Maintaining the conservative stance that was taken last year, the University has adopted a General Fund operating budget for 199394 that maintains flexibility and the quality of the University, and provides a more normal merit-based salary program than was possible in 199293.
Central funds, amounting to 2.5 percent of a units operating budget, will be available for merit-based salary increases. Last year, a modest merit-based salary was available only for those individuals making $25,000 or less on an annual basis.
Our faculty and staff responded tremendously this past year when we were not able to provide any money for a merit salary program, said Provost Gilbert R. Whitaker Jr. at last weeks Regents meeting. I am pleased that we have been able to fund a merit salary program this year. While it does not make up for the hardships suffered last year, it is evidence that we have been able to cut the budget in other areas this year in order to reward our faculty and staff.
This year, Whitaker explained, the Uni-versity is adopting a new decentralized and flexible approach to its merit salary program for non-bargained-for employees.
The Universitys central administration will provide a pool of funds, amounting to 2.5 percent of a units operating budget, to each unit to be used for merit salary increases.
In addition, Whitaker explained, each unit is being asked to supplement this pool with resources of its own. It is expected that every unit on campus will do this, but the size of each units contribution will vary depending on its finances and priorities.
This approach, Whitaker pointed out, allows each unit maximum flexibility in constructing a merit salary program to fit its needs.
Whitaker said the University actually is increasing the central administration resources devoted to employee compensation by 3.5 percent. This includes the 2.5 percent devoted to merit salary increases plus 1 percent to cover the cost of employee benefits, much of which will cover the increased costs of health care benefits.
Key features of the Ann Arbor campus budget are a 9.5 percent increase in tuition for resident undergraduates and a 6.9 per-cent increase in tuition for graduate students and non-resident undergraduate students.
In coming to our tuition recommendation, we have carefully considered the fi-nancial burden on our students and their parents, the tuition rates being charged by our peer schools, and a variety of pressing expenditure needs, Whitaker told the Regents.
In our review of these various issues, we were influenced by our continuing commitment to access for our resident students. Our aid policies, Whitaker noted, have succeeded in making the decision to attend Michigan by admitted resident applicants independent of family income.
The General Fund budgetwhich relies largely on state appropriations and student tuition revenues, and pays for teaching, research, library services, scholarships and fellowships, maintenance and operation of physical properties, among othersis set at $671 million.
In his presentation, Whitaker noted that the fundamental objectives of our budget planning process for 199394 are the same as those that drove the process a year ago.
To maintain and enhance access for Michigan undergraduates.
To increase our investment in the maintenance of our infrastructure and continue to reduce the enormous backlog of deferred maintenance.
To enhance the educational experience we provide to undergraduate students.
To expand the internationalization of our programs.
To provide some reserves against potential shortfalls in revenue, minimizing the need to impose mid-year reductions on individual units.
In commenting on the Universitys other sources of support, Whitaker noted:
The outlook for state supportwhich accounts for 40 percent of the revenue budgetis unchanged from last year. We must look to the sources of the remaining 60 percent and internal reallocation to cover all of our rising costs and new initiatives.
Indirect cost recovery grew significantly last year. In addition to offsetting last years budget reduction of $3 million [in indirect cost recovery], we anticipate a further increase of about $8 million, the provost said.
The importance of this area in revenue growth cannot be overestimated, and we recognize and applaud the many faculty, staff and students whose continuing efforts against major obstacles have brought about this outstanding achievement, he added.
The students Infrastructure Maintenance Fee will be increased by $50 per term. After an allowance for financial aid, this will provide annual resources of nearly $9.5 million to deal with the growing backlog of deferred maintenance.
Interest rates remain relatively low and we do not anticipate significant increases in the coming year. This means that our other revenue will be budgeted with only a very modest increase over last year.
In planning the 199394 budget, Whitaker said University officials placed a top priority on a return to a significant annual increase in staff and faculty compensation
Other areas that will receive support through the Universitys 1993-94 budget include:
Fixed costs will increase by $5.1 million. Of that, more than $4 million will cover increases in utility costs and the costs of operating new or renovated space.
Financial aid will increase by the rate of the tuition increase, and will be supplemented to ensure that we can maintain our commitment to meet the needs of our undergraduate resident students through a combination of gift aid, work-study and loans, Whitaker said.
A small amount of new resources, less than 1 percent of the total budget, will be allocated to new initiatives, critical academic needs and the programs that assist in the hiring of minority and senior women faculty.
Significant additional resources will support activities in the general area of improving undergraduate education. A number of new initiatives, focusing particularly on the first- and second-year courses taken by all students, are under way in LS&A.
Among other critical needs, the acquisitions budget of the Library will receive an inflation adjustment, and funds will be made available to increase the quality of the Universitys recruitment brochures. In addition, each academic unit will receive a modest allocation to help them address their high priorities.
Whitaker said that in crafting the 199394 General Fund budget, University officials carefully considered alternative expenditure and tuition patterns, but the final decision was driven primarily by our belief that it is the quality of the institution that distinguishes the University of Michigan and that this quality will be best maintained by this budget.
We believe this plan will maintain the firm foundation of human and financial resources on which the University of Michigan has been built and sustained, Whitaker added. A budget cannot create excellence, but it can create the conditions within which excellence can flourish. We are committed to that goal.