenditures through a combination of increased efficiencies, elimination of lower priority activities and moving expenses from the General Fund to other funds. In addition, focused efforts have led to avoidance of significant costs that otherwise would have placed a burden on the General Fund.

Reallocation strategies have been implemented across the University, including University-wide improvements in areas where operations are centralized and in the academic units. 

Specific examples of efficiencies and cost reductions in the FY2007 General Fund budget include:

  • The North Campus Chiller Plant commissioned during FY2006 is expected to reduce the costs of air conditioning by $200,000 per year. 
  • The Central Power Plant installed two new steam turbines which will produce electricity more efficiently than the older models, saving approximately $600,000 per year.
  • Water conservation projects have decreased the volume of water consumption, avoiding approximately $450,000 annually in water and sewer costs.
  • M-Stores was closed and purchasing processes changed to reduce the need to maintain inventory, eliminate some distribution and warehouse operations, and save on administrative and overhead costs. Initial cost savings are estimated at $500,000 per year.
  • The University achieved additional savings through debt refinancing ($100,000 savings), negotiation of more favorable vendor contracts ($3.1 million), reduced costs for FY2007 prescription drug coverage ($2.6 million), and insurance premium cost savings ($1.2 million). 
  • Business and Finance units have identified $1.6 million in cost savings for FY2007. These include the restructuring of open staff positions, resulting in a reduction of 10 full-time positions in building services, facilities, ground and waste management and property disposition. 
  • The College of Engineering achieved more than $800,000 in General Fund savings through reductions in operating allocations and consolidation and elimination of several staff positions.
  • The College of Literature, Science, and the Arts will combine the instrument/machine shops in the science departments into a single college facility. This releases space on central campus for other uses, reduces the number of technical staff needed and provides a superior level of technical support to a greater number of faculty researchers. Initial savings will be about $300,000 per year.
  • The Law School will reduce annual expenses of the Law Library by $1 million (or 15 percent of total expenses) over the next five years.  The savings will be achieved through careful planning designed to minimize the impact on service and collections. Purchases of duplicate materials will be eliminated and some reduction in staffing will be made through reorganization as positions become vacant. The Law Library's comprehensive international collection (one of only five in the country) will be preserved.
  • Information Technology Central Services achieved General Fund savings through reduction in services and through more efficient use of space. The University's dial-in service for the Ann Arbor campus has been greatly reduced and will be eliminated entirely by January 2007, resulting in an estimated annual savings of $236,000.
  • The Office of Evaluations and Examinations is working with the Michigan Administrative Information Services to develop a Web-based system for collection of course evaluation data. Once the system is operational, the Office of E&E will reduce its course evaluation staff by one full-time position and reduce its use of paper and printing supplies through the elimination of nearly 400,000 custom questionnaires for evaluation of teaching in 12,000 University classes, saving more than $50,000 per year. 
  • The basis for charging utilities expenses in the U-M Hospital buildings has been renegotiated, which has led to $2.9 million in utilities costs being moved from the General Fund to auxiliary funds.
  • The academic units are maximizing the use of endowed professorship support to shift faculty salaries off of the General Fund.

University of Michigan Ann Arbor Campus summary of new expenditures FY2007

Following is a short summary of how the U-M Ann Arbor campus will direct incremental revenues in its FY2007 budget**:

  • This budget continues the University's longstanding commitment to meet the full financial need of all Michigan resident undergraduates, and increases centrally-budgeted financial aid within the General Fund at a rate greater than the increase in tuition for an incremental expenditure of $5.7 million.
  • Recruitment and retention of outstanding faculty remains a top priority. A total of $7.1 million will be targeted for faculty recruitment and retention including a special faculty recruitment and retention fund to be allocated by the provost and a major allocation of funds to the College of Literature, Science, and the Arts for expansion of faculty in departments that are facing heavy enrollment demand.
  • Moderate increases in salaries for faculty and staff will increase costs by $21 million. Average rates of increase will vary by unit, but will be in the range of 2 to 4 percent. Benefits costs will increase by $9.6 million.
  • Utilities costs will increase by $10.7 million, due to an increase of more than 30 percent in the price of natural gas. This is in addition to increased new building costs listed below.
  • The University will direct $18.3 million to new academic initiatives. Examples include the Energy Research Initiative, the Graham Institute of Environmental Sustainability, and a new undergraduate degree program in public policy.
  • An additional $500,000 per year will be budgeted for the Bachelor in Business Administration degree program. Changes will include enhancements to advising and earlier entry into the degree program so as to allow greater flexibility to incorporate learning experiences such as study-abroad and to provide earlier career counseling.
  • In FY2007, the University will allocate about $100,000 for the Ethics in Public Life Initiative launched by President Mary Sue Coleman at the beginning of the 2005-06 academic year. This initiative seeks to enhance deliberation on issues of ethics in public life on campus.
  • A total of $2.5 million over five years has been committed to the Multidisciplinary Learning and Team Teaching Initiative, which supports team-teaching efforts and the development of multidisciplinary degree programs at the undergraduate level.
  • The University is investing in a new 10,000-square-foot data center to support high-performance computing on campus, at a cost of approximately $500,000 per year. The facility will provide the specialized power conditioning, air handling and cooling infrastructure to support the computation- and data-intensive processing needs of faculty researchers. High-performance computing clusters can consist of hundreds of server platforms placed in dense rack configurations and organized to work together on significant computational challenges. This shared facility provides a cost-effective solution to the growing needs of several schools and colleges for machine room facilities and will enable high-performance computing in an environment that encourages collaboration. 

**NOTE:  This list is not exhaustive, and reflects internal budget cuts and reallocations of more than $18 million as well as net incremental revenues.

 

U-M Budget Update

U-M Board of Regents

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