ANN ARBOR—A modest tuition increase and the largest investment in need-based financial aid in University of Michigan history are highlights of a $1.41 billion 2008-2009 General Fund budget approved today (June 19) by the Board of Regents.

The FY 2009 budget for the Ann Arbor campus, recommended by U-M President Mary Sue Coleman and Provost Teresa Sullivan, includes a 5.6 percent tuition increase for resident and nonresident undergraduates, a 5 percent tuition increase for most graduate programs, and a 10.8 percent increase in centrally awarded student financial aid for undergraduates.

The budget also will increase the number of faculty to help improve the student-faculty ratio and provide additional funds for graduate student stipends, new academic programs, research and technology initiatives, and facilities.

The regents, who in prior years approved the budget and tuition rates in July, moved the annual vote to June to give students and families more time to plan.

“Through a combination of innovation, ingenuity and hard work, we have been able to control costs and limit this year’s tuition increase,” Coleman said.

Tuition and fees for first-year undergraduates in the College of Literature, Science, and the Arts in 2008-2009 will be $11,037 (a $590 increase from the previous year) for Michigan residents and $33,069 (a $1,768 increase) for nonresidents.

Financial aid can make a significant difference between the tuition rate and what people actually pay out of their own pockets. Nearly 80 percent of undergraduate students who are Michigan residents receive some form of institutional financial aid based on their financial need, including grants, work-study and loans.

“This year’s increase in financial aid allows us to continue our commitment to meeting the full demonstrated need of students from Michigan,” Coleman said. “Compared with other top universities, the University of Michigan remains affordable for our residents, even at full price.”

The U-M continues to increase centrally awarded financial aid at a higher rate than the tuition increase. The FY 2009 General Fund budget includes a 10.8 percent increase in financial aid for undergraduates, or nearly $6.7 million, for a total of $68.6 million. Centrally awarded financial aid for all students, both undergraduate and graduate, will grow by more than $8.5 million, an 8.6 percent increase, for a total of nearly $107.6 million.

In addition to centrally awarded financial aid, U-M’s schools and colleges award merit and need-based scholarships, which directly reduce the loan and work-study amounts that students require to cover their expenses. Furthermore, the President’s Donor Challenge, a matching program launched by Coleman, has raised more than $60 million in endowed funds for need-based undergraduate financial aid.

The General Fund supports the University’s primary missions—teaching, research and public service. The main revenue sources for the General Fund are the state appropriation, tuition and indirect cost recovery from federally sponsored research. Although the exact amount of the state appropriation remains under discussion, U-M’s FY 2009 budget assumes a 2 percent increase over last year’s $323 million appropriation, or $330 million.

The newly approved General Fund budget represents a 4.5 percent increase over the previous year. The majority of new funds will go to academic units, with small increases to administrative units. The General Fund is one facet of the Ann Arbor campus’ total FY 2009 operating revenue budget of nearly $5.1 billion, which also includes the U-M Health System, intercollegiate athletics, and programs supported by gifts and research grants.

Vice Provost Philip Hanlon said U-M has been able to moderate tuition increases through disciplined cost containment efforts. Each year for the past five years, U-M has reduced General Fund spending by up to 2 percent through aggressive cost cutting and reallocations. As a result, U-M has trimmed more than $117 million in recurring costs and shifted the savings to high priority activities.

The University must continue to devote significant resources to recruiting and retaining faculty, Sullivan said.

“The excellence of our faculty is the single most important factor in determining the quality of our education and research,” she said. “Only by increasing support for faculty compensation will we be able to continue to compete successfully with other top public and private universities for outstanding faculty members.”

The budget includes first-time base funding to begin hiring 100 new faculty members. The new faculty hires will enhance the University’s interdisciplinary teaching and research efforts, as well as reduce the student-faculty ratio over the next several years.

Sullivan said operating costs are driven by the fact that education as an industry is both labor- and capital-intensive, and those costs rise faster than in other parts of the economy for a number of reasons:

• Labor costs generally rise faster than other prices, and 65 percent of the University’s total costs are for labor. Moreover, competition is strong for top talent, especially faculty.
• On-going investments in state-of-the-art laboratory facilities and sophisticated technological equipment are required to keep students and faculty at the leading edge of the full array of emerging fields. 
• Work and infrastructure demands increase with expansion of research and instructional activities. Over the past six years, the number of U-M students has grown 5 percent and research volume has increased 25 percent.
• The University preserves the past and invests in the future; it serves as library, museum, classroom and laboratory. As the sum of human knowledge and creative expression grows each year, the costs to operate museums, libraries, and other repositories of knowledge steadily increase.

Related Links:

• U-M Board of Regents