When Republican Gov. Rick Snyder cut the state’s higher education budget by 15 percent in 2011, he also reintroduced a mechanism to incentivize state universities to limit the size of their annual tuition increases. This effective cap on tuition hikes, known as “tuition restraint,” makes the state’s provision of performance funding conditional upon a university certifying it will not raise its tuition above a certain threshold.
The state capped tuition increases at 3.75 percent for the current school year in last year’s state budget, and the current budget will lower the cap to 3.2 percent for tuition next year. This stricter threshold, however, is being met with a 6.1-percent increase in state appropriations, marking the third straight year of budget increases since the initial cut.
Snyder said during a conference call with college newspapers last week that the tuition increase caps have been successful, and that he wants to help universities reduce their costs going forward. In addition, the Presidents Council, State Universities of Michigan has also not found the caps to be too burdensome on university operations.
“Do we like them? No. We think it really undermines our autonomy, but we’ve accepted them because they’ve been reasonable in relationship to growth in state appropriations,” said PCSUM Executive Director Michael Boulus.
With the exception of Wayne State University’s 8.9-percent tuition increase last year, all state universities have complied with the cap since it was instituted. University of Michigan officials and policy analysts have not viewed the cap as particularly burdensome on operations.
The law still allows for schools to raise tuition and the penalty for exceeding the cap is not severe. Penalties would come in the form of eliminating schools’ performance funding. Of the state’s $1.4 billion outlay for higher education, $74.6 million, or roughly 5 percent, goes toward performance funding. For Wayne State, the consequence of raising tuition above the cap last year was a reduction of $534,700 from their $183 million allocation from the state.
Still, the state’s attempt to reign in tuition costs as its own contributions to universities have declined could be more consequential should current fiscal trends continue. The proportion of state funds and tuition dollars in the University’s budget has almost fully reversed. In 1960, state appropriations accounted for 78 percent of the University’s general fund; today, the state contributes just 16 percent to that budget, while tuition revenues represent 71 percent of it.
The exploding cost of tuition is a direct result of this significant decline in state support. Due to the state’s reduced role and the fact that the cost of attendance is becoming unaffordable for a growing number of students, according to Boulus, financial aid now occupies a greater share of universities’ operating budgets. Some fear that a cap on tuition increases could inhibit the University’s ability to provide financial aid, but it has managed double-digit percentage increases in the financial aid budget for nine of the past 10 years. The largest percentage increases have occurred in the past two years — at 13.7 and 13.4 percent, respectively — even as the cap on tuition increases has become more restrictive.
“For the last several years we’ve increased financial aid at a rate that for the students who have the highest financial need, they’re essentially shielded from the increase in tuition,” said Cynthia Wilbanks, University vice president for government relations.
The Snyder administration was not the first to introduce tuition restraint into its budget language. Former Democratic Governor Jennifer Granholm’s first budget in 2003 specified an intent to keep tuition increases “reasonable.” Then in 2004, the state provided additional funding to universities that did not adopt a tuition increase, and the following year implemented a 2.4-percent cap on tuition raises tied to the provision of a small portion of state appropriations. In 2006 and 2007, the state budget required that universities match its increase in resident undergraduate tuition with an equal percentage increase in its general fund financial aid expenditures.
While Michigan’s state universities have not had a problem with the tuition conditions so far, Boulus warned that could change.
“If it gets out of line and the tuition restraint doesn’t mesh well with whatever increase or decrease we receive from the state, there will be a pushback,” he said.
The issue of tuition caps has not explicitly been raised in the context of the governor’s race, but Democratic gubernatorial candidate Mark Schauer has repeatedly criticized Snyder for his initial 15-percent cut in 2011, and has vowed to restore the budget to pre-2011 levels.
“Mark supports caps on tuition increases as one tool to make college more affordable for the middle class,” said Cathy Bacile Cunningham, Schauer’s press secretary. “However, he believes the best way to make college more affordable is to reverse Governor Snyder’s cuts to our colleges and universities, while increasing need-based financial aid. Mark’s jobs plan also calls for establishing a student loan refinancing authority, which would allow students to refinance their college loans at more affordable rates.”