BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                            



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                                    THIRD READING


          Bill No:  AB 94
          Author:   Assembly Budget Committee
          Amended:  6/13/13 in Senate
          Vote:     21


           ASSEMBLY FLOOR  :  Not relevant


           SUBJECT  :    Budget Act of 2013:  Higher Education

           SOURCE  :     Author


           DIGEST :    This bill contains various policy changes related to  
          higher education and creates a new student aid program.

           ANALYSIS  :    

          This bill:

           Middle Class Scholarship  .  Establishes the Middle Class  
          Scholarship that is capped, at full implementation, at $305  
          million.  This scholarship program will be available to provide  
          scholarships of up to 40% of tuition for the California State  
          University (CSU) and University of California (UC) students,  
          annually, to families with incomes up to $150,000.  Scholarship  
          awards will be phased in over four years, starting in 2014-15  
          with freshman entrants.  Eligibility will be limited to students  
          that meet all Cal Grant program requirements except for the  
          income and asset test, and have a minimum of a 2.0 grade point  
          average.  Scholarships will provide tuition coverage on a  
          sliding scale, with income of up to $100,000 receiving 40%  
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          tuition coverage, and a reduction of tuition coverage by  
          approximately 0.6% for every additional $1,000 of income up to  
          $150,000.  If sufficient money is not available to provide  
          specified scholarship amounts, scholarships will be prorated  
          proportionately among all recipients.  
          In the first three years of implementation, starting in 2014-15,  
          the scholarship program's statutory appropriations will be  
          capped at $107 million, $152 million, and $228 million.  Statute  
          will provide authority to prorate spending down to $200 million  
          and by one-third in the first three years of implementation if  
          the May Revision projects a budget deficit for the upcoming  
          fiscal year.  As an institutional requirement for participating  
          in the Middle Class Scholarship, the UC and CSU is required to  
          preserve current fee policies and the 2013-14 amount of student  
          fee revenue that is set-aside as institutional aid.

           Performance Measures  .  Requires the CSU and UC to report the  
          following information annually, starting in March 2014, with  
          2012-13 data as follows:  graduation rates, community college  
          transfer rates, number of degrees earned by low-income students,  
          and number of degrees in STEM (Science, Engineering, Technology  
          and Mathematics) fields.

           Cost of Higher Education Reporting  .  Requires the UC and CSU to  
          provide bi-annual reports describing the costs related to  
          undergraduate, graduate and professional school education.  The  
          reports will allow for a better understanding of how much the  
          university systems spend on instruction and research, and the  
          difference in educational costs among different disciplines.

           Capital Outlay Flexibility  .  Provides UC with increased  
          flexibility to pursue capital outlay projects outside of the  
          annual budget process, after approval by the Department of  
          Finance (DOF) and review by the Joint Legislative Budget  
          Committee.  Further provides the UC with the authorization to  
          pledge up to 15% of the state funds provided in its General Fund  
          support budget, less general obligation debt payments and lease  
          payments, towards capital outlay, lease revenue bond debt  
          financed and pay as you go, inclusive.  Requires that any  
          savings achieved by the UC, through the restructuring of debt,  
          be used to support pension costs.
           
          University of Riverside Medical School  .  Requires that of the  
          state General Fund support provided to the UC in the 2013-14  

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          Budget Act, $15 million, shall be provided for planning and  
          startup costs associated with the School of Medicine at the UC  
          Riverside.  Also includes a requirement that the university  
          provide an annual progress report on the School of Medicine.

           Creates New Fund  .  Creates a new fund within the California  
          Student Aid Commission (Commission) to allow the Commission to  
          contract with other out-of-state agencies seeking to implement  
          the Dream Act.  By assisting other states in developing outreach  
          and application materials, the Commission anticipates improving  
          its own Dream Act administration for California students.
           Retirement Contributions  .  Provides state General Fund support  
          for CSU retirement costs, based on the 2013-14 payroll.   
          Increased payroll or pension costs beyond the 2013-14 baseline  
          will not be automatically funded for the CSU.

           Cash Flow  .  Allows DOF to adjust payment schedules to CSU, based  
          on the state's cash flow needs.

           Legislative Intent Language  .  States legislative intent that the  
          absence of language in the Budget Act of 2013 requiring the UC  
          and the Hastings College of Law to use budgeted funds for  
          retirement costs is not an indication of legislative support for  
          increasing retirement costs for university employees.

           Debt Service Payments  .  Requires that of the state General Fund  
          support provided to the UC, the university shall pay lease  
          revenue and general obligation bond debt service.

           UC, Merced Equipment Appropriation  .  Allocates $375,000, from  
          the 1996 Higher Education Capital Outlay Bond Fund, to the UC  
          for funding equipment at the UC Merced Science and Engineering  
          Building 2.

           FISCAL EFFECT  :    Appropriation:  Yes   Fiscal Com.:  Yes    
          Local:  No

          According to the Senate Budget and Fiscal Review Committee, this  
          bill has the following impacts on state costs:

                 Authorizes $305 million statutory appropriation, at full  
               implementation, for the Middle Class Scholarship and  
               potentially additional support costs for the Commission,  
               for implementation of this program.

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                 Potentially millions of dollars in savings to the state  
               from requiring the UC to manage its lease revenue debt  
               program for infrastructure projects from within its  
               existing support appropriation.

                 Potentially millions of dollars in savings to the state  
               from not providing the CSU with future annual adjustments  
               for increased retirement obligations beyond 2013-14 actual  
               costs.

                 Authorizes appropriation of $375,000 in 1996 Higher  
               Education Capital Outlay Bond funds for equipment purchases  
               for the UC Merced Science and Engineering Building 2.




          PQ:ej  6/14/13   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  NONE RECEIVED

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