BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session AB 25 (Gipson) - Financial aid: Cal Grant program: renewal. ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: April 8, 2015 |Policy Vote: ED. 9 - 0 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: No | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: July 6, 2015 |Consultant: Jillian Kissee | | | | ----------------------------------------------------------------- This bill meets the criteria for referral to the Suspense File. Bill Summary: This bill requires the California Student Aid Commission (CSAC) to establish an appeal process for institutions failing to meet Cal Grant program participation requirements and authorizes the CSAC to grant an appeal to an institution with a small cohort of 20 individuals or less, as specified. Fiscal Impact: Unknown costs potentially in the low hundreds of thousands General Fund dependent upon the number of ineligible institutions and approved appeals. Costs would likely vary from year to year. Likely minor costs to the CSAC to create and administer the appeals process. Background:1) Existing law authorizes the Cal Grant program, administered by AB 25 (Gipson) Page 1 of ? the CSAC, to provide grants to financially needy students to attend a college or university. The Cal Grant programs include both the entitlement and the competitive Cal Grant awards. The program consists of the Cal Grant A, Cal B, and Cal Grant C programs, and eligibility is based upon financial need, grade point average, California residency and other criteria. (Education Code 69430-69433.9) The 2012 and 2013 Budget Acts established new requirements for institutional participation in the Cal Grant program (SB 70, Chapter 7, Statutes of 2011, and SB 1016, Chapter 38, Statutes of 2012) by providing that colleges must maintain three year cohort default rates below 15.5 percent and a graduation rate above 30 percent in order to be eligible for initial and renewal Cal Grant awards at the institution. There is an exception to these requirements for an institution with a three- year cohort default rate of below 15.5 percent and a graduation rate above 20 percent through the 2016-17 academic year. Existing law also provides that the cohort default rate and graduation requirements do not apply to institutions with 40 percent or less of their students borrowing federal student loans. (EC § 69432.7) Proposed Law: This bill: (1) requires the Commission to establish an appeal process for an institution that fails to satisfy the three-year cohort default rate and graduation rate requirements pursuant to existing law, and (2) authorizes the Commission to grant an appeal for an academic year only if it determines the institution has a cohort size of 20 or less and the cohort is not representative of the overall institutional performance. Related Legislation: AB 640 (Hall, 2014) similar to this bill, would have required CSAC to implement an appeal process for schools that fail to meet the CDR and graduation rate requirements and authorized CSAC to consider cohort size. AB 640 was held in this committee. SB 1149 (Galgiani, 2014) was substantially similar to AB 640. SB 1149 was held in this committee. AB 25 (Gipson) Page 2 of ? Staff Comments: This bill requires the CSAC to establish an appeals process and authorize an appeal for an academic year only if it determines (1) the institution has a cohort size of 20 or less and (2) the cohort is not representative of the overall institutional performance. The CSAC will likely incur costs to establish and administer the required appeals process, including establishing the criteria by which it is determined the cohort is not representative of the overall institutional performance. However, more significant costs could be incurred to the extent this bill results in the reinstatement of disqualified institutions. The costs will likely vary from year to year dependent upon a number of factors such as: the number of ineligible institutions, how many seek an appeal, whether students that receive Cal Grant awards transfer to eligible institutions (as awards follow the student), and whether it is determined that cohorts are not representative of overall institutional performance. As a point of reference, according CSAC's most recent data, four institutions that fall under the cohort size required by this bill were recently determined to be ineligible for Cal Grants and received about $200,000. If these institutions appealed this determination and through the CSAC's appeals process their awards were reinstated, state costs could rise by up to that amount. It is unknown whether the cohorts of these institutions were representative of the overall institutional performance and thereby would have not received an approved appeal, as that is not defined by this bill. -- END --