Jared Stolove: U-M Ann Arbor doesn’t need state funding

Wednesday, October 2, 2019 - 5:11pm

Last year, a coalition of University of Michigan faculty and students launched the One University (1U) campaign, with the goal of advocating for more equitable funding across U-M’s three campuses. The campaign’s efforts culminated in May with the opportunity to speak directly to the Board of Regents at their meeting in Dearborn, after which the board did not implement the changes that 1U sought out. Despite this setback, the movement has built considerable momentum, with several regents expressing support and multiple state lawmakers publishing an op-ed advancing the 1U’s viewpoint.

1U’s argument is simple: The University’s Ann Arbor campus is substantially better-funded than either of the Flint or Dearborn campuses ­– a problem exacerbated by the fact that Ann Arbor students tend to be from significantly more advantaged backgrounds. The argument of those who oppose the coalition’s view, such as University President Mark Schlissel, is also simple: The three campuses have different purposes and different goals, and the funding stream reflects that. While I’ve always found the “different goals” argument to be a dismissive response to a highly consequential issue, I also have been hesitant to fully embrace 1U’s mission. 

Most of the people I had heard advocate for 1U were either students at Flint and Dearborn — who only had things to gain — and Ann Arbor students like me, who come from wealthier backgrounds and would therefore be well-insulated from the impacts of budget cuts. On the other hand, many of my friends in Ann Arbor come from small towns in rural Michigan and are not necessarily better off financially than those students at Flint or Dearborn.

Moreover, research shows that students who attend U-M’s Ann Arbor campus from less wealthy backgrounds are nearly twice as likely to move up the income ladder as students at Flint or Dearborn. Initially, I worried that budget cuts could reduce U-M Ann Arbor’s effectiveness as a platform for social mobility for people like my friends, either by harming the quality of the education they had worked hard for, or by reducing the financial aid they depended on to go here.

However, when I actually set out to look into the budgets of the three campuses, I realized that 1U was stating their case in the most conservative way possible. 1U’s research already indicates that Ann Arbor students receive over twice as much state funding per student and well over twice as much total funding in comparison to Flint and Dearborn. But this is calculated based only on the U-M General Budget. The General Budget, which comprises only of the revenue that U-M generates through tuition and state funding, accounts for less than a quarter of U-M Ann Arbor’s funding, as compared to over 80 percent of funding for the other two campuses.

The rest of Ann Arbor’s funding comes from interest off of its $11.9 billion endowment, research grants from foundations and the federal government, designated funds and “auxiliary” components of the campus, like Michigan Medicine and Campus Housing, which generate their own revenue. These funding streams, which result from the Ann Arbor campus’ status as a world-renowned research university with wealthy alumni, are simply less to the other campuses. Once these other funding streams are factored in, the calculations show that state funding shrinks to 3 percent of the Ann Arbor campus’ total budget, compared to over 15 percent on both of the other campuses. The endowment interest alone brings in millions of dollars more than the totality of state funding. This means state funding for U-M Ann Arbor students, which, to reiterate, is twice that of Dearborn and Flint, is barely significant in the context of the campus’ total budget.

Thinking about my initial reservations about 1U’s arguments, I looked into financial aid. Unsurprisingly, the Ann Arbor campus spends only a miniscule amount of its total budget of financial aid – just 3 percent compared to 10 percent and 18 percent at the Flint and Dearborn campuses respectively. Since U-M Ann Arbor also relies so little on state funding, this means that reallocating state appropriations would be unlikely to significantly affect financial aid on the Ann Arbor campus.

To get a sense of how big the effect of reallocations might be, I did some back-of-the-envelope calculations. I held each campus’s percent spending on financial aid constant, and transferred an amount equal to one quarter of the Ann Arbor campus’s state funding to the other two campuses. The result? Average financial aid packages in Dearborn and Flint by increased by over 15 percent, while reducing Ann Arbor students’ financial aid by less than one percent. In light of numbers like these, the current funding structure isn’t simply unfair or inequitable: It’s completely at odds with common sense. 

Of course, the effect of reallocations might not be exactly what I found. There is a good reason why 1U only considers the General Fund in their calculations: much of the rest of the budget is earmarked for specific activities. Endowment donors want their money spent on specific programs, foundation funding is tied to particular research projects, and units like Michigan Medicine need much of their revenue to carry out daily operations. However, these funds heavily subsidize many of the activities, such as research, student services and financial aid, that are also paid out of the General Fund. Not accounting for these components completely disregards the enormous amount of funding that benefits Ann Arbor students at the cost of those in other campuses.

Ultimately, the Ann Arbor campus simply doesn’t need state funding the way that either the Flint or Dearborn campuses do. U-M Dearborn and Flint students come from less advantaged backgrounds and receive less funding and support even while their schools dedicate much larger portions of their budget to serve students. These disparities across campuses can’t be erased, but it’s clear that they can be easily improved. What isn’t clear is why Schlissel, the Board of Regents, and the state legislature refuse to take action.

Jared Stolove can be reached at jstolove@umich.edu.