ANN ARBOR—The University of Michigan Board of Regents will be asked on Thursday (July 18) to approve a 2002-2003 budget that continues momentum on major University initiatives in a framework of widespread cost savings and reallocation of expenditures around the campus. State appropriations for higher education will be flat for the coming year, not increasing over FY2002 funding. Michigan public universities agreed to pass tuition increases for the coming year no more than 8.5 percent or $425, whichever is greater. Both educators and legislators regarded this as a positive development because severe budget pressures in Michigan could have led to actual cuts in state funding and resulting tuition increases that were much larger. “This University and higher education in general have been spared widespread cuts in state funding, and in this regard we have fared better than most of the major public universities in the country,” said Interim Provost Paul Courant. “This is our lowest increase in the state appropriation since FY1994, which was also zero, but given the state’s circumstances we recognize how fortunate we are.” The University will propose that Ann Arbor campus tuition rates increase by 7.9 percent for undergraduate students in 2002-2003. The proposed increase is the lowest of any public university in the Big Ten and second-lowest in the state, Courant noted. Graduate student tuition varies by program but most graduate tuition rates will increase by 5.8 percent. The University’s General Fund budget, as it has in recent years, will continue to focus most new resources on academic programs. Areas of priority include the life sciences, undergraduate education, distinguished scholarship and research, and the use and understanding of new information technologies. Examples of new or expanded efforts in these areas include: —New areas of research in Biomechanical Engineering such as biofluid mechanics, biologic micro- and nanotechnology, tissue engineering and biomedical applications of ultrafast optics. —Continuing expansion of the Department of Molecular, Cellular and Developmental Biology and Department of Ecology and Evolutionary Biology, with recruitment of new faculty and increases in graduate student support. —A new Global Intercultural Experience for Undergraduates Program, which sent its first 25 students to exciting locations around the world in summer 2002 for two to four weeks of academic study. —Expansion of the Arts at Michigan Program, which enables students to get engaged in arts opportunities at U-M in order to inspire a commitment to the value of the arts in their lives. —A multi-million-dollar upgrade to the University’s computing backbone and infrastructure, and increased budget support for schools and colleges to cover related operating costs. Recruitment and retention of top faculty and support for faculty and staff salaries continues to be a key component of the University’s budget, Courant said. While salaries are crucial in attracting and retaining excellent faculty, he said, equally important is the investment in facilities for faculty research and creative endeavors. The overall budget projects growth in the General Fund of about 5.5 percent (down from 6.3 percent last year), or $57.7 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 nearly $7 million, reflecting continued record levels of research conducted at the University. As both research volume and student enrollment continue to rise, they bring with them not only revenues but also corresponding costs associated with increased activity levels, Courant said. The University is seeing relatively rapid growth in costs in a number of areas, and the expenditure budget reflects these cost increases. These areas include employee benefits, particularly health insurance premiums and prescription drug coverage; maintenance of computerized data management systems; and upkeep of physical facilities. For example, the budget includes new funding of $2 million to replace chillers across the campus and another $1 million for debt service of renovation and construction. Insurance premiums for liability and property coverage also are increasing sharply, part of a national trend in response to the attacks of Sept. 11. Heading into this extremely tight budget year, Courant said, University units must find ways to cut costs in order to support their academic priorities, fund new initiatives, and provide for salary increases for faculty and staff. He cited several examples of the type of cost-cutting that is taking place across campus: —Many schools and colleges have deferred searches for faculty and staff positions, and many are filling vacancies at the senior faculty level with junior faculty instead. Some schools and colleges have reduced staff positions overall by not replacing retiring staff. —Units across campus are cutting down on travel, photocopying, hosting expenditures and the like. —The Purchasing Department continues to aggressively negotiate prime vendor contracts to save money on standard purchases. For example, agreements reached this year are estimated to result in a savings of 15 percent on purchases of office supplies campuswide. —Business and Finance studied the use of the motor pool and was able to cut 20 vehicles from the University’s fleet, saving about $100,000 per year. —Individual units are saving money in a variety of creative ways, including better management of supplies ($35,000 saved in the Music School), moving paper reports into an online system ($50,000 saved in the Office of Communications), and reorganizing the governance structure ($36,000 saved in the School of Natural Resources and Environment). Related material: Tuition 2003