Office of the Provost

Budget Presentation to the Board of Regents

The University of Michigan -- Ann Arbor
FY2012 General Fund Operating Budget Recommendation
Executive Summary

June 16, 2011

The FY2012 General Fund budget plan seeks to maintain the excellence of the University of Michigan – Ann Arbor during a period of unprecedented financial stress. The proposed budget reallocates resources to our highest priorities so that the student experience can be advanced and the quality of the academic enterprise protected, despite a historic reduction in our state appropriation.

The FY2012 General Fund budget proposal incorporates a $47.5 million reduction in our state appropriation, the largest cut in the history of the University. This reduction puts the Ann Arbor campus’ appropriation at $268.8 million, slightly more than the amount received in FY1991 and over $90 million lower than the amount that was appropriated in FY2002, in nominal dollars (over $165 million lower in inflation-adjusted dollars).

The budget recommendation includes a tuition rate increase of $7971 (6.7%) for resident undergraduates and $1,7811 (4.9%) for non-resident undergraduates. Most graduate and professional rates are increasing by 4.9%, and a limited number of differentials are also recommended for specific programs.

Even with a 15% reduction in state support, the University’s commitment to our students and their families takes top priority in this budget, similar to prior years. The FY2012 budget recommendation includes an increased General Fund allocation of $8.2 million in centrally awarded financial aid and an additional increase of over $3 million from other sources, for a total increase of over $11.2 million. The majority of this funding ($9.2 million) is for need-based aid for undergraduate students, an 11% increase in that budget. This year’s financial aid investment is sufficient to cover the full increase in the cost of attendance (tuition and fees, housing) with grant aid for undergraduate students with financial need, resulting in no increase in packaged loan burden for those students, a significant accomplishment in a time of tightly constrained resources.

In addition, our unwavering commitment to improving the quality of the academic experience will not be compromised, and the proposed budget gives top priority to the University’s essential missions in education, research and public service by enabling critical investments through the reallocation of resources from lower priority activities. The recommended budget includes nearly $44 million in reductions for FY2012 that will be reallocated to assist with the budget challenge and to fund new initiatives and increase support for research and entrepreneurial programs.

Some of these savings are coming from the greater sharing of health benefits costs with employees, the implementation of a waiting period for our retirement savings plan, procurement initiatives, and expanded energy conservation efforts. Other administrative savings areas include operational reorganizations in facilities maintenance and building services. Additional savings will result from a combination of activities throughout the campus including reorganizations, the shift of expenditures to other revenue sources (gifts and endowment streams), reduced equipment expenditures (primarily through extending replacement cycles and/or reducing new equipment purchases), reductions in the level of facilities support, and improved purchasing practices.

However, given the magnitude of the reductions required in this year’s budget, we needed to look deeper into the academic enterprise for efficiency opportunities. For example, efforts are under way to examine our investments in centers and institutes, taking a hard look at their value, and scaling back or even closing them where appropriate. Given the level of state appropriation reduction, tough decisions must be made. Additional efforts will be taken to reduce costs and improve efficiency in the academic units, and some reductions may directly impact students.

The cost reductions in FY2012 are on top of the remarkable cost containment efforts of the past eight years during which we have succeeded in removing nearly $200 million in recurring General Fund expenditures through a combination of efforts. Working to achieve this level of cost containment has been both difficult and disruptive, but necessary. Consistently cutting and reallocating at a level higher than our rate of new investment will ultimately have a negative impact on the quality of the institution, so we must achieve stability in our revenue and continue with long-term savings efforts in the areas of IT rationalization, administrative services transformation and energy conservation.

The FY2012 General Fund budget proposal for the University of Michigan – Ann Arbor is the result of many years of financial planning and incorporates difficult tradeoffs. Even with the largest reduction ever in our state appropriation, we are able to enhance our commitment to students and their families by investing heavily in financial aid and ensuring a high quality student experience. This is possible because of our aggressive, long-term cost containment efforts and multi-year financial planning. The budget ensures that the University maintains its excellence, both in and out of the classroom, and remains a strong and vibrant contributor to the state, the region, and the nation despite a period of difficult budgetary challenges. Nevertheless, we must continue to be exceptionally prudent in our planning and financial management in order to protect the quality of the University or Michigan.

The attached Budget Narrative and associated Table 1 outline the General Fund budget recommendation for FY2012 in more detail.

We respectfully request approval of the proposed FY2012 General Fund budget.


Footnote

  1. Figures are per academic year for the most common undergraduate lower division rate

Attachments

FY2012 General Fund Operating Budget Narrative
Table 1: General Fund Budget Proposal