Postsecondary Education

CONNECTING YOUNG ADULTS TO OPPORTUNITIES

2024 State Budget Analysis

As Michigan’s economy changes, it is essential to have some kind of postsecondary credential that signifies skill attainment in order for most workers to have success in the job market and earn livable wages. This can be a college degree, an occupational license or a recognized certificate. Based on the recent A Stronger Nation report by the Lumina Foundation, only 50.5% of Michigan working-aged adults (25 to 64) had a postsecondary credential or degree in 2021. While we have made a lot of progress over the past 10 years, we still have a significant way to go to meet our goal of having 60% of working-aged adults with a postsecondary credential or degree.

And even within this progress, disparities exist due to systemic barriers at accessing postsecondary education, tuition or other financial aid and other wraparound supports necessary to succeed in college. In Michigan, only about 52.8% of 2022 high school graduates had enrolled in postsecondary education within six months of graduation, but rates were lower for Hispanic or Latino graduates (41.5%) and Black or African American graduates (37.2%). And rates are declining across almost all races and ethnicities.

The final budget includes a net increase of $99.2 million (with a $753,200 General Fund reduction) for university operations. This is a 6.4% increase over the current year budget. This includes $21.4 million to fund a $4,500 per full-year equivalent student funding floor and speed up the phase-in to over two years instead of the planned three-year phase-in. The total for university operations funding is over $1.6 million, including $443.2 million in School Aid Fund (SAF) dollars. Increases in operations funding for public colleges and universities will range from a low of 4.7% to a high of 19.8%

The budget also includes an increase of $16.7 million (4.9%) in SAF dollars for community college operations, bringing the total funding for operations to $358 million, all paid for from the School Aid Fund. Increases in community college operations funding will range from a low of 4.1% to a high of 7.1%.

These are both more than what was recommended by the governor’s budget proposal.

Tuition restraint, first enacted in the public universities budget in the 2013-14 budget, is a tool with which the governor and Legislature incentivize limiting tuition increases from year to year. It makes each university’s operations funding increases contingent on keeping tuition increases within a specific percentage or monetary amount, whichever is greater. The final budget’s tuition restraint level of 4.5% or $676 is lower than the current year level of 5% or $722.

Tuition restraint will also apply to community colleges in the 2023-24 budget. Operations funding increases would be conditioned on restraining in-district tuition and fee increases to the greater of 4.5% or $205. 

These restraint limits are in alignment with the governor’s original recommendation.

Even as the cost of providing an adequate college education has increased, total state appropriations for operations costs at institutions of higher education have declined on a per-student basis. This has resulted in rising tuition costs, and, even with tuition restraint provisions in place, many students find it difficult to pay for their education and turn to financial aid, including grants and loans. Unfortunately, rising student loan debt has made long-term financial security out of reach for many Michiganders.

To help offset the costs of paying for college, the final budget provides the following in financial aid programs:

• Michigan Reconnect, which provides non-traditional students with free tuition for degree and certificate programs, receives $65.2 million in General Fund dollars in the Dept. of Labor and Economic Opportunity budget, a $10.2 million increase over current year appropriations. This is to reflect current cost estimates of the program. Additionally, $70 million in federal State Fiscal Recovery Funds (SFRF) are provided in a current year supplemental to temporarily reduce the age of eligibility to 21 years old from 25, expanding eligibility to up to 350,000 more students, as recommended by the governor.
• The Michigan Achievement Scholarship is a newly created program to award scholarships to eligible in-state students that graduate high school or achieve a GED in 2023 or after and attend an eligible Michigan public university (up to $5,500 a year), community college (up to $2,750 a year), tribal college or independent nonprofit college or university full time (up to $4,000 per year). The current year budget included a $250 million deposit into the Postsecondary Scholarship Fund (which funds the scholarship program), and the 2023-24 budget includes another $50 million deposit—half of the governor’s recommendation—bringing the fund total to $300 million. 
• The Michigan Tuition Incentive Program (TIP) receives $73.8 million in federal Temporary Aid for Needy Families (TANF) funds, a $2.5 million (3.5%) increase over the current year, to align appropriations with expected expenditures. TIP pays students’ tuition costs in their entirety for associate degree coursework, and up to $2,000 for bachelor’s degree coursework. TIP is the only Michigan needs-based grant in which eligibility is based on household income (using Medicaid eligibility as a proxy, it covers students from families whose household income is below 130% of the federal poverty guideline) rather than on estimated family contribution. Because TIP supports the target population for TANF, paying for this financial aid grant is an appropriate use of TANF dollars.
• The Michigan Competitive Scholarship sees a $3 million reduction in General Funds, a 10% decrease. The reduction is due to the anticipated phase-out of the scholarship program as student awards increase under the new Michigan Achievement Scholarship program (above). The Tuition Grant Program receives flat funding. Both of these need-based programs are based on estimated family contribution rather than on household income, and as such, support students from middle-income and affluent households in addition to those from households with low incomes. However, funding for these programs largely comes from TANF despite only partially serving the TANF population.

While many students struggle with paying for college, many students also need additional support to connect with an appropriate college or training program, career counseling for post-college, or have other needs to allow them to remain in school, like food access or child care needs. To help support these students, the final budget includes:

• New funding of $5 million for career and education navigators for adult learners. Community colleges could partner with county governments to apply for grants through the Office of Sixty by 30 to supplement or create career and education navigators.
• New funding of $5 million for the Michigan Reconnect Entry Point Program. Community colleges could partner with county governments to apply for grants through the Office of Sixty by 30 to engage applicants who have been approved for Reconnect funding, but have not enrolled in an eligible program.
• New funding of $37.8 million to fund the College Success Fund and Student Wraparound Supports. Of this, $11.5 million would be required to go toward student wraparound services and basic needs supports that help students remain in college, such as child care, on-campus food pantries, housing or other emergency needs, mental health supports or funding to resolve institutional barriers to college success. The remaining would be provided for competitive grants to implement best practices at improving student retention and graduation rates. The governor had recommended $55 million total for these purposes, including $30 million for student wraparound services and basic needs support.

Both the community colleges and the public universities budgets continue the problematic practice, begun in budget year 2010, of using a significant amount of School Aid Fund (SAF) dollars to supplant General Fund dollars. Although constitutionally allowed, this is money that has historically been meant to support K-12 public education; when Michigan residents voted by ballot to raise their taxes in 1994 to strengthen the SAF, they did so with the understanding that the money would go to support the public K-12 school system, not universities and community colleges.

Taken together, the two postsecondary education budgets for 2023-24 use a total of more than $1 billion to support the operations of postsecondary institutions—the highest diversion of SAF dollars since the practice began. With the enacted budget, a total of more than $8.5 billion will have been diverted out of K-12 education this way during the past fifteen years.