'U' faces tough budget choices

BY MICHAEL GUROVITSCH
Daily Staff Reporter
Published February 13, 2004

A provision in Gov. Jennifer Granholm’s 2005 budget
proposal could decrease the amount of state funding the University
receives by 6 percent if it does not agree to keep tuition
increases below the rate of inflation.

The $39.7 billion proposed budget, officially released
yesterday, includes $494 million in cuts and $391 million in new
revenue necessary to balance the state’s budget.

Late last year, the state legislature approved a supplemental
budget that reduced higher education allocations by 5 percent.
Universities and colleges that agree not to increase tuition above
the rate of inflation would receive 3 percent of the decrease
back.

Granholm’s proposed budget would keep the promise to
return the 3 percent to schools that complied with the
“tuition restraint,” while levying an additional 3
percent penalty on those who did not, State Budget Director Mary
Lannoye announced during a joint meeting of the House and Senate
Appropriations Committees yesterday.

“Schools that pledged not to increase (tuition) got base
funding restored,” Lannoye said. “Those who do not
accept will have aid reduced by another 3 percent. …Will
(they) accept this challenge to hold down fees?”

University President Mary Sue Coleman said in a written
statement that if the school keeps its tuition below the estimated
rate of inflation, 2.4 percent, the University will face a
cumulative base budget cut of $43 million.

If the University were to raise tuition more than 2.4 percent,
then the cumulative budget cut over the past 13 months would be
$62.5 million.

The situation puts the University in a bind, as it is still
reeling from more than $16.4 million in budget reductions handed
down in December, which exacerbate the 10 percent cuts from the
previous year.

“We are carefully studying the short and long-term effects
of the proposal,” Coleman said. “We must assure both
the affordability and academic quality our students demand and
expect.”

State Rep. Chris Kolb (D-Ann Arbor) said one of the goals of the
tuition cap is to make college more affordable. “I’m
supportive of it. I’m hoping universities will be able to
meet it … Not participating would not be financially
prudent,” he said.

“It is not that (the University) isn’t complying
… (they are just) waiting until they have a better picture
of a whole situation,” Kolb added.

Lannoye emphasized that the budget proposal focuses on not
increasing general tax rates.

“Although we face a massive hole in our budget due to
reduced federal funding and the effect of an economic slowdown,
this budget is a blueprint for growing our state’s economy
and enhancing our quality of life,” Granholm said in a
released statement.

The proposed budget also calls for a 75 cent per pack increase
in the cigarette tax. Lannoye outlined the estimated benefits of
the proposal, including an increase of $295 million, $30 million of
which would be earmarked for smoking cessation programs, with the
rest going to help fund Medicare. These figures take into account a
15 percent reduction in smoking as a result of the tax hike.

Lannoye said raising cigarette prices would also cause about
60,000 Michigan adults to stop smoking and 94,000 kids to never
start smoking.

“Teenagers are the most price-sensitive, so when you raise
(the) price of cigarettes, they are the first ones to quit,”
she said.

Kolb said he agrees with the tax increase. “Are we
supposed to encourage that person to smoke and cause great harm to
themselves, but also (to others) in that household.”

Granholm also proposed raising the liquor markup —
excluding beer and wine —from 65 to 74 percent, raising an
additional $35 million.

The increase would raise the cost of a $9.47 bottle of vodka to
about $10, the Associated Press reported.

“The liquor money goes so we can for once fully fund the
fire protection program in communities like Ann Arbor,” Kolb
said, adding that the city has been getting only 23 cents to the
dollar of what it is owed.