Promoting budget literacy is a significant goal and challenge of the budget team and the Office of the Provost more broadly. The Office of Budget and Planning has produced explanation videos and articles about the budget model and state appropriations. The university’s Office of Public Affairs regularly updates its Key Issues page with budget-related materials. And this year, the annually-released University Budget Book received a beautiful makeover. 

Budget myths are persistent: they resurface in conversation, at open forums, and on social media. Below, the budget team addresses some of the most common budget misconceptions.

 

Myth: “Student tuition/tax dollars paid for the new scoreboards in the Big House.”

Fact: Intercollegiate Athletics, which includes the university’s football program, is an “auxiliary unit,” which means it is a self-sustaining budgetary unit. Tuition and state funding do not fund the budgets of auxiliary units. Auxiliary units are responsible for generating their own revenue, and use  that revenue to fund their expenses. In the case of the Athletics department, revenues from football tickets, donations, media contracts, and sales of licensed apparel fund expenses like stadium renovations and the salaries of the university’s coaches. Tax dollars or student tuition are not attributed.

There are many institutions which subsidize their athletic department operations, either by charging students an athletics fee or transferring a portion of tuition to athletics.  The University of Michigan is one of a handful of institutions nationally where the Athletics department fully funds its own operations.

Other examples of Auxiliary units – units which “pay their own way” without receiving a portion of U-M’s state funding or tuition support – include Michigan Medicine, Student Housing, and Student Publications.

A related myth is that the Athletics operation is so substantial that it plays a large role in University finances and therefore decision-making. Our large fanbase and the media attention paid to teams, not to mention the volume of traffic on game days, add to this impression. In fact, U-M Athletics has an annual budget of about $200 million, whereas the FY24 General Fund budget totals $2.8 billion. In other words, our academic enterprise is 14 times larger than the Athletics department. The university’s total operating budget for FY24 is more than $13 billion, or 65 times larger than Athletics.

In general, budget confusion occurs when people don’t distinguish between the University’s General Fund and other funds. The General Fund’s sources include student tuition and fees, state support, and indirect cost recovery from sponsored research. It pays for teaching, student services, facilities and administrative support. 

 

Myth: “As a public university, the General Fund’s main source of funding is the State of Michigan.”

Fact: While the State of Michigan’s contribution to the U-M budget is essential, it is approximately 13% of the $2.8 billion General Fund.

When expressed in real dollars (i.e., purchasing power in 2023 dollars) the state appropriation for the Ann Arbor campus peaked at $363.6 million in FY 2003. In 2003, U-M received the equivalent of $12,257 per student in appropriations, when adjusted for inflation and for present day enrollments. In FY23, U-M received $6,508 per student, 47% less purchasing power per student compared to 2003.

We are always grateful when the State increases our appropriation, as these increases help the University to meet rising costs and relieve some of the pressure to increase tuition.   But the purchasing power calculations shared above illustrate how recent increases have not been sufficient to overcome cuts and disinvestment.

The majority of the University’s General Fund revenues come from tuition and fees paid by our students.

 

Myth: “Much of the General Fund goes to central services and administration.” 

Fact: About 14% goes to what is called Central Services. This includes, for example, the Office of Undergraduate Admissions, The Center for Students with Disabilities, the Registrar’s Office, the University Career Center, and the university’s legal, human resources, and fiscal offices. 

The majority of the General Fund goes to Academics: 67% is allocated to schools and colleges, libraries, research institutes, museums, capital renewal, and academic program support. 

13% is allocated to financial aid. (This is why, for instance, many students see no net tuition increase even when tuition increases.) 

The remaining 6% goes to a collection of miscellaneous mandatory costs, including insurance, utilities, and health services.