Program: Public university operations

Appropriation:

GF/GP:

$1,615,486,200

Total:

$1,615,486,200[2]

Program Description:

This appropriation funds a portion of the operations of Michigan’s 15 four-year universities located throughout the state. Currently 232,648[3] full-time students attend Michigan’s public universities.

Three of these institutions — the University of Michigan in Ann Arbor, Michigan State University, and Wayne State University — have large undergraduate, graduate and professional programs. Five institutions — Western Michigan University, Eastern Michigan University, Central Michigan University, Oakland University, and Northern Michigan University — offer primarily undergraduate programs, but also offer some graduate programs. Programs in specialized areas are emphasized at two institutions: Michigan Technological University, which offers primarily engineering courses, and Ferris State University, which offers primarily vocational and technical programs. Three institutions, as well as the University of Michigan’s two sub-universities in Flint and Dearborn, offer primarily undergraduate liberal arts programs; they are: Grand Valley State University, Saginaw Valley State University, and Lake Superior State University.

For the fiscal year 2003, public university operations funds will be allocated as follows:

Central Michigan University

$90,003,800

Eastern Michigan University

$87,637,200

Ferris State University

$55,520,300

Grand Valley State University

$60,095,400

Lake Superior State University

$14,268,700

Michigan State University

$325,982,300

Michigan Technological University

$55,241,600

Northern Michigan University

$52,012,900

Oakland University

$52,384,700

Saginaw Valley State University

$27,393,300

University of Michigan — Ann Arbor

$363,562,700

University of Michigan — Dearborn

$27,993,300

University of Michigan — Flint

$24,068,100

Wayne State University

$253,644,700

Western Michigan University

$125,677,200

In December of 2002, then Governor Engler reduced the appropriations for higher education by $40,388,994 through Executive Order 2002-22. The Center updated appropriations figure is used here to calculate savings.

Recommended Action:

Although the direction of higher education funding should be toward using tuition vouchers or tax credits to replace direct state grants to public universities, such changes may be politically difficult at the moment. Such a move would provide universities with stronger incentives to control growing costs, a problem the Legislature should take more immediate steps to address.

Spending at Michigan’s 15 public universities has increased to levels that few could have anticipated and some believe are unjustified.  Total spending by universities from fiscal year 1985 through fiscal year 2002 increased by more than $5 billion in nominal terms. 

According to the President’s Council, State Universities of Michigan, the “nearest approximation to total expenditures” for Michigan’s 15 public universities shows an increase from about $2.4 billion to $7.6 billion during this period.  (The year 1985 is used as a base year because this is when state spending began increasing most dramatically.)

Both state appropriations to public universities and the revenue they derive from tuition and fees have helped fund the extraordinary increases in higher education spending. 

Total state appropriations for university operations increased from approximately $760 million to $1.615 billion since 1985.  The increase is 24 percent more than inflation, but full-time enrollment increased 28 percent over this time.

During the same period, however, students’ tuition and fees skyrocketed.  In fiscal year 1985 the tuition and fees charged to all full-time public university students (not weighted by population, program of study, or school) averaged approximately $1,786.  If tuition and fees had increased at merely the rate of inflation, students today would pay only $3,093 annually instead of the fiscal year 2002 average of approximately $5,365.  This means today’s students, on average, pay about 73 percent more than they would have to pay if tuition and fee increases had just kept pace with inflation.

Since higher education spending is one of the largest drains on the state budget, it deserves special scrutiny at a time of historic projected deficits.  Increases in tuition and fees in excess of inflation suggest one way to determine a reduced state appropriation.

If state appropriations for higher education were reduced by an amount equal to the excess revenue generated by tuition and fee increases that exceeded inflation since 1985, the total savings would come to approximately $547 million, based on a current population of 241,134 students.  (The savings calculation is imprecise, since no attempt is made to account for changes in the mix of undergraduate and graduate enrollment, or changes in the proportion of students paying higher amounts at some universities and lower amounts at others.)

Universities are charging students $547 million more per year than can be explained by inflation alone.  With more than a half-billion dollars in new annual revenue from students, the universities should be less dependent on the state. A $547 million cut is justifiable and technically possible, but a starting-point reduction, for the coming year, of 20 percent of that amount would still yield significant savings of $109.4 million.  Recommendation: $109.4 million.

Program: Postsecondary education

Appropriation:

Federal Funds:

$1,332,400

Special Revenue Funds:

$478,900

GF/GP:

$679,000

Total:

$2,490,300[4]

Program Description:

This line item was transferred to this portion of the report from the Michigan Department of Career Development (MDCD) chapter. This appropriation funds administrative expenses for five programs. They are 1) Community Colleges Services; 2) King — Chavez Chavez — Parks Initiative; 3) Proprietary Schools; 4) Veterans Education; and 5) Educational Corporations.

Program Recommendation:

Elimination of the King-Chavez-Parks programs (see below) allows eliminating 20 percent of this line item. This is an estimate only, and a detailed analysis of the impact of programs reductions is needed to determine precise savings. The remaining funds transferred from the MDCD will be added to the appropriation summary above. Transferred from MDCD: $1,992,240.