Tuition rates, and their growth over time, have been the subject of a great deal of national debate in recent years. At U–M, as at most other institutions of higher education, tuition revenue is a critical source of support for the academic enterprise, but it is not sufficient to cover the full costs of higher education.
In addition to tuition revenue, state support, private giving, endowment income, and federal and non–federal sponsored grants and contracts are all critical sources of support that enable the institution to ful fill its educational mission. The diversity of revenue sources is one of our strengths and a key part of our financial strategy, which aims both to ensure access to U–M for qualified students of all economic backgrounds and to continue to advance students’ educational experience.
The primary financial support for the operation of the academic enterprise resides in the General Fund. Tuition revenue, the state appropriation, and indirect cost recovery from sponsored research are the principal revenue sources for the General Fund on the Ann Arbor campus. General Fund revenue is used to support teaching, financial aid, student services, libraries and museums, and administrative/operational activities.
The UMHHC and other auxiliary units, such as athletics and housing, are independent of the General Fund; these units have their own sources of revenue and do not receive tuition or state appropriation support. In addition, most construction on campus is funded from sources other than the General Fund.
Where the General Fund Money Goes
UM–ANN ARBOR FY 2010 GENERAL FUND BUDGET
- Instruction
- Academic advising
- Libraries
- Museums
- Utilities
- Insurance
- Plant operations
- Public safety
- Admissions
- Budgeting and accounting
- Central human resource services
- Central information technology
- Legal services
8.1 cents of each dollar is for centrally awarded financial aid
(U–M’s schools and colleges also award financial aid.)
In FY 2010, tuition revenue constituted 65 percent of the Ann Arbor campus’s General Fund budget while the state appropriation was 22 percent. As the state of Michigan has dealt with a troubled economy, state support to the university has decreased, both in real dollars and as a fraction of the General Fund.
On the cost side, institutions of higher education tend to see increases beyond the normal forces of inflation because teaching and research are more labor–intensive than most activities in the economy, and labor costs generally tend to rise faster than other prices. At the same time, U–M’s volume of instruction and research activity continues to experience significant increases.
These factors combined have challenged U–M to work especially hard to develop effective, long–term strategies to achieve its dual goals of ensuring access and maintaining an unwavering commitment to the quality of the institution both inside and outside the classroom.
The university has been particularly mindful of the issue of affordability and in recent years has held increases in cost of attendance to a minimum while investing significantly in financial aid. In particular, the Ann Arbor campus has consistently boosted financial aid for students with demonstrated need from year to year at a rate at least equal to, and often exceeding, the increase in tuition. Approximately 70 percent of resident undergraduate students and 50 percent of non–resident undergraduate students on the Ann Arbor campus receive some form of financial aid.
At the same time, U–M has invested in key academic priorities that enable it to remain one of the premier public universities. One recent example is an increase in the number of full–time faculty members, which will decrease average class size and enhance the student experience. Another is an investment in increased research opportunities for undergraduates.
The University of Michigan’s success at ensuring access while investing in excellence has been made possible by aggressive and successful cost–containment efforts, a philosophy of continual reallocation of funds toward highest–priority activities, and the diversity of our revenue sources. The generous philanthropy of U–M donors, combined with the active sponsored–research portfolio of our faculty, have diversified our funding sources and made it possible for the university to fulfill its mission.
Tuition revenue helps support the quality of teaching, the many and varied learning opportunities, and the respected scholarship that continue to make a University of Michigan education one of the best in the world.
Quick Facts
- Annual budgeting of the General Fund is directed by the provost, who serves as both the chief academic officer and the chief budget officer. This dual role ensures that budgetary decisions are directly aligned with U–M’s academic mission. Final approval of budget and tuition rate recommendations rests with U–M’s publicly elected Board of Regents.
- Tuition rates for undergraduate students vary by residency, school of enrollment, level of study, and number of credit hours enrolled.
- The increase in Ann Arbor campus resident undergraduate tuition for FY 2011 will be 1.5 percent—the lowest rate of increase in 26 years and lower than the rate of increase for resident students at most public universities.
- Cost containment efforts have resulted in the reduction or reallocation of $135 million of recurring Ann Arbor campus General Fund expenses over the period FY 2003–2009, and there has been significant progress made toward our goal of achieving an additional $100 million in reductions over the period FY 2010–2012. All new initiatives for the past two years have been funded through reallocation.