Feature: University Funding at a Crossroads

            Across the country a number of trends and factors are converging that will shape the future of our public universities. A ‘boom’ in the number of high school graduates, as well as the ever-growing need for advanced education, contribute to the enrollment pressures our public universities are experiencing. Families increasingly seek the academic quality and affordability offered by public universities. For example, enrollments at MSU have increased approximately 11.2% in the last 7 years in response to these changing demographics.

            Paradoxically, as enrollment pressure grows, state universities nationally have experienced a decrease in the level of per student state funding – a drift which began over 25 years ago. In 1975 MSU received 67% of its general operating budget from state appropriations and 26% from tuition revenue. Today 50% of the Universities budget comes from the state and 42% from tuition. Nationally public universities advocate for state policies that provide funding levels that respond positively to demographic and financial trends, but two major impediments make this difficult in Michigan.

            A slowing economy threatens state revenues, effecting the state’s ability to support at traditional levels the growing number of high school graduates seeking higher education. A weakened economy also increases pressure for other vital state programs including human services. Public universities in Michigan and elsewhere are left to “compete” at unprecedented levels for priority in state budgets. In states with “term limited” legislatures such as Michigan, the contest for budget priority is made more difficult by the rapid turn over of state lawmakers.

            Second, the appropriations mechanism that is currently used to fund public universities in Michigan does not yet fully respond to the size of a university’s enrollment or the complexity of the school’s programs. Currently state appropriations do not provide equal funding support for students attending similar universities. Most recently there have been significant attempts in Michigan to address these important policy problems by instituting per student “funding floors” for similar universities. These reforms hold great promise and enjoy growing support, but until they are made a permanent part of the state budget process Michigan’s universities will not be able to rely on state financial support to meet growing enrollments or improve quality.

            There is ample precedent in Michigan for educational funding reforms that can serve as models for university funding. Until the early 1990’s, schools within the K-12 system were funded by local property taxes – resulting in a system whereby some schools received significantly more per-student funding support than others. Michigan changed its funding structure to one that begins to narrow funding ‘gaps’ among school districts. The state now appropriates “foundation grants” (equal dollars per enrolled student) to each school district resulting in the lowest funded students gradually and predictably gaining in funding support.

            Students across Michigan have benefited from the state’s policy change intended to equalize support for elementary and secondary students. Similarly, the Community College appropriations “formula” reaches for the same policy outcome. Each school receives an amount based in large part on student enrollment numbers, and other factors related to the college mission. Universities across the country must respond to enrollment pressures if they are to serve their states.

            Internal cost cutting offers an important but ultimately limited source of financial support needed to meet projected enrollment growth and ensure quality. State governments will have to determine the importance of strong public universities to their future and respond by funding these schools in an adequate and appropriate manner.