Tuition at the University of Minnesota will be frozen for two years, for the first time in decades, under a budget finalized Friday.

The U’s Board of Regents approved a $3.6 billion operating budget that holds undergraduate in-state tuition steady, cementing a pledge to the Legislature to spare those students in exchange for more state funding.

U President Eric Kaler’s plan raises tuition for students from states without reciprocity agreements, increases prices for graduate and professional students and boosts funding for research. Regents praised its promise to cut costs but also to hire; state funding will help add more than 50 faculty jobs.

The budget’s investments in research, faculty and equipment are essential alongside its trims, said Regent Richard Beeson, the board’s newly elected chairman. “Thank you for the balance.”

Of the 12 regents, only Laura Brod voted against the budget. She lauded Kaler’s “creative approach” to nabbing new state funding for a tuition freeze but said she’s bothered by greater spending on scholarships.

“The high-tuition, high-aid model — which is effectively expanded in this budget — is concerning to me,” she said.

Several regents also expressed “considerable and ongoing concern,” as Regent David McMillan put it, about the cost of graduate and professional education. Kaler promised deeper discussion about those costs, as well as fees.

The 2014 operating budget spends about $61 million more than the year before, a 1.9 percent increase. It includes more than $2 million for “merit-based” scholarships, a 2.5 percent increase in salaries and $880,000 for classroom upgrades on the Twin Cities campus.

The university tied its legislative request to specific line items, including $14.2 million in the first year for the tuition freeze. Regents credited Kaler for the resulting boost to state funding, the U’s first increase in six years. In their review of his “stellar” second year on the job, presented Friday, they said he was “relentless in his efforts to halt the significant erosion in state funding.”

A small slice of the state funding — 5 percent, or $26.5 million — depends on the university meeting three of five goals. One is cutting $15 million in administrative costs. U leaders say that they’ve enumerated $10 million of those reductions and will identify another $5 million soon.

Rep. Gene Pelowski, DFL-Winona, chairman of the House’s higher education committee, said Thursday that he’ll keep a close eye on what the U counts toward that number, making sure that it’s not simply moving people around.

“Reclassifying is not eliminating anything,” he said.

Concern for grad students

Tuition will be frozen, but a few fees will rise. For Twin Cities undergraduates, in-state tuition and fees combined will increase 0.7 percent, to $13,479. Room and board will increase 3.9 percent, to $8,312, largely to pay for a new residence hall.

Richard Pfutzenreuter, chief financial officer, assured regents that the university is among the cheapest in the Big Ten for room and board.

Out-of-state tuition will rise $1,000 on the Twin Cities and Duluth campuses, widening the difference between the resident and nonresident rates. Graduate tuition will rise 3 percent. First-year medical students will pay 2 percent more.

During a committee meeting Thursday, Regent John Frobenius voiced concerns about tuition increases for graduate and professional students — a 9 percent increase for first-year resident students in the U’s Law School, in particular. That brings tuition to $38,040.

Kaler said the school is moving to a high-tuition, high-aid model that will allow it to recruit strong students with scholarships and maintain its national ranking. “This is a model we’ll watch very carefully,” he said.