Postsecondary Education Budgets Take Good Steps, But University Tuition Remains Unaffordable

Michigan is taking some small steps toward postsecondary education affordability in the FY 2015 budget by continuing to make a portion of university funding contingent on keeping tuition increases within 3.2% (“tuition restraint”), by adding a performance funding indicator that rewards universities based on enrollment of students with Pell Grants, and by increasing appropriations for financial aid.

Because Michigan does not have a state agency that exercises financing or policy authority over its universities and community colleges, decisions made during the budget process are often designed to force policy changes.

For Fiscal Year 2014-15, funding for the Tuition Incentive Program, a needs-based grant for Medicaid-eligible students, is increased by $1.5 million (3.2%). This grant pays all expenses for an Associate Degree or certificate from a community college, and $2,000 for continuation at a four-year university. Funding for the Tuition Grant, a needs-based grant for attendance at private institutions, is increased by $1.9 million (5.9%). Funding for the Michigan Competitive Scholarship, for which eligibility is based on both merit and need, comes from Michigan’s TANF block grant and remains at the current level.

Community colleges remain affordable in Michigan, but university education is not, due to appropriations decisions over the past 12 years. Since 2002, universities have become increasingly dependent on tuition as the state reduced its support, and as a result, nearly 75% of current university operations funding comes from student tuition and fees, while less than 25% comes from state General Fund appropriations. Most universities doubled their tuition between 2003 and 2013 to make up for the loss in state funding, and Michigan now has the sixth-highest university tuition in the nation while Michigan students hold some of the highest debt. While the 5.9% increase in university appropriations and the 3.2% limit on tuition increases are steps in the right direction, they do not go far enough toward making university tuition affordable.

Community Colleges

Governor’s Budget:

  • Appropriates a 3% ($8.9 million) increase in total funding for community college operations, which is distributed among the 28 Michigan community colleges according to the following metrics: proportional increase from FY 2013-14 funding (50%), weighted completions (17.5%), student contact hours (10%), administrative costs (7.5%) and local strategic value (15%). (Colleges receive the local strategic value portion if they meet four out of five listed best practices in each of the following areas: a) economic development and business/industry partnerships, b) educational partnerships, and c) community services.)
  • As in previous recent years, the majority of overall funding in the governor’s budget for community colleges comes from the School Aid Fund ($197.6 million, an amount equal to the current School Aid Fund appropriation) and the rest comes from the General Fund ($173.9 million, a 26% increase over the current General Fund appropriation).
  • Includes, for the first time, a tuition restraint prerequisite (similar to the one for universities) that conditions receipt of metric funding on limiting FY 2014-15 tuition and fee increases for resident students to 3.2%.

Senate:

  • Concurs with the governor on the increase in operational and performance funding.
  • Appropriates more money from the General Fund ($323.9 million) than the governor, and less from the School Aid Fund ($47.6 million).
  • Does not include the governor’s recommended tuition restraint provision.

House:

  • Concurs with the governor on the increase in operational and performance funding.
  • Concurs with the governor on the amount of funding from the General Fund ($173.9 million) and from the School Aid Fund ($197.6 million).
  • Does not include the governor’s tuition restraint provision.
  • The House Appropriations Committee included boilerplate, supported by the League, and a $100 placeholder to develop a program by which students could obtain a GED at a community college free of charge if committing to enroll in an academic or vocational program. The state would reimburse community colleges for eligible costs associated with providing the GED programs or testing. The boilerplate language and placeholder were removed on the House floor.

Final Budget:

  • Increases community college operations by $8.9 million. Continues to use money from the School Aid Fund for more than half of the total community college funding (operations plus employee retirement system payments), with $167.1 million from the General Fund and $197.6 million from the School Aid Fund.
  • Does not include tuition restraint provision.
  • Does not include House budget language establishing a new program by which students could obtain a GED at a community college free of charge.

Universities

Governor’s Budget:

  • Increases the total appropriation for university operations by $76.9 million (6.1%) over the current fiscal year. As in previous recent years, this increase is in the form of performance funding, though the formula has been modified so that half of the increase goes proportionally to universities to make up for funding lost in 2012.
  • Includes a new performance metric that rewards institutions based on the number of students receiving Pell Grants, a positive change that attempts to encourage universities to become more accessible to low-income students.
  • Continues the practice begun two years ago of requiring universities to limit tuition increases to 3.2% or less in order to receive any performance funding. This “tuition restraint” prerequisite for receiving performance funding helps to keep postsecondary education affordable for low-income students.

Senate:

  • Concurs with the governor in increasing the total appropriation for university operations by $76.9 million (6.1%) over the current fiscal year.
  • Concurs with the governor’s performance funding and tuition restraint changes.

House:

  • Increases university operations funding by $70.4 million (5.6%) over the current fiscal year.
  • Concurs with the governor’s performance funding and tuition restraint changes.

Final Budget:

  • Increases university operations by $74.6 million (5.9%) in performance funding, an amount slightly lower than what was proposed by the governor. Despite the increase, the total General Fund appropriation for universities remains lower than that of all fiscal years from FY 2001 to FY 2011.
  • Includes the governor’s new Pell Grant indicator for performance funding.
  • Maintains the governor’s 3.2% tuition restraint requirement for receiving performance funding.

Financial Aid

Michigan’s three financial aid grants are funded through the Higher Education budget even though students at community colleges and private, not-for-profit institutions are also eligible.

Governor’s Budget:

  • Increases the Tuition Incentive Program by $1.5 million over the current fiscal year, for a total of $48.5 million. The increase is entirely from the General Fund, but $43.8 million (90%) of total funding for TIP is from the state’s TANF funds.
  • Provides total funding for all financial aid grant programs of $103.1 million, some of which comes from the federal Temporary Assistance for Needy Families allocation.
  • Does not increase the Michigan Tuition Grant program, but adds a requirement that independent colleges submit data, including student performance data (Tuition Grant students enrolled in remedial education and/or completing degrees, Pell Grant students completing degrees), to the P-20 system in order to participate in the Tuition Grant program—a change supported by the League.

House:

  • Increases the Tuition Incentive Program by $1.5 million over current year, and the Michigan Tuition Grant by $1.8 million over the current year.
  • Includes the governor’s P-20 data reporting requirement for participation in the Tuition Grant program.

Senate:

  • Increases the Tuition Incentive Program by $1.5 million over current year.
  • Does not increase the Michigan Tuition Grant. Requires only that participating independent colleges submit data on students receiving the Tuition Grant, instead of including the governor’s proposed requirement that they submit data on all students.

Final Budget:

  • Increases funding for the Tuition Incentive Program by $1.5 million (3.2%) to a total of $48.5 million, 90% of which is paid out of Michigan’s TANF block grant.
  • Increases funding for the Michigan Tuition Grant by $1.9 million (5.9%) and includes the Senate’s data reporting requirement rather than that proposed by the governor. Complete data reporting to Michigan’s P-20 longitudinal data system is crucial for evaluating strategies to help at-risk and low-income students, so it is hoped that the governor’s requirement will be in the final budget next year.
  • Maintains $18.4 million in funding for the Michigan Competitive Scholarship, which is merit-based as well as need-based. Although it is awarded to students who are not low-income as well as to those who are, all of this funding comes from Michigan’s TANF block grant.