BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 1370


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          Date of Hearing:  April 28, 2015


                       ASSEMBLY COMMITTEE ON HIGHER EDUCATION


                                 Jose Medina, Chair


          AB 1370  
          (Medina) - As Amended April 22, 2015


          SUBJECT:  Public postsecondary education:  student residency


          


          SUMMARY:  Revises provisions governing the nonresident tuition  
          at the University of California (UC) and the California State  
          University (CSU).  Specifically, this bill:  



          1)Requires UC and CSU to establish nonresident tuition rates at  
            each campus of their respective segment based on the total  
            nonresident charges imposed by comparison institutions, as  
            identified by the California Postsecondary Education  
            Commission or a successor agency, and the cost of instruction.  


          2)Removes requirements that nonresident tuition increases be  
            gradual and moderate with a minimum of a 10-month notice, and  
            instead requires nonresident students have predictable  
            increases that ensure an appropriate notice of the increase to  
            students.









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          3)Requires, at minimum, 50% of revenues generated, above the  
            cost of instruction, from undergraduate nonresident enrollment  
            to be directed to enrollment of resident students. 

          4)Removes language that sets aside the provisions of the law in  
            the event that state revenues and expenditures are  
            substantially imbalanced due to unforeseen factors.  

          5)Prohibits the number of undergraduate nonresident students  
            enrolled at any UC campus from exceeding 10% of total student  
            enrollment. Provides, until July 1, 2021, any campus of UC at  
            which undergraduate nonresident enrollment exceeds 10% on the  
            operative date of this bill is prohibited from increasing the  
            enrollment of undergraduate nonresident students above that  
            amount.

          6)Requires UC to establish a revenue sharing agreement pursuant  
            to which revenues generated by undergraduate nonresident  
            student enrollment are distributed equitably to each campus of  
            the UC.

          7)Requires the UC to annually publish an annual report that  
            includes the undergraduate nonresident tuition and fee level  
            established at each campus, the amount of revenues generated  
            by undergraduate nonresident enrollment at each campus, the  
            method by which the revenues were distributed among the  
            campuses of the university, and, for each campus, the purposes  
            for which these revenues were expended. 

          8)Provides that the Regents of the UC shall not allocate any  
            state funds appropriated to the UC in the annual Budget Act or  
            another statute to a campus of the UC unless the campus is in  
            compliance with this article.

          EXISTING LAW:  










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          1)Requires that a student classified as a nonresident pay  
            nonresident tuition. Current law authorizes both the UC and  
            the CSU to establish nonresident student tuition policies and  
            methodologies to be developed by each institution's governing  
            body. The annual fee rate is prohibited from falling below the  
            marginal cost of instruction and the rates at comparison  
            institutions, as identified by the California Postsecondary  
            Education Commission, must be considered. (Education Code  
            Sections 68050-68052) 



          2)Establishes UC as a public trust and confers the full powers  
            of the UC upon the UC Regents.  The Constitution establishes  
            that the UC is subject to legislative control only to the  
            degree necessary to ensure the security of its funds and  
            compliance with the terms of its endowments.  Judicial  
            decisions have held that there are three additional areas in  
            which there may be limited legislative intrusion into  
            university operations: authority over the appropriation of  
            state moneys; exercise of the general police power to provide  
            for the public health, safety and welfare; and, legislation on  
            matters of general statewide concern not involving internal  
            university affairs.  (Constitution of California, Article IX,  
            Section 9)

          FISCAL EFFECT:  Unknown


          


          COMMENTS:  Purpose of this bill.  According to the author, the  









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          California Constitution establishes UC as a public institution;  
          annually, over $3 billion in California taxpayer funds are  
          provided to support UC's teaching, research, and public service  
          mission. However, evidence suggests that the way in which UC  
          enrolls and uses funds generated by nonresident students could  
          be undermining the UC's public mission. 





          The author notes that during California's recession and  
          resulting state budget cuts, UC increasingly relied on tuition  
          (and nonresident students, in particular, who pay an additional  
          $23,000 in tuition) to meet revenue needs. From 2007-08 to  
          2013-14 the number of nonresident undergraduates grew from 7,103  
          to 20,073.  In 2000 90% of freshman at UC Berkeley came from  
          California. By 2012, the proportion dropped to 71%. At UCLA, the  
          percentage of California residents dropped 23%, to 72% in 2012. 





          According to the author, UC argues that admitting nonresident  
          students has allowed the system to enroll about 7,500 California  
          students for which the state has not provided funding. However,  
          UC allows tuition revenues generated by nonresident students to  
          be kept by the campus in which the student enrolls. As the  
          author points out, according to UC's own records, the majority  
          of "unfunded students" are attending campuses with very low  
          nonresident enrollment. In fact, in 2013, UCLA, with 19.2%  
          nonresidents, was only serving 191 California residents for  
          which it was not funded. UC Berkeley, with 21.2% nonresidents,  
          was serving 332 fewer California students than it was funded to  
          serve. UC Riverside, on the other hand, served 1,871 unfunded  
          Californians, but enrolled only 448 nonresidents.   









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          The author points to UC's recent indication that, for the  
          2015-16 academic year, it will be capping the number of in-state  
          enrollments at current levels pending the outcome of budget  
          negotiations. While UC has indicated it will cap nonresidents at  
          UCLA and Berkeley, it will continue to enroll nonresident  
          students at other campuses during this time. According to the  
          author, this means that UC-qualified California students will be  
          wait-listed and potentially turned away, while nonresident  
          students are provided access to the system.





          Nonresident enrollment.  Out-of-state and international students  
          (nonresidents) are recognized in higher education as enhancing  
          the college experience by bringing a diversity of backgrounds  
          and perspectives to campuses.  However, the state has  
          traditionally considered only resident students when determining  
          enrollment for CSU and UC because the state does not provide  
          funding for nonresident students.  Current law allows each  
          segment to set nonresident enrollment levels and fees, requiring  
          that nonresident fees, at minimum, cover marginal costs.  At UC,  
          approximately 13% of all students systemwide are nonresidents,  
          and undergraduate nonresidents pay about $23,000 more than  
          California students in tuition.  At CSU, about 5% of all  
          students are nonresidents, and undergraduate nonresidents pay an  
          additional $11,160.  Both UC and CSU indicate that monies  
          generated from nonresident enrollment are used to support and  
          enhance educational access and quality for all students  
          (residents and nonresidents) at that campus.  










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          Resident enrollment targets.  According to the LAO, while it  
          appears that some campuses, like UC Berkeley, are substituting  
          nonresidents for residents, it is difficult to hold these  
          campuses accountable for resident displacement without a clear  
          indication from the state on what it expects in terms of  
          resident enrollment systemwide and at each campus.  Governor  
          Brown's budget proposal requires UC and CSU to not increase  
          student fees and requires UC to not increase nonresident  
          enrollment above 2014-15 levels in order for each segment to  
          receive the proposed $119 million augmentation.  As noted by the  
          LAO, if the intent of this proposal is to prioritize access to  
          UC for California residents, in the absence of enrollment  
          targets and associated funding, restricting nonresident  
          enrollment alone might not achieve this objective.   
          Reestablishing resident enrollment targets in the Budget Act is  
          an item under discussion by the Assembly Budget Subcommittee No.  
          2 on Education Finance (subcommittee).    





          Funding directed toward California resident access.  This bill  
          would require at least 50% of the revenue generated from  
          undergraduate nonresident enrollment, in excess of the cost of  
          instruction, to be used to support enrollment of resident  
          students.  According to the Subcommittee, which heard issues  
          surrounding UC enrollment at a hearing on April 21, 2015, the  
          data reveal that rising admission and enrollment of nonresident  
          students has coincided with decreasing admission and enrollment  
          of Californians at many UC, particularly flagship, campuses.   
          The Subcommittee analysis notes that, in a paper published in  
          October 2014 called "Tuition Rich, Mission Poor: Nonresident  
          enrollment and the changing proportions of low-income and  
          underrepresented minority students and public research  









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          universities," professors at the University of Arizona,  
          University of Missouri, and University of Michigan studied  
          enrollment trends at public research universities across the  
          country - including UC - and reported that "nonresident  
          enrollment growth may have negative consequences for access" to  
          low-income and underrepresented students. 





          Campus-based nonresident tuition.  Currently nonresident tuition  
          rates are established on a segment-wide basis.  The bill would  
          allow UC and CSU to establish nonresident tuition rates at each  
          campus based on nonresident tuition rates of that campus's  
          comparison institutions.  This requirement would potentially  
          allow UC and CSU to charge different nonresident tuition rates  
          for each campus, based on the amount the market allows.   
          Depending on the rates established, this provision could  
          increase the ability of some campuses to increase nonresident  
          enrollment and revenue from that enrollment.  





          UC nonresident enrollment limitations.  In 2009, former-UC  
          President Yudof  announced the creation of the UC Commission on  
          the Future, charged with developing a vision for the future of  
          the UC that would reaffirm its role in sustaining California's  
          economy and cultural life while recognizing that limited state  
          resources required the UC to be creative and strategic in  
          meeting that mission. The final report of the Commission was  
          adopted in November 2010. 












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          Among other things, the Commission recommended that the UC allow  
          campuses to increase the number and proportion of undergraduate  
          nonresident students to generate additional resources to sustain  
          current instructional capacity and quality.  The Commission  
          requested:





          a)Campuses establish targets that did not displace  funded   
            California residents eligible for UC admission.

          b)The President of the UC monitor enrollments to ensure that  
            these students were fairly apportioned among campuses. 

          c)The President to ensure that the proportion of nonresidents  
            systemwide did not exceed 10% and annually report on the  
            systemwide proportion to the Regents.  



          Governor Brown's January budget proposal prohibits UC from  
          increasing nonresident enrollment above 2014-15 levels in order  
          for each segment to receive the proposed $119 million  
          augmentation.  





          This bill would prohibit the number of nonresident students  
          enrolled at any campus of the UC from exceeding 10% of total  
          student enrollment and would, until July 1, 2021, prohibit any  
          campus at which nonresident enrollment currently exceeds 10% of  









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          total student enrollment from increasing the enrollment of  
          nonresident students above current levels.  Currently, UC  
          Berkeley, UC Los Angeles and UC San Diego are above the 10%  
          threshold.  This bill would provide until 2021 for these  
          campuses to reach the 10% limitation.  





          In response to concerns over nonresident enrollment, current-UC  
          President Napolitano recently announced capping nonresident  
          enrollment at UC Berkeley and UCLA, and limiting growth at UC  
          San Diego.  UC has expressed concern that by instituting the cap  
          proposed in this bill, this bill could disadvantage campuses  
          seeking to increase nonresident enrollment to fund resident  
          enrollments and operational needs not met by the state.   


             
           As previously noted, nonresident tuition provides a source of  
          revenue to UC that is particularly important in budget years  
          where General Fund support is not provided to the system.   
          Moving forward, the author may wish to consider whether it would  
          be appropriate to set aside the nonresident student cap when  
          necessary to address fiscal imbalance.





          Sharing nonresident revenues among UC campuses.  Formerly, UC  
          required supplemental nonresident tuition to be collected  
          centrally and redistributed back to all campuses based on  
          systemwide priorities.  Since 2007-08, UC has allowed individual  
          campuses to retain the revenue associated with nonresident  
          supplemental tuition.  UC argues that excess funding generated  









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          by nonresident enrollment is used to improve services and access  
          for California students.  Nonresident enrollment is managed at  
          the campus level, and campuses have taken different approaches  
          in recent years.  





          As shown by the 2013 undergraduate enrollment numbers outlined  
          below, UC campuses have taken different approaches to resident  
          and nonresident enrollment:





           ---------------------------------------------------------------- 
          |   UC     |Undergradua|%        |Undergradua|Budgeted |"Unfunded|
          |          |    te     |  Nonresident|    te     |Residents|    "    |
          |          |Nonresident|         | Residents |         |Residents|
          |  Campus  |     s     |         |           |         |         |
          |          |           |         |           |         |         |
          |          |           |         |           |         |         |
          |----------+-----------+---------+-----------+---------+---------|
          |Berkeley  |   5,418   |  21.2%  |  20,147   | 20,479  |0 (-332) |
          |          |           |         |           |         |         |
          |          |           |         |           |         |         |
          |----------+-----------+---------+-----------+---------+---------|
          |Davis     |   1,748   |  7.1%   |  22,822   | 20,780  |  2,042  |
          |          |           |         |           |         |         |
          |          |           |         |           |         |         |
          |----------+-----------+---------+-----------+---------+---------|
          |Irvine    |   2,138   |  9.3%   |  20,733   | 20,348  |   385   |
          |          |           |         |           |         |         |
          |          |           |         |           |         |         |
          |----------+-----------+---------+-----------+---------+---------|









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          |Los       |   5,185   |  19.2%  |  21,877   | 21,686  |   191   |
          |Angeles   |           |         |           |         |         |
          |          |           |         |           |         |         |
          |          |           |         |           |         |         |
          |----------+-----------+---------+-----------+---------+---------|
          |Merced    |    21     |  0.4%   |   5,517   |  3,935  |  1,582  |
          |          |           |         |           |         |         |
          |          |           |         |           |         |         |
          |----------+-----------+---------+-----------+---------+---------|
          |Riverside |    448    |  2.7%   |  16,180   | 14,309  |  1,871  |
          |          |           |         |           |         |         |
          |          |           |         |           |         |         |
          |----------+-----------+---------+-----------+---------+---------|
          |San Diego |   3,375   |  14.7%  |  19,625   | 20,315  |   690   |
          |          |           |         |           |         |         |
          |          |           |         |           |         |         |
          |----------+-----------+---------+-----------+---------+---------|
          |Santa     |   1,362   |  7.6%   |  16,662   | 16,365  |   297   |
          |Barbara   |           |         |           |         |         |
          |          |           |         |           |         |         |
          |          |           |         |           |         |         |
          |----------+-----------+---------+-----------+---------+---------|
          |Santa     |    378    |  2.5%   |  14,742   | 13,670  |  1,072  |
          |Cruz      |           |         |           |         |         |
          |          |           |         |           |         |         |
          |          |           |         |           |         |         |
           ---------------------------------------------------------------- 
              


          Under the current UC nonresident tuition structure, only those  
          campuses that enroll nonresidents benefit from the revenue  
          generated by those nonresident enrollments.  This bill would  
          require UC to establish an equitable revenue sharing agreement.   
          The intent of the author is to ensure that all campuses, and  
          particularly those enrolling additional California students,  
          benefit from revenues generated by nonresident enrollment.  









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          UC has expressed concern that requiring redistribution of  
          nonresident tuition could take away campuses' incentive to  
          invest the resources necessary to attract out-of-state students  
          and thereby generate nonresident tuition revenues.  The author  
          may wish to consider this concern moving forward.    





          REGISTERED SUPPORT / OPPOSITION:





          Support


          


          None on File


          


          Opposition


          









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          None on File








          Analysis Prepared by:Laura Metune / HIGHER ED. / (916) 319-3960