Universities say funding system broke, lawmakers disagree# Parenting - 为人父母
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It's a simple fact — $12 million is much bigger than $1.2 million.
That's why Oakland University President George Hynd and the Board of
Trustees didn't have to really think about the rationale for increasing
tuition by 8.48% last week and exceeding a state tuition cap. The Rochester
school declined $1.2 million from the state in incentive money in exchange
for getting $12 million in tuition revenue.
Eastern Michigan University made the same calculation in June — $1 million
is much smaller than $10 million.
The simple math is a why university presidents across Michigan are coming to
a similar conclusion: The incentive money attached to a state tuition cap
and other performance measures put in place by Gov. Rick Snyder isn't a big
enough carrot to keep tuition down.
Oakland University President George HyndBuy Photo
Oakland University President George Hynd (Photo: Detroit Free Press)
If OU would have forfeited more money — like $6 million — for going over
the cap, a different decision might have been made, Hynd admits.
University presidents said they think more schools will go with bigger
increases in coming years unless a new funding system is put in place.
A completely new funding system isn't likely, but lawmakers say there will
be talks this fall about tweaks, including increasing the penalty for
exceeding the tuition cap.
"I think we've got to come back with some response to a tuition hike that is
five times inflation," said state Rep. Al Pscholka, R-Stevensville, the
chairman of the House appropriations committee and former chairman of the
House higher education subcommittee. "I don't want us to overreact, but we
need some response. We do need to put some teeth into it. I think we need to
look at base funding and if they are going to increase tuition by X percent
over cap, then we need to reduce the base funding. That's an option."
Snyder is taking a wait-and-see approach.
"The governor's office is always analyzing the impact of its initiatives and
we will continue to monitor the role performance funding has played in
holding down the cost of a college education for both new and returning
students," spokesman Dave Murray said.
Hynd — and other university presidents — said they would like to see the
funding formula looked at as well. They say they need more funding and blame
state cuts — including a 15% cut in 2011 — for making these hikes
necessary.
State Rep. Sam Singh, D-East Lansing, agrees more state funding is needed.
"I'm always disappointed by these increases, because you know they will
impact students," said Singh, who serves on the state House's higher
education subcommittee. "I'm not surprised though. There isn't enough
resources dedicated by the state to higher education.
"I hope my colleagues won't overreact and hurt those institutions because it
just hurts students."
OU's decision
Last Monday and Tuesday, Hynd and other OU officials spent the day on the
phone, talking with lawmakers, trying to make the case for why they were
about to exceed the state-imposed tuition cap.
The argument boiled down to numbers. The amount of money needed to do the
things Oakland wanted to do — add faculty, increase staff, upgrade
technology, improve facilities — was much greater than the $1.2 million
being offered by the state under performance funding. An 8.48% tuition hike
would raise $12 million, enough to get a good start on what a new strategic
plan told them they needed to be doing.
Related: Oakland University hikes tuition 8.48%
"From a pure dollar point, it makes all the sense to go over the cap," Hynd
said. "We're getting squeezed from both ends. The state, over a number of
years, has disinvested in higher education, and even though they have added
money back recently, still are underfunding us. Parents and students want us
to keep costs low.
"I think there needs to be a much larger conversation about how the public
wants to fund higher education."
Michigan has two ways of dividing up its pot of money headed to the 15
public universities.
The bulk of the money comes through what is known as the "base," which is
money coming to the universities the same way it has been coming for decades
. There's no formula for how the money is divided. The amounts were set
decades ago in political deals and the differences between the universities
have stayed mostly the same.
The amounts range from the $295 million headed to the University of Michigan
to the $12 million earmarked for Lake Superior State University.
Then, additional money slated for the universities is divided up based on a
formula that looks at performance measures like graduation rates, percentage
of students getting Pell Grants and percent of budget spent on instruction,
along with several other items. In order to qualify for that pot of money,
universities have to stay under a tuition cap, set this year at 3.2%.
This year, $20 million — or a 1.5% increase in total higher education
funding — was divided up using the performance funding
Under the formula, Grand Valley State University gets the biggest percentage
hike — 3%; while Wayne State University gets the smallest — 0.4%. Two
years ago, Wayne State gave up its performance funding in favor of an 8.9%
tuition increase and received an additional $7 million in tuition revenue.
This year, Wayne State settled for a 3.2% hike.
Snyder introduced the cap and the performance funding in 2012.
"The tuition cap was included because the governor wants to keep a college
education in reach for all students," Snyder spokesman Murray said. "We know
that many students are leaving college with significant debt. Michigan
needs to attract more students to post-secondary education, and cost is
unquestionably an obstacle for many families."
Eastern's decision
Like Oakland, Eastern's decision to go over the cap was also a simple
numbers game.
The university could stay under the cap and get about $1 million in
performance funding. Or it could raise tuition 7.8% and get $10 million.
President Susan Martin, who stepped down earlier this month, said the extra
money is needed after years of keeping tuition increases down, including no
increase five years ago.
Related: EMU hikes tuition, forfeits $1M in state aid
Susan Martin
Susan Martin (Photo: Handout)
"We have a very tight balance sheet," Martin said. "Our balance sheet is too
thin. We need to improve our reserves and use the money to help with needed
capital improvements. We never have enough money for what we need to do. We
've tried to manage as best as we can, but this step was needed."
Eastern is a rare state public university to see a dip in its unrestricted
net assets in the past couple of years, financial statements show.
Unrestricted net assets are money that the university can spend however it
wishes to spend. In many cases, university administrators and boards have
targeted the money toward specific projects, but can change where that money
is being spent if they wish.
At Eastern, unrestricted net assets dropped from $24.7 million at the end of
the 2012-13 school year to $20.9 million at the end of the 2013-14 school
year, the latest data available.
Oakland, on the other hand, saw its unrestricted net assets increase during
the same time period, from $147 million to $154 million.
"Unspent investment income in the endowment fund was the primary funding
source which increased OU's unrestricted net assets in FY2014," Vice
President for Finance and Administration John Beaghan told the Free Press in
a June e-mail. "Investment income can not be counted on annually to fund
base expenditures, therefore, it is not a source of funding that can offset
tuition increases."
Change the system?
No Michigan public university president will admit right now that they will
raise tuition over whatever the cap is next year. Several, however, said
they won't be surprised if there are a couple more universities that go over
the cap for the same reasons as OU.
"The university board has the right to react to (the cap)," said Grand
Valley President Thomas Haas. "They have the fiduciary responsibility to set
the tuition rate and have to determine what is best for their university."
Haas likes the performance funding — "it brings accountability," he said.
Grand Valley has done well under the funding formula, ranking first this
year, with a 3% increase under performance funding.
But, he pointed out, the bulk of the money is still tied up in the base. And
, Haas adds, that base has been cut over the last decade, making tuition the
largest revenue source for universities, not state aid.
That's echoed by Daniel Hurley, the CEO of the Presidents Council, State
Universities of Michigan.
"If states begin reinvesting, tuition caps are unnecessary," Hurley said.
So how should Michigan fund its universities?
That depends on who you ask.
Central Michigan President George Ross has been the leading advocate to
switching to a system much like K-12 funding in Michigan that assigns a
dollar figure to each student. Universities then get state aid in a simple
formula — number of students enrolled times dollar amount attached to each
student equals funding.
"Our funding levels were set decades ago by political decisions," he said. "
Dollars should follow students."
Central last year got $3,787 per student in state aid, according to figures
from the nonpartisan House Fiscal Agency. That's below the state average of
$4,775.
If Central got the average, it would have $31 million more in state aid.
The five lowest per-student schools – U-M-Dearborn, U-M-Flint, Saginaw
Valley State University, Grand Valley and OU are the five newest
universities in the state. OU has the lowest per-pupil state funding at $2,
870. Wayne State has the highest, at $8,414.
Lake Superior State University President Thomas Pleger said the state
funding should make sure to fund universities according to missions,
including those who keep tuition low.
"Long-term, Michigan needs to have a series of access universities," Pelger
said. "The state should invest so they can keep tuition low."
Convincing state lawmakers to change the system will be hard.
"The formula, for the most part, is working," said state Rep. Mike McCready,
R-Bloomfield Hills, who is the chairman of the House higher education
appropriations subcommittee. "When you create a formula, you need to stick
with it.
"At the end of the day, each student will make their choice on where to go
to school."
Contact David Jesse: 313-222-8851 or [email protected]
/* */ Follow him on
Twitter @reporterdavidj.
That's why Oakland University President George Hynd and the Board of
Trustees didn't have to really think about the rationale for increasing
tuition by 8.48% last week and exceeding a state tuition cap. The Rochester
school declined $1.2 million from the state in incentive money in exchange
for getting $12 million in tuition revenue.
Eastern Michigan University made the same calculation in June — $1 million
is much smaller than $10 million.
The simple math is a why university presidents across Michigan are coming to
a similar conclusion: The incentive money attached to a state tuition cap
and other performance measures put in place by Gov. Rick Snyder isn't a big
enough carrot to keep tuition down.
Oakland University President George HyndBuy Photo
Oakland University President George Hynd (Photo: Detroit Free Press)
If OU would have forfeited more money — like $6 million — for going over
the cap, a different decision might have been made, Hynd admits.
University presidents said they think more schools will go with bigger
increases in coming years unless a new funding system is put in place.
A completely new funding system isn't likely, but lawmakers say there will
be talks this fall about tweaks, including increasing the penalty for
exceeding the tuition cap.
"I think we've got to come back with some response to a tuition hike that is
five times inflation," said state Rep. Al Pscholka, R-Stevensville, the
chairman of the House appropriations committee and former chairman of the
House higher education subcommittee. "I don't want us to overreact, but we
need some response. We do need to put some teeth into it. I think we need to
look at base funding and if they are going to increase tuition by X percent
over cap, then we need to reduce the base funding. That's an option."
Snyder is taking a wait-and-see approach.
"The governor's office is always analyzing the impact of its initiatives and
we will continue to monitor the role performance funding has played in
holding down the cost of a college education for both new and returning
students," spokesman Dave Murray said.
Hynd — and other university presidents — said they would like to see the
funding formula looked at as well. They say they need more funding and blame
state cuts — including a 15% cut in 2011 — for making these hikes
necessary.
State Rep. Sam Singh, D-East Lansing, agrees more state funding is needed.
"I'm always disappointed by these increases, because you know they will
impact students," said Singh, who serves on the state House's higher
education subcommittee. "I'm not surprised though. There isn't enough
resources dedicated by the state to higher education.
"I hope my colleagues won't overreact and hurt those institutions because it
just hurts students."
OU's decision
Last Monday and Tuesday, Hynd and other OU officials spent the day on the
phone, talking with lawmakers, trying to make the case for why they were
about to exceed the state-imposed tuition cap.
The argument boiled down to numbers. The amount of money needed to do the
things Oakland wanted to do — add faculty, increase staff, upgrade
technology, improve facilities — was much greater than the $1.2 million
being offered by the state under performance funding. An 8.48% tuition hike
would raise $12 million, enough to get a good start on what a new strategic
plan told them they needed to be doing.
Related: Oakland University hikes tuition 8.48%
"From a pure dollar point, it makes all the sense to go over the cap," Hynd
said. "We're getting squeezed from both ends. The state, over a number of
years, has disinvested in higher education, and even though they have added
money back recently, still are underfunding us. Parents and students want us
to keep costs low.
"I think there needs to be a much larger conversation about how the public
wants to fund higher education."
Michigan has two ways of dividing up its pot of money headed to the 15
public universities.
The bulk of the money comes through what is known as the "base," which is
money coming to the universities the same way it has been coming for decades
. There's no formula for how the money is divided. The amounts were set
decades ago in political deals and the differences between the universities
have stayed mostly the same.
The amounts range from the $295 million headed to the University of Michigan
to the $12 million earmarked for Lake Superior State University.
Then, additional money slated for the universities is divided up based on a
formula that looks at performance measures like graduation rates, percentage
of students getting Pell Grants and percent of budget spent on instruction,
along with several other items. In order to qualify for that pot of money,
universities have to stay under a tuition cap, set this year at 3.2%.
This year, $20 million — or a 1.5% increase in total higher education
funding — was divided up using the performance funding
Under the formula, Grand Valley State University gets the biggest percentage
hike — 3%; while Wayne State University gets the smallest — 0.4%. Two
years ago, Wayne State gave up its performance funding in favor of an 8.9%
tuition increase and received an additional $7 million in tuition revenue.
This year, Wayne State settled for a 3.2% hike.
Snyder introduced the cap and the performance funding in 2012.
"The tuition cap was included because the governor wants to keep a college
education in reach for all students," Snyder spokesman Murray said. "We know
that many students are leaving college with significant debt. Michigan
needs to attract more students to post-secondary education, and cost is
unquestionably an obstacle for many families."
Eastern's decision
Like Oakland, Eastern's decision to go over the cap was also a simple
numbers game.
The university could stay under the cap and get about $1 million in
performance funding. Or it could raise tuition 7.8% and get $10 million.
President Susan Martin, who stepped down earlier this month, said the extra
money is needed after years of keeping tuition increases down, including no
increase five years ago.
Related: EMU hikes tuition, forfeits $1M in state aid
Susan Martin
Susan Martin (Photo: Handout)
"We have a very tight balance sheet," Martin said. "Our balance sheet is too
thin. We need to improve our reserves and use the money to help with needed
capital improvements. We never have enough money for what we need to do. We
've tried to manage as best as we can, but this step was needed."
Eastern is a rare state public university to see a dip in its unrestricted
net assets in the past couple of years, financial statements show.
Unrestricted net assets are money that the university can spend however it
wishes to spend. In many cases, university administrators and boards have
targeted the money toward specific projects, but can change where that money
is being spent if they wish.
At Eastern, unrestricted net assets dropped from $24.7 million at the end of
the 2012-13 school year to $20.9 million at the end of the 2013-14 school
year, the latest data available.
Oakland, on the other hand, saw its unrestricted net assets increase during
the same time period, from $147 million to $154 million.
"Unspent investment income in the endowment fund was the primary funding
source which increased OU's unrestricted net assets in FY2014," Vice
President for Finance and Administration John Beaghan told the Free Press in
a June e-mail. "Investment income can not be counted on annually to fund
base expenditures, therefore, it is not a source of funding that can offset
tuition increases."
Change the system?
No Michigan public university president will admit right now that they will
raise tuition over whatever the cap is next year. Several, however, said
they won't be surprised if there are a couple more universities that go over
the cap for the same reasons as OU.
"The university board has the right to react to (the cap)," said Grand
Valley President Thomas Haas. "They have the fiduciary responsibility to set
the tuition rate and have to determine what is best for their university."
Haas likes the performance funding — "it brings accountability," he said.
Grand Valley has done well under the funding formula, ranking first this
year, with a 3% increase under performance funding.
But, he pointed out, the bulk of the money is still tied up in the base. And
, Haas adds, that base has been cut over the last decade, making tuition the
largest revenue source for universities, not state aid.
That's echoed by Daniel Hurley, the CEO of the Presidents Council, State
Universities of Michigan.
"If states begin reinvesting, tuition caps are unnecessary," Hurley said.
So how should Michigan fund its universities?
That depends on who you ask.
Central Michigan President George Ross has been the leading advocate to
switching to a system much like K-12 funding in Michigan that assigns a
dollar figure to each student. Universities then get state aid in a simple
formula — number of students enrolled times dollar amount attached to each
student equals funding.
"Our funding levels were set decades ago by political decisions," he said. "
Dollars should follow students."
Central last year got $3,787 per student in state aid, according to figures
from the nonpartisan House Fiscal Agency. That's below the state average of
$4,775.
If Central got the average, it would have $31 million more in state aid.
The five lowest per-student schools – U-M-Dearborn, U-M-Flint, Saginaw
Valley State University, Grand Valley and OU are the five newest
universities in the state. OU has the lowest per-pupil state funding at $2,
870. Wayne State has the highest, at $8,414.
Lake Superior State University President Thomas Pleger said the state
funding should make sure to fund universities according to missions,
including those who keep tuition low.
"Long-term, Michigan needs to have a series of access universities," Pelger
said. "The state should invest so they can keep tuition low."
Convincing state lawmakers to change the system will be hard.
"The formula, for the most part, is working," said state Rep. Mike McCready,
R-Bloomfield Hills, who is the chairman of the House higher education
appropriations subcommittee. "When you create a formula, you need to stick
with it.
"At the end of the day, each student will make their choice on where to go
to school."
Contact David Jesse: 313-222-8851 or [email protected]
/* */ Follow him on
Twitter @reporterdavidj.
