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In their January 15th Michigan Daily Op-Ed piece, LEO members Kirsten Herold and Ian Robinson stated that “Our research shows increased wages are not a significant driver in increased undergraduate tuition.” There was no space to go into the analysis that led us to this conclusion in the Op-Ed, but we promised to lay out the reasoning and evidence on our web site. Here it is.
The budget pressures that are driving undergraduate tuition up every year come from two sources: rapidly rising costs and falling revenues from state appropriations. Even if UM expenditures were not rising at all, falling state transfers would generate a deficit and create pressure for the university to increase revenues. How big was each contributing factor? Between fiscal year 2001-2 and 2009-09, university expenditures increased by about $1.23 billion from a starting point of $3.8 billion; over the same years, transfers from Lansing fell by $34 million from a starting point of about $364 million. Together, these two changes give us the size of the gap that needed to be filled with increased revenues by 2008-09: $1.264 billion. Falling support from the state government accounted for just 2.7% of that gap. 1
The vast majority of the gap – and the resulting pressure to raise tuition -- therefore derives from the expenditure side. How much did faculty salary growth contribute to rising UM expenditures in those years? The faculty salary bill (including GSIs) was not a very large share of UM expenditures in 2008-09: at $456 million, they accounted for 9% of the $5 billion that UM spent in that fiscal year. (Lecturers’ share of faculty salaries was about 9% of that 10% -- that is, less than 1% of the total that year.) That represents no increase over faculty salaries’ share of the 2001-02 budget, which was also 9%. 2 The implication is that faculty salaries did not drive the increase in UM expenditures in the new century, though they did more or less keep up with it.
In sum, faculty salary increases cannot be more than a marginal contributor to rising UM expenditures – and, by extension, rising undergraduate tuition fees -- because faculty salaries account for only 9% of all university expenditures, and that share has not been growing over time: the tail does not wag the dog! So what accounts for the other 91%? In our next installment, we’ll consider possible answers to this question and what they imply for the best way to get UM expenditure growth under control.
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1. UM expenditures are calculated using the total budget figures from the “Grey Books” for 2002-3 (which contains data on 2001-2) and 2008-9, available on the web at http://sitemaker.umich.edu/obpinfo/um_budget_detail. Even if we look only at the smaller General Fund component of the UM’s overall budget, the basic conclusion that expenditure increases are much more important than cuts from Lansing holds. General Fund spending increased by about $300 million during the years in question, so the cut of $34 million amounts to just about 10% of the $334 million revenue gap.
2. University of Michigan, An Analysis of Salaries Paid to U of M Regular Instructional Faculty, Lecturers and GSIs, 2001-02, p. 9, and 2008-2009, pp. 9-10. (Aka “The Yellow Book”) The Department of Labor’s Inflation Calculator (b based on the Consumer Price Index) -- http://www.bls.gov/data/inflation_calculator.htm -- was used to transform Yellow Book data into the inflation-adjusted figures used here.
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