BILL ANALYSIS Ó SENATE COMMITTEE ON EDUCATION Carol Liu, Chair 2013-2014 Regular Session BILL NO: AB 606 AUTHOR: Williams AMENDED: April 11, 2013 FISCAL COMM: Yes HEARING DATE: June 19, 2013 URGENCY: No CONSULTANT:Kathleen Chavira SUBJECT : Community colleges financial aid pilot program. SUMMARY This bill requires the California Community College Chancellor's Office (CCCCO) to establish a voluntary pilot program to increase student participation in state and federal financial aid programs, outlines the parameters of the pilot, and requires the Legislative Analyst's Office (LAO) to report to the Legislature on the results of the pilot program and to make recommendations for its statewide expansion. BACKGROUND Current law provides for a variety of student financial aid programs including the Cal Grant programs and the Community College Board of Governors (BOG) Fee Waiver program. Current law requires that eligibility for a Cal Grant and the determination of financial need be accomplished using the federal financial need methodology and application (the Federal Application for Student Assistance, or FAFSA), and that this application be used for all programs funded by the state or a public institution of post-secondary education as well as all federal programs administered by a postsecondary educational institution. Current law makes an exception to this requirement for the BOG Fee Waiver Program which is authorized to use a simplified application designed for that sole purpose. (Education Code § 69432.9, § 69433) Current law requires the BOG to charge each student a $46 per unit per semester fee effective with the summer term of 2012. Current law exempts certain students from this fee requirement, as specified, including students who meet AB 606 Page 2 specified income requirements. (EC § 76300) Current law requires the CCCCO to develop a statement that individual students will be asked to sign, which acknowledges that federal and state funds are available to assist with the costs of college and that information regarding these programs, and assistance in applying for those funds can be obtained at the financial aid office. The Chancellor is required to request the colleges to require students to sign this acknowledgment in the application for enrollment at all campuses of the California Community Colleges. Current law also requires the California Community College Chancellor's Office (CCCCO) to develop a statement to individual students receiving the Community College Board of Governors (BOG) Fee Waiver, who did not apply for federal student aid, informing them about the benefits of the federal programs, the application process, and the availability of assistance to apply and to request colleges to provide this statement to all students who meet this description. (EC § 76071) ANALYSIS This bill : 1) Requires the CCCCO to establish a voluntary pilot program to increase student participation in state and federal financial aid programs. More specifically it: a) Requires the Chancellor to select no more than 10 campuses from those that volunteer to participate. b) Requires, to the extent possible, that the geographic, economic and demographic diversity of participating campuses be ensured. c) Establishes the following two target populations of potentially eligible students to be identified for participation in the pilot program: i) Those who complete an AB 606 Page 3 application for either a BOG fee waiver or a FAFSA. ii) Those who do not receive any campus, state, or federal aid. d) Establishes the goal of the pilot program to increase student participation in both state and federal financial aid programs by actions that include, but are not limited to: i) Identifying strategies and best practices for increasing the number of students who submit the Free Application for Federal Student Aid (FAFSA). ii) Examining and developing strategies for increasing student participation in financial aid programs beyond the BOG Fee Waiver program. iii) Identify the extent to which students claim the federal American Opportunity Tax Credit and strategies for increasing the number of students who do so. 2) Encourages the CCCCO to pursue both private and federal funding to support implementation and operation of the pilot program. 3) Requires the California Community College Chancellor's Office (CCCCO) to provide information on the strategies and techniques employed by participating campuses and data on student participation in state and federal financial aid programs to the Legislative Analyst's Office (LAO) by January 10, 2016. 4) Requires the LAO, based upon the information received, to: a) Report to the Legislature on the results of the pilot program. b) Make recommendations for statewide expansion of the pilot. c) Include in its report a AB 606 Page 4 statistical analysis of financial aid applications and awards before and after the pilot and a summary of the major strategies and techniques employed by participating campuses. 5) Repeals these provisions as of January 1, 2017. STAFF COMMENTS 1) Need for the bill . According to the author, this measure is necessary to gather information on the reasons and strategies specific to California's students and community colleges to determine why California Community College (CCC) students do not submit the FAFSA in greater numbers and to identify intervention strategies to increase their participation in state and federal financial aid programs. Several reports have highlighted the fact that CCC students have significant financial need but are the least likely to take advantage of the federal financial aid support that is available to them. A 2009 research brief issued by MPR Associates, Inc. noted that fewer than 230,000 (about 10%) of degree seeking students at the CCC received federal Pell Grants. The most common form of financial aid was a BOG fee waiver, given to 540,000 students (26% of enrolled students). About 305,000 of these students received only a fee waiver and of those, 110,000 applied for federal aid but did not receive it with the most common reasons for not qualifying being 1) they were part-time, 2) their income or expected family contribution was too high, or 3) they did not meet citizenship, academic, or other requirements for federal financial aid. 2) Related budget activity . The Governor's proposed budget for 2013-14 would have required all students seeking financial aid to fill out a Free Application for Federal Student Aid (FAFSA) form. In the May Revision, this proposal was modified to allow students one academic term to provide financial need documentation and delay implementation of the new policies to the 2014-15 academic year. A pilot program would allow for closer examination of the unique student population served by the California Community Colleges in order to identify best practices AB 606 Page 5 for ensuring the colleges' commitment to access while maximizing the potential for California students to benefit from federal financial aid programs. 3) Further clarification . This bill proposes a pilot program to examine, among other things, strategies and best practices for increasing the use of the FAFSA, and the extent of the use of the American Opportunity Tax Credit and strategies for increasing the number of community college students who claim this credit. To further clarify: a) Free Application for Federal Student Aid (FAFSA). The FAFSA is the core document used to determine eligibility for all major federal and state financial aid programs, including Cal Grant, Pell Grant, institutional aid at the UC and the CSU, work-study awards, scholarships, and federal student loans. b) American Opportunity Tax Credit. Is a federal credit that can be claimed for expenses paid for tuition, certain fees, and course materials for higher education. The tax credit refunds up to $2,500 in educational costs for students with modified adjusted gross incomes of $80,000 or less ($160,000 or less for joint filers). Additionally, 40% of the credit (up to $1,000) is refundable, which means a student can receive the credit even if no taxes are owed. According to the author, it is unclear as to how many CCC students know about this tax credit and take advantage of the tax credit. 4) Board of Governors (BOG) fee waiver . The BOG Fee Waiver program provides for an exemption from CCC fees for financially needy students. A CCC student may apply for a BOG fee waiver by submitting a FAFSA or by submitting a Short Form, which requires less information and is simpler to complete than the FAFSA. According to the CCC Chancellor's Office, approximately 80% of BOG fee waiver recipients filed a FAFSA in 2010 - 2011. The Chancellor's Office also found that the BOG fee waiver program has grown AB 606 Page 6 substantially over the past eight years. For example, in 2002- 2003, 597,000 CCC students received $102.7 million in BOG fee waivers compared to 2010 - 2011, those figures grew more than 89% over the comparison year, with over 1,130,000 students receiving more than $410 million in BOG fee waivers. In a recent report, The Impact of Budget Cuts on the California Community Colleges, Public Policy Institute of California (PPIC) suggested that, absent an increase in state or local funding, bridging the gap between demand and supply would likely require additional money from students and families. Alternatively, PPIC suggests it may be worth re-evaluating the need-based criterion of the BOG fee-waiver system. According to PPIC, BOG waivers currently limit the CCC's ability to generate revenue from about one-third of their students. The PPIC opines that reducing eligibility thresholds may not necessarily discourage access, given that lower income students are likely to be eligible for federal grants and suggests one option for addressing this situation would be to require students to apply for federal financial aid in order to receive a BOG waiver. Additionally, the report recommends high schools, colleges, and the state should strive to ensure that students are made aware of the availability of federal aid, and should make every effort to help students complete the necessary forms. 5) Prior legislation . This bill is substantively similar to legislation previously considered by this committee. These include: AB 91 (Portantino, 2011) passed by this committee in June 2011, by a vote of 8-2, and was subsequently vetoed by Governor Brown, whose veto message read: This bill orders the Chancellor of the Community Colleges to set up a pilot program at local campuses to figure out how to motivate their students to apply for financial aid. This is a matter that each community college can handle on its own. AB 1997 (Portantino, 2010) passed by this committee in AB 606 Page 7 June 2010, by a vote of 7-3, and was subsequently vetoed by Governor Schwarzenegger, whose veto message read: Nothing under current law prohibits the California Community College Chancellor's Office from working with local community colleges to meet the objectives of this bill. Furthermore, the annual budget act was augmented several years ago to provide the community colleges an additional $34.2 million for financial aid outreach efforts that were expected to assist students with maximizing federal and state financial aid. SUPPORT Campaign for College Opportunity OPPOSITION None received.