In a rare 6-2 vote, the University Board of Regents passed a 5.6-percent tuition rate increase for both in-state and out-of-state University undergraduates for the 2009-2010 academic year at its June 18 meeting.

The rate increase will bring the annual cost of tuition to $11,659 for in-state undergraduates in the College of Literature, Science and the Arts and $34,937 for out-of-state undergraduates.

The tuition rate figure represents a $622 increase in annual tuition for an in-state undergraduate and an additional $1,868 for an out-of-state undergraduate.

The regents also approved a 5.6-percent increase for students in the Rackham School of Graduate Studies, a 6.7-percent increase for students attending the University of Michigan-Dearborn and a 6.5-percent increase for the Flint campus.

University Provost Teresa Sullivan described the increase — which is the same as last year’s rate increase for in-state and out-of-state undergraduate students — as modest compared to other public institutions in the Big Ten.

“This represents an average rate of growth and tuition that’s been among the lowest of public universities in Michigan and also in the Big Ten,” Sullivan said.

Not all public institutions have approved tuition rates for undergraduate students for the 2009-2010 academic year. But, Michigan State University approved a rare two-year budget plan, which includes a 5.2-percent tuition increase for the upcoming academic year and a 4.9-percent increase for the next academic year.

If MSU receives federal stimulus dollars, the tuition rate increase for this fall could be reduced to about 2.5 percent.

Additionally, Ohio State University announced in March that it will not increase tuition rates for Ohio residents for the next academic year.

The tuition rate increase, combined with enrollment changes, will bring in a projected $54 million in revenue for the University.

Regents Julia Darlow (D–Ann Arbor) and Denise Ilitch (D–Bingham Farms) voted against the tuition increase, breaking the regents’ two-year streak of unanimous approval of the budget.

Ilitch said she believes University students should not be forced to pay an increase in tuition, especially with the state’s current economic situation.

“Just like families across Michigan are doing during these tough times, we need to re-evaluate our priorities and our budgets,” Ilitch said. “We have to fix our budget crisis from within — not on the backs of working students and families.”

Ilitch added that University administration could improve the budget by making more internal adjustments.

“It is my firm belief that we must find new revenue sources and new ways to contain costs, identify additional cuts that can be made at every level, contain costs by centralizing more functions to avoid duplicative efforts and tighten our belts and make the same difficult sacrifices made every day by the hardworking people that attend our fine institution,” Ilitch said.

Sullivan said that in light of Michigan’s economic slump, it was difficult for her and the Budget Committee to determine the budget for the 2010 fiscal year.

“We find ourselves in the middle of a very difficult economic time, not just for the state of Michigan, but worldwide,” Sullivan said. “And so it has been a very challenging time for us to put together a budget. The budget team has worked harder this year than ever before.”

The budget takes into account an estimated state appropriation of $316.6 million for next year — a $10.4 million decrease from this year’s amount — and is waiting to be approved by the House of Representatives, Senate and Gov. Jennifer Granholm.

The University won’t know the exact amount of state appropriations until the state determines its budget in October, but the state agreed to maintain funding for higher education at no less than the 2006 level as a condition for receiving federal stimulus money.

The 2010 budget represents the largest investment in financial aid that the University has ever made. It includes $118 million in centrally funded financial aid, which is an increase for undergraduate financial aid by 11.7 percent.

“We are reaffirming our commitment to meet the full demonstrated financial need of all undergraduates who are residents in the state of Michigan,” said Sullivan, in response to the financial aid increase. “That has been our policy in the past, and that will continue to be our policy.”

Donations from University alumni and other University affiliates are responsible for the increase in financial aid funding.

“Many students are going to see this year fewer loans and more grant aid because of the increased resources for financial aid and because of more generous Pell Grants from the federal government and also because of more money for work study,” Sullivan said. “We believe that more students will take home actual cash and will need to take out fewer loans.

“In addition we estimate that 22,000 University of Michigan families will benefit from the American Opportunity Tax Credit.”

The AOTC is a tax credit contained in the stimulus package available for families with one earner making $80,000 or less or two earners making $160,000 or less.

Sullivan said that the Budget Committee will begin preparing for the budgets of fiscal years 2011 and 2012 because it is concerned that state appropriations could be even lower.

“We have been engaged in long term planning looking out at the financial situation in Michigan for the future as well,” Sullivan said. “And because of that, we are going to institute a program of prudent cost cutting to prepare us for fiscal year `11 and fiscal year `12.”

The program of prudent cost-cutting has already been instated for next year’s budget, including $15 million in cuts, which will be taken from every unit that receives General Fund money. The General Fund represents 28 percent of the overall budget and is composed of tuition and fees, state appropriations and indirect cost recovery on sponsored research activity.

Some cost-saving measures have already been enacted, some are currently in the process and some will be done in the future, Sullivan said.

In the past six years, the Budget Committee has saved and reallocated $135 million from the General Fund budget by monitoring the University’s purchasing and energy conservation, containing health care costs, using technology to reduce administrative costs and by shifting some expenses from the General Fund to other funds.

But Sullivan said this year many more of these cuts are going to come out of academic units instead of operational units.

She added that the cuts will not damage the University’s academic programs, which are among the most important aspects of the undergraduate experience.

“We’re going to (make cuts) without doing damage to the academic programs because the academic programs are what are most important to our students, and we want to maintain an undergraduate experience that is second to none,” Sullivan said. “We have a terrific undergraduate experience here, and I’m optimistic that we’ll continue to be able to do that.”

As another cost-cutting measure, University President Mary Sue Coleman, Sullivan, University deans and all executive officers declined a merit salary increase for the coming fiscal year.

“We wanted to show leadership,” Coleman said. “We have in our budget a modest increase for faculty and staff, but we make a lot of money, and we wanted people to see that we’re not going to have a salary increase.”

University faculty will see an average 2.5-percent salary increase while University staff will see an average 2-percent salary increase.

Coleman said this year’s budget was constructed on the premise that the University would “emerge as a stronger institution.”

But she said financial difficulties are not over.

“We are not out of the woods,” Coleman said. “We anticipate more budget challenges in the near future, but we are confident in the institution’s ability to move forward.”

— Daily News Editor Stephanie Steinberg contributed to this report.

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