For MSU, the proposal could amount to about $61 million in cuts from the $283.6 million the university received from the state this year. East Lansing could be out nearly $1.8 million from the state if the governor’s proposal to eliminate statutory revenue sharing remains intact.

Revenue sharing is the process of the state reimbursing money allotted through legislation to municipalities in exchange for the ability to collect gas, sales and other taxes.

And although Snyder’s proposals are contingent on approval by a Legislature-given freedom to make whatever changes it sees fit, a grim reality is taking hold.

“In terms of the last decade, higher education funding has been cut 18 percent,” said Michael Boulus, executive director of the Presidents Council, State Universities of Michigan. “In the last decade, Michigan has ranked near last or dead last in support for higher education.”
Above all, university and city officials said it is not as though they did not see such deep-cutting proposals coming. They said the governor’s message of “shared sacrifice” means pain for everyone on all levels.

That acknowledgement, though, does not take away from the pain many expect if support dollars begin drying up.

“I understand that Gov. Snyder had to make some tough decisions, and we need to work with him,” East Lansing City Manager Ted Staton said in an e-mail. “But these latest cuts to revenue sharing will make it very difficult for even a well-run city like East Lansing to provide the basic services that our residents need and deserve.”

To Snyder and many others, the proposals are a bold step in a much-needed direction for a state facing an estimated $1.4 billion budget deficit.

“This day should have happened a long time ago,” Snyder said as he presented his budget. “Not doing this would be kicking the can down the road. That’s not why I got elected. … A lot of us are going to have to make some sacrifices.”

Funding education
Snyder did not mention higher education specifically during his budget presentation Thursday, but his plan was loud and clear in the text of the budget itself.

The governor’s plan would slash nearly 22 percent from the appropriation for each university should they not take an incentive the governor would offer to offset drastic tuition increases. That would mean a reduction of $61 million for MSU.

But under the plan, $83 million in state funds would be set aside for universities that keep tuition increases for the 2011-12 academic year at or below 7 percent. MSU’s share of that pool would be more than $18 million, reducing its total proposed cut to about $43 million.

Snyder’s budget also proposed that, beginning in 2013, university appropriations be divvied up using a formula that will be determined in time instead of the current year-to-year fluctuation in appropriations.

John Nixon, Snyder’s budget director, said the impetus for offering such an incentive is multifaceted and might abate costs to students and their families. He also said Snyder hopes the reduction will be a one-time cut rather than a yearly slashing.

“This also provides an incentive to our universities to look internally … to bring down expenditures and to reduce expenditures,” Nixon said.

But universities such as MSU, Boulus said, already have taken such measures. Withholding money unless a governing body keeps tuition at or under a certain level appears to take away universities’ ability to financially support themselves, he said.

“He’s put price controls on our major revenue source,” Boulus said. “That’s tuition. I don’t think anyone would go over 7 percent, but it’s an unprecedented restriction on university boards. … That seems inconsistent with a governor who understands the market.”

Decades ago, state support made up about 75 percent of the university’s budget with tuition contributing about 25 percent. Those percentages have been swapped in recent years, administrators said.

But leading up to Snyder’s recommendations, administrators had planned for the worst. Last summer, the MSU Board of Trustees enacted a preliminary budget for the fiscal year to begin in October, along with it an assumption state support would decrease by more than $36 million.

Any tuition increase for that period, budget documents say, would be planned for no more than 7.2 percent. When factoring in a scheduled 2.4 percent tuition increase set to take effect this summer, that increase would put undergraduate tuition for a student taking 30 credits per year at about $12,298.

Despite Snyder’s proposal being a $6 million addition to a cut already expected, it still is within parameters MSU trustees set last year, MSU President Lou Anna K. Simon said in a statement. The same goes for the target tuition increase of no more than 7.2 percent.

“This is the beginning of the process of budget development,” Simon said in the statement. “We will closely monitor developments as the state works to finalize its budget while at the same time engaging in our own consultation to arrive at our university budget guidelines for the next two fiscal years.”

MSU Trustee Dianne Byrum said she is not concerned MSU will be unable to adapt to Snyder’s proposal of keeping a tuition increase at or below 7 percent because the board planned for a range of anywhere from 5 percent to the previously stated 7.2 percent.

“I think Michigan State is probably in a better position than some of our peers because we had been planning for a worst-case scenario,” Byrum said. “We’ve seen more than a decade of flat or declining revenues from the state: This continues us on this path. So clearly, we are not out of the woods.”

Apart from appropriations, the governor focused some on state-funded financial aid.

Snyder recommended $51.5 million in aid, a zero percent change from the current fiscal year. The governor also proposed to merge the Michigan Competitive Scholarship and the Tuition Grant programs into one, called the Pathway to Higher Education grant.

If adopted by the Legislature, the grant would be need based and would be awarded to students at public and private colleges and universities. Furthermore, Snyder proposed $43.8 million for the Tuition Incentive Program, or TIP, a $6.3 million increase from the year prior.

TIP is awarded to high school students who have been Medicaid recipients for at least two years. They are aimed at increasing high school completion through college financial assistance.

State Rep. Joan Bauer, D-Lansing, was encouraged by the governor’s proposals for financial aid but, above all, is concerned with the proposed 15 percent to 22 percent cut in university funding.

Bauer — who chaired the state House Higher Education Appropriations Subcommittee last session and now serves as its minority vice chair — said evidence supports what the governor has said about higher education being a solution to Michigan’s economic troubles.

But the recommended cut baffles her.

“That’s a huge hit for our universities to take,” Bauer said. “I think it presents a very difficult position for our universities to be in.”

But the reality of the crushing deficit and $47 billion in unpaid debt facing the state makes the situation for higher education dire, said state Rep. Bob Genetski, R-Saugatuck.

Genetski chairs the House Higher Education Appropriations Subcommittee. He said although he still is combing through the governor’s proposal for the state’s universities, changes in the long term — not just 2012 — are necessary.

“We need to have a discussion when we talk about taxpayers funding universities. We need to look at what’s truly contributing to our state’s economy,” Genetski said, adding that means examining the possibility of closing one or more state universities in the future because of necessity. “When we start looking at these sort of budget deficits, we have to think if we can keep these 15 public universities and keep funding them.”

In the end, such drastic cuts mean bad news for students, second-year graduate student George Maxin said.

“I think cuts are necessary, but education is one of the things we shouldn’t be cutting,” he said.

Sharing, caring
What is almost certain to be one of the most contentious points of Snyder’s recommendations is statutory revenue sharing, an appropriation crafted by legislators each year. A partisan battle in the Legislature is shaping up between Republicans spreading a message of sacrifice and Democrats who say municipalities already have sacrificed enough.

Snyder’s plan eliminates the nearly $300 million expected to be doled out to municipalities in statutory revenue sharing during the current fiscal year. Instead, the governor recommends creating a $200 million fund that would distribute funds to municipalities that demonstrate a commitment to reducing excess and other standards.

“To get those dollars, it’s not just writing municipalities a check,” Snyder said. “We’re asking them to … join us in best practice.”

The governor would seek to increase revenue sharing payments mandated by Michigan’s constitution by 4 percent. East Lansing would receive slightly more than $120,000 atop its constitutional appropriation of about $3 million this year should that plan be enacted.

But further reductions — let alone an elimination of statutory revenue sharing — would create a dire situation, East Lansing City Councilmember Nathan Triplett said.

“There’s this mixed perception by some in state government that revenue sharing is charity,” Triplett said. “What those dollars support are things like police and fire and water and other vital services.”

Staton said revenue sharing payments to East Lansing have decreased by $12 million during the past 11 years; the latest cuts, he said, would be a 30 percent reduction.

“We’ve already made significant cuts to every municipal service and have implemented all of the reforms expected of efficient local government,” Staton said. “If these new state cuts become a reality, we will have no choice but to look at even more significant reductions.”

Ari Adler, spokesman for House Speaker Jase Bolger, R-Marshall, said Snyder’s “shared sacrifice” message is exemplified by the proposal to reduce statutory revenue sharing.

“We all need to be in this together, whether you’re talking about the governor or the Legislature or local units of government,” Adler said. “We need to find a way to constrain the cost of government.”

But state Rep. Mark Meadows, D-East Lansing, was critical of the proposal, saying the governor is creating a system that likely will end up being unattainable for cities already feeling the burn.

“The governor’s proposal eliminates $1.6 million in fire grants, and East Lansing and Lansing are among the biggest recipients of that money. It’s like a double hit,” Meadows said. “I can tell you right now it is not shared sacrifice.”

The governor’s recommendations are the starting point of a months-long process, one Snyder said he hopes the Legislature will complete by May 31. Ultimately, the exact toll will remain unknown until lawmakers craft appropriations bills to construct the budget.

Thursday was not just the starting point for the budget process. It also gave life to the pain of closing a $1 billion-plus budget deficit.

“At the end of the day, you’re facing some tough decisions,” Adler said. “So we need to take the next few months to gather all the information we can and receive all the feedback we can and take some tough votes and make the choices that are the right ones to move Michigan forward.”