The University Record, January 24, 1994

U faces stiff competition for state dollars, legislators say

By Mary Jo Frank

Michigan has a three- or four-year window of opportunity to bring its support of higher education up to a respectable level, before the state’s next economic downturn, predicts Sen. John J.H. Schwarz, R-Battle Creek.

Schwarz, chair of the Higher Education Subcommittee of the Senate Appropriations Committee, and Sen. Lana Pollack, D-Ann Arbor, joined economics Profs. Ned Gramlich and Paul Courant, and Gary Olson, director of the Michigan Senate Fiscal Agency, in a discussion about Michigan’s economy and the outlook for state support of higher education at last Thursday’s Regents’ Meeting.

“We should compete and we should compete hard in the good years” for dollars for higher education, Pollack said. “Our cause is worthy.”

Major competitors for taxpayer support include the state’s corrections system, K-12 education and health care, according to the speakers.

State spending on corrections is up 343.6 percent, compared to an overall budget growth of 76.2 percent for the 10-year period beginning 1982–83, Olson reported. While corrections spending accounted for 3 percent of the state’s budget in 1982–83, it had grown to 7.5 percent by 1992–93.

The prison population has grown by 21,000 inmates or 145 percent over the past 10 years, compared with a 3.5 percent growth in the total Michigan population, Olson said. One out of four new prisoners is a drug offender.

During the past 10 years, the state has constructed 21 new regional prisons at a total cost of approximately $1 billion, for a capital cost of approximately $80,000 per new prison bed.

In contrast, the U-M has experienced a period of sustained erosion in state support for the last seven to eight years, President James J. Duderstadt said.

Pollack noted that state appropriations, as a percentage of the U-M’s General Fund, have declined from 76.9 percent in 1960 to 41 percent in 1993. In the meantime, student tuition, as a percentage of the General Fund, has increased from 21.7 percent in 1960 to more than 50 percent.

Regent Philip H. Power said that since the 1960s there has been a change in attitude toward higher education. Three decades ago the notion was that the state should subsidize education for students as a whole. This social obligation, he charged, has since been replaced by the idea that students should pay a users’ fee.

Over the past three fiscal years, the overall state general fund/general purpose budget has increased by 10.4 percent while higher education funding is up by 4.7 percent, Olson said.

Gov. John Engler’s 1994–95 budget recommends $1.25 billion for higher education—an overall increase of 3 percent for state universities, with individual increases ranging from 2.3 percent for nine of the state’s 15 universities, including the U-M, to 17.1 percent (Grand Valley State University).

Noting that the Regents have had to make the painful decision to increase tuition to maintain the U-M’s quality, Regent Nellie M. Varner asked the senators why the U-M is not slated to receive more than the flat percentage increase. Many U-M programs, she noted, are more expensive to offer than those offered by other state universities.

“If it were possible, I would do it,” Schwarz said. However, in 1994, in a climate where no university received any increase last year, “the fairest thing to do is give each university something.” He plans in 1995–96 to target appropriations to individual institutions, emphasizing his opposition to any formula funding for state universities.

Increased state support would come at a price, Pollack said. If the U-M received extraordinary support, legislators and taxpayers would expect restraint when it comes to tuition increases, she explained.

Tuition increases and concerns about the in-state/out-of-state ratio of students are the most sensitive constituent calls she receives regarding the U-M, said Pollack, who noted that since 1987 U-M tuition increases have risen considerably faster than the Consumer Price Index and the Higher Education Price Index.

She also reminded the Regents of the state’s recent “very generous capital fund appropriation,” crediting Schwarz for pushing for the funding.

Regent Paul W. Brown suggested that any tuition debate be centered on the quality of the education Michigan residents receive at the U-M compared with peer institutions nationwide. “We provide a top-notch education for about one-quarter of the cost a Michigan resident would have to pay for any other [national peer] school. That differentiates the U-M from other state schools,” Brown said.

Education is key to the state’s economic growth, Duderstadt said. “In a knowledge-driven society, new jobs will be generated by new knowledge.”

Gramlich said that while everyone knows of college graduates who are having difficulty finding employment, higher education still correlates with higher income.

Although Michigan is not a poor state, it no longer is a rich one, Courant explained. Fueled by the auto industry, Michigan’s per capita income was above the national average from the 1950s to the 1980s. Since 1987, the state’s per capita income has remained below the national average and is now more like the national average, Courant added.