BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 94| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- 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% CONTINUED AB 94 Page 2 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 CONTINUED AB 94 Page 3 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. CONTINUED AB 94 Page 4 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 **** END **** CONTINUED