An overview of U-M’s operating budget
U-M’s operating budget has four major sources of funding.
General Fund money come from student tuition and fees, state support and indirect cost of sponsored research. It pays for teaching, student services, facilities and administrative support.
Auxiliary Funds come from self-supporting units that “pay their own way” and receive no taxpayer or tuition support. These include Michigan Medicine, Intercollegiate Athletics, Student Housing and Student Publications.
Expendable Restricted Funds are from providers who designate how their money is spent. Money comes from research grants and contracts, endowment payout and gifts. It pays for scholarships and fellowships; salaries, benefits and research support for some faculty; and research, programs and academic centers.
Designated Funds come from fees charged for and spent on experiential learning, programs, conferences and executive and continuing education.
Where the General Fund money comes from
U-M Ann Arbor FY2019 budget
General Fund money comes from student tuition and fees, state support and indirect cost recovery on sponsored research activity. It pays for teaching, academic services, academic and research facilities utilities, operations, and maintenance and administrative support.
The General Fund does not pay for intercollegiate athletics, housing or Michigan Medicine.
Where the General Fund money goes
U-M Ann Arbor FY2019 budget
Please select a slice of the pie for a breakdown of budgeted expenses.
Declining state support drives up tuition
- In 1960, state support accounted for 78 percent of the U-M Ann Arbor General Fund budget. It has dropped to 15 percent of the General Fund budget in 2018.
- U-M experienced significant baseline declines in state support in fiscal years 2004-2006, and again in fiscal years 2010 and 2011.
- The FY 2018 state operating appropriation to U-M of $314.6 million remains lower than 10 years ago, and is equivalent to FY 1998 in nominal dollars, and FY 1965 after adjusting for inflation.
- If U-M’s 2003 appropriation, which just preceded large reductions, had increased at the rate of the Detroit-area Consumer Price Index, U-M would receive approximately $145 million more in state support than the current 2017-18 level.
Why are costs rising?
- 63 percent of U-M’s total costs are for labor— to hire and retain world-class faculty and staff.
- U-M is facing almost $27 million in mandatory cost increases for FY2018 resulting from benefits rate increases, utilities, contractual salary increases for union employees, costs of new space, regulatory compliance and inflation on the goods and services that U-M purchases.
General Fund health care costs have increased approximately 47 percent over the past 10 years. U-M must continue to invest in state-of-the-art laboratories and instructional space and new technologies that support education and research. U-M invests heavily in need-based financial aid, including the Go Blue Guarantee beginning in 2018. U-M has averaged more than 11 percent growth annually in the centrally awarded undergraduate financial aid budget over the past 10 years.
How U-M is cutting costsSince 2004, U-M has achieved more than $380 million of savings in the General Fund. Savings have resulted from U-M’s efforts to:
- Implement strategic, aggressive campuswide initiatives. U-M has been an early adopter of such efforts such as efficient energy usage, benefits cost sharing, prescription drug savings, facilities maintenance improvements, and strategic sourcing and procurement. U-M also has centralized transactional administrative work and business processes to gain efficiency. Recurrent General Fund savings: $148 million.
- Direct units to annually identify internal cuts in order to reallocate funding toward higher priorities and new initiatives. Recurrent General Fund savings: $152 million.
- Use philanthropy and endowment distributions to pay for activities otherwise paid for from general funds. Recurrent General Fund savings: $60 million.
- Develop new alternative revenue sources such as digital learning platforms and professional and continuing education/certification. Recurrent General Fund savings: $21 million.
- Cost containment remains a priority, with at least an additional $20 million in new General Fund savings planned for FY2019.
Keeping U-M affordable: financial aid
- The university has made a strong financial commitment toward financial aid over the past decade, continuing its long-standing policy of meeting the full financial need of all undergraduate students from Michigan.
- The budget for centrally awarded, undergraduate financial aid has grown much more quickly in percentage terms than tuition and has well outpaced inflation.
- The five-year average annual growth rate for the undergraduate financial aid budget is 12 percent (compared to 2.7 percent for in-state tuition, 3.9 percent for out-of-state tuition and 0.9 percent for Detroit CPI).
- The undergraduate financial aid budget grew by another 10.6 percent this year, as compared to 2.9 percent for in-state tuition and 4.5 percent for out-of-state tuition.
- The General Fund is just one source of financial aid for our students.
- In 2016-17, nearly $985 million in aid was paid to U-M students, with nearly $390 million of this aid going to undergraduate students. This includes all types of aid (grants, scholarships, loans and work-study jobs) by all known funding sources (Office of Financial Aid, Rackham, schools/colleges, federal and state programs).
- We have achieved double-digit percentage increases in the centrally awarded undergraduate financial aid budget in eight of the last 10 years:
|Fiscal Year||Budget (in Million)||Change|
|FY 2008-09||$ 66.3||9.4%|
|FY 2009-10||$ 73.8||11.3%|
|FY 2010-11||$ 81.4||10.3%|
|FY 2011-12||$ 90.9||11.6%|
|FY 2012-13||$ 100.1||10.1%|
|FY 2013-14||$ 113.8||13.7%|
|FY 2014-15||$ 133.3||17.2%|
|FY 2015-16||$ 144.1||8.1%|
|FY 2016-17||$ 159.7||10.8%|
|FY 2017-18||$ 176.7||10.6%|
- The majority of this aid is need-based.
- There are several other sources of institutional undergraduate financial aid: non-General Fund aid provided centrally, and school/college aid (both General Fund and non-General Fund).
The U-M endowment
U-M’s endowment is a collection of about 10,500 separate funds. Each fund must be spent as specified by the donor.
- One-fifth of the total endowment is earmarked for student scholarships and fellowships.
- Approximately one-fifth of the endowment was given for Michigan Medicine and can only be used to support research, patient care or other purposes identified by donors or sponsors.
- In the past 20 years, U-M’s long-term investment strategy and spending policies generated nearly $4 billion in endowment distributions to support operations.
- U-M’s endowment is the ninth largest among all universities in the country, and U-M ranks 84th in endowment per student, much lower than private peer universities, indicating our endowment supports learning for a much larger body of students