Just hours after state economists estimated Michigan’s revenue shortfall at $370 million, University Provost Paul Courant confirmed Friday that the administration would most likely respond to any further cuts in the University’s funding by enacting rare mid-year tuition hikes for next semester

The state budget for the current fiscal year is based upon a larger revenue estimate released in May and that will force policy makers to make cuts to balance the budget as required by law.

Faced with a much larger shortfall of $900 million in each of the two previous fiscal years, Gov. Jennifer Granholm twice decided to cut higher education funding. It remains to be seen whether state universities will be on the chopping block once again this year.

“It would be premature to talk about what may or may not be on the table,” said Office of the State Budget spokesman Greg Bird, referring to higher education.

The University’s Board of Regents — similar to a board of directors — decided in July to restrict fall tuition increases to the rate of inflation in order to avoid stiff penalties from the state.

If the state does cut funding to public universities mid-year in an attempt to trim the budget, the regents will be able to raise tuition without incurring penalties.

“We had a very strong agreement with the state. … If the state is unable to keep its side of the bargain, we’ll have to change our side,” Courant said.

The University avoided mid-year tuition hikes during the 2003-04 academic year. A reduction in the hours of University custodial staff and the elimination of many administrative positions were just two of the alternatives the administration pursued to cope with the budget cuts.

But Courant said this pattern of belt tightening throughout the University cannot be sustained in light of the growing number of students. This year’s freshman class is the largest ever.

Still, Courant said, “We will have to look carefully at everything we can do.”

But the regents may be eager to exercise their independence from Lansing. In July, Regent Andrew Richner (R-Grosse Point Park) said he felt that the state “dictated” his primary job — the setting of tuition rates. Other regents have expressed similar resentment of state constraints on University tuition.

Courant also said the University’s highly successful Michigan Difference campaign — which has passed the halfway mark toward its goal of raising $2.5 billion in private donations — would be of limited use in the event of mid-year cuts in state funding.

“Philanthropy is a key element of the University’s ability to weather these storms,” he said, but added that benefactors often earmark donations for specific purposes, and as a result the University could probably not use donations to offset general budget cuts.

This was the case with the record $100 million that University alumnus Stephen Ross donated to the Business School for the express purpose of the school’s refurbishment.

Courant affirmed, however, that the University’s major housing renovations, set to begin next summer when West Quad Residence Hall is scheduled for a makeover, will not be affected by any further cuts in state appropriations and will proceed as scheduled.

Mid-year tuition hikes may surprise many students, but they are consistent with remarks Courant made in July, when he said he would recommend the increases if the University’s funding was cut.

He emphasized that mid-year tuition hikes are not set in stone, adding, “It really is premature … until we know what we’re responding to.”

The University will have to respond when Granholm finalizes her spending reduction plan, which she may release before her revised budget for FY 2005 comes out next month. Revisions to the budget require the approval of the Senate and House appropriations committees.

Armed with an official estimate of state revenue for FY 2005, Granholm will have to make some tough choices as she balances the budget in the coming weeks.

Despite all the uncertainties, there is one early indication of the impact of state budget shortfalls.

“We do not have any plans to cut (funding) for K-12 schools,” said Bird. If these plans hold, the state will have to cut other state-funded programs and institutions to make up for a $113.2 million shortfall in the school aid fund, which subsidizes K-12 schools.

 

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