MSU trustees establish policy recognizing link between state support, tuition rates

Contact: Terry Denbow, Vice President for University Relations, (517) 355-2262, denbow@msu.edu

May 10, 2002

EAST LANSING, Mich. - The Michigan State University Board of Trustees on Friday adopted a new "Policy of Mutual Responsibility" that acknowledges the link between the economy, state support and tuition rates - and promises continued initiatives to control costs.

The policy was adopted as part of a discussion on proposed budget guidelines that identify projected revenues and expenditures, including state appropriations, tuition and fee revenues, financial aid costs, utility costs, compensation parameters for faculty and other employee groups, and continuation of the program efficiency and reinvestment fund.

The policy succeeds the MSU Tuition Guarantee, established in December 1994, which has been suspended the last two years because of the level of the university's state appropriations. The Guarantee had promised that tuition would rise at no more than the rate of inflation as long as the state was able to provide inflation-rate funding increases to the university.

Between 1994 and 2001, MSU was able to limit tuition increases to an average of 2.8 percent per year. In that same period, rates increased an average of 4.8 percent per year at other Michigan public universities and 5.2 percent per year at other public universities in the Big Ten.

"The new policy preserves the spirit of the Tuition Guarantee while acknowledging emerging economic uncertainties," MSU President Peter McPherson said.

"One of the positive outcomes of this year's state appropriations process was an informal, mutual set of expectations about the respective roles of legislature and university in higher education funding and budgeting matters," he said.

"With this policy, we are formalizing those expectations. In our view, the legislature is responsible for providing an appropriate level of funding and the university is responsible for providing quality education while restraining tuition increases. Both partners have a role in making sure that our mutual goal of providing a world-class education to Michigan's daughters and sons can be met."

A general-fund operating budget of $681.9 million was proposed, with a final vote on its approval scheduled for the Board's June 28 meeting.

The guidelines include a tuition and fee rate increase of 8.5 percent and a merit-based faculty salary increase of 5 percent. They also include a 2 percent reduction in the university base budget - a cut necessary to fund increases in health care expenses - and a further 1 percent reduction in unit budgets to fund initiatives to sustain quality. That translates into approximately $7 million in budget cuts - up from $5 million last year.

MSU's health care costs - estimated at $72 million for 2001-02 - have accelerated faster than any other major variable in the university's budget over the past 20 years. The cost in 2000-01 was $59.7 million. This pattern is consistent with national trends and is expected to continue.

Earlier this year, the University Committee on Faculty Affairs (representing faculty) and the Coalition of Labor Organizations (representing eight staff unions) agreed on new health care provisions that will take effect on July 1.

"I'm grateful to our faculty and staff for agreeing to share some of the cost of their health care," McPherson said.

"If not for their cooperation, the Board would have had to consider additional reductions and possibly a tuition increase in excess of 11 percent," he said.

Under the guidelines, MSU freshmen and sophomores who are Michigan residents will pay $179.75 per credit hour this fall. Juniors and seniors who are Michigan residents will pay $200.50 per credit hour.

The increase is in line with a promise made earlier this year by the presidents of Michigan universities not to raise tuition by more than 8.5 percent or $425, whichever is greater. In return, Gov. John Engler and legislative leaders agreed not to reduce state spending on higher education from this year's $1.7 billion level.

Student financial assistance will increase approximately 3 percent, as will pay ranges for students working on campus.

Salary adjustments for ranked faculty members will increase a total of 4 percent effective Oct. 1, distributed largely on a merit basis. In addition, the Office of the Provost will oversee a university-wide market pool that will enhance MSU's ability to compete for the best available faculty.

"We have an excellent record of containing costs while providing academic programs of outstanding quality," he added. "These budget guidelines reflect our success in balancing those two goals."