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Spring 2003
The Price of Excellence
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In a recent letter, UM President Emeritus James J. Duderstadt summarized the university’s stance: “UM’s vigorous assertion and defense of its constitutional autonomy, occasionally through litigation, has established and protected its ability to control issues such as tuition levels, in-state/out-of-state enrollments, indirect cost recovery and such. Many governors and legislatures have challenged this autonomy … we are ‘jawboned’ at times to limit tuition increases or reduce out-of-state enrollments, but we have consistently maintained that this is a regental decision, not a state government issue. We have challenged any attempts to link either operating appropriations or capital outlay to such actions and have been successful in the courts. … We have never taken any action which might later be used as a precedent in challenging our constitutional autonomy.”

To meet its responsibility as Michigan’s public university, UM offers resident students generous financial aid, thereby assuring access. It seeks through a combination of grants and loans to meet the full demonstrated financial need of any Michigan resident enrolling in undergraduate programs. In fact, roughly half of Michigan resident students receive some form of financial aid and pay no tuition.

Nonresidents pay at a much higher level. UM admits a high proportion of nonresident students — about 50 percent — and charges them tuition comparable to that of private institutions, $12,197 for undergraduates and $24,517 for graduates. UM’s tuition policy contributes significantly to its income; tuition revenue exceeds $600 million, with about two-thirds paid by nonresidents and students enrolled in professional schools. The portion paid by nonresidents and professional-school students alone exceeds the total of $360 million that UM receives from the state.

The University of Virginia has taken a different approach. State funding for the university has declined 30 percent in the last decade; in 2001-’02 it accounted for just 20 percent of UVA’s budget. In response, UVA’s board decided to spin off professional schools, which appear to have the ability to be self-supporting. The business school and, to a lesser extent, the law school have moved toward self-sufficiency. By charging high tuition and by offering high-priced executive-training programs, the business school appears able to successfully fund its operating budget. And by independently raising $77 million in gifts, it has funded construction of its own nine-building campus. At the same time, the business school pays UVA a franchise tax of 10 percent of its income.

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