Specific proposals and figures in the University’s budget are often kept secret until the budget is presented to the University Board of Regents in June, but this year administrators have released much of the proposal early.

The information, acquired by The Michigan Daily over the course of several interviews with University President Mary Sue Coleman, Provost Teresa Sullivan and Phil Hanlon, vice provost for academic and budgetary affairs, includes several recommendations for next year’s budget.

One of the main sources of revenue for the University’s academic mission — state appropriations — won’t be finalized until the final state budget is passed in September. But, in an interview last week, Hanlon said budget predictions from the state place next year’s state budget down 15 to 20 percent from this year’s budget. Hanlon said in the current budgeting, the University has assumed a 3-percent reduction in state funding, but that the number will be revised as June nears.

In an interview last month, Sullivan said the uncertainty surrounding state funding makes it especially difficult to predict what level of funding the University will receive from the state.

Language from the federal stimulus bill requires states to continue funding higher education at 2006 levels, which was the lowest year of state funding for the University in recent years. However, Coleman said the state could apply for a waiver to allow it to fund higher education at lower levels.

Sullivan and Coleman both stressed that the federal stimulus bill may also present some unique opportunities for the University next year.

If the University receives stimulus money through the state, Sullivan said there are several things the University could use the money for, including a temporary increase in student financial aid. However, she stressed that the stimulus money — which is a one-time sum — should not be used for an ongoing expense as that could create a structural deficit in the University’s budget.

Another major funding source academic activities at the University is student tuition, which has not been finalized yet. When asked how the University would handle the increased costs next year, Sullivan said cost containment efforts would help, but admitted they probably wouldn’t cover the entire cost increase.

“We’ve already squeezed a lot out of the budget and that’s why additional cost containment is hard, especially in the short run,” she said.

Other revenue sources will include indirect recovery costs for research projects at the University, which pays for utility costs at the University that are associated with research projects funded by grants, and endowment revenue, which typically pays for 8 percent of the University’s operating expenses.

Hanlon said current projections show an increase in expenses of $10.3 million, before considering non-union staff and faculty raises and increases to financial aid paid by the University. Hanlon said this amount is much less than in previous years, when cost increases have ranged from $55 to $70 million.

Past year’s figures for salary increases to non-union staff and faculty have ranged from $15 million to $21 million. Hanlon said it was still unclear how much salaries would be increased next year.

According to Hanlon, a 1-percent increase for non-union staff would cost the University $2.8 million. Additionally, he said a 1-percent increase for faculty would cost the University an additional $3.36 million.

In an interview yesterday, Sullivan said she wasn’t sure yet what raise, if any, faculty and non-union staff would receive. Sullivan said while employee productivity makes her want to give employees a raise, she’s not sure how it would all be funded.

To help cope with expected cost increases and expected declines in state appropriations, Hanlon said University administrators have proposed a number of cost containment efforts for next year.

Hanlon said the University has also put several capital projects — including an academic building and parking structure on North Campus, a similar project on Wall Street and an underground storage facility for artifacts at the William L. Clements Library — on hold, until the economic situation improves.

One reduction to the budget will include eliminating centrally funded key initiatives. Past funded key initiatives have included the 100 new faculty initiative, which was fully funded last year but is still being implemented. Next year any new initiatives will need to be funded through a reallocation of funds, requiring deans to sacrifice current activities to finance new activities, Hanlon said.

The University will also freeze funds for faculty retention programs and incentives at current levels. In past years, funds for faculty retention and recruitment have been increased by as much as $4.5 million in one year. Sullivan said making this decision was very difficult since the University wants to retain its outstanding faculty members in an increasingly competitive market. Hanlon echoed Sullivan’s remarks, but said the current job market should help to reduce the need the use these funds.

Changes to University employees’ health care packages will also be made in January to help control costs. Instead of the approximate 20 percent paid by employees for their health plan, they will now be responsible for paying 30 percent.

New hires to the University will also be confronted by a recently announced plan to implement a one-year waiting period on University contributions to new employees’ retirement funds. Sullivan said the change is expected to save approximately $6 million in the next year alone.

Hanlon said the University has hired a consultant to explore the possibility of outsourcing some services at the University. Among the possibilities, Hanlon said the consultant is currently considering the possibility of outsourcing telephone services and student e-mail.

Additionally, Hanlon said other cost containment efforts will include the consolidation of information technology services, restructuring the University Press as part of the University Library System and the implementation of best practices for the use of endowment funds.

Despite the measures being implemented to control costs, Sullivan said she doesn’t expect that cost containment efforts will be able to make up for projected increases in expenses.

Over the past six years, the University has eliminated approximately $135 million in expenses. The savings are attributed to several changes, including renegotiating purchasing procedures to receive additional discounts and making buildings on campus more energy efficient to reduce utility costs.

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