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Updated 10:00 AM July 24, 2006




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  FY 2007 Budget
Moderate tuition increase, major financial aid investment

As the Michigan Legislature gets closer to finalizing a welcome increase in the state appropriation to higher education, the Board of Regents July 21 approved a moderate increase in tuition for the Ann Arbor campus, along with an increased investment in financial aid. The budget recommended by President Mary Sue Coleman and Provost Teresa Sullivan "strongly supports our commitment to both academic excellence and access," Coleman says.

"We continue to place a high priority on recruiting and retaining outstanding faculty, who are essential to our academic quality," she says. "This budget also includes strategic investments in new academic programs and research initiatives, as well as a continued focus on financial aid, so that all talented students may aspire to attend U-M, regardless of their means."

Sullivan says the state's proposed funding increase of 3 percent for the Ann Arbor campus provides the University with some relief from the deep cuts of the past four years.

"Given the state's constrained fiscal circumstances, this increase shows strong support for higher education, for which we are very grateful. More importantly, this increase is an indication that the state recognizes the crucial role that higher education in general, and the state's research universities in particular, can play in transforming the state's economy," she says. That role was illustrated most recently with the decision by Google to locate a major new research and marketing facility in the Ann Arbor area, creating 1,000 new jobs in the region.

A 3 percent increase will bring the state's appropriation to the Ann Arbor campus to nearly $326 million for FY2007. That amount still is $37 million below the level of state funding to the University in 2002, Sullivan says.

The FY2007 budget includes a 5.5 percent increase in tuition for both resident and nonresident undergraduates in LSA (the largest U-M undergraduate college). That increases the total for tuition and all required fees to $9,724 (up $510) for Michigan residents, and $29,132 (an increase of $1,530) for nonresidents—before calculating financial aid support.

Tuition for resident undergraduates in the College of Engineering will rise by 7 percent, and tuition for a few smaller academic units will rise by 6.5-6.6 percent. Tuition for upper-division students in the Ross School of Business will increase by 9.3 percent. The weighted average tuition increase for all undergraduate students will be 5.8 percent. Most graduate tuition rates will increase by 5 percent.

Continuing its longstanding commitment to financial aid, the Ann Arbor campus will increase centrally budgeted financial aid by $5.7 million to a total of $91 million. Financial aid for undergraduate students is being increased by 7.7 percent, and graduate student financial aid will increase 5.5 percent. This central, General Fund allocation will be added to other University sources of financial aid, including scholarships and private funding.

For example, the M-PACT program launched last year and funded through private donations, distributed nearly $3 million in grants to 3,190 students in FY2006. The University will invest an additional $4.8 million, in partnership with the Jack Kent Cooke Foundation, to offer greater opportunities for high-achieving, low-income community college students to transfer to U-M. These and other programs will assist the University to continue its longstanding policy of meeting the full, demonstrated financial need of all resident undergraduates.

The total General Fund budget for the Ann Arbor campus—with revenues comprised primarily of state appropriations, tuition and indirect cost recovery on sponsored research—will increase by about 6 percent from FY06 to FY07. The budget allocates the majority of new funds to the academic units, with smaller increases to the administrative units. Those whose budgets are growing more rapidly are units with the greatest growth in enrollment and research activities.

Sullivan says this year's budget is challenged by several factors, including sharply rising utility costs, a competitive recruitment environment for faculty and flattened federal support for research. Rapidly rising natural gas prices will contribute to a nearly 15 percent increase in utility costs in FY2007. U-M schools and colleges continue to face a challenge in hiring to replace recent faculty losses and to support demand for courses created by growing enrollments.

The University is able to meet cost pressures and invest in new academic initiatives only by focused attention on cost-cutting and business efficiencies, Sullivan says. A total of $18.3 million has been removed from this year's General Fund budget through a combination of increased efficiencies, elimination of lower-priority activities and moving expenditures (such as faculty salaries) from the General Fund to other sources.

New revenues and funds freed up by reallocations will support an ambitious set of programs and initiatives, including a new undergraduate degree program in the Gerald R. Ford School of Public Policy; changes to the Bachelor of Business Administration degree program in the Stephen M. Ross School of Business; and a new Energy Research Initiative and the Graham Institute of Environmental Sustainability, which will have a positive impact on the economy through workforce training and the generation of start-up companies.

To read more about the budget, visit

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