LANSING – University funding may have been spared the axe in Gov. Jennifer Granholm’s 2010-11 proposed budget, but student financial aid was not, and that caused several members of the House Appropriations Higher Education Subcommittee to worry about the ability of the state to pull itself out of its economic malaise.

One subcommittee member, Rep. Alma Wheeler Smith (D-Salem Twp.), was particularly sharp on Granholm’s proposal to make the Michigan Promise Scholarship a tax credit for those students who stay in the state, saying it would help hasten the state’s decline by forcing colleges to boost tuition.

Financial aid will be a main focus of the subcommittee, said chair Rep. Joan Bauer (D-Lansing), and the subcommittee has a hearing scheduled next week at Michigan State University to hear from students about what they face in terms of financing their education.

The subcommittee does not have the proposed $1.54 billion 2010-11 budget before it, since this year it will begin in the Senate, but Ms. Bauer said the subcommittee will begin its work early in playing its part as the Legislature tries to resolve the budget by July 1.

She expressed great worry about the level of state financing for financial aid. The proposed budget calls for $53.4 million in financial aid, compared to $87.4 million in the current year (much of that reduction comes from Granholm calling for the elimination of the $31 million of the Tuition Grant for students at private colleges, something Granholm has called for in most of her budgets and that the Legislature has rejected).

But a few years ago, Bauer said, the state was providing up to $200 million in student financial aid.

“We just continue to cut, cut, cut,” she said. For example, the state’s competitive scholarship has gone from better than $30 million to $16.5 million, meaning the scholarship has gone from $1,650 per student to $510.

If education is considered a key to the state’s rescuing itself from its ongoing economic malaise, then the cuts to financial aid could have direct implications on the state’s future.

Last week, Grand Valley State University President Thomas Haas told the Senate Appropriations Higher Education Subcommittee that if the state does not increase funding for its universities, it is effectively taxing students and their families by forcing them to pay more for tuition.

The Legislature did not provide funding for the Michigan Promise Scholarship this fiscal year, though Granholm tried to get public pressure out to force the Legislature to raise revenues for the scholarship.

With this budget, Granholm calls for the Promise Scholarship to be paid for with an income tax break available to students who live and work in the state for at least a year. That could mean a tax loss of as much as $150 million when fully implemented, a House Fiscal Agency analyst said.

Smith, who is a Democratic candidate for governor, said the proposal on the Promise Scholarship is an example of how the state will drive itself down. With a tax credit, the state will have less revenue to allocate to universities, which in turn will have to raise tuition.

“We have to do something different if education is to be our saving grace,” Smith said. “We have to take a hard look at revenues.”

But Rep. Bob Genetski II (R-Saugatuck) said the state also needs to look at ensuring universities are effectively using the revenues they receive by cutting back on the number of non-teaching faculty and cutting levels of middle-management.

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