OT - University of Michigan going private? Any updates?

Submitted by profitgoblue on November 8th, 2010 at 12:15 PM

I am wondering if anyone has heard any recent updates/discussions about Michigan going private (see http://www.nextstudent.com/student-loan-blog/blogs/sample_weblog/archive/2009/05/05/19299.aspx, for example of previous rumors).  A guy sitting a few rows in front of me on my flight home from the game yesterday was talking about the movement gaining some fresh steam both with the administrators and in the legislature.  Anyone know any more?  Was this guy just talking out of his a--?  Thanks.


James Burrill Angell

November 8th, 2010 at 2:33 PM ^

#1) I broke a finger yesterday playing flag fb so I can't write as much as I would like

#2) Establishing credibility by saying I'm very involved with Alumni Assoc. on national level, would prefer not to go further. Also, I have immediate family members who work for the school.

#3) MSC has a duty to look into EVERY possibility. With the potential for MASSIVE funding cuts from what the State gives to all universities, MSC and the Admin had to look at doomsday scenarios. They conducted studies into what it would look like if we were to no longer get any money from the State.

  a) Note that the % of  Universities operating budget that is given by the state (as opposed to tuition and endowment) is actually not that big. I don't have in front of me but I think its like 20 or 25% of the budget. At most state universities its like the exact opposite.

  b) That said, I believe thats still somewhere between 150 and 200 million dollars a year.

  c) studies concluded for the University to operate and replace that money they would likely have to (i) go private and create a level tuition somewhere in the $30,000 range (in state is about $19,000 right now and I think out of state is about $41,000). (ii) a few of the schools (majors) would have to be cut for cost savings (iii) we would have to have another MASSIVE fundraising capital campaign to create an endowment such that the 4.5% interest they typically allow for per year would replace a nice portion of that money the state gave us. Just so you understand, if the University put $100,000,000 in their endowment, they don't spend off that amount, they only spend 4.5% of the interest. Accordingly, $100mil in the bank is only $4.5mil in usable operating money year to year.

BUT THATS WHERE IT ENDS!!! There is no one pushing for this agenda!!! Its just a doomsday scenario. The proverbial end of days scenario as prepared by a human group tasked to determining the same much the way the W.H.O.P.P.E.R. computer system was tasked to do in the 80's movie Wargames with Mathew Broderick. (Dating myself somewhat here.

Now, my understanding is that our new Alumni-In-Chief/Governor, Rick Snyder will likely be facing a fairly massive budget deficit next year and not expecting the federal bailout funds that were used the last two years.. I know he's close to the University but the cuts may come pretty deep this year. I would ask all of your faith and tell you that this WON'T happen unless it has to happen and NO ONE wants it to happen.


November 8th, 2010 at 2:46 PM ^

a) Thanks for delivering some deep knowledge on this topic.

2) I was appreciating your post and noticed you had 0 vote-points, so I wondered, "when was this posted?  Must've been very recent if no one has yet pos-voted it."  Lo and behold, it was actually posted 52 minutes IN THE FUTURE!  Are you THE_KNOWLEDGE or like some miniature, just a little bit into the future version of same KNOWLEDGE? (Er, or: Hey Brian and peeps, dey turk ar kloks this weekend, or something.)


November 8th, 2010 at 4:06 PM ^

My assessment after conference call(s)...

You're dead on.

Due diligence has been done and passed on.  It is being discussed, but not as a truly serious option - right now.

GIven the budget problems in Michigan, changes will be made - but this one seems to be near the bottom of the list.

Outstanding post - would +25 you if I could.


Go Blue!


November 9th, 2010 at 12:26 AM ^

You are definitely dead on. I was my department's graduate student rep for faculty meetings. You are completely correct regarding the deep cuts at the state level for funding. My department based its hiring strategy (ie whether to recruit a junior tenure track faculty member or a senior tenure track member with an endowed chair) for a new faculty member upon state funding for the 2010-11 academic year and the level of tuition increases for said year. A lot of it came down to whether Marian Illitch was going to push for a tuition freeze as a potential accomplishment for a run as Michigan's governor. 

Bando Calrissian

November 8th, 2010 at 12:32 PM ^

Not-for-profit...  As a Michigan alum now going to grad school at a ritzy private institution, I see this argument all the time, look at what I pay to be here, and I just don't get how it could possibly be true.


As far as UM is concerned, it's an institution that takes its identity as a public university quite seriously, and I don't see that being forfeited or abandoned any time soon.


November 8th, 2010 at 3:26 PM ^

Not for profit doesn't mean the organization doesn't make money.  It means that the organization is not created for the financial profit of shareholders. 

Profits are plowed back into the organization - expanding service offerings, building physical infrastructure, acquiring intellectual capital, providing scholarships, etc.


November 8th, 2010 at 12:22 PM ^

But I believe that such a move would require approval of the citizens of the state, since thus far, our tax dollars have supported it, and we have elected positions involved in operating it.

Pretty sure this all got started when the state was talking about 500 million crazy ways to save money. Key change... the budget is looking like it may just improve.


November 8th, 2010 at 12:26 PM ^

I think you're right on all counts.  The discussion began when the legislature was looking to cut the budget and the argument goes that Michigan can fund itself through the increased tuition charged to in-state students.  I also heard that they are looking to change the ratio of students to be more even in-state versus out-of-state which would cause serious heartache in the legislature.  Another consideration I've heard is that Michigan has been ranked around 20-30 in the US World News rankings every year and some say that will never change unless they go private.  I'm not sure how much weight this concern carries but its still an interesting argument for going private (an increase in rank means more grant money, etc.).


November 8th, 2010 at 1:37 PM ^

UM already has a staggering out-of-state attendance rate for an ostensibly public, state school. Something like 30% of undergrads are out-of-state (as are the vast majority of grad students). Surely the student quality would begin to drop off a bit given that out-of-state UM undergrads are often Ivy rejects (though they often make for great students) while in-state students often reflect the absolute best students in a very large state. So I don't know that increasing that percentage substantially is tenable; it seems that they've struck a nice balance of out-of-state and in-state talent (and, remember, as bad as things can get in the state, Michigan doesn't suffer acutely from the brain drain that afflicts other economically struggling state and we can thank UM and, to a lesser extent, MSU for that). 

The UC system only admits about 10% out of state students, which is costing a cash-strapped state untold millions of dollars. I recall seeing a petition by UC profs encouraging increasing those numbers, as well as further institutionalizing the split between elite UC schools and the lower tier, or the sake of achieving solvency. But even if they really, really need the money, I can't see UC going to even 20% out-of-state enrollment.


November 8th, 2010 at 1:58 PM ^

Surely the student quality would begin to drop off a bit given that out-of-state UM undergrads are often Ivy rejects (though they often make for great students) while in-state students often reflect the absolute best students in a very large state.

I'm not sure I get what you're saying here.  Are you saying that increasing the OOS % would be worse for Michigan academically?  Or that taking the school private would hurt the school academically?  Neither really jives with reality.


November 8th, 2010 at 2:38 PM ^

I'm saying neither. I'm saying that it would hurt the state of Michigan by a) pricing out good local students b) consigning more talented Michigan students to MSU or c)  sending such students out of state.  30% is a lot of out of state students for a public school but it seems to be about the price of admission for having an institution that can compete with any in the world. And, relative to the size of Michigan (compared to California), it seems to produce an appropriate admixture comparable to the UCs.  But more than that, or going private altogether, would obviously have some effects on both student body demographics and on the general educational environment of the state.


November 8th, 2010 at 2:13 PM ^

The UC system only admits 10% OOS because there are 33 million people living in California.  Even with Stanford and USC providing some outlet, the top tier of the UC system can't handle all of the good California kids who want to go there, let alone tons of out of state kids.

By comparison, Michigan has a little less than 10 million in population that skews older.  Any top-level student who wants to go to Michigan will pretty much be accepted to Michigan.  That's not necessarily the case in the UC system.  Top level kids might not get into Berkeley or UCLA.

Putting it another way, Michigan's has around the same admissions standards as Berkeley, UCLA, and UCSD.  The next best school in Michigan, MSU, is about on par with UC-Riverside and UC-Santa Cruz, the 6th and 7th best schools in the UC system.

James Burrill Angell

November 8th, 2010 at 2:17 PM ^

Iowa is like 55% instate/45% out of state. No discussion of going private there.

MSU WANTS to go higher than their 10% or 15% out of state but can't attract high enough caliber out of state students.

There is precendent for the split. Has to do with the demand and the state's desire to have a school of national  quality versus just a "best school in the state". Sorry. WOuld type more but I broke my finger playing flag fb yesterday and typing is a pain.


November 8th, 2010 at 7:08 PM ^

I got into a couple Ivy schools but the truth was for the fields I was interested in, they weren't as good as UM.  They also cost 2x+ what UM did out of state.  Having visted and known many people who went to Ivy schools, I'm still not sure what the big deal is.  Outside of Law/B-School they really aren't any better than numerous other institutions throughout the US.


November 8th, 2010 at 2:41 PM ^

This has been threatened forever.  At the end of the day it won't happen. 

I remember hearing a rumor about UT-Austin going private, also. 


November 8th, 2010 at 12:24 PM ^

i've spoken to a professor close to the situation several times about this and he continues to tell me that while certain people make rumbles about taking the university private, it will not happen.  the university gets very little money from the state relative to other public schools, and that cuts both ways.  it makes it easier for them to go private, but so long as they don't need more money, it alleviates the need for them to change their financial model.  ultimately, this seems like all talk.


November 8th, 2010 at 12:25 PM ^

How much is in-state tuition? I know out-of-state is somewhere upwards of $40,000/yr. During my years at U of M, out-of-state was somewhere around $16,000/yr. 


November 8th, 2010 at 12:40 PM ^

in California some of the professional schools have explored becoming more independent of the UC system.  The most recent example is Cal's law school.  They haven't made much progress but the driving force is to be able to independently finance the school-meaning alumni and business fundraising will be retained in larger part by the law school and they will be able to raise tuition, without any go-forward discount for in-state students.

Wine Country W…

November 8th, 2010 at 1:00 PM ^

. . . that diverts attention from the fact that Michigan, because of relatively high fees, a large out-of-state contingent, and a rich endowment is less dependent on state funds than comparable public institutions like Berkeley and UCLA, or in-state counterparts like MSU. In that sense, it reflects the political calculus in Michigan that students should pay a comparably larger proportion on what it costs to educate them than in states like California, where tuition has historically been low.  As Yooper indicates,  public generosity in California regarding higher ed (codified in what is called the Master Plan) has been scaled back in recent years with a series of draconian fee increases. There's even been talk of introducing a clear funding hierarchy to the UC system, where Berkeley, UCLA, and UCSD would be identified as "flagships," and thus given the ability to set their own fees.


November 8th, 2010 at 1:00 PM ^

No basis in actual plans. The University receives 7% of its budget from the state (that link goes to a good New York Times article from last year about this subject). Out-of-state students effectively attend a private university, and pay accordingly, so their tuition replaces the unreliable state funding. With its endowment and brand strength, it has the option to go private, but neither the Regents nor President Coleman desire to do that because they value the university's mission as a public.


November 8th, 2010 at 1:53 PM ^

Wouldn't this decision come from the Regents, or even through a constitutional amendment? In either case, it wouldn't be the governor.

It's a hypothetical decision on a hypothetical proposal, so it doesn't really matter, but I have to put my poli sci major to use when the time calls for it.


November 8th, 2010 at 1:12 PM ^

I love what I call Michigan the school threads. I also hate them.  Love reading people closely tied talk with knowledge about the greatness of the school. Hate it that I messed around a little too much in high school and could only get into MSU.

Arguably the top public University in the country, if not the world.   Good to read that folks think it will stay that way.


November 8th, 2010 at 1:17 PM ^

This comes up at the start of every new administration, and it's kind of a shot across the bow (another guy used red herring). Every budget cut in the state has managed to cut Michigan's share down a little bit more, because, well, here's this big university in the state that seems to be taking more and more out-of-staters, and whose alumni don't often stick around. And every time this gets a "well do you want us to go public? Huh?" empty threat.

I talked with a guy once about an idea of debt forgiveness for Michigan grads. The idea is every year you work in Michigan after graduating from U-M, the state will forgive an increasing percentage of your student loans. It never got anywhere, but that might be a reasonable sweetener to add when the state wants to make it 6.5% next time. Any other states do something like this?


November 8th, 2010 at 5:01 PM ^

But without entry-level jobs available it's a non-starter. A better one would be for entrepreneurs. Relieving them of a large, non-dischargeable debt would make taking risks more palatable.


November 8th, 2010 at 1:23 PM ^

Privatizing UofM would be a huge mistake for the state, and not be good for Michigan. I don't want Michigan to be another second rate private school (like USC). A huge appeal of Michigan is it's one of the best public schools in the country.