Here are the need-based and non-need based FA budgets (institutional funds only) as reported on their CDS by the schools I mentioned:
Illinois: $82.7 million need-based / $15.3 million non-need based / meets 65% of need
Indiana: $48.9 million need-based / $64.7 million non-need based / meets 69% of need
Michigan: $149.1 million need-based / $60.6 million non-need based / meets 100% of need for MI residents
Michigan State: $87.5 million need-based / $61.3 million non-need based / meets 59% of need
Minnesota: $57.4 million need-based / $14.1 million non-need based / meets 72% of need
Ohio State: $114 million need-based / $74.7 million non-need based / meets 70% of need
Wisconsin: $55.8 million need-based / $13.7 million non-need based / meets 80% of need
To answer your question, I’d say any spending above $10 million on non-need based aid is “substantial” if you’re not meeting full need for in-state students. Obviously the amounts that go into this vary by school, and I have no problem whatsoever with Michigan spending $60 million a year on non-need based aid because they already meet full need for in-state students. In their case the merit money is gravy. But it sure looks like some of these schools could meet full need if that was their priority.
I don’t mean to single out B1G schools. Only a handful of public institutions meet full need for in-state students, and most of them give out merit money.
It’s not entirely a direct trade-off, of course. “Non-need based” includes athletic scholarships which are a very specialized type of merit award, often paid in whole or in part out of athletic department revenue. Many merit scholarships come from endowed funds which can only be used for that purpose. And as someone mentioned, merit awards are sometimes used to lure higher-paying students, in-state or OOS, who indirectly bolster the school’s ability to support need-based aid. But to my mind, public institutions like Ohio State, Indiana and Michigan State that spend lavishly on non-need based aid while shorting their own states’ residents with need have their institutional priorities seriously out of whack.