The Arizona Desert Lamp

Privately Funded, Publicly Provided

Posted in Campus, UA Transformation Plan by Evan Lisull on 31 October 2008

Speaking of the funding issues of the University (overheard at a coffee shop today: “Administration can’t write the check because the school has no money!”), this three-year-old editorial by the Goldwater Institute is more relevant than ever:

What you might not know is that the University of Michigan is a largely privately financed public university. As of 2003, state funding constituted less than 10 percent of its general revenue, and it was the first public university to top Wall Street rankings with an Aa1 credit rating and its bonds trading at Aaa levels. Today, the University of Michigan offers an education rivaling the best private universities at about one-third the price.

Things were very different 40 years ago. In 1965, the state of Michigan provided 70 percent of the University’s revenue. After peaking at this level, the state economy declined and competition among Michigan’s 15 public campuses for limited public funding intensified. Over the years, Michigan went from being a top-ranked state for higher education appropriations to one of the lowest nationwide. It was clear that state appropriations would not sustain the University of Michigan as a world-class research institution.

So the University of Michigan went where most public universities feared to tread: the private sector. It began aggressively raising private funding and decentralizing management of those resources to be more financially independent.

The strategy paid off. By 1997, the University of Michigan completed one of the most ambitious private fundraising efforts by any university at that time, raising more than $1.4 billion through its five-year Campaign for Michigan. From 1992 to 1997, annual private giving to the University nearly tripled, from $60 to $165 million. Its endowment grew from $250 million to $2 billion, yielding $90 million in annual endowment income.

The University of Michigan, along with California-Berkeley and the University of Virginia, is the goal to which all large public universities strive. When the article was printed, endowments made up 32 percent of the UA’s funding; this certainly has gone up, in wake of a record fundraising year and diminished state funding, but it is still not high enough. The best way to avoid the problem of fickle funding from the legislators in Phoenix is to become more self-reliant as a school.

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  1. […] cool stuff, and a small reminder that this model is very possible. Perhaps the university administration should save their tears and start […]


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