Ann Arbor campus to increase tuition, financial aid

Updated 10:00 AM July 29, 2005

Ann Arbor campus to increase tuition, financial aid

By Julie Peterson
Office of the Vice President for Communications
and Laurel Thomas Gnagey

Saying the University is at a crossroads with respect to declining state funding, President Mary Sue Coleman outlined a budget to the Board of Regents July 21 that increases tuition and supports important funding priorities, including recruitment and retention of faculty and staff.

Click image for to enlarge in new window

The budget includes a 12.3 percent tuition increase for resident undergraduates and a 6 percent increase for out-of-state undergraduates. At the same time, the University plans to increase centrally budgeted financial aid in the General Fund by 14.5 percent for resident undergraduates and 6.3 percent for nonresidents.

The plan reflects the importance of attracting and keeping quality faculty and staff by including $22.5 million for salary and benefit increases, and for recruitment and retention efforts. Provost Paul N. Courant said salary increases generally will be in the 2-4 percent range for 2005-06.

Regents unanimously approved the budget, but not without discussion.

Regent Andrew Richner asked if there was any plan to give back part of the tuition increase if the state appropriation—which won't be determined until well into the fall semester—comes in higher than expected. U-M's budget is based on the assumption that Gov. Jennifer Granholm's 2 percent cut for higher education will be the prevailing amount as the House and Senate wrestle with her proposal and their own versions of a spending plan for the state's 15 colleges and universities.

Click image for to enlarge in new window

Other regents and Coleman answered Richner, saying if the amount were to be higher than the governor's budget for U-M, it is unlikely the increase would be great, but that the University would take it into account during next year's budget discussions. Of more concern, Coleman said, is that if the last three years are any indication, any amount approved by the state may not hold up.

"We have no guarantee there wouldn't be a midyear cut," Coleman said, citing the situation last March when the state cut funding in the middle of its fiscal year despite its pledge not to make further cuts to higher education in exchange for tuition restraint.

"I was in favor of it, and it didn't work," Regent Laurence Deitch said of the
2.8 percent tuition hike regents agreed to last fiscal year.

In presenting the budget to the board, Coleman and Courant reiterated their concern that quality continues to be threatened by the erosion in state support.

"The massive loss of state appropriations over the past several years now threatens to compromise the University of Michigan's core academic excellence," Coleman said. "We cannot hope to make it through another year of low salary increases and minimal investments in our academic programs without resulting damage to our core business."

In fiscal year 2002 the state's appropriation to the Ann Arbor campus was about $363 million; under the governor's proposed budget that figure would decline to $314 million for FY 2006. That $49 million decline amounts to a decrease of more than $1,500 per student at the Ann Arbor campus, and has been coupled with nearly $21 million in one-time cuts.

Courant noted that if the state's funding support during the four-year period had simply kept pace with inflation, as measured by the Consumer Price Index, the U-M appropriation for FY 2006 would be $396 million—an $82 million gap the University has managed largely by making cuts in expenditures (see chart).

"I am particularly concerned about the threat to faculty and staff recruitment and retention as we compete with the best universities in the country," Coleman said. "Also, we must continue to provide the services students need, address pressing issues such as manageable class size and course availability, and make investments in curriculum renewal as well as innovative new programming."

The budget directs $11 million to new academic initiatives, including the Detroit Center, which will support and coordinate faculty and student projects in Detroit; a major transformation of teacher preparation programs in the School of Education; the new Michigan in Washington program, which will enroll its first students this fall in coursework and internship placements in Washington, D.C.; and a new interdisciplinary program in science and technology in public policy.

The additional cost of doing business, including increased utility and healthcare expenses, also are factored into the plan.

The tuition increases approved by the board mean that a first-year Michigan resident student entering LSA will pay $9,213 per year for tuition and all required fees, an increase of $1,012, while a nonresident student will pay $27,601, an increase of $1,574—before calculating financial aid support.

Despite this year's rate, the University's average tuition increase over the past five years is lower than all public universities in the Big Ten and close to the lowest in the state.

"We worked hard to restrain our tuition increases over the past few years in the hopes that the state funding picture would improve," Courant said. "Those improvements haven't materialized, and instead we have sunk into one of the worst consecutive four-year periods for state support in our history."

Saying she doesn't believe the state funding situation will improve, Board Chair Andrea Fischer Newman called on University leaders to come up with a plan to replace the state's appropriation with other funding sources.

"You're on notice for next year: unless we do something to fix the General Fund, I am not voting for this next year," Fisher Newman said. "What we are seeing now is a result of the state's involvement in tuition last year. I hate this tuition increase [even though] I do think the provost did a good job of putting the budget together."

Coleman and Courant said the decision to recommend significant tuition increases was not an easy one, particularly in light of concerns that a U-M education must remain affordable for students of modest means.

"This University has consistently placed financial aid at the top of our priority list," Courant said. "In this budget, as in past years, we have increased financial aid at a rate greater than the increase in tuition, so that our most vulnerable students will not suffer an undue burden.

"Our financial aid packages will continue to ensure that all Michigan resident undergraduates will receive a combination of grants, loans and work-study awards that cover their full financial need, including not only tuition but also room and board, books and related expenses."

The University will allocate nearly $85 million in its General Fund to centrally budgeted financial aid for FY 2006. The M-PACT program launched by the University in February adds to the General Fund amount, meaning that U-M's new commitments to financial aid will result in an overall increase in grant aid for resident undergraduate students of 28.6 percent.

M-PACT will provide an additional $3 million per year in grant assistance to low- and moderate-income students who are Michigan residents. As a result of these programs, the lowest-income in-state students—those who receive a full Pell grant—will receive total grant assistance of more than $13,000 per year. M-PACT grants also will go to Michigan resident students whose families earn a bit more—typically in the range of $50,000 to $70,000. Raising money for financial aid for both in-state and out-of-state students is a major goal of the University's current fundraising campaign, The Michigan Difference.

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 4.9 percent from FY 2005 to FY 2006. The budget allocates the majority of new funds to the academic units, with smaller increases to administrative units.

"Once again, as in recent years, we expect to enroll a record number of students and conduct a greater amount of research than ever before," Courant said. "As our teaching and research continue to grow, these activities bring with them corresponding costs. It is essential that we find ways to support this growth if we are to help the state achieve its goals of increasing college attainment and developing the research discoveries that contribute to a robust economy and improved quality of life for all our citizens."

Ann Arbor campus to increase tuition, financial aid

More Stories