The University of Michigan’s Board of Regents approved a budget during a special session June 29 that includes a 1.9 percent tuition increase and $12.8 million in additional need-based financial aid for undergraduates on the Ann Arbor campus.

The Ann Arbor campus’ general fund budget, including its 5.6 percent increase in undergraduate financial aid, will cover the entire cost of the tuition increase for in-state students receiving need-based aid, said President Mark Schlissel, adding that the financial aid office is ready to adjust or grant new aid to families whose circumstances have changed because of the ongoing COVID-19 pandemic.

The university will also tap into its reserves to meet the need if it exceeds the budgeted amount, Schlissel said.

“We are committed to do our very best to make sure that the COVID-19 pandemic does not result in a lost generation of students who were unable to continue or complete their Michigan educations because of the circumstances we all find ourselves in,” Schlissel said.

University leaders said the general fund budget for the 2020-21 fiscal year reaffirms the school’s long-standing goals of academic excellence and affordability amid financial uncertainty caused by the global pandemic.

Regents approved the budget measure on a 5-2 vote, with Regents Jordan B. Acker, Michael J. Behm, Mark J. Bernstein, Paul W. Brown and Ron Weiser voting yes, and Regents Shauna Ryder Diggs and Denise Ilitch voting no. Regent Katherine E. White was unable to attend the virtual meeting.

The vote came during a special session conducted four days after the budget proposal failed when regents split 4-4. The general fund budget is part of an approved universitywide consolidated budget package that also included spending plans for Michigan Medicine, UM-Dearborn, UM-Flint, Athletics, Michigan Housing and a number of supplemental student fees.

The university budget includes the use of more than $400 million from the university’s endowment, Schlissel said. The distributions from the endowment have increased every year for more than a decade.

Schlissel also announced he would double an amount he promised during the June 25 regents meeting for a fund available to support student recruitment, retention and graduation at UM-Dearborn and UM-Flint — from $10 million to $20 million. A number of regents remarked last week that they would like to see greater resources allocated for the two campuses.

“I appreciate the many voices who have advocated for greater investments to promote increased enrollment and greater student success at our regional campuses,” Schlissel said. “I’ll be working closely with the chancellors to determine how best to target this funding since they know their campuses the best.”

The $2.3 billion general fund budget for the fiscal year that starts July 1 is based on the new tuition rate, $102 million in cost containment and an estimated state appropriation of $325.5 million – the same amount as this year.

Tuition for the most common lower-division rate will increase by $290, for an annual rate of $15,520 for in-state students, and by $966, for an annual rate of $51,838 for nonresident students. A 5.6 percent increase in undergraduate financial aid will cover the entire cost of the tuition increase for in-state students receiving need-based aid.

Most graduate programs also will see a 1.9 percent tuition increase.

In a presentation to regents last week, Interim Provost Susan Collins said the budget supports the vital work being done across campus to meet the “unique circumstances” of the pandemic.

That includes investments in instructional technology as the university offers courses in a variety of formats, including fully remote, and adapts co-curricular, community-building and other student engagement opportunities to best align with public health guidelines.

“Across campus, members of the U-M community have invested significant time and effort in planning how to safely and effectively meet the challenges of the 2021 fiscal year,” Collins said, adding that those plans have drawn widely from the research and expertise of U-M faculty.

“Our combined efforts will enable us to offer meaningful experiences for all our students while caring for the health and safety needs of our community, as well,” she said.

The budget presentation also highlighted the significant steps the university has taken in recent months to contain costs and limit the pandemic’s financial blow. Those measures include a universitywide salary and hiring freeze, reducing the salaries of campus leaders, postponing some construction projects and providing staff the ability to take voluntary furloughs or reduce their work hours.

Collins cautioned that additional reductions would be necessary if enrollment is lower than expected, if the university incurs pandemic-related costs that are higher than anticipated, or if the university receives a reduced state appropriation when the state passes its FY ’21 budget.

The state of Michigan anticipates a $2.5 billion deficit in FY ’20 and an expected shortfall of $3 billion in FY ’21.

Despite the uncertainty, the university’s general fund budget carves out planned investments in a number of key areas, including funding for increased safety and health measures.

“The budget supports a public-health-informed academic year enabling in-person engagements for our students, as well as needed financial aid support for Michigan families in this extremely challenging time,” Collins said. “With our combined stewardship, U-M can continue to deliver a quality educational experience and pursue the groundbreaking research and discovery upon which the state, nation, and world depend.”

Last week, Schlissel announced that the university would launch the fall semester Aug. 31 with a blend of in-person and remote classes, an adjusted academic calendar and an emphasis on public health measures.

During the June 29 meeting, regents said they appreciated the complicated work of developing a budget amidst so much uncertainty, but they differed on whether it was appropriate to increase tuition rates during a pandemic and economic downturn.

Brown said he was enthusiastic to support a budget that effectively eliminates any tuition increase for most families with incomes under $125,000 and increases the university’s “financial and administrative support for families whose incomes were dramatically hurt by the 2020 economic downturn.”

Brown also said the university’s $20 million investment in UM-Dearborn and UM-Flint will help create an unprecedented opportunity for those campuses “to increase the world-class education provided at those schools.”

Behm said the budget proposal addressed his two top priorities — providing a funding increase to the Flint and Dearborn campuses, and ensuring that students and families under financial strain are not asked to pay more in tuition.

“In order to assist our students who are struggling financially, we have asked those who can afford to pay a very small amount more, to do so,” Behm said.

Focusing on “sticker price” tuition rates is deceptive and misleading, said Bernstein, noting that U-M is the only public university in the state that covers 100 percent of the demonstrated financial need of Michigan residents.

Bernstein added that one in four in-state undergraduates — more than 4,100 students — pay no tuition at U-M due to financial aid.

“So who does pay full tuition? Students who can and, therefore, should,” he said. “And they are getting one of the great bargains in higher education — paying half what out-of-state students pay.”

Diggs said she was especially worried that many students who do not qualify for financial aid will be “caught in the middle as their families experience sudden, recurrent decreases in income for the unforeseeable future.”

“I have consistently voted in favor of tuition increases,” she said. “But this year is unlike any other in our lifetimes. When a global health crisis evolves into an economic crisis, we should not increase our tuition.”

Diggs also called for the university to adopt a more streamlined approach to re-evaluating financial aid needs for students whose families experience sudden economic hardships like a temporary furlough, death or illness of a family member or unemployment.

Ilitch, who last week described the proposed tuition increase as “tone deaf,” agreed with Diggs that raising tuition was not wise.

“I remain steadfast in believing that raising tuition on Michigan students and their families during this global pandemic — the likes of which we haven’t seen in over 100 years — is dead wrong,” said Ilitch.

Although he said he “was not thrilled” with a 1.9 percent tuition increase, Acker said he appreciated stated commitments from the administration that helped to address some of the uncertainty of budgeting during a pandemic, such as adjusting aid for students whose financial circumstances have changed due to COVID-19.

“In spite of my misgivings about this budget, you have to weigh this as a whole,” he said. “Ultimately, I’ve weighed that this is the right budget for now.”

Weiser focused his comments on responding to frequent questions about why the university doesn’t use more of its $12.4 billion endowment in situations like this, arguing that the majority of the 11,700 individual endowment funds are restricted to specific uses by donors.

“There are reasons for why this money can’t be used. It’s not a $12 billion endowment where we can take the income and spread it to places we want,” he said. “We have obligations to do the research and other things that the donors have committed their money for.”

Regents also approved a temporary $50-per-term COVID-19 fee. Revenue from the fee will assist in covering the costs of testing and other health and safety-related services associated with the pandemic.

Students also will see a 1.9 percent increase in the University Health Service fee to $202.39 per student per semester.

Housing rate increases to cover operating, public health costs

Regents also approved a 1.9 percent increase for residence hall room and board rates for FY ’21. The increase will meet rises in day-to-day operating costs while also supporting investments in public health measures to reduce transmission of COVID-19.

Contracts with an adjusted length will be offered in light of changes to the academic calendar. On-campus classes will end at Thanksgiving in the fall to minimize student travel home and back to campus. Winter semester will start later in January.

Need-based grant aid will mitigate this increase for students with financial need. University Housing is a self-funded auxiliary unit of Student Life within the university.

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