Proposed budget includes 6.5 percent tuition increaseANN ARBOR—Facing its most difficult budget challenges in many years, the University of Michigan will present a 2001-2002 budget to the Board of Regents Thursday (July 19) that is “designed to sustain the quality of the University, consolidate the gains of the past few years, and maintain momentum on our most important initiatives,” said U-M President Lee C. Bollinger.

The state appropriation to the University will increase by 1.5 percent for the coming year, far below inflation. U-M Provost Nancy Cantor noted that there has been a direct relationship over the years between state funding and tuition increases for U-M students.

The proposed tuition increase for most students at the U-M, both undergraduate and graduate, in-state and out-of-state, is 6.5 percent. That figure is among the lowest in the Big Ten and among public institutions in the state of Michigan, continuing a four-year trend, said Paul N. Courant, associate provost for academic and budgetary affairs.

[Proposed College of Literature, Science, & the Arts tuition for lower division (freshman and sophomore) students]

[Proposed Candidate tuition and fees]

“We have worked hard to restrain our tuition increase despite the difficult state funding environment and rapidly rising costs in areas such as utilities, employee benefits, and information technology,” he said. “Other institutions in the state and the region are facing much the same pressures we are, and in general they are responding by increasing tuition rates quite sharply for the coming year.”

Natural gas prices, in particular, more than doubled in the past year. The University’s central power plant runs on natural gas, which burns more cleanly than other available fuels, providing steam and electricity to the campus. In FY2001 the University spent $13.7 million more than budgeted for natural gas. Reflecting recent reductions in natural gas prices, the budget for FY2002 includes an $8.4 million increase.

Other unavoidable cost increases include an additional $7 million in faculty and staff benefits—driven primarily by the cost of medical care and prescription drugs—and the new costs of operating the University’s administrative information systems. The investment in the new, University-wide financial, student administration and human resource information systems had been funded as a series of one-time costs in each of the past five years, but will now be supported by an annual General Fund allocation.

The budget, if approved by the Board, will continue to support commitments in four broad areas of priority: the Life Sciences Initiative, the undergraduate student experience, the information revolution, and maintaining excellence in research, scholarship and teaching through the recruitment and retention of top faculty. The first three areas have been the subject of special commissions appointed by President Bollinger.

Courant highlighted some of the efforts and accomplishments that fall under these major priorities: Construction of the new undergraduate science center. Construction of the Life Sciences Institute building and recruitment of Institute faculty and staff. Three new team-taught, interdisciplinary undergraduate courses in the life sciences that will be offered beginning in the fall. Restructuring of the Biology Department, including recruitment of additional faculty and staff, improved facilities and additional graduate student support. In the College of Literature, Science, and the Arts (LSA), a transformed undergraduate concentration in Organizational Studies. A new office of instructional technology and expanded peer mentoring programs in the College of Engineering. A pilot in Fall 2001 of the Health Sciences Scholars Program, which will bring together faculty, students and professionals from a wide range of disciplines and backgrounds in academic, residential and real-world settings to explore a broad range of health-care issues. A virtual-reality medical theater, developed by the Medical School and the Department of Emergency Medicine, that immerses interns in the environment of an emergency room and tests their ability to develop and carry out a plan of action. Investment in the campus data network and infrastructure in order to address pressing needs identified by the President’s Information Revolution Commission.

Retention of faculty continues to present a challenge for the University, Courant said. Although resources have been focused in the past few years on improving faculty salaries, he said, “we continue to face severe competitive pressure on the wages and working environments of faculty.”

Salaries of faculty nationwide rose last year by 5.3 percent, with salaries at the top universities rising even more sharply. “At U-M, faculty salaries rose by an average of 5.1 percent during FY2001, implying that we are not quite keeping up with the competition,” Courant said. In the sciences, he noted, there is also competition for improved laboratory and research equipment and facilities for faculty.

The overall budget projects growth in the General Fund of about 6.3 percent, or $61.4 million. The General Fund is comprised of state appropriations, tuition revenues and indirect cost recovery from sponsored research. Indirect cost recovery is expected to grow by more than $19 million (18.5 percent), reflecting record levels of U-M research activity and associated costs.

When basic budget commitments are factored in for the instructional costs of increased enrollment, increases in financial aid, increased research activity levels, utility and employee benefit cost increases, and the like, the resulting amount is $20 million less than is needed to offer minimally competitive salary increases for faculty and staff and to meet other essential commitments, Courant said. The difference is made up by cost savings and reallocations from elsewhere in the budget.

Examples of cost savings in the proposed budget include: Renegotiating the contract for local phone service, saving $500,000 per year. Purchasing electricity from Engage Energy for a $1.2 million annual savings. An enhanced focus on supply chain management through programs designed to allow less expensive processing of orders, encourage faster service and take advantage of volume discounts. Reallocation of faculty and staff from academic programs where enrollments are falling to ones in which enrollments are rising.

“Most important is the general emphasis this year on consolidation,” said Courant. “Our faculty and academic leadership are putting a great many plans on hold, and focusing their resources on doing what is essential to retain the faculty, teach the students, and meet our highest academic priorities.”

2001-2002 budgetNancy CantorundergraduateProposed College of Literature, Science, & the Arts tuition for lower division (freshman and sophomore) students]Proposed Candidate tuition and fees]Life Sciences InitiativeBiology Department