(Editor's note: Michigan Capitol Confidential did a story about rising costs at Michigan's universities and University of Michigan President Mary Sue Coleman's claims. The following is a response from University of Michigan spokesman Rick Fitzgerald.)

U-M has been holding down employee compensation costs with modest pay raises for faculty and staff for the past decade.

The average annual salary increase over the past five years was 2.5 percent for staff and 3.7 percent for faculty. You can find additional detail here.

As President Mary Sue Coleman told the state Legislature last March, “I am proud that we are able to offer competitive salaries throughout the University. I am not going to punish people for doing a good job. We want the best, and work hard to keep them.”

Because we value our employees so highly, we’ve made significant cuts in other areas instead.

We just learned that we will save $90 million in 2012 — $400 million so far since 2003 — through a number of changes in our benefit plans. We’ve reduced energy consumption to save $5.2 million a year. We saved $7 million in fiscal year 2011 by consolidating central IT services.

All told, we’ve already reduced or reallocated more than $235 million in recurring costs in the past decade. And we’re committed to finding another $120 million in reductions and reallocations by 2017.

You’re curious why our employee growth would outpace our student enrollment growth. The main reason for employee growth is the increasing amount of sponsored research we are conducting.

For fiscal year 2011, total research spending was a record $1.23 billion, an increase of 8.5 percent from the previous year. That funding creates jobs, provides learning opportunities for students and, in many cases leads to new discoveries — and still more new jobs. Economic development is a core mission of the university.

Even with more research jobs, the number of full-time equivalent positions paid by the general fund (which is where all the state funding goes) decreased by 2 percent from 2009 to 2010.

I also want to caution you about what the HEIDI data does and does not show. That data only counts the people and compensation paid from the university’s general fund. At U-M we’ve done such a good job of getting other sources of funding for faculty (donor gifts, endowment proceeds, research grants) that today more than one-third of faculty salaries are now paid from those other sources.

That’s good for U-M and that’s good for the taxpayers of Michigan. But it also distorts much of the HEIDI data. The HEIDI data would make you think that the number of administrators — which includes IT staffers, finance employees and academic departmental staff — and their pay is growing faster than faculty pay. Actually, just the opposite is true.

Here are some other facts to consider

At U-M Ann Arbor, on an inflation-adjusted basis, our current year’s state allocation is equivalent to what the university received in 1964. State funding has shrunk from 80 percent to less than 20 percent of the general fund budget.

While the “sticker price” of a U-M education has gone up, for many students, the actual cost to them has stayed flat or declined.  A significant portion of the money we saved has been re-invested in financial aid.  Today the typical in-state student with a family income of $80,000 or less actually pays less than in 2004 and students from families earning up to about $120,000 pay just slightly more.  And it’s important to note that the additional aid comes through increased grant funding rather than increased loan burdens.

Here is a link to more information on our cost-cutting efforts.

In a letter to President Barack Obama, University of Michigan President Mary Sue Coleman blamed the rising costs at state colleges on “declining state support.”

“Higher education is a public good currently lacking public support,” Coleman wrote in her Dec. 16 letter. “There is no stronger trigger for rising costs at public universities and colleges than declining state support. The University of Michigan and our state’s 14 other public institutions have been ground zero for funding cuts.”

The state is scheduled to give the University of Michigan and its two satellite campuses about $54 million less in 2011-2012 than the previous year, a 15 percent cut. But one fiscal policy expert questions the logic in Coleman’s linking a reduction in state dollars to rising costs.

Michigan’s average compensation for full-time faculty, for example, increased from $122,943 per full-time position in 2005-2006 to $141,753 in 2009-2010, a 15 percent increase over four years.

“To say that higher education costs are increasing because of declining state appropriations confuses revenue with expenses,” said James Hohman, assistant director of the Morey Fiscal Policy Initiativefor the Mackinac Center for Public Policy. “It would be like arguing that losing $20 in the lottery makes groceries cost more. Universities have control over their expenses and can’t blame stalling state appropriations for their ever-increasing costs.”

U-M spokesman Rick Fitzgerald said the college has held down employee compensation costs in the last decade and still offers competitive salaries. Fitzgerald said U-M has made significant cuts in other areas, such as reduced energy consumption and changes in employees’ benefit plans. For U-M’s full response to this article, click here .

The University of Michigan's main campus in Ann Arbor and its satellite campuses in Dearborn and Flint received $361.8 million in 2010-2011 from the state. That was cut to $307.5 million this year.

Although state appropriations have been reduced this year, overall spending at U-M has increased.

According to the University of Michigan budget, the college’s operating expenses increased 24 percent from 2006 to 2010. U-M’s operating expenses increased from $4.25 billion in 2006 to $5.28 billion in 2010. At the same time, student tuition and fees and scholarship allowances increased 28 percent, from $675 million in 2006 to $863 million in 2010. 

Some scholars believe there are other causes to tuition hikes than government appropriations.

The Mackinac Center reported in 2010 that the number of administrators and service staff at Michigan’s 15 state universities increased 15 percent while their average compensation grew 13 percent from 2005 to 2009.

As an example, the University of Michigan-Flint campus now has more full time administrators (278) than full time faculty (275).

“Taxpayers need to find out what they want from universities," Hohman said. "Those footing the bill send billions of dollars year after year and are continually asked for more, but promised nothing but a tuition discount in return. Higher education’s constant cost increases point toward a broken system that can’t be fixed by more taxpayer dollars.”