Formula Funding Discussion Escalates

The NMU Board of Trustees approved the 2012-13 budget development submission to the State of Michigan Budget Office. Instead of an operating budget request, as required in previous years, Michigan’s public universities were asked to supply suggestions for performance measures, goals and other factors that should be considered for a formula funding metric.

If the state pursues a formula, Gavin Leach (Finance and Administration) said there are a few conditions universities agree are important. “Those are: reverse the decline in state support for higher education; don’t take money away from one school to benefit another; and develop a two-prong strategy for higher education appropriations that includes performance-based funding as an incentive for improvement and funding for extraordinary enrollment growth over time.

“State legislators, especially in the House, are looking at moving toward a funding formula. NMU has typically ended up on short end of these formulas. We’re concerned about that. We’ll keep close tabs on it and have many discussions in Lansing as the budget process continues this spring.

NMU President Les Wong sat on a national committee on administrative policies for the American Association of State Colleges and Universities. He said performance funding is the number one issue.

“There are about 35 states contemplating it now,” he said. “We have to keep in mind that adding output variables to justify appropriations is a dramatic change. It’s not a one-year thing. Once you go down that path, it’s going to be a multi-year proposition. The state is moving into a discussion of finding the right balance between traditional and outcome-based funding. No matter how that comes out, you still need to cover upfront costs. There are challenges that would require serious consideration and changes in habits that would ripple down to unit level.”

Northern’s 10-page submission stresses that NMU is a rural comprehensive university that serves a geographically diverse population from around the Great Lakes region and northern tier of the United States. The goals, measures and factors identified by NMU in the document as appropriate in serving its unique mission are as follows:

▪Facilitate and strengthen collaborative partnerships in order to enhance the delivery of high-quality health care education, research and support services in the Upper Peninsula

▪Continue to be a rural technology leader through WiMAX and partnerships with technology companies

▪Accessibility

▪Affordability

▪Community and economic development

▪Promote regional businesses/tourism and enhancing the regional economy by operating the Upper Peninsula trade and convention center (Superior Dome)

▪Special consideration for state-mandated costs: Seven public universities, including NMU, have an unfunded annual liability and cash health costs related to the Michigan Public School Employee Retirement System (MPSERS) program. The costs are not within control of the universities and represent 9 percent of their annual state appropriation. For NMU, the annual liability is $4.2 million. “The seven schools impacted have met to discuss ways to reduce that cost,” said Leach. “We agreed to submit a special project request as a way to help fund our MPSERS liability.”

▪Maintain a percentage of nonresident students that equals or exceeds the state average

▪Geographic and environmental conditions: Give consideration to institutions with higher costs related to heating/cooling and snow removal. Also offer incentives for energy reduction measures.