As Gov. Jennifer Granholm slashes the state budget to avoid further ballooning the deficit, University students and their parents can anticipate significant tuition increases come next fall. Along with the usual moaning and groaning about the increased costs of education, students might wonder – where exactly does all that tuition money go?
All tuition money goes directly into a general fund, which is then used to pay for a variety of student services.
“Most of what you see as a student, with the exception of athletics and the hospital, are paid for out of the general fund – from the projectors used in classrooms, to professors’ salaries and custodial staff pay,” University Provost Paul Courant said.
It may come as a surprise to many students that tuition only contributes to about 55 percent of the general fund, while the bulk of educational revenue comes from other sources, Glenna Sweitzer, director of the Office of Budget and Planning, said.
“The cost of educating (a student) is significantly more than what you pay in tuition,” Courant said.
The remaining percentage of educational revenue comes primarily from the state’s appropriation and federal grants, Sweitzer said.
Education senior Agnes Aleobua said she expects a large percentage of the costs of education to be covered by government aid. In fact, she thinks more federal and state money should help defer the costs of education.
“Education is something that should be provided for every citizen, regardless of cost. The U.S. can afford to educate more people for less,” Aleobua said.
Many students said they were not aware that the government contributed so much to University costs.
“I had no idea before,” LSA freshman Kenyon Richardson said.
In 2003, an astounding $364 million – or 35 percent of the general fund – came from the state appropriation revenue. In order to make up for some of the lost revenue, the University will also have to raise tuition more than it expected, Courant said.
“There will be tuition increases, I’m sure. There would have been tuition increases without increases in the state appropriation,” Courant said.
But Courant is especially concerned about the decrease in state appropriation.
“The state fair of the general fund could fall to 31 percent – that’s huge,” Courant said.
The remaining 15 percent of the general fund comes primarily from indirect cost recovery, said Ruth Kallio, associate director of the Office of Budget and Planning. This is federal money that supports the indirect costs of research. Indirect costs could include maintaining a building with a research laboratory or updating the libraries with journals necessary for research.
General fund revenue is used for a variety of activities, as show in the chart.
Most of general fund money, about 67 percent, is used to pay for the operation of schools and colleges, while about 20 percent of the fund goes toward paying for the executive officer and service units, including the offices of the president, vice presidents and general counsel. Other items that come out of the general fund include financial aid and utilities.