St. Thomas University is raising tuition for its students by $434 next year, a move that will put the liberal arts university in conflict with the Alward government’s $150 cap on tuition.

The university’s $28.5-million budget outlines tuition increases of $434 for domestic students and $150 for international students.

Dawn Russell, the president of St. Thomas University, said in a statement the province's decision to cap fees and freeze its operating grant is a "challenge."

"Our ongoing challenge will be to maintain excellence in education in light of a freeze in the operating grant and our comparatively low tuition," Russell said in a statement.

"This creates a unique circumstance as we attempt to balance rising costs and constrained revenues while delivering on our high standards of quality."

A bachelor of arts degree at the Fredericton university will now cost $5,379 per year, which is the lowest in New Brunswick, according to the school.

The New Brunswick government froze the university’s operating grant at $13.5 million in this year’s budget.

The university's main sources of revenue are the provincial grant and tuition fees, along with some endowments, scholarships and bursaries, said Russell.

The Alward government has a policy that is intended to cap tuition increases at $150 a year.

Post-Secondary Education, Training and Labour Minister Danny Soucy said he is "disappointed" St. Thomas ignored the policy.

"We're disappointed as a province. I’m disappointed as a minister that other universities were able to do it and one (couldn’t)," he said.

Soucy would not say if St. Thomas would be penalized. "I’m not going to make decisions on the spur of the moment."

He wants to sit down with the university's administration to discuss the tuition hike first and then decide "what appropriate actions should be taken," he said.

"We will come up with actions that will be looking at making sure the protection of students are there," Soucy added. He wants to make sure tuitions don't "skyrocket," he said.

St. Thomas University's president said she would be "surprised and disappointed" if the government decided to punish the university, which already has the lowest provincial grant and will still have the lowest tuition, even with the fee hike.

"We hope that the province will understand just as … in order to deal with their fiscal situation, just as they had to increase taxes, something they didn’t want to do but they had to do to be responsible, that St. Thomas has to address its fiscal situation now to avoid a deficit," said Dawn Russell.

"We have a history of balanced budgets and no significant debt and maintaining a high quality of education and financial sustainability are very much connected and so we hope they’ll understand that."

Russell acknowledged the government could decide to decrease the university's grant even further, but questioned the logic of such a move.

"If you’re concerned about students, why would you aggravate the situation, where we already have the lowest grant, which is part of the need for the tuition increase, why would you aggravate the situation by making the grant even lower?"

In the March budget, Finance Minister Blaine Higgs said there would be "zero increase in funding to public universities, NBCC and CCNB with the expectation that they continue to seek operational efficiencies, and that any tuition increases will be capped at $150."

Higgs said he expected the universities to continue to find efficiencies within their budgets.

St. Thomas University contends its latest budget included expenditure restraint by continuing an early retirement program and making "reductions in some administrative budgets."

The university's decision to increase its tuition beyond the provincial government's cap means the Alward government is now facing disputes on two fronts over its budget-tightening measures.

The Department of Health is also in a dispute with the New Brunswick Medical Society over the provincial government's decision to freeze the medicare budget.

The organization, which represents the province's doctors, has vowed to take the provincial government to court over the decision.