Coinciding with approval of the University’s budget, the University’s Board of Regents unanimously voted Thursday to increase in-state undergraduate tuition by 1.6 percent and 3.4 percent for out-of-state students. Tuition for graduate students in most programs will increase by 2.4 percent.

At their monthly meeting, the Regents also approved an operating budget for the institution’s Ann Arbor campus of nearly $1.8 billion for fiscal year 2015. The budget marks a 4.1 percent increase in the University’s total expenditures compared to the previous year. It also calls for cutting $24 million in recurring General Fund expenses and a $19.5 million increase in financial aid.

The University’s entire budget — which includes all the University’s campuses, the health system and the athletic department — totals more than $6.9 billion.

The final budget comes after Republican Gov. Rick Snyder signed into law a state budget earlier this month that increased funding to public universities by 5.9 percent. The increase amounted to an additional $18.5 million for the University’s three campuses.

Despite receiving a larger funding bump from the state, the tuition increase is slightly higher compared to the previous year’s increase. Last year, the University approved an in-state tuition increase of 1.1 percent, the lowest hike in 29 years.

In a press briefing before the meeting, University Provost Martha Pollack said the University will use the state’s increased funding allocation in part to keep tuition rates down for in-state students.

Pollack said the University would have likely needed to increase tuition rates further without the increase in state funds. However, she noted the allocation is still only equivalent state funding levels in 1964 when measured in real dollars.

Though the budget and tuition fees for the Ann Arbor campus were approved unanimously, a handful of regents and executive officers engaged in a fairly lengthy discussion over the merits of increasing tuition when state funding is up.

Andrea Fischer Newman (R), chair of the Board of Regents, asked a question she said she will certainly be asked of her following the vote: is there a level of state appropriation when the University won’t feel the need to increase tuition?

“It concerns me that many people have asked for a higher appropriation from the state every year and the state is starting to respond and I appreciate that,” she said. “But I think we need to be responsible stewards of that increase. So I wonder why we have to have an increase in tuition when the state is stepping up to the plate?”

However, Pollack said the University not only has to account for cost increases due to inflation, but must also continue to grow and remain competitive. Increasing expenditures, she said, requires more funding from both the state and from tuition fees.

“We do work extremely hard … but we also really need to protect the excellence of the University,” Pollack said. “And that means we have to compete for faculty … and of course we’re coming off of a whole decade of cuts … So will we ever not need a tuition increase? I don’t know the answer to that.”

She said she would like to see the University keep tuition hikes below the rate of inflation. Pollack — along with Regent Andrew Richner (R) — noted the officials need to keep the tuition curve “smooth” instead of spiking tuition whenever there’s a drastic funding cut.

“You can’t look at one year in isolation,” Richner said. “We don’t want to shock our students with a huge increase. We would all like to get to a point of holding tuition firm.”

Regent Denise Ilitch (D), who last year voted against increasing tuition, voiced approval of the proposal prior to the vote.

“I detest tuition increases and wish we never had to do them,” she said. “But this year and this particular budget, I feel very good about. Everyone has paid some kind of price for us to keep our tuition increase low.”

The conversation also referenced an ongoing debate of the state’s role in funding its public universities. In recent years, the University has increasingly relied on its own endowment and fundraising clout to compensate for the decline in state funding and the desire for expanded expenditures.

At the front-end of the meeting, Timothy Slottow, the University outgoing executive vice president and chief financial officer, delivered an annual report on the University’s fiscal condition.

Even as state appropriations improve and Michigan’s economy begins to rebound, Slottow said the University will continue to grapple with rising health care and energy costs, as well as pressures to remain competitive in faculty pay and financial aid.

However, he also detailed efforts to grow the University’s endowment to supplement reductions in state appropriations. In fiscal year 2014, the endowment provided $231 million to the General Fund compared to $125 million in 2005.

While Regent Mark Bernstein (D) again emphasized the dismal state allocation compared to previous decades, Newman said the University is the part that’s making the decision to grow.

“I have difficulty rationing those numbers because we are making the decision to grow and we are telling the state to keep up,” she said.

Tied in with calculating tuition rates, the University is also investing an additional $19.5 million in financial aid in an effort to keep the cost of attendance stable for most students with need.

Pollack said the aid would allow most in-state students to rely less on loans due to expanded funding in the form of grants. She said the University has spent the past six years focused on increasing financial aid for families earning under $60,000 annually. This year, the financial aid budget will also emphasize expanding aid for families in the $60,000 to $140,000 per year income bracket.

The increased allotment to student support is also allowing the University to more than double the amount of financial aid that can be provided to out-of-state students. Pollack said the University is continuing to use out-of-state tuition in part to expand need-based grants for out-of-state students. She said expanding financial aid for all students is key to improving the University’s diversity — a topic that has drawn acute attention from the campus in recent months.

Tuition alone for out-of-state students will now total $41,478 compared to $13,158 for in-state students. The hike amounts to a $210 increase for in-state undergraduates and a $1,380 hike for out-of-state undergraduates.

In contrast to the University’s strategy of bolstering aid to improve affordability, some public institutions, such as Ohio State University, have opted to freeze tuition.

At the Mackinac Policy Conference last month, Mitch Daniels, the president of Purdue University and the former governor of Indiana, lauded his school’s efforts to keep tuition rates static.

“We have to take seriously the job of being accessible and affordable,” he said.

In Michigan, however, multiple public institutions have also opted to raise tuition this year. Officials at Eastern Michigan University and Western Michigan University, for example, approved tuition increases of 3.2 percent. Michigan State University and Wayne State University have yet to approve tuition fees for the upcoming academic year.

On top of cushioning tuition rates, the University will also deploy the state’s additional funding to hire between 60 and 80 new faculty members over the next two years in a $6 million program aimed to increase the number of small classes for undergraduates.

The budget will also provide for new academic programs in robotics, entrepreneurship and in the School of Information. Pollack also highlighted the creation of an initiative that will provide long-term laptop loans to students. She said five percent of LSA students do not have laptops and the program can be a key factor in improving on-campus climate.

In a separate agenda item, the regents also approved a 2.5 percent increase in room-and-board rates. Part of the funding is earmarked for increasing operating costs while the remaining two percent will help fund continuing renovations of residence halls such as South Quad and West Quad.

The regents also voted to approve a $2 increase to the student fee assessed for Central Student Government, bringing the total to $9.19 per term. The measure passed with a 6-2 margin.

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