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The Politics of Spin: U of M President Touts Belt-Tightening to State Lawmakers

Dr. Mary Sue Coleman is smart. That goes without saying. She does have a Ph.D., after all. She’s also clever. Her recent act in front of the Michigan State Legislature was a performance that the Academy should recognize next year with a special award: Best Use of Numbers to Hide the Truth. She was in Lansing to arm-wrestle with 14 other presidents of Michigan universities over the money the state of Michigan plans to allocate to universities in its 2011-2012 budget. Dr. Coleman went to Lansing to sing the praises of her university and to stave off threatened cuts to the $316 million dollar allocation the state of Michigan made to the University of Michigan in 2010.

In her testimony, Dr. Coleman noted the university has cut more than $130 million in the last six years by scaling back on expenses ranging from utility costs to planting fewer flowers. U-M is in the midst of trimming another $120 million from its budget by 2017, she said. If the cuts projected between 2010 and 2017 are actually realized, the University of Michigan will have trimmed $250,000,000 from its budget over a period of 12 years, or an average of $20.8 million dollars per year.

On the surface, of course, it’s just the right way to talk to the state’s legislators. However, when the cuts are viewed in some perspective, we see just how miniscule the realized and proposed cuts actually are . Of course, the University just blew $266,000,000 to renovate its football stadium for a team that, in 2009, brought in $34.21 million in revenues, then spent $18.03 million on its program, for a net gain of $16.18 million dollars. U of M’s athletic director recently announced to the media he’s “not messing around,” and contracted with a defensive coordinator for $900,000 per year (base plus bonuses). Never mind Michigan is in the worst recession in 70 years.

While the U, with its 25,000 employees, scrapes by on a $1.2 billion dollar annual General Fund budget, and a $4 billion dollar overall budget, Ann Arbor’s taxpayers have been asked to accept cuts in both police and fire protection, sharply hiked fees for a variety of services, including sewer and water, watched as elected officials have attempted to sell parkland to pay the bills, and seen service cuts. Meanwhile, our state-supported neighbor received a 2010 state allocation of $316 million. On the U of M Provost’s web page, visitors can read a self-congratulatory message that touts the U’s ”belt-tightening.” In the Budget Presentation to the Board of Regents, the Provost writes:

Similar to last year, the FY2011 budget includes aggressive cost-cutting measures, amounting to nearly $39 million in reductions, with almost $22 million of that being reallocated to higher priority activities. The result is approximately $17 million in net reductions…. The cost reductions in FY2011 are on top of our on-going cost containment efforts. For information on our efforts, please see www.vpcomm.umich.edu/pa/key/budget/. Over the past seven years, we have succeeded in removing nearly $159 million in recurring general fund expenditures through a combination of efforts.

Over the past seven years, officials at the University of Michigan have been able to trim just 3.9 percent from a $4 billion dollar budget. Over the past 20 years, the cost of tuition at the university has increased exponentially. In 2010, in state tuition was $8,892 per semester. In 1990, a gallon of milk cost $2.28 and a dozen eggs cost $1.00. The median price of a home was $149,000. Today, the average cost of a new home is $232,000, a gallon of milk costs $3.45 and a dozen eggs cost $1.37. Tuition, then, had it risen at the same rate of inflation between 1990 and 2010, should be $1,800 per semester.

Why has the University of Michigan raised the cost of tuition so much? For starters, in an institution with a collective bazillion years of higher education among its administrators, faculty and students, the braniacs there who teach economics, finance and management to MBA students in exchange $22,000 in tuition per semester for in state students, can’t for the life of them figure out how to reign in their own gargantuan spending more than 3.9 percent over a seven year period.

In a piece published in The Chronicle of Higher Education, one discovers that higher education ranks among the top ten lobbies that spend on federal elections. American higher education is a billion dollar industry populated by egghead administrators lighting their corner offices with $1,000 bills, then spending hundreds of millions on lobbyists in state capitols and in Washington, DC to beg, borrow and wheedle more and more out of American taxpayers. The result? Fewer and fewer students are graduating within the traditional four-year cycle of undergraduate study. According to information from the American Enterprise Institute for Public Policy, in 2008 alone Americans frittered away almost $500 million dollars in tuition and fees at colleges and universities that graduated between zero and 33 percent of enrolled students. “While American high schools graduate about three-fourths of their students in four years, American colleges graduate only about half of their students in six,” writes Mark Schneider in “The Costs of Failure Factories in American Higher Education.”

These are all at once frightening, sobering and maddening statistics. Is the answer to shut off the hydrant of public money and force colleges and universities to live within more reasonable means? How would such a move impact students? College officials have shown little self-restraint in raising the cost of tuition and fees. In various states, including Michigan, state legislators have, at times, held up allocations until college officials have agreed to only modest hikes in tuition costs (i.e. less than double-digit hikes). Perhaps the answer is to change the U.S. tax code so that the entire higher education industry is subject to income taxes, along with the for profit education sector. Why shouldn’t the University of Michigan pay income taxes on the tens of millions it earns yearly from, say, patents and royalties? In October 2006, the University of Michigan reported five-year revenues of $63.6 million (royalty and equity sales) from technology transfer patents and licenses. Add the former Pfizer site, stir well, and watch the patent and royalty revenues grow.

The same faculty and administrators who rake in six- and seven-figure salaries to teach our country’s best and brightest how to manage complex budgets, haven’t reigned in spending and contained costs within their own institutions. In December of 2009 U of M officials “announced” that the institution was “freezing” and “lowering”  the salaries of top paid executives. Almost one year later, to the day, U of M officials announced just how seriously they were taking this whole salary freeze thingy. “Some U of M executives double-digit pay raises following last year’s freeze,” the local paper reported.

You can download U of M’s salary spreadsheets here.

At the same time Dr. Coleman told state legislature that her institution is spending less on “flowers,” and “projecting” total cuts of less than 7 percent to a $4 billion dollar budget over a period of 12 years, she is employing 94 deans who, in 2009, were paid, collectively, $17.856 million dollars plus an additional $6 million dollars for benefits. Tweaking its budget for flowers or utilities is not where the University of Michigan (or any of the state’s 15 public universities for that matter) is going to find significant savings.

“Freezing” salaries, then awarding double-digit raises to offset the faux “freeze” is just the kind of hypocritical move that should prompt state legislators to look at Dr. Coleman’s earnest professions of fiscal responsibility and belt-tightening with a very cold eye, indeed. 

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1 Comment for “The Politics of Spin: U of M President Touts Belt-Tightening to State Lawmakers”

  1. A2P,

    Tuition at UofM has risen at about twice the rate of the CPI for the last 30 years. Also, the cost of university run student dorms have increased at about 50% faster than the CPI for the last 30 years (the student owned and run ICC has kept its cost increases almost exactly in line with the CPI for the last 30 years.) UofM is one big money machine and its admins are very good at squeezing the most money out of the public as possible using every trick one can and can’t imagine.

    However, I believe UofM is simply a very adept opportunistic institution since it is following trends that have existed nationally for the last 30 years. UofM’s two main businesses are in an area where pricing power has proven robust since 1980; tuition and health care. What’s going on is a good old fashion shake-down; take something people need, ration it by blocking any alternatives and then charge a shit-load of money for it! There was an article in a newspaper I read once quoting a city official who stated something to the effect that costs (when it comes to city expenses) will rise to meet income which I believe explains the trends in higher education over the last 30 years. There is no underlying reason the cost of a four college degree should have increased the way it has the same way there was no inherent reason there should have been a bubble in housing the last 10-15 years. The bubble in housing was created by defacto and dejure policy changes at the national level; likewise with education and health care.

    The two trends I believe that account for the increase in tuition are the explosion of incomes in the top 5-10% of the household income distribution (top 5% starts at around 200K/year these days) over the last 30 years and increases in Federal support for education through grants and loans. The more aid money the Feds made available, the more colleges raised tuition! I believe a significant policy failure was to make more grant and loan money available to students without putting any cost controls on the institutions of higher learning in this country. In that kind of environment, the rational thing for college admins was to raise tuition costs through the roof, but slowly over time (prey tell, that is exactly what happened!) It does not help that student debt cannot be discharged in a bankruptcy–I believe that the institutions that receive tuition dollars paid for with loans should have to pay back up to half the tuition money collected from a student in the case of a default.

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