Testimony of President Mary Sue Coleman to the House Higher Education Sub-Committee of the House Appropriations Committee

March 19, 2003

I would like to thank the committee and Chair Caul for the opportunity to address you today.

I appreciate the time that many of you have provided to me for discussions with you about higher education in this state, and I look forward to getting to know those of you whom I have not yet met.

Even before I moved to Michigan from Iowa last summer, I knew that Michigan’s policy-makers have had a strong history of support toward public higher education overall, and like the rest of the country, I admired the distinctive missions and excellence of the universities in this state. This state has created and fostered some of the great public universities of this country. The approach of the Legislature has been thoughtful and strategic, and the state and our students have reaped enormous dividends from that investment.

Today, we are facing international challenges, as well as serious fiscal challenges and policy decisions in our state. I want to tell you why it is so important that the state keep higher education as a top funding priority, even given the fiscal constraints of the current economy.

I understand your dilemma, as does every president sitting up here. We will share in the burden of the current budget challenge, but we hope you will help us preserve our quality and our ability to be a real economic force in this state.

A significant reduction of our state appropriation will lead to an adverse impact on the education of our students. If classes get larger, if some courses are offered less frequently, then we risk diminishing the quality of our students’ education.
The lifetime economic benefits of education are well understood by our students, who seek to join us in record numbers. The rest of the economy may be struggling, but the demand for higher education has never been higher, precisely because students and their parents understand so well that education is the best route to economic security.

The state provides a large portion of the funding for teaching undergraduate students. As you can see in Figure A, our state appropriation is just over 30 percent of our general fund support. With that money, we provide an outstanding educational experience to our students, and we educate and graduate a highly qualified workforce to fuel Michigan’s economy.

In addition to our educational offerings, the state’s research universities provide a direct and powerful link to economic development in the form of federal research dollars.

It is true that we depend on our appropriation from the state—but at the University of Michigan, we give back far more to the state than we receive in our state appropriation.

Just as the Governor is working with federal officials to obtain funding for roads and Medicaid, the University of Michigan, along with Michigan State University, Wayne State University, and Michigan Technological University, are instrumental in leveraging federal dollars for the state. The result is job creation and economic development.

Think about it this way: this past year, the University of Michigan brought in over $456 million in federal funds for targeted research activity, making us one of the largest research universities in the country.

For every job created at the University of Michigan, a total of 2.5 jobs are created in the state. An important mechanism in this chain of job creation is the attraction of federal funds for sponsored research.

This research, of course, leads to new discoveries. And with new knowledge comes the opportunity for technology transfer into the commercial marketplace—in the last three years, 25 start-up companies were generated by the University of Michigan, along with the application for 254 patents and 222 licenses for our discoveries. Research universities create jobs through new ideas and new businesses.

We know that the cuts proposed in the Governor’s budget will be difficult to absorb while trying to maintain the competitive advantage and national reputation that enable us to contribute to the state’s economy as we currently do.
The state’s annual appropriation is an important part of the University’s general fund, and one we cannot do without.

The $36 million that the Governor proposes to cut from our budget will have real consequences for our University.

We currently are making and we will continue to make significant reductions in operations, staffing, programs, and class offerings. We are going to work hard to preserve our academic quality and the student’s educational experience—our top priority will be our students and the educational environment.

In addition to the $36 million that are cut in the Governor’s budget, we also face another $50 million in cost increases next year. Many of these increases in operational costs are necessary because of factors outside our control, such as increased federal regulation of patient privacy, increased costs of utilities, increased medical care costs, and increased costs of security systems in student housing, just to name a few. We are continually working at mitigating costs, but we cannot avoid them entirely.

And although we can always do more, I can tell you that the University of Michigan has exercised strict cost control and has worked vigorously to reduce the cost of its operations.

Figure B illustrates one example of this, demonstrating significant savings in our energy consumption in one of several efforts we have made on that front. All told, we have cut more than $19 million per year from purchasing and energy costs alone. We are wringing every dollar we can from the system and will continue to do so.

And finally, I want to discuss our commitment to tuition restraint and financial aid support.

Our excellence as a public university means little unless we are accessible. In order to keep the University of Michigan as accessible as possible, we are determined to maintain our longstanding policy of meeting the demonstrated financial need of all our resident undergraduate students.

Figure C shows the amount we have increased financial aid over the past twelve years. Please note that our financial aid increases have kept pace—and more—with our tuition increases in order to continue to provide access for those with need—this is a principle to which we are dedicated.

Let me emphasize this: we are determined to meet the demonstrated financial need of all our undergraduate students from the State of Michigan. This requires a combination of grants from the state, grants and loans from the federal government, our own scholarship funds, and student work-study.

When the economy worsens, this need only increases, as more families become dependent on financial aid.

We will always increase our own funding of financial aid sufficiently to honor this pledge of accessibility we have made to the students of Michigan.

And, of course, tuition is very much on your minds and the minds of our students and parents. If you refer to Figure D, you can see what the tuition increases have been in recent history. We have kept tuition increases as low as possible over the past several years, especially in comparison to our Big 10 counterparts. In this state, the University of Michigan and Michigan State University have been leaders in tuition restraint.

We must spend taxpayers’ dollars responsibly, and must run our institutions as efficiently as possible. Although our enrollments have grown over time, we have managed our core needs through strict attention to cost controls and a resolve to keep tuition as low as possible, while maintaining the expected quality of our university that everyone expects of us.

You and your predecessors have been our partners in this effort.

I ask for your consideration and for a careful look the strategic investment in higher education; I hope we will not allow a short-term fiscal problem to affect the long-term health of our educational institutions or the future competitiveness of our state.

Your own teachers, your physicians, your accountants, your dentists, the engineer who designed your car, and so many more, are the products of our outstanding universities. Please help us protect the future of us all. We look forward to continuing our partnership with you to secure the future of our students and our state.

Fig. A — General Fund Revenue

Sources of General Fund Revenue, Fiscal Year 2002-03

Uses of General Fund Revenue, Fiscal Year 2002-03

Fig. B — Energy Consumption of General Fund Buildings

Progress Impact of Energy Star Program

Fig. C — Increases in Budgeted Centrally Allocated Institutional Financial Aid to Undergraduates Compared to Tuition

Fig. D — Undergraduate First-Year Freshman Tuition Rates

Big Ten Institutions

Four-Year Average Annual Percentage Increase

Michigan Public Institutions

Four-Year Average Annual Percentage Increase