Focus, Government, and Higher Education

State approves funding increase for public university operations

August 21, 2015
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Although the state is allocating additional funds to Michigan’s 15 public universities this year, the major source of university revenue continues to come from student tuition.

A Michigan House-Senate appropriations conference committee in May approved a $1.5 billion higher education spending plan for the 2015-16 state budget, and included an overall funding increase for public university operations at 1.5 percent, which varied by school based on performance.

The state-level Higher Education Budget not only provides financial support for Michigan’s 15 public universities, but also a number of higher education-related programs and financial aid programs for students attending public and independent academic institutions.

West Michigan-based universities include Ferris State University, Grand Valley State University, and Western Michigan University.

The FY 2015-16 Higher Education Budget approved by the committee included roughly $1.36 billion for university operations, an approximately $20.6 million, or 1.5 percent, increase from FY 2014-15, according to the Senate Fiscal Agency bill analysis.

Funding allocated to the universities actually ranged from 0.4 percent to 3.1 percent due to the use of a performance funding formula. FSU received approximately $50 million in state funding, an increase of more than $1.1 million, or 2.3 percent; GVSU had an increase of nearly $1.9 million, or 3 percent, for an overall $65 million in funding.

David L. Eisler, president of FSU, said while the funding is less than the previous year, the university is grateful for the increased support from the state.

“We have certainly seen many years where there was no increase at all and some years where there were pretty significant reductions,” said Eisler. “We are grateful the state recognizes the need for support of higher education, and the state understands the continued growth of our economy and creating bright futures for our citizens really hinges upon strong higher education.”

The roughly $50 million in state dollars will be used to keep the tuition increase at FSU for the upcoming year at 2.6 percent, and to provide additional financial support for students, according to Eisler.

“When you think about increased costs that are out there for managing a major institution, this helps us,” said Eisler. “Not every institution received the same amount; we received a little more percentage-wise because we do well on the performance metrics.”

Matt McLogan, vice president for university relations at GVSU, said the increase will be used exclusively for student financial aid and other programs related to reducing the cost of attendance.

“State appropriation has been a rollercoaster over the last decade. We had a significant 15 percent reduction in 2011 and we have not yet returned to our former level of support,” said McLogan. “We are glad that higher education was a priority in the budget process this year and we hope it continues.”

The Allendale-based university received the second-highest percentage increase in state funding this year — just behind Lake Superior State University’s 3.1 percent increase — or roughly $400,000 in state appropriation. GVSU has benefitted from the state’s policy of reviewing university performance and outcomes, according to McLogan.

“The legislature recognized the university for our efficiency, for our high retention rates, our high graduation rates, and for producing graduates in what the state is calling essential skills, which are science, engineering, technology, math and the health professions.”

While the 3 percent increase has allowed the university to grow its student financial aid for the coming year by 6 percent, McLogan said the number has to be seen in context since, today, students pay more than 80 percent of the cost of running the university.

“No student pays a bill of percentages — they pay in dollars, and a 3 percent increase in the state appropriations translates to five-tenths of 1 percent on the total university budget,” said McLogan.

“For most of the 20th century, the state provided the lion’s share of funds needed to operate the state’s public universities. Who pays has changed dramatically as the state has disinvested in its public universities.”

GVSU’s 2015-16 General Fund Revenue Budget, approved by the board of trustees in July, included more than $363 billion, with state appropriations comprising only 18 percent of overall revenue and tuition comprising 81 percent. The funding from the state will also go toward debt service, maintenance and utilities for classroom buildings, according to the July 10 GVSU press release.

“Governor Snyder and the legislature have attempted to reverse some of those disinvestments and have provided additional funding to all 15 public universities, and I hope that continues,” said McLogan. “I hope it means there is appreciation in Lansing for the importance of keeping the public universities stable, and in reducing the costs of attendance for students.”

For the upcoming academic year, Western Michigan University received more than $104.1 million in state funding, an increase of roughly $1.4 million, or 1.4 percent.

Greg Rosine, vice president of government affairs and university relations at Western, said given the context of last year’s budget process and revelations regarding tax credits being claimed, the university was getting word there would be a very good increase in the coming year.

“In December, as time progressed, it became more and more apparent there were some significant problems with the state budget and we knew it would become less likely,” said Rosine. “Is it a substantial increase for the university that allows you to pursue the strategic objectives or provide the kind of assistance you would like to provide to students? No, it’s not.”

The Kalamazoo-based university’s board of trustees approved a general fund operating budget of roughly $388 million for the 2015-16 fiscal year beginning July 1, which includes roughly $274 million anticipated in tuition and fee income from students as the top source of revenue, according to the June 3 WMU press release.

“It’s about state inflation adjustment. We have about 70 percent of money coming from students in the form of tuition as opposed to state aid. That is much different than it was years ago,” said Rosine.

“The constraints on state funding have been a major impediment. Even with the current discussion on road funding … it is another way of saying, ‘Let’s take money elsewhere from within the budget,’ and higher education has a prominence, takes up a large slice of that state budget pie.”

The FY 2015-16 Higher Education Budget also included Michigan Public School Employees Retirement System reimbursement of nearly $5.2 million to seven universities across the state.

“I think the most significant part, for us, was the recognition for seven universities that have some of their members in the Michigan Public School Employees Retirement System that there was relief provided — and Western was one of them — for the costs of that state retirement system,” said Rosine.

The governor’s proposal also included a rate cap for employer contributions for MPSERS unfunded accrued liability payments, which is similar to the cap introduced for K-12 and community college employers, according to the Senate Fiscal Agency bill analysis. Payments by the state for the rate cap will increase from $5.2 million this year to $10.3 million in FY 2035-36.

“What we were having to pay into the retirement system kept growing, and there were times, for some universities, almost the entire increase they were getting from the state of Michigan for operations was being paid right back to the state for the cost of this retirement system,” said Rosine. “We came to an agreement they were going to cap our contributions to that system; that will be a long-term, on-going savings for the universities.” 

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