U proposes tuition hikes for most students; out-of-state students taking the biggest hit

Tuition hikes will hit many students under the University of Minnesota's budget proposal for the 2017 fiscal year.

School leaders say they have no choice but to raise tuition more than it has over the last several years beginning this fall. By releasing its proposal now, the U also hopes to get the attention of legislators to steer more money to the school.

The proposed $3.79 billion operating budget, which was sent to the University's Board of Regents Friday, cuts millions of dollars in administrative costs, gives 2.5 percent raises to most staff and faculty and increases room and board fees for most students.

"This budget is built on internal reallocations — budget cuts," said Richard Pfutzenreuter, the U's chief financial officer. "About 60 percent of that budget, which we are going to present to the Board of Regents, is built by reallocating funds to pay for investment needs and about 40 percent of the needs are being funded by tuition."

Those proposed tuition hikes are highest on the Twin Cities campus, where non-resident, non-reciprocity students would see a 9.9 percent tuition increase, and residents would get a 2.5 percent increase.

However, a scholarship fund would offset that increase for students who come from families making $120,000 or less a year. That accounts for about half of resident students.

It would be the largest tuition increase for resident students on the Twin Cities campus since 2012. Last year, tuition rose by 1.5 percent.

"The president remains committed to keeping tuition rate increases at a minimum," Pfutzenreuter said. "We have bills to pay, we have no additional state money this year. And we are going to reallocate more than we thought we could reallocate in order to pay those bills, but we couldn't do it without tuition revenue."

Resident students attending Crookston, Duluth, Morris and Rochester won't see any change. But non-resident, non-reciprocity students at Duluth and Morris would also see tuition hikes.

While the budget proposal cuts administrative costs, it also proposes a 2.5 percent raise for nearly everyone else from faculty to undergraduate assistants. Some faculty at the University are currently attempting to unionize both tenured and non-tenured faculty.

The U's budget anticipates no change in state funding from the 2016 fiscal year.

Pfutzenreuter said the tuition hikes for residents could be avoided with more state money, and a supplemental budget bill passed in the Minnesota Senate would actually reduce tuition. The House isn't likely to do the same.

"At least as far as the House is concerned, we have no new money, we have nothing other than policy that might affect the University," said Rep. Bud Nornes, R-Fergus Falls, the head of the House Higher Education Policy and Finance Committee. "I know the Senate has different thoughts on that."

Nornes is surprised the increase in out-of-state tuition didn't help resident students more.

"I was hoping that they would, because they are raising the out-of-state tuition, be able to do more for the in-state students," Nornes said. "It doesn't seem like they've gone far enough."

Rep. Gene Pelowski, DFL-Winona, who also serves on the Higher Education Policy and Finance Committee said an increase for out-of-state tuition should've come earlier.

"That's frankly long overdue, they've been subsidizing that," he said. "And now I think we have to focus all our resources on citizens of Minnesota."

He thinks some on the Board of Regents might want an even larger increase in tuition for out-of-state students.

The budget continues President Eric Kaler's 2014 plan to cut administrative costs by $90 million by 2019. The proposal reduces administrative costs by about $15 million.

Julie Tonneson, associate vice president for budget and finance, said many of those cuts would be made in staffing levels, and lower compensation for new hires.

The budget says most of the staffing level changes could come through retirements or "natural attrition" in different departments.

Tonneson said the U could reduce spending on supplies, travel and equipment.

The Board of Regents is expected to take up the budget next week.