Before budget presentation, lawmakers talk higher education

Higher education advocates have expressed several areas of concern over the potential for a cut in funding in the upcoming budget, following both a projected deficit and a proposed change in where the University’s state funding comes from. Republican Gov. Rick Snyder is expected to announce his budget Wednesday.

The deficit stems from an unexpectedly high number of businesses cashing in on previously allocated tax credits in the state’s general budget. Initial estimates from the House Fiscal Agency put the deficit at $454.4 million, but more recent reports from Michigan Budget Director John Robert estimate about $325 million.

Rep. Jeff Irwin (D–Ann Arbor), a member of the committee, said in an interview after the meeting that the deficit could have a significant impact on higher education institutions in the state.

“The budget deficit certainly puts pressure on higher education funding, and that’s going to make it more difficult for us to continue to make progress on funding our institutions of higher learning in a way that makes sense,” he said.

In May, the state’s electorate will vote on a series of proposed bills that are intended to provide funding to fix Michigan’s roads. As part of the plan, the School Aid Fund will only be eligible for use by community colleges and K-12 programs.

Public universities in the state currently receive close to 13 percent of their state funding from the School Aid Fund, as part of the $1.2 billion they receive from the General Fund. The Snyder administration has said the funding will now come entirely from the General Fund, as was the practice several years ago.

In addition to the monies from the General Fund, 13.5 percent of higher education funding comes from state-restricted funds, and 6.4 percent from federal funds. These in total comprise the over $1.5 billion that is distributed to colleges and universities across the state.

During the meeting, representatives highlighted that higher education funding has seen significant cuts in the past few decades, which has resulted in a rise in tuition. Over the past few years, state funding has fluctuated — in 2011, Snyder cut funding for higher education by 15 percent, but has raised it incrementally since.

2002 was the first year that the amount that the state appropriates was less than the amount paid by students, according to a report presented at the meeting by Marilyn Peterson, committee clerk and senior fiscal analyst.

Since then the gap between student tuition and state appropriations has only grown, according to the report.

Students contributed 71.4 percent of the total $5.9 billion that comprised the Public University General Fund Revenue for the 2013-2014 fiscal year. State appropriation only made up 21.3 percent of it, and 7.3 percent came from other sources.

“With the increasing reliance on tuition and fees, and decreasing on appropriations, the numbers simply work out that it becomes more difficult to make a large impact with state appropriation dollars,” Peterson said.

Irwin said the issue of rising tuition isn’t new, but rather had accumulated over a long period of time.

“You can draw a straight line between declining state support for higher education and increasing tuition,” Irwin said, “That’s what’s driving the outrage in student debt loads, and that’s the problem that the last couple decades of budgeting has caused.”

The majority of the committee also asked questions regarding how Michigan’s state funding to student funding ratio compared to other states’, which Peterson said she wasn’t certain.

The largest percent of the $1.5 billion that state institutions receive in appropriations — 88.4 percent — goes directly to universities through University Operational Support. The University of Michigan receives more funding for operational support than any other in the state: $295.2 million. The amount that each university receives is calculated based on the institution’s number of full-time students.

Seven percent of the remaining higher education appropriation goes to financial aid, 3.9 percent goes to MSU AgBioResearch/Extension, 0.4 percent goes to other university funding, and the remaining 0.3 percent is appropriated to other higher education programs.

During the meeting, members of the subcommittee asked whether the $500,000 provided for the North American Indian Tuition waivers is enough. The North American Indian Tuition waiver gives free tuition to Michigan public higher education students of at least one-quarter Native American descent.

State Rep. Michael McCready (R–Birmingham), the committee chair, asked what happens if there are more students of Native American descent enrolled in public institutions than the amount of money allocated to the fund.

“What’s presumed to be rolled up into the University Operations Grants does fall short of the actual cost of the tuition waiver programs,” Peterson said.

She added that universities typically make up the shortfall through their general funds.

The subcommittee also questioned whether language about the portion of financial aid funding currently allocated to the Michigan Competitive scholarship, which provides aid to students who attain a qualifying ACT score and demonstrate financial need, will be rewritten to reflect the fact that public schools in Michigan will now take the SAT instead of the ACT.

Besides the budget, the committee also discussed a concern for the future — the decrease in student enrollment in higher education in Michigan. There has been a growing trend of students not completing high school and in turn not going on to college, Peterson told the committee.

At least in the immediate time frame, that trend is not expected to change, she added.

However, unlike other schools in the country, the University did not experience a significant decrease in enrollment for the fall 2014 term.