BILL ANALYSIS Ó SB 174 Page 1 Date of Hearing: June 18, 2014 ASSEMBLY COMMITTEE ON APPROPRIATIONS Mike Gatto, Chair SB 174 (De Leon) - As Amended: January 6, 2014 Policy Committee: Higher EducationVote:11-0 Urgency: Yes State Mandated Local Program: No Reimbursable: SUMMARY This bill specifies the allocation of funds that would be generated by the College Access Tax Credit (SB 798), if that bill were to be enacted this year. Specifically, this bill: 1)Provides that annual disbursements from the fund shall be for the following: a) To supplement Cal Grant B Program access awards up to a limit of $5,000 per student per academic year, including the amount already provided through the General Fund in the Budget Act (currently $1,473 per student). The bill prohibits any reduction in the GF portion of the access award while funding through the tax credit, which would expire after three years, is available. b) To cover the Student Aid Commission's administrative costs for making these supplemental awards. 2)Specifies that the amount disbursed per the above shall not exceed 85% of the College Access Tax Credit Fund balance as of April 1 of each year. FISCAL EFFECT 1)The amount of funds allocated for supplemental Cal Grant B access awards will depend on the amounts contributed by taxpayers, per the provisions of SB 798, to the College Access Tax Credit Fund net of the total tax credits claimed by these taxpayers and state administrative costs. This amount is unknown, but could be up to several hundred million dollars SB 174 Page 2 annually for three years. If $240 million was made available through the tax credit, the access award for that year would be increased from $1,473 to $3,000 per student. (There were an estimated 178,000 Cal Grant B recipients for the 2013-14 academic year.) 2)The Student Aid Commission will incur annual costs of around $140,000 for three years for 1.5 positions to field additional calls generated by additional notifications regarding the supplemental grant, to revise the website, publication, and award notifications, estimate and determine actual award amounts based on available funds, and other administrative functions. COMMENTS 1)Background . In the first year that they receive a Cal Grant B award, almost all recipients are only awarded a grant to cover access costs, i.e. for living expenses and expenses for transportation, supplies, and books. After their freshman year, the Cal Grant B award may also include tuition and fee coverage in the same amount as the Cal Grant A award. Current law limits the access award to $1,551, but allows the amount to be adjusted in the annual Budget Act. The 2012 Budget Act reduced the award to $1,473-a level maintained in the 2013 Budget Act. In 2010-11, there were a total of 94,710 new recipients of Cal Grant B, and their average income was only $17,407. A majority of these recipients (53%) were enrolled at the California Community Colleges. 2)Purpose . The author notes that, adjusted for inflation, the Cal Grant B access award today should be $5,900. At the current level of $1,473 it has lost most of its purchasing power over time. According to the author, there is significant research showing that students who work more hours take longer to graduate. Grant aid is the proven equalizer that allows low-income students to persist and complete degrees at rates that equal those of their higher-income peers. 3)Related legislation . The implementation of SB 174 is contingent on the fund source established in SB 798 (De León), pending in Assembly Revenue and Taxation. That bill, for SB 174 Page 3 taxable years 2014 through 2016, allows taxpayers, upon receipt of California Educational Facilities Authority certification, to receive a tax credit for a specified percentage of cash contributions made to the Fund. AB 1364 (Ting), pending in Senate Appropriations, increases the maximum Cal Grant B access award to $1,710 in 2014-15, and provides for an annual inflation adjustment thereafter. 4)Prior legislation . In 2013, the author carried similar companion bills (SB 284 and SB 285), which were vetoed by the Governor solely due to a technical error in SB 285. That error is corrected in SB 798. In 2012, SB 1466 (De Leon), which expanded eligibility for a Cal Grant to include a student with a household income up to $100,000, subject to specified funding prioritization, and contingent upon legislation that created a fund for this purpose, passed off this committee's Suspense File, but was subsequently amended to address a different subject. Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081