Jennifer Granholm.

The University won’t know the exact amount of state appropriations until the state determines its budget in October, but the state agreed to maintain funding for higher education at no less than the 2006 level as a condition for receiving federal stimulus money.

The 2010 budget represents the largest investment in financial aid that the University has ever made. It includes $118 million in centrally funded financial aid, which is an increase for undergraduate financial aid by 11.7 percent.

“We are reaffirming our commitment to meet the full demonstrated financial need of all undergraduates who are residents in the state of Michigan,” said Sullivan, in response to the financial aid increase. “That has been our policy in the past, and that will continue to be our policy.”

Donations from University alumni and other University affiliates are responsible for the increase in financial aid funding.

“Many students are going to see this year fewer loans and more grant aid because of the increased resources for financial aid and because of more generous Pell Grants from the federal government and also because of more money for work study,” Sullivan said. “We believe that more students will take home actual cash and will need to take out fewer loans.

“In addition we estimate that 22,000 University of Michigan families will benefit from the American Opportunity Tax Credit.”

The AOTC is a tax credit contained in the stimulus package available for families with one earner making $80,000 or less or two earners making $160,000 or less.

Sullivan said that the Budget Committee will begin preparing for the budgets of fiscal years 2011 and 2012 because it is concerned that state appropriations could be even lower.

“We have been engaged in long term planning looking out at the financial situation in Michigan for the future as well," Sullivan said. "And because of that, we are going to institute a program of prudent cost cutting to prepare us for fiscal year `11 and fiscal year `12.”

The program of prudent cost-cutting has already been instated for next year’s budget, including $15 million in cuts, which will be taken from every unit that receives General Fund money. The General Fund represents 28 percent of the overall budget and is composed of tuition and fees, state appropriations and indirect cost recovery on sponsored research activity.

Some cost-saving measures have already been enacted, some are currently in the process and some will be done in the future, Sullivan said.

In the past six years, the Budget Committee has saved and reallocated $135 million from the General Fund budget by monitoring the University’s purchasing and energy conservation, containing health care costs, using technology to reduce administrative costs and by shifting some expenses from the General Fund to other funds.

But Sullivan said this year many more of these cuts are going to come out of academic units instead of operational units.

She added that the cuts will not damage the University’s academic programs, which are among the most important aspects of the undergraduate experience.

“We’re going to (make cuts) without doing damage to the academic programs because the academic programs are what are most important to our students, and we want to maintain an undergraduate experience that is second to none,” Sullivan said. “We have a terrific undergraduate experience here, and I’m optimistic that we’ll continue to be able to do that.”

As another cost-cutting measure, University President Mary Sue Coleman, Sullivan, University deans and all executive officers declined a merit salary increase for the coming fiscal year.

“We wanted to show leadership,” Coleman said.