The University of Michigan will invest in strategic academic programs and initiatives that enhance the student experience, while maintaining its focus on affordability with the fiscal year 2016 general fund budget approved Thursday.
The $1.83 billion budget approved by the Board of Regents brings together the university budgeting priorities of academic excellence, affordability and access, and fiscal discipline. New initiatives for FY ’16 are funded with resources reallocated from lower-priority activities.
“The budget approved today by regents allows the University of Michigan to pursue academic excellence at the highest levels while continuing to support our outstanding educational programs in a fiscally responsible manner,” said President Mark Schlissel.
The budget, which covers the fiscal year that begins July 1, includes an 8 percent increase in undergraduate financial aid. As a result there will again be no increase in the net cost of attendance for most students with financial need.
U-M will continue its long-standing commitment to provide aid packages that meet the full demonstrated financial need of all in-state students. The budget also includes funding to provide a similar commitment for out-of-state students from families with incomes of up to about $68,000 a year.
The budget includes funding to continue a program of faculty expansion to enhance student learning and reduce the average class size. A U-M survey of students earlier this year found that making personal connections with faculty members and small class sizes were two of the most important academic factors for students.
Undergraduate tuition for in-state students will increase by 2.7 percent, below the 3.2 percent cap established by the state Legislature. Out-of-state undergraduate tuition will increase 3.7 percent. Tuition for most graduate and professional programs will increase 2.7 percent. Tuition and required fees for first-year, in-state undergraduates in LSA will be $13,856 for 2015-16, an increase of $370 over this year.
“We must continue to have the capacity to provide our students with a world-class education that prepares them to thrive in the 21st century, and we must continue to invest in financial aid to ensure access to all qualified students,” explained Provost Martha Pollack, the university’s chief academic and budget officer. “This budget emphasizes those goals, while continuing our cost-containment efforts and our strategic use of philanthropic resources to moderate tuition increases.”
Regents voted 6-1 to approve the budget for the Ann Arbor campus with Regent Andrea Fischer Newman voting no. Regent Denise Ilitch was absent. Several regents discussed the importance of keeping a U-M education affordable for middle-class families.
“Continuing to push for more federal and state funding for higher education is not the solution,” said Newman. “U-M is doing a good job but we need to do better. We need to look at everything and do a better job.”
Regent Mark Bernstein says the net cost of attending college — what students actually pay — is often lost in concern over rising college costs.
“Public concern about college costs is understandable,” he said. “What gets lost in the conversation is … the net cost that students and their families actually pay. Average net tuition is down over the last five years.
“Our focus should be on making college affordable for those who can afford it the least. Voting against a tuition increase would be easy, but it would betray my commitment to social justice and would deprive middle-class families of much-needed financial aid.”
Regent Laurence Deitch voted in favor of the budget, but also expressed concerns about costs.
“We have to challenge ourselves: How can we do better? Could we cut even more? Can we be creative in looking for new revenue streams? We can never be complacent. We must challenge ourselves to do our best,” Deitch said.
Regent Andrew Richner said, “We do have to look for other ways to control costs, but this is a budget that does more with less, making it more affordable here for middle-class students.”
The approved budget includes support for a set of strategically identified academic initiatives that draw on distinctive strengths of the university community and are essential for maintaining academic excellence. Examples include a data science initiative, a collaborative approach to redefining the humanities, and an interprofessional approach to health education that harnesses the expertise of the university’s health-sciences schools of Dentistry, Medicine, Kinesiology, Nursing, Pharmacy, Public Health and Social Work.
The general fund budget provides resources to improve the student experience on the Ann Arbor campus by expanding services for students with disabilities and mental health concerns, and re-examining sexual assault prevention efforts. It also includes funds to support a strategic planning process aimed at improving education by enhancing student and faculty diversity.
The budget extends the university’s long-standing commitment to cost containment by trimming an additional $24 million in recurring expenses from the general fund by consolidating information technology services, phasing out low-enrollment courses and programs, and using philanthropic resources to support core academic activities.
Since 2004, the university has trimmed $313 million in recurring expenses from the general fund, allowing resources to be reallocated to higher priorities and constraining tuition increases.
Revenue to the general fund, which pays for the core academic mission of the university, comes from three main sources: tuition, state appropriation and indirect cost recovery on sponsored research. Indirect cost recovery pays specifically for the indirect costs of research. The year-over-year change in tuition revenue is a function of class size, the tuition rate increases and a small projected increase in the proportion of out-of-state students.
Overall, the FY ’16 general fund budget will increase 2.2 percent to $1.83 billion. The Legislature has approved a 1.4 percent increase in state funding for the coming year. U-M Ann Arbor’s total FY ’16 operating revenue budget, including the U-M Health System, Athletics, University Housing and other auxiliary activities, and programs supported by designated gifts and grants, is $7.05 billion.
Gifts and other non-general fund sources are increasingly important to the university’s financial health. Philanthropy is an essential component of the university’s commitment to academic excellence, access and affordability and fiscal discipline. The university is in the midst of a $4 billion fundraising campaign, which includes a goal of raising $1 billion for student support.
University housing rates
Separately, the Board of Regents approved a 3 percent increase in residence hall and apartment room-and-board rates for 2015-16. That rate includes 1 percent to partially offset projected operating cost increases and 2 percent to fund the ongoing program of major renovations of housing facilities, such as the renovation of West Quad, on schedule to be completed in August.
The cost per student for a double room with a basic meal plan will total $10,554 for the fall and winter terms, an increase of $308. Rental rates in Northwood Community Apartments for graduates and students with families will increase by an average of 1 percent.
University Housing is a self-funded auxiliary unit of Student Life within the university. Since 2006, University Housing also has embarked on a program of substantial cost controls, reducing costs by $15.3 million.
