Michigan House and Senate Reach Agreement on FY 2014 Budget for Universities and Community Colleges

 Full report in PDF

Both the Michigan House of Representatives and Senate have finalized the Fiscal Year 2014 budgets for Higher Education (universities) and Community Colleges. Both budgets affect low-income individuals, including traditional (age 18-24) and nontraditional (older and in the workforce and/or raising a family) students. As state funding has been reduced during the past ten years, universities and community colleges have been forced to raise tuition, with most universities more than doubling tuition between 2003 and 2013.1

Community colleges continue to be much more affordable, with 59% of the state funding available to slow the growth of tuition costs transferred from the School Aid Fund–dollars that have as their primary purpose the funding of K-12 education. The amount appropriated to community colleges from this fund is slightly less than the amount given to universities, with a total of approximately $400 million in School Aid Fund dollars being diverted to postsecondary education (universities and community colleges combined).

Although the current budget increased need-based grant or financial aid funding slightly, Michigan’s overall spending on need-based grants declined by roughly 20% over 10 years. To keep postsecondary education affordable, Michigan needs to maintain a well-funded and well-targeted financial aid system.

Public Universities

UNIVERSITY OPERATIONS

Governor: The governor’s budget for Fiscal Year 2014 appropriated $1.243 billion in base funding for university operations and $24.9 million in new GF/GP funding (a 2% increase) that would be allocated based on performance metrics, for a total of $1.268 billion for university operations. This is a smaller increase than for the current year budget, which included a 3% increase. Total state funding for universities is comprised of 15% from the School Aid Fund and 85% from the state General Fund.

Final Budget: The Legislature reduced new funding for university operations to $21.9 million—12% below the governor’s recommendation. In the final budget, funding for performance funding was cut by $3 million, with funds shifted to Michigan Public School Employees Retirement System reimbursements ($2 million) and MSU AgBioResearch/Extension ($1 million). This resulted in a total of $1.265 billion for university operations, a 1.76% increase over last year as opposed to the governor’s 2% increase.

PERFORMANCE FUNDING AND TUITION RESTRAINT

Governor: The governor’s performance metrics were: (1) undergraduate completions in critical skills (science, technology, engineering, mathematics and health); (2) research expenditures; (3) six-year graduation rates; (4) total completions; (5) administrative costs as a percentage of core expenditures; and (6) tuition restraint (keeping tuition increases under 4%). Conditions for receiving performance funding are participating in at least three transfer agreements with community colleges, maintaining a dual enrollment credit policy that does not consider whether credits were used toward high school graduation, and participating in the Michigan Transfer Network (which allows students, advisers, and the general public to view transfer course equivalencies between many Michigan colleges and universities).

Final Budget: The Legislature removed tuition restraint as a metric and made it a condition for receiving performance funding (in addition to the governor’s three other conditions), and lowered the tuition increase limit to 3.75%.

TEXT BOOK COST REVIEW

Governor: The governor’s budget did not include boilerplate language regarding textbook costs.

Final Budget: The Legislature added language that requires universities to develop and report on policies to minimize the cost of textbooks and course materials and review any potential financial conflict of interest for faculty written materials.

FINANCIAL AID GRANTS

Governor:

Tuition Incentive Program (needs-based financial aid for students who are Medicaid-eligible, determined by household income): The governor’s budget increased funding for the Tuition Incentive Program by $3.2 million in state General Funds, bringing total funding to $47 million. The program is currently funded by $43.8 million in federal TANF funds. The governor added boilerplate language limiting public university reimbursements to 300% of the average community college tuition rate.

Michigan Tuition Grant (needs-based financial aid for students attending private colleges, determined by tuition costs minus “estimated family contribution”): The governor included continuation funding using $31.7 million in federal TANF funds. The governor added budget language requiring private colleges with students receiving this grant to participate in the state’s P-20 longitudinal data system, report on the number of Michigan Tuition Grant and Pell Grant students graduating, and report on the number taking remedial education classes.

Michigan Competitive Scholarship (merit-based financial aid, determined by ACT scores): The governor provides continuation funding using $18.4 million in federal TANF funds.

Final Budget: The Legislature concurred with the governor on all financial aid appropriations amounts, but did not include language limiting Tuition Incentive Program reimbursements or Michigan Tuition Grant reporting requirements.

Community Colleges

COMMUNITY COLLEGE OPERATIONS

Governor: The governor’s Fiscal Year 2014 budget increased funding for Michigan’s 28 community colleges by 2% ($5.8 million), for a total of $298.2 million for community college operations. Of the total appropriation for community colleges, 59% is from the School Aid Fund and 41% is from the state General Fund. The governor’s formula metrics are similar to previous years, except that a new metric for job placement in the skilled trades would replace the metric for local strategic value (a set of goals related to community colleges’ connection and interaction with their surrounding communities), and attainment of local strategic value goals would be a prerequisite for all performance funding. The formula metrics in the governor’s budget are:

  • 50% across-the-board distribution
  • 17.5% based on weighted degree completions
  • 15% based on job placement of students who completed skilled trades programs
  • 10% based on student contact hours
  • 7.5% based on administrative costs as a portion of total operations spending

Final Budget: The Legislature concurred with the governor on the $5.8 million increase in operations, but did not include the metric for job placement in the skilled trades. The final budget included language requiring institutions to submit a report by February 2014 on the number of students who successfully completed a skilled trades program and obtained an apprenticeship or job in their field, and the number of those students who are veterans.

 

 

 

 

 

 

 

Source: House and Senate Fiscal Agency

Endnote

1. For more information on tuition increases and the overall decline in state funding for Michigan’s need-based financial aid grants, see Michigan League for Public Policy, Keeping It Affordable in Michigan: Disinvestment in Financial Aid Grants Hurts Students and Their Families, November 2012.