Remarks by President Mary Sue Coleman to the Regents concerning the University budget

Fleming Administration Building
March 18, 2004

I want to take a few minutes to discuss the state budget situation and the University’s plans for the months ahead. We face a challenging environment for our core teaching and research because of unprecedented and continuing reductions in our state appropriation. As you know, this appropriation is a critical component in providing a high-quality educational experience for University of Michigan students, especially at the undergraduate level.

I expect to bring a recommendation to you later this spring, asking you to accept the Fiscal Year 2005 state budget proposal for higher education — under the condition that the Legislature fulfills the terms outlined in that proposal. I understand the chancellors of the Dearborn and Flint campuses will do the same. By taking this action, we would limit further cuts to our state appropriations, would receive some relief on the significant mid-year cut of 2004, and would agree to limit our 2005 tuition increase for in-state undergraduate students.

The state’s proposal, if it remains substantially intact through the legislative deliberations, will allow us to mitigate the cumulative reduction in appropriations and be responsive to the continued erosion of the state’s budget situation.

One of the most important considerations for us is the impact on our annual base appropriation for the Ann Arbor campus, which will be $321 million if we accept the proposal, but only $301 million if we do not accept it. This funding is critical to our long-term financial stability.

We support the efforts of the Governor and the Legislature to keep public higher education affordable for Michigan families. We share that goal, and it was most recently reflected in our decision to hold the current year's tuition increase well below the average of statewide tuition increases. But tuition restraint will not be possible over time unless we can depend upon adequate and predictable appropriation levels.

This year finds us in an especially challenging circumstance. The economic downturn has not yet abated for our state, and it continues to put pressure on state government, as well as on Michigan residents and all of our publicly supported enterprises. We want to partner with the State of Michigan to do all we can during a time of such economic stress.

But the state’s proposal does not alter the reality of nearly $43 million cut from our base-level state support for the Ann Arbor campus in the last two years, along with almost $20 million in one-time cuts. These funding reductions are unprecedented.

As you know, we have responded to this reduction in our annual appropriations by cutting our budget deeply, and we have more hard work to do.

We estimate we will need to cut another $20 million from the Ann Arbor budget for the 2005 fiscal year. That is in addition to the $37 million we cut last year.

By the time the coming year concludes, we will have taken a total of $57 million out of the budget in order to address these severe revenue constraints.

Our Flint and Dearborn campuses also face additional cuts. The Flint campus anticipates cutting another $800,000 next year, and in Dearborn the reduction will be $1 million on top of previous budget cuts.

We have responded responsibly to calls for the University to examine its expenditures and we continue to promote efficiency aggressively in all areas of our institution. But we cannot minimize the significant impact of these reductions, and we must honestly face the serious long-term consequences for all three of our campuses.

Preserving the quality of core academic activity is our highest priority. We will be laser-focused on protecting our academic quality for the future — if our quality begins to decline, it will take far longer to rebuild than it will take to lose it.

Our students and families expect and demand the academic excellence that has created the outstanding reputation of the University of Michigan. Our alumni, too, have an enormous stake in the continued strength of their alma mater.

The distinctive quality of our university depends on stable state support and reasonable tuition revenue. As we go forward, we must be clear that we accept the state’s proposal only as a short-term measure. It is not a sustainable, long-term solution. Ultimately, we must be true to our mission and to our students. We cannot let the focus on cost trump the commitment to quality.

As I told the Senate higher education subcommittee last month, our public universities must work with the Governor and the Legislature to find more sustainable models that can achieve our shared goals of both excellence and affordability. I believe our long-term planning should incorporate three main elements:

• More robust and more predictable state support;
• Moderate tuition increases;
• And a continued emphasis on financial aid, especially in the form of grants.

Financial aid can pave the road to affordability. We have increased financial aid at a greater rate than tuition over the past several years to meet the full financial need of every in-state undergraduate. We know we must do even more, and we will be focusing an extraordinary effort on scholarships as a central component of our upcoming capital campaign.

In the coming weeks, the Provost will work closely with deans, executive officers, and unit directors to move through the budgeting process for the year ahead.We have developed a set of guiding principles to help shape our planning and budget decisions. We know there will be difficult choices to make, and there will be no easy answers.

Let me say it again: Continued academic quality is our first priority.

In addition, Michigan’s public universities must put tremendous effort into creating a new kind of partnership with our state. I believe that the concept of “partnership” is a two-way street. We have to ensure that investment in our public universities meets the needs of our state and reaps robust economic vitality for Michigan. Nowhere is that more evident than in my determination to bring down barriers and foster greater economic development activity stemming from our University’s research. I welcome this week’s announcement from the Governor announcing the formation of a Blue Ribbon Commission on Higher Education. I look forward to working with Governor Granholm, Lt. Governor Cherry, and commission members to improve the state’s economy through higher education.

The University and the State still have many economic challenges to face. I will continue to make sure that we do not forget the future, as we work together to solve the problems of the present.