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
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            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
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            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