House budget action begins: Higher Education summary

And the decision-making begins.

The Legislature took its first formal action on Governor Snyder’s budget proposal yesterday morning as several House Appropriations subcommittees reported their own budget recommendations.   Among those recommendations was the eagerly awaited proposal for the Higher Education budget.

The House Appropriations Subcommittee on Higher Education reported House Bill 4221 with no overall change to the funding level recommended by the Governor.   However, the Subcommittee included significant changes that could affect the distribution of that funding across individual universities.

Perhaps of greatest significance, the House subcommittee proposed withholding 15% of overall base funding ($186.5 million in total) from universities that do not comply with specified “fiduciary responsibility in employee  contracting” requirements that relate to efforts discussed by some universities to extend existing labor contracts prior to implementation of “right-to-work” restrictions that take effect later this month.   In order to avoid the reduction, universities would have to refrain from extending, renewing or entering into a new labor contract between December 10, 2012 (date on which “right-to-work laws were enacted) and March 28, 2013 (effective date of “right-to-work” laws) unless all of the following apply:

  • Any  extension/renewal of a non-expiring contract generates at least 10% annual      savings from the existing or expected future contact (as certified by an independent certified public accountant)
  • The term of the new agreement does not exceed the length of the contract being      replaced unless the same 10% savings requirement is met
  • The contract does not only contain terms that constitute a union security agreement, closed-shop provision, or other specified agreements related to membership in or payment to a labor organization as a condition for obtaining or continuing employment

To the extent that universities fail to meet these requirements, 15% of their FY2013 base funding is unappropriated and then reappropriated, with up to $2.2 million redirected to MSU AgBioResearch and MSU Extension; up to $7.0 million of remaining amounts to universities with retiree health care premium obligations to the Michigan Public School Employees’ Retirement System (MPSERS); and the rest to remaining universities through a modified performance funding formula.

That performance funding formula is also revised by the House Subcommittee from the model proposed by the Governor.  In particular, the House eliminates a specific tuition restraint component of the Executive formula and instead ties all other performance funding to the prerequisite that universities keep tuition and fee rate increases for resident undergraduate students at or below 3.0% for the 2013-14 academic year, slightly below the 4.0% threshold used in the Governor’s performance funding allocation.  The $6.2 million in the Governor’s proposal based on tuition restraint is then reallocated to the other performance funding factors.   Finally, the House Subcommittee combines three separate performance factors included in the Executive recommendation based on how universities compare to national Carnegie classification system peer universities.   The two formulas are compared in the table below.

U formula2

The performance funding changes result in a re-distribution of funds across the individual universities.   Below is a review of how each university fared under both the Governor’s February proposal and yesterday’s House Subcommittee recommendation, including a look at what a 15% withholding could mean to each.

U funding 3

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