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Remarks to the Regents about the budget and tuition

July 21, 2005

I want to begin our presentation on budget and tuition-setting today for the Ann Arbor campus.

Last year we had three strikes against us on the funding front: another reduction in our state appropriation, artificially restrained tuition and then an unexpected mid-year cut. At that time I said such a combination couldn’t continue without jeopardizing the ability of this University to provide a high-quality education. The unprecedented loss of state appropriations over the past several years now threatens to compromise the University of Michigan’s core academic excellence.

As we look ahead to the fourth year of likely cuts in state support, it is clear we are at a crossroads which will define Michigan’s future strength. The budget we will present to you today focuses squarely on the two most critical priorities in my administration:

preserve our University’s distinctive excellence in a hotly competitive national marketplace,
and maintain access to that education in the face of declining state support.

To address the continued state funding decline, today’s budget recommendation will include increases in tuition and in financial aid, as well as about $20 million in budget belt-tightening measures including cuts and reallocations. For resident undergraduates, we will recommend a 12.3 percent increase in resident undergraduate tuition along with a 14.5 percent increase in resident undergraduate financial aid. This is a tough decision, but I am convinced that it is the most responsible approach under the extraordinary circumstances which now face higher education in the state of Michigan.

Let me put a little more context around this before I ask Provost Courant to walk you through the budget proposal in more detail.

We have lost nearly $50 million in base appropriations since 2002, and another $21 million in one-time cuts. It translates into a loss of more than $1,500 per student on the Ann Arbor campus. We responded with significant budget cuts throughout the university, such as cutting back service hours, eliminating faculty and staff positions, extending replacement cycles on our equipment, and cutting even more deeply into administrative operations in an attempt to protect the academic core as much as possible.

But the accumulated effects of these budget cuts are enormous, and the impact on the academic environment is real. Let me give you just one example that I think illustrates the scope of the challenge: We have eliminated about 400 staff positions over the past two years, some through attrition and some through layoffs. Nearly 100 faculty positions have been eliminated through attrition. This has a direct effect on teaching workload, class size, course offerings, advising, and on student mentoring and support services.

And I want to be clear: though we have realized significant business efficiencies and productivity gains, we are now at a point that threatens our long-term strength.

We cannot hope to make it through another year of low salary increases and minimal investments in our academic programs without resulting damage to our core business. I am particularly concerned about the threat to faculty and staff recruitment and retention as we compete with the best universities in the country. Also, we must continue to provide the services students need, address pressing issues such as manageable class size and course availability, and make investments in curriculum renewal as well as innovative new programming.

As I think about resource needs in the next few years, I also look at new facilities that represent 21^st century teaching and research environments. This year, for instance, we will assume operating costs for our state-of-the-art Undergraduate Science Building which will open in January. It costs more to operate new facilities, of course, but it is critical to Michigan’s ability to be a leader in cutting-edge education and scholarship.

Even with these pressing needs, we kept our tuition increases as low as possible over the past few years, hoping that the state’s economic situation would stabilize. In fact, even with today’s recommendation our average tuition increase over the past five years is still one of the lowest in the state and in the Big 10. Our private peers are increasing tuition revenue at a rate higher than ours as well, and I’ve asked Provost Courant to provide that data so we can see where we are among our national competitors. Most of the other Big 10 institutions are now experiencing stable or increased state funding, but the fact that we are struggling with an extended downturn in Michigan is at the heart of this year’s pressure on tuition.

Throughout all of this, I have been very concerned about the impact of state cuts and cost increases on our most financially vulnerable students. Earlier this year we introduced the M-PACT program, in large part so we could assure that today’s economic reality did not make a University of Michigan education out of reach for students with financial need.

We offer the most financial aid of any institution in the state, and this year’s proposal reflects our continued commitment: we will increase our centrally-funded financial aid program for resident undergraduates at a greater rate than the tuition increase, and that will be in addition to what we can provide through M-PACT. In fact, when you add it all together, our grant support for Michigan resident undergraduates will increase over 28 percent this year.

Finally, I want to recognize the investment that all our stakeholders make in preserving Michigan’s academic excellence.

This is a big commitment of the part of our students and their families, and I have made a pledge that the investment will continue to be of the highest value. Our students tell me over and over that it is the quality of their education that means the most to them. We owe our students and their families the best education any university can offer.

Especially in the face of declining state support and pressure on tuition, I want to acknowledge the critical importance that fundraising has on our ability to sustain what we’ve been calling The Michigan Difference. Gifts give us the chance to provide more scholarships, to enhance our facilities, to develop innovative programs, and to give us that margin of excellence that would not be possible otherwise with all of the challenges at hand. A Michigan experience costs far more than tuition reflects or than the state could ever fully support, and private giving is more important than ever before.

So we’re all in this together. Our students, alumni, donors and state invest in the University and share our expectation that Michigan will continue to remain at the forefront of academic and research excellence. My most important obligation as president is to ensure that quality continues to be the #1 return on our stakeholders’ investment.