Campus Sustainability Report

Introduction & Overview | Income | Research Funding | Impact on Students | Employee Wages & Benefits | Employee Contributions

Michigan State University, under one name or another, has been around for more than 150 years. It is almost unthinkable that we wouldn’t be around 150 years from now. If MSU does not exist then, what would have been the cause? If we assume the ongoing need for higher education and the earth is still hospitable to humans, can we assume that MSU will exist in 2157?

We suspect that if the need is still there for formal higher education, MSU will keep its doors open. Will the Internet revolution reduce the need for students to live on campus? Will energy or climate change pressures force students to stay closer to home? Will the availability of more and more information and knowledge through electronic means reduce the demand for large university campuses? These are legitimate questions to raise in planning for an uncertain future. MSU must simultaneously ensure that we are financially sound enough to keep the doors open, the computers humming, the buildings operable, and the employees paid so that our enterprise in higher education can continue. Recent trends in state support of higher education have flipped our financial reliance from strong state support to an ever-weakening commitment to funding public higher education.

In response to this shift, MSU has embarked on significant efforts to build financial stability through a major capital campaign, an aggressive search for research funds and, more recently, increases in tuition and fees. These shifts all come with some costs to the institution. Many if not most faculty feel more and more pressure, some would say “unrelenting” pressure, to bring in large grants. The pools of money available, especially from the federal government, are flat if not shrinking, while the competition for them is increasing. Students and parents are digging deeper to help cover the increasing costs of tuition as state support for higher education dwindles and yet students leave MSU in deeper debt after graduation. While a relatively small part of our overall income, returns on investments have been exceptionally strong in the past few years.

MSU has managed to weather good times and bad over its 150 years, but the coming years will surely be a challenge as the perfect storm of reduced state funding, increased costs, and global pressures tax our collective future. Within the broader issue of economic sustainability lie issues that affect some stakeholders more than others. Growing employee wage gaps, increasing student debt, and financial accessibility to attend MSU are some current issues of concern. On the brighter side, we have been successful in significantly increasing endowment and research funding. Increasing health care costs continue to affect our financial health, and the economic uncertainties in Michigan foster decisions that are more financially conservative than better times might allow. How we balance the financial pressures with the goals of the university and the sustainability of the larger community and ecosystems is the challenge before us all.

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Rationale for Indicators- The long term financial health of MSU is a key component to our sustainability. While looking at total income and expenditures might give us a glimpse of that health, at least as important are questions concerning who pays and who benefits across the larger community. Entangled herein are questions of fairness and equity, about impact on present members of the university community versus those beyond our borders, the longer term impacts of our investments on individuals (loans) and the institution, and the strains we put on our environment when we are pressured to cut costs.

How are we doing? - If we look at the graph below of our income sources, a few trends are readily visible. Since our last report (2001-02), state appropriations have declined more than 12% while tuition and fees have increased by 36%. While those numbers bring real challenges, we have seen sizable increases in indirect cost recovery, primarily from research grants (20%) and investment income (80%). While those increases in income are encouraging, they still represent a small fraction of our operating budget.

Figure 74 General Fund Budget (Income)

With the small increase in nonresidents the University sees some cost recovery, since tuition for nonresidents is higher than for residents. But the short-term outlook for state government budget looks grim and thus the likelihood of either flat appropriations or real cuts from the state is strong. This financial pressure was further intensified by MSU’s altruistic commitment to restrain tuition increases at or below inflation rates, which in more recent years has not been a feasible option.

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Research expenditures grew 20% since our last report. We use expenditures as a benchmark of annual change rather than amount of grants awarded, because both the beginning and end dates of the grants rarely correspond consistently with our fiscal year, whereas expenditures do. While most of the money that comes through research is for specific projects, there are overhead (indirect recovery) costs that assist in supporting our operations. Indirect recovery costs on federal government grants hover near 50% of the grant funds, while other grant sources offer less or sometimes no overhead support.

Figure 75 Research Expenditures

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Rationale for Indicators - The economic impacts on students are important indicators of the sustainability of our institution. If the lack of affordability reduces the number, quality, or diversity of our students, the university will suffer as a quality learning community. Economic pressures can greatly affect retention and graduation rates as students become forced to either drop out or work many additional hours, thus putting themselves at academic risk.

How are we doing? - The costs for students attending the university have risen sharply since our last report. The efforts by the university to keep tuition low for a number of years (MSU Promise), coupled with constrained state appropriations, ultimately forced sizable annual increases from 3.4% to 9.9% in recent years. As the chart below indicates, room and board also increased between 3.8% and 6% per year since the last report.

Figure 76 Undergraduate Tuition and Room & Board Cost

As those costs have gone up, and even though student wages have climbed slightly, students need to work more hours now to cover their additional costs. As the graph below indicates, they would need to be working in excess of 60 hours per week to cover their costs. The actual average number of hours worked has remained steady at 10 hours per week.

Figure 77 Student Hours Worked vs. Student Hours Needed for Costs

MSU hires many students. In fact, we couldn’t operate without them. Offering employment is one of the ways the university can help offset rising costs to students. The number of students working dropped off slightly on campus in 2004 but returned to the level of our last report in 2005. Since jobs remain open in some units (e.g., Housing and Food Services), shortages of job openings do not explain the decrease.

MSU has been paying students above minimum wage for many years. The recent raise in state minimum wage will benefit a few students at the bottom of the current scale.

Figure 78 Number of MSU Payroll Students Working Annually

A new indicator with this report is the level of debt students have at graduation. Average annual student loans increased by 27% between 2001 and 2006 to $5,528.

Figure 79 Annual Average Loans

During this time there has been a cutback on federally subsidized college loans and this has triggered a very significant (270%) rise in private loans.

Figure 80 Total Annual Federal Loans vs. Annual Private Loans

These annual increases end up leaving an increasingly burdensome debt upon the shoulders of many of our students. Average loan debt for Federal subsidized Stafford loans now average more than $19,000 for our graduating seniors. But based upon the average annual loan mentioned above, today’s freshmen can expect loan debt of more than $22,000, possibly significantly higher.

Figure 81 Average Loan Debt of Graduating Seniors

Based on the “Follow-Up Report Post-Graduation Status of 2004-05 Graduates” from Career Services and Placement, MSU graduates are having mixed success. Within nine months after graduating from MSU with a bachelor’s degree, 56% of the 2004-05 graduates were employed, 24% were pursuing further education, 15% were exploring options, and 5% took on volunteer work. This is a shift from 2000-01, when more students were employed (63%) but fewer were pursuing additional education (15%).

MSU’s 2004-05 bachelor degree graduates were also less likely to take employment in Michigan than 2000-01 graduates, according to surveys conducted by Career Services and Placement. Of 2000-01 graduates, 76% took jobs in the state as compared to 61% in 2005, although employment in adjacent states increased by 5%. While this might well be a response to the contracting Michigan economy, other factors likely contribute to that shift. For those graduates who matriculated from Michigan high schools to MSU, 64% were working in Michigan after graduation; another 13% were working in the adjacent states. Graduates not working in Michigan would be found in 45 other states and 23 foreign countries. The primary destinations include Illinois (12%), California, Florida, Washington D.C., New York and Texas.

For MSU graduates who matriculated from other states to MSU, only 24% found employment in Michigan, while 25% worked in Illinois. Out-of-state students were found in 26 states, in addition to Michigan, and five foreign countries.

The average full-time starting salary was $40,187, a 4.2% increase over 2000-01 graduates. Because of the state of the economy from 2001 to 2004 and because employers raised salaries significantly in the late 90s, annual salary increases between 2001 and 2005 nationally have been at or slightly below the adjusted rate of inflation. Salaries reported ranged from $7,000 to $150,000. The lowest salaries were reported by graduates working for service organizations, such as City Year and Americorps, or receiving the primary component of their salaries from commission. The highest salaries were reported by alumni in real estate and sales positions. Nearly 10% reported that their salary would be partially or wholly dependent on commission. Approximately 18% of these graduates reported receiving a bonus upon signing with their employers (not included in salary).

Table 3 2004-05 Alumni Starting Salaries per College

Respondents were asked how closely the skills and content of their position related to their academic programs; 56% indicated their positions and academic major were “highly” to “very highly” related. Approximately 13% said that the two were “moderately “related. The final 31% reported that their position was “hardly” to “somewhat” related.

Table 4 Relation of Occupation to Academic Program for 2005-05 Graduates

Even though some graduates responded that their jobs did not require degrees and others reported a poor relationship with their academic interests, 66% reported that their positions “definitely” held career potential and another 22% felt that their positions had “possible” potential as careers. Only 12% believed their positions held no career potential for them.

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Rationale for Indicator – Wages are important not only because they are essential for providing employees with necessary income to cover basic living costs for themselves and family, but also as a measure of feeling valued and as an incentive to attract quality employees to work at the university. At a minimum, employees should make enough income to provide basic necessities and increases should at least parallel increased cost of living. How wages are distributed across the spectrum of skills, responsibilities, and experience is a complex issue, but one that should be attended to as we try to fairly compensate our workforce.

How are we doing? - MSU wages and benefits are consistently at or above other employers in the area based on studies done by the university for similar work. Since our last report the average wage has increased more than 12% to $57,639 with an average increase of $6,641. MSU’s lowest paid full-time employees saw their salaries rise by only 9% to $18,907, or an average increase of $1,581. As the graph below makes clear, the gap between the average and the lowest continues to grow. MSU’s 2006 minimum wage ( $18,907) plus benefits still provides a living wage (frequently pegged at federal poverty level for a family of four). Of concern is the increasing gap between the lowest and the average, a gap that grew by 21%.

Figure 82 Wage Comparisons

Highest wages are more difficult to determine. The president’s salary was recently boosted by the Board of Trustees to $495,000, though it should be noted she returns a significant portion of that to the university. Reports in the press suggest that some revenue sports coaches make more than $1,000,000, although the 2006-07 MSU Salary List indicates those salaries as less than the president’s. Other clauses of coaches’ contracts provide additional bonuses and options that help raise their annual income. The same list identified more than 90 employees whose salary exceeds $190,000, a figure ten times the MSU minimum wage.

Rationale for Indicators - Our industry is a labor-intensive one. Besides the salaries and wages we pay, increasingly we see that benefit packages are a crucial driver of our costs. The level of the benefits provided has significant impact on the quality of faculty and staff we can attract and maintain.

How are we doing? - Anyone who has had a pulse in the past decade knows all too well about the increasing cost of health care. The university administration has continued to partner with employee groups to identify cost-saving measures and to look at fresh options in reining in escalating costs. Nonetheless, the university has not been exempt from national trends as health care costs increased 37% since 2001-02.

Figure 83 Annual Health Care Cost

The 5% increase in the number of sick days reported since our last report, and depicted in the Social section of this report, has economic costs as well due to a combination of lost productivity days and increased costs of doctors’ visits. As noted in the earlier section (p. 38) of this report, while the number of employee injuries has fallen considerably, the costs have not. Workman compensation costs have climbed despite the decline in injuries. The increase is based upon the combination of a few significant cases and increased health care costs.

Figure 84 Workers Compensation Claims with Cost

By cost, the leading injury type is falling from a ladder or being injured by a machine.

Figure 85 Top 10 Injuries by Medical Cost per Incident 2000-2005

The amount invested in employee educational assistance has remained over $1,000,000 since 2000 but has slipped some from the high of $1.5 million in 2003. While some of this may be a result of a somewhat smaller staff, other issues we haven’t identified may play a role. These numbers do not include the additional tuition reduction benefit provided to children of employees!

Figure 86 Annual Dollars Spent on Employee Educational Assistance

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Rationale for Indicators - Our Development Office informs us that our ability to raise money from within the institution is a key ingredient for their success in attracting outside funding. It might also signal employee job satisfaction and significance of compensation. What we publicly add to our local community through the United Way is in some small yet significant way, a testament to building a stronger social fabric.

How are we doing? - Not every financial indicator is gloomy. MSU employees increased their contributions to the university by 70% between 2001-02 and 2005-06. This might well be considered a partial measure of job satisfaction. Our development office can be more successful in attracting outside funds when they can show the employees themselves are contributors to the institution. As such, they act a bit like matching funds.

Figure 87 Employee Contributions to MSU Capital Campaign

While not a direct impact on MSU’s economic bottom line, MSU employees in turn also contribute significant amount of money to the area United Way through workplace donations. This generosity helps build stronger communities, which in turn attracts quality students and employees to MSU. The graph notes a sharp decline after an incident was uncovered regarding embezzlement by a United Way employee a few years back. United Way contributions rebounded last year by nearly 6% over the previous year, hopefully a signal that the earlier scandal has been put behind us. Of course, this records only donations made through MSU, not those given directly to local charities by employees.

Figure 88 United Way Contributions

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