BILL ANALYSIS Ó
AB 67
Page 1
Date of Hearing: April 17, 2013
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 67 (Olsen) - As Amended: April 1, 2013
Policy Committee: Higher
EducationVote:11-0
Urgency: Yes State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill requires the California State University (CSU), and
requests the University of California (UC), to freeze
undergraduate tuition and fees through 2016-17. Tuition and
fees could be increased in each fiscal year, however, if state
General Fund support does not increase by at least:
1)5% in 2013-14.
2)5% in 2014-15.
3)4% in 2015-16.
4)4% in 2016-17.
FISCAL EFFECT
The bill creates significant cost pressure in two ways. First,
to avoid fee increases, there is pressure to provide the minimum
amount of state funding increases specified in the bill for each
of the next four years. (Each 1% of GF increase is around $25
million.) Second, to the extent either segment is underfunded
(see comment #2), there will be pressure to increase state
support for UC and CSU to an even greater extent to compensate
for unavailability of additional fee revenue due to the freeze.
COMMENTS
1)Background and Purpose . Student fee revenue works
interchangeably with the state GF support to fund the core
instructional program of UC and CSU. State funding essentially
subsidizes the amount paid by students. From 2007-08 through
2011-12, state support for the two segments declined
significantly. This resulted in fee increases over this time
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period totaling 84% at UC (from $6,636 to $12,192) and 97% at
CSU (from $2,772 to $5,472).
As a result of additional state revenues made available by
voter-approval of Proposition 30 in 2012, there is no fee
increase for the 2013-14 academic year. Moreover, the Governor
has proposed a multi-year funding plan that would increase GF
support to both segments by 5% in 2013-14 and 2014-15 and by
4% in 2015-16 and 2016-17. This plan assumes no further fee
increases over this time period.
AB 67 essentially mirrors the Governor's proposal-predicating
a freeze on fees each year with the state funding increases at
least equal to those specified by the Governor. The author
believes this freeze is necessary to create a predictable fee
environment for students going forward.
2)Opposition . UC notes that it is not pursuing a tuition
increase in 2013-14, "even though this decision will eliminate
$125 million from our approved spending plan." UC indicates
that the state GF augmentations proposed by the Governor cover
only the state's portion of the university's budget needs,
noting that since the tuition-funded portion of UC's budget is
now considerably greater than the state-funded portion, "it is
not reasonable to assume that more than half the core
operating budget can withstand several years of no revenue
adjustment." UC estimates that, without new resources, it
faces a significant budget gap by 2016-17, and that while it
continues taking steps to generate efficiencies and
alternative revenues, it cannot cover the remaining gap
without moderate increases in both state funding and tuition
and fees.
3)CSU expresses concerns similar to UC, and also notes that it
has a deferred maintenance backlog approaching $1 billion as
well as significant underfunding of ongoing maintenance.
Given these and other cost pressures, CSU indicates that the
Governor's modest formula for growth, coupled with a tuition
freeze, could result in reduced access for students.
4)Legislative Analyst's Office (LAO) Analysis and
Recommendation . In its review of the Governor 2013-14 budget
the LAO notes that (a) tuition at CSU is still the lowest
among its 15 public university comparison institutions and
tuition at UC is slightly above the average of its four public
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comparison institutions, and (b) despite the almost doubling
of tuition in recent years, when financial aid is taken into
account, the net price for UC and CSU has increased only
slightly for about 75% of all students. (The net price has
increased more significantly for UC students with family
income above $110,000 and CSU students with family income
above $75,000, as they are less likely to qualify for
financial aid.) The LAO also indicates that average student
debt for those UC and CSU graduates with any debt is about 25%
below the national average.
The LAO argues that, while a tuition freeze would assist
current students, based on an almost 30-year trend of boom and
bust in tuition level adjustments, it would be to the
detriment of future students who would likely experience
increased volatility. The analyst instead recommends a policy
that bases tuition and fees on a share of educational costs at
each segment.
5)Why a Freeze ? The rational for enacting a four-year statutory
freeze is unclear. A fee policy allowing for modest increases
would still be predictable and would allow families to plan
for their college expenses. Moreover, given the impact of
recent budget reductions, in reduced class offerings for
example, the state and students could benefit from a modest
increase if the additional revenues were to provide direct
services that allowed more students to get the courses they
need to expedite completion of their educational goals. As an
example, just a one or two percent undergraduate tuition
increase at CSU (about $55 - $110) would generate over $10
million to $20 million in additional revenue that could be
used to benefit students.
After several years of significant annual tuition increases, a
brief pause for a few years seems reasonable, but this would
be an opportune time for the Legislature to consider enacting
a rational, long-term fee policy for public higher education
in California.
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081