<p>^ It not uniformly true that the top tier public institutions get a large fraction of their budgets from the state legislature. Some do, some don’t. The UCs including Berkeley and UCLA are heavily dependent on legislative appropriations, and given the magnitude of California’s current budget crisis will be hit hard. California public institutions further down the food chain will be hit even harder because in most cases they have no other substantial sources of revenue. Research funding will keep a large part of UC berkeley and UCLA afloat. </p>
<p>In contrast, the University of Michigan gets only about 7% of its operating budget from state appropriations, so if appropriations to higher ed are cut 3% (as Michigan’s governor is proposing), that amounts to a minuscule 0.21% hit to the University’s overall budget. Michigan gets much more revenue from tuition, which in comparison to other publics is relatively high for in-state students and even higher for OOS students, the latter making up a full 35% of the student body. Do the math—those OOS students bring in hundreds of millions in additional tuition revenue annually. Michigan also has huge research enterprise, along with a relatively large endowment for a public. But it prudently spends from the endowment at a rate of 5% of endowment assets calculated on the basis of a 7-year moving average, which means even a sudden and sharp economic downturn like this one doesn’t result in a radical swing in the University’s endowment payout, limiting the budgetary impact. Most schools base endowment spending on a 3-year moving average, resulting in much sharper impacts on the budget, especially in year 2 after a sharp downturn when lower asset values make up 2/3 of the average—so things can be expected to go from bad next year to worse the following year at most endowment-heavy schools.</p>