In 1965, the University of Michigan-Ann Arbor (U-M) received 70 percent of its funding in appropriations from the state of Michigan. By 2003, U-M had reduced its dependence on the state to just 10 percent of total revenue. At the same time, U-M remained a top 25 institution according to the University of Florida's Top American Research Universities and U.S. News & World Report's annual rankings. U-M also tops Wall Street rankings, becoming the first public university to have its credit rating raised to an Aa1 ranking and its bonds trading at Aaa levels. Today, Michigan's flagship university is considered "Silicon Valley East" and has become a model for other large, public research institutions.
Arizona's two largest public universities, Arizona State University (ASU) and the University of Arizona (UA), face many of the same challenges that U-M confronted decades ago. Like the University of Michigan of the 1960s, ASU and UA depend heavily on state appropriations, yet have great endowment and alumni-giving revenue potential. This case study describes U-M's efforts over the past 35 years to transform itself into a privately financed public research university and draws three recommendations for consideration.
Arizona's universities can increase their financial self-sufficiency and reduce their reliance on state funding by identifying core academic programs, aligning tuition more closely with the actual cost of educational services, and increasing private funding. ASU and UA have strong community support, with well over 200,000 alumni each, and increasingly distinguished academic rankings. Like U-M, ASU and UA have the potential to become world-class research institutions by embracing an entrepreneurial approach to fundraising, management, and resource allocation.