Cuts To U-M, MSU Can't Be Absorbed By Restricted Endowment Funds, MASU Says

(Source: MIRS.news, Published 06/17/2025) Expecting Michigan State University (MSU) and the University of Michigan (U-M) to use their restricted endowments to account for millions of dollars of funding cuts from the state is not "appropriate, rational, or possible by any means," said Dan Hurley of the Michigan Association of State Universities (MASU).

Chris Kolb, vice president of government relations at U-M, said the claim that the university can absorb the cut by using its endowment is not accurate.

"U-M's endowment is not a rainy-day fund, or a budget backfill – it is made up of more than 13,000 donor-designated funds that are legally restricted and support specific purposes such as scholarships, research, patient care and professorships," Kolb said in a statement.

An explainer sheet shared by U-M says the endowment is not one large fund and is actually made up of over 13,000 individual funds, with donors that want to fund specific things like scholarships, faculty positions, research and more. All three campuses and Michigan Medicine benefit from the endowment.

Management of the fund is described under a spending policy that the Board of Regents passes. In Fiscal Year (FY) 2024, $144 million of the endowment's return funded financial aid to students, $162 million went to instruction and academic programming, and $200 million went to Michigan Medicine for patient care and research.

"The vast majority of donations are earmarks, as are the earnings off of those earmarks," Hurley said. "Donors don't contribute money to the university so they can pay electric bills."

Under the original version of HB 4580 that considered the Michigan Achievement Scholarship (MAS) as an appropriation from the state, MSU would have lost $237 million or 72.6 percent of its funding ($61 million or 18.9 percent when MAS is factored in), and U-M would have lost $335 million or 91.6 percent ($239 million or 65.4 percent with MAS).

Factoring in MAS was scrapped after the bill was substituted to get 56 Republicans to vote in favor of HB 4580, and MSU would lose $59 million or 18.3 percent of its state appropriation and U-M would lose $237 million or 65.1 percent under the House-passed version.

Rep. Greg Markkanen (R-Hancock), who chairs the House Appropriations Subcommittee on Higher Education and Community Colleges, reiterated that the endowments of the two schools should be used to fund operations.

In June 2024, MSU said their endowment was valued at over $4.4 billion, having generated over $1 billion in the previous five years for student scholarships, endowed professor support, program support and other annual university expenses.

For FY 2024, the return rate was 15.1 percent, or $660 million.

While U-M's endowment is over four times larger than MSU's, its return rate for FY 2024 was 8.93 percent, bringing in "a record $506 million."

"Without the endowment, it's estimated that tuition would need to be about 35% higher than it is today," the explainer sheet says.

Hurley said he doesn't see the use of endowment returns becoming a negotiation piece with the Senate and Executive.

In response to the argument that U-M and MSU need to prioritize admitting Michigan students rather than out-of-state or foreign students, Kolb's statement also said that U-M educates 18,000 in-state undergraduate students, which is more than the total enrollment at all but four of Michigan's public universities.

"The suggestion that U-M is not attracting Michigan students simply does not hold up. We are the least expensive public university in the state for families earning $75,000 or less and the third most affordable for families earning up to $100,000," Kolb said.

Hurley said out-of-state students pay a higher rate of tuition that subsidizes that of in-state students. Cutting funding to the two universities would likely cause them to lean toward out-of-state students rather than incentivizing increased in-state enrollment.

Markkanen told MIRS on Friday that he understands that argument and thinks there's merit to it, but said in-state students should still be prioritized.

"I think U-M and MSU should prioritize Michigan students first rather than foreign students that pay cash," Markkanen said.

In his conversations with U-M and MSU, Markkanen said they had good discussions and that the universities recognize that this is the first step in negotiations.

Hurley said like other public research universities, they have a higher proportion of out-of-state students since they are nationally and globally recognized.

"The return on investment to this state of being that type of institution has a tremendous number of benefits," Hurley said.