Testing Tuition Restraint: MSU Could Lose $18.3 Million

Despite charging its students 9.4 percent more in tuition than it did last fall, Michigan State University still claims the state should give it $18.3 million for keeping its tuition increases below 7.1 percent. The tuition incentive grants were included in Gov. Rick Snyder’s first budget proposal and survived into the first state budget agreement of the Snyder era, approved this spring.

The decision regarding whether MSU kept student costs within the parameters of the agreement appears to be in the lap of State Budget Director John Nixon. If Nixon accepts the MSU argument, some observers and lawmakers will likely question what the state's tuition restraints are really all about.

On June 17, MSU trustees approved what they claimed was a 6.9 percent tuition increase for in-state undergraduates. The storyline at the time was that the hike was small enough for the university to qualify for tuition restraint incentive dollars from the state.

However, that storyline is now in doubt. According to an analysis from within the House Fiscal Agency (HFA), MSU actually hiked its tuition a very unrestrained 9.4 percent above what students paid last fall.

The difference between the university's 6.9 percent claim and the HFA's 9.4 percent assertion is that MSU is comparing the tuition rate it will be collecting in September to its summer rate, which was increased 2.5 percent over its spring rate. This approach has the effect of burying the 2.5 percent summer increase. If this approach is accepted, then it reduces the fall tuition hike to the theoretical 6.9 percent MSU is claiming.

MSU argues that the 2.5 percent tuition increase this summer was merely the restoration of a portion of a previously approved 4.9 percent increase that had been delayed. Thus, it was not a hike.

“The (4.9 percent) increase was approved by the board last June,” MSU Vice President for Governmental Affairs Mark Burnham told Capitol Confidential. “But late in the game some (federal) stimulus money came in, so we decided to give half of the increase back to the students.”

This, according to Burnham, created a situation where MSU technically had a higher tuition rate last fall than it was actually charging.

Capitol Confidential asked Burnham if the tuition rate MSU students would be paying this coming September would indeed be more than a 6.9 percent increase over what MSU students paid in September of 2010.

“Yes,” Burnham responded. “That's because they won't be getting the (2.5 percent) rebate.”

Based on this, MSU's figures appear to either represent a hangover from the federal stimulus complexities or an attempt to use those complexities for a bookkeeping gimmick.

Presumably if Nixon sees it as simply a stimulus hangover, MSU could get the $18.3 million. If he sees the situation as a bookkeeping gimmick, MSU could lose out.

Whether or not Nixon interprets the situation the way MSU hopes he will is currently unclear. He was vacationing with his family on Wednesday and not available for comment. Capitol Confidential has learned that prior to leaving, Nixon met more than once with MSU President Lou Anna K. Simon. It's likely the tuition issue came up during those meetings.

Last week Nixon sent a form and cover letter to the presidents and chancellors of the state's universities, and it seems to signal some potential problems for MSU.

In his cover letter, which was dated June 28, Nixon asked for certification of the tuition status of the various institutions — and seemed to tighten the parameters for how the tuition hikes are to be tabulated. The document provides a glimpse into the world of government entities, where officials word their questions carefully to potentially bolster the case for their eventual decision.

“Universities must return this certification form to the State Budget Director by Aug. 31 and show that tuition and fees will not increase by more than 7.1 percent to qualify for their tuition restraint incentive appropriations,” Nixon wrote in the cover letter.

Insiders tell Capitol Confidential that the meat of the form Nixon sent out is found in Nixon's Question 3. That's where he instructed the universities to provide the figures as they reported them to HEIDI (the Higher Education Information Database for Institutions).

The state has traditionally based its higher education calculations on the national HEIDI standards. In his cover letter Nixon stressed that fact:

“HEIDI is the State of Michigan's Higher Education Institutional Data Inventory,” Nixon wrote.

The point here is that HEIDI calculates tuition on an autumn to spring schedule, not summer to spring. It seems apparent that state officials will be watching with interest to see how MSU answers Question 3.

Nixon's final decision on the MSU situation could set a precedent not only for years to come but for other universities this year.

So far, MSU is the only university with a questionable approach to determining the status of its tuition increase. However, Capitol Confidential has learned that issues could potentially arise with Wayne State University and Northern Michigan University. NMU is expected to announce its tuition status on July 13.