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Posted on Wed, Apr 10, 2013 : 12:48 p.m.

Higher ed budget that threatens to withhold $41M from University of Michigan headed to House floor

By Kellie Woodhouse


Michigan's state Capitol file photo

The state House Committee on Appropriations approved a proposal Tuesday that would add $31.4 million to Michigan's higher education budget, but possibly penalize the University of Michigan for its recent labor agreements.

The budget was passed Tuesday morning in a 19-10 vote in Lansing. It now awaits appraisal by the whole House when representatives vote on the state's fiscal 2014 budget later this spring.

The bill ties the 2.2 percent higher education funding increase to performance formulas. It threatens to withhold 15 percent of a school's base funding if it negotiated new union contracts prior to late-March enactment of right-to-work and did not achieve a 10-percent cost savings in those contracts.

During the Tuesday meeting Kyle Jen, deputy director of the House Fiscal Agency, told lawmakers that Wayne State University and U-M's three campuses —the schools with contracts that reportedly violate the stipulation— are at risk of losing a combined $74 million, $41 million of which would fall on the Ann Arbor campus.

U-M says the 5 contracts it settled prior to March 28 include a cost savings of $81 million, but it is unclear if the House Republicans consider such savings sufficient since overall costs —including salaries— will increase.

Highlights of the proposed budget:

  • The overall permanent funding increase is suggested at $31.4 million, bringing total higher education funding to $1.43 billion — a 2.2 percent increase from this year. In the absence of any penalties, U-M is set to receive $278.9 million in state appropriations, a 1.7 percent increase over this year.
  • The most devastating blow to U-M remained in the budget. Schools will lose 15 percent of base funding if it's found that they didn't achieve a 10 percent cost savings in agreements reached in advance of right-to-work legislation, which took effect in late March. Lost funding will be directed to the state's retirement fund and to universities that are compliant with performance metrics.
  • campusumichstudents.jpg

    University of Michigan's campus.

    Joe Tobianski |

  • Tuition restraint is once again tied to funding, but instead of a 4 percent cap on increases, the committee has suggested a 3 percent cap. The restraint requirement is tied to all formula funding dollars, instead of to a separate allocation like last year.
  • A new performance funding metric is introduced. Universities will be evaluated based on the number of resident undergraduates they enroll. Other metrics remain, including metrics that reward schools for producing graduates with high-demand degrees, for the number of Pell Grant recipients per school and for improving graduation rates.
  • An amendment instructs universities not to provide benefits for domestic partners and to report the cost of providing such benefits. This amendment is not tied to funding.
  • Language remains in the bill that instructs universities to disclose information about research using embryonic stem cells. U-M is the only school that conducts such research.
  • Appropriated funds can't be used to purchase foreign-made vehicles. The bill also includes language encouraging universities to buy from American businesses and companies owned by veterans.

Kellie Woodhouse covers higher education for Reach her at or 734-623-4602 and follow her on twitter.



Thu, Apr 11, 2013 : 12:31 p.m.

Yes, by all means pass rules that retroactively punish education facilities and students in order to prove that you are about local control and less big government interference in local arenas. After all, if we don't have an educated populace we can always increase immigration, something the GOP has long been for. The House is acting like a pre-school that missed it's cookie and nap.


Thu, Apr 11, 2013 : 5:38 a.m.

Two words regarding U of M: Constitutional Autonomy.

A Voice of Reason

Wed, Apr 10, 2013 : 9:06 p.m.

Well, maybe we should give them another challenge (like ambushing workers into having to join a union) to see if there is more money to cut in their budget. Clearly, the right motivation gets results and can hopefully reduce tuition for the kids in this state.


Thu, Apr 11, 2013 : 3:44 p.m.

Don't be silly. Nobody over there wants to reduce tuition. The goal is a 10 TRAZILLION DOLLAR ENDOWMENT and world domination.


Wed, Apr 10, 2013 : 7:34 p.m.

I guess they overlooked the fine print, now suck it up.


Thu, Apr 11, 2013 : 3:42 p.m.

Clownfish, the fine print on the laws of power and common sense is difficult to read, but I believe it goes something like, " don't tug on superman's cape; you don't spit into the wind, you don't pull the mask off the ol' Lone Ranger and you don't mess around with ...." them's that has the power. "Don't bite the hand that feed you" I believe is also applicable here.


Thu, Apr 11, 2013 : 12:25 p.m.

Can you cite the fine print that was in place in law when the contracts were signed, please.

Basic Bob

Wed, Apr 10, 2013 : 7:04 p.m.

since the u saved 81 million on the contracts, they don't need the paltry 41 million from the state. congratulations to the u for saving the taxpayers money and sharing some of it with us.

Jay Thomas

Thu, Apr 11, 2013 : 1:54 a.m.

You hit the nail on the head. They can go out to a ten year contract if they like next time, negotiate even more "savings", and require less from us at the same time. That's if what they say is true.


Wed, Apr 10, 2013 : 10:06 p.m.

Agree except the 81 is over the life of the contracts and the 41 is the first year. Time to take it private. The question is whether the voting public would ever let it happen....doubtful.


Wed, Apr 10, 2013 : 9:26 p.m.



Wed, Apr 10, 2013 : 8:19 p.m.



Wed, Apr 10, 2013 : 7:02 p.m.

When you live by the sword (unions and elected officials working on conditions that do not necessarily favor the taxpayer), you die by the sword (elected officials working for the taxpayer enacting less-than-favorable legislation). The law. Yep, it's a female dog.


Thu, Apr 11, 2013 : 12:24 p.m.

What law did UM break?


Wed, Apr 10, 2013 : 9:26 p.m.

I'm a taxpayer and they ARE working for me.


Wed, Apr 10, 2013 : 8:23 p.m.

I'm a taxpayer, and those elected officials aren't working for ME.


Wed, Apr 10, 2013 : 6:36 p.m.

There are consequences to every action.

Rick Stevens

Wed, Apr 10, 2013 : 6:24 p.m.

Only solution: vote out the Republican nuts who are creating all these idiotic rules. So much for their supposed distaste of 'big government'. As soon as they're in office they're legislating what everyone can and can't do and running roughshod over local government. Micromanagement from the peanut gallery.


Wed, Apr 10, 2013 : 9:24 p.m.

Did you forget that the UofM and its union member employees ARE big government?


Wed, Apr 10, 2013 : 5:37 p.m.

Time to move to a fully private funding model. This is disgraceful.


Wed, Apr 10, 2013 : 5:25 p.m.

"U-M says the 5 contracts it settled prior to March 28 include a cost savings of $81 million, but it is unclear if the House Republicans consider such savings sufficient since overall costs —including salaries— will increase." Only in the public arena could you claim an 81 million dollar savings while total spending increases. That's what happens when there is no accountability, people forget how to count.


Thu, Apr 11, 2013 : 12:35 p.m.

careful there, Blue, we know government should run like a business, and therefore basic accounting practices used throughout the business world do not apply. Do not attempt to bring any facts into the debate, this is about rhetoric and Talking Points.


Wed, Apr 10, 2013 : 6:40 p.m.

My original post ran out of runway. The summary: 1) forward costs are just as real as sport costs; 2) given growth accounting, the concept of inflation, the concept of present value and the concept of marking contracts to market, a contract at a lower rate or a lower PV value does indeed represent a savings; 3) these concepts are well understood in the entirety of the accounting and financial literature, so if you don't understand these very RUDIMENTARY concepts: you don't understand finance, you don't understand accounting, you don't understand inflation and you don't understand economics. If you disagree with me, here is a simple thought experiment... if you don't think there is a savings: 1) take the old projected pay levels over the new contract period; 2) subtract the new level over the same period; 3) PV the values to spot dollars; 4) figure out whether or not you would be happy to receive or pay the difference. Per step two, the subtraction with or without the PV is a number greater than zero. If you object to the above, you are arguing against the existence of systemic inflation and are looking for either zero change or deflation. No central bank in the galaxy wants deflation; every central bank is looking for a controlled band that generally equates to 1% to 2% per annum. This is the level that tends to assure stability of pricing and stable employment.


Wed, Apr 10, 2013 : 6:32 p.m.

All over the financial galaxy, people use two types of dollars: 1) "spot" or current dollars; 2) "future" or "forward" dollars. Spot dollars are dollars that are either: 1) earned/spent at spot; or 2) forward or future dollars which are generally contractual or quasi-liabilities or quasi-assets which are present valued. Spot dollars are typically cash-flow dollars which flow through the income statement and the statement of changes at spot time and at an undiscounted rate; likewise, future dollars are typically discounted with a PV factor and are run through the statements as accruals and/or accrued to the balance sheet. If I have a forward liability, that is just as real as a spot liability and to reflect my financial status on a moment by moment basis I must PV that liability. If UM has a LEGAL contract for services bargained for but not yet paid for, it most sensibly will reflect this liability -- which will occur in forward time -- as a PVed expense. If current contracts reflect ZERO increases, there is still a liability which must be PVed; settling that liability at a lower dollar value would indeed be a savings. With an inflation escalator -- indeed with ANY cost-factor increase -- reflecting the PV of that factor at a lower level is indeed a savings. Why? Because forward labor markets reflect cost-factor increases; thus the avoided cost, relative to a historical factor driver, is indeed a savings. Thus if UM, historically, paid a 3% escalator per year and struck a new contract for 2% a year, that is a 1% savings which would be PVed to spot dollars to measure its impact. In other words, the fact that events happen in forward time in no wise reflects the fact that they are not somehow "real" events resulting in real expenses or real savings. Stating: "Only in the public arena could you claim an 81 million dollar savings while total spending increases. " is utterly fallacious. These FACTS are embedded in the very u


Wed, Apr 10, 2013 : 5:02 p.m.

The chickens are coming home to roost.


Wed, Apr 10, 2013 : 5:13 p.m.

They left their poop in Lansing, though.