BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 1711


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          Date of Hearing:  March 15, 2016 


                       ASSEMBLY COMMITTEE ON HIGHER EDUCATION


                                 Jose Medina, Chair


          AB 1711  
          (McCarty and Medina) - As Introduced January 26, 2016


          SUBJECT:  University of California:  nonresident student  
          enrollment


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



          1)Requires, as a condition of receipt of Budget Act funds, UC to  
            comply with the following:



             a)   Prohibits the percentage of undergraduate nonresident  
               students enrolled at UC systemwide from exceeding 15.5% of  
               total undergraduate student enrollment;



             b)   Until July 1, 2021, prohibits any UC campus at which  
               undergraduate nonresident enrollment exceeds 15.5% from  
               enrolling new undergraduate nonresident students; and,










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             c)   Requires not less than 50% of the revenues in excess of  
               the marginal cost of instruction from undergraduate  
               nonresident enrollment to be directed to fund increased  
               enrollment of undergraduate resident students at all  
               campuses serving undergraduates.



          2)Requires UC to annually publish a report that includes, but is  
            not necessarily limited to, all of the following information:



             a)   The undergraduate nonresident tuition and fee level  
               established at each campus; 



             b)   The amount of revenues generated by undergraduate  
               nonresident enrollment at each campus; 



             c)   The method by which these revenues were distributed  
               among the various UC campuses; and,



             d)   For each campus, the purposes for which these revenues  
               were expended, including, but not limited to, the number of  
               California resident undergraduate students admitted  
               pursuant to the aforementioned requirements.
          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 California State University (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, there  
          has been a growing trend at UC to enroll more out of state and  
          international students (nonresidents) at the expense of  
          California students (residents).  The author argues that the  
          main reason for this shift in enrollment is due to tuition and  
          fee revenues.  As of the 2015-16 academic year, tuition and fees  
          for nonresidents is $38,108 and for resident students is $13,400  
          a year.  All additional revenue derived from out of state  









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          students stays with the local campus.  The author points to  
          recent enrollment numbers, in the fall of 2015, UC admitted  
          1,600 fewer resident freshmen compared to fall 2014, and  
          increased nonresident enrollment by 4,700.  According to the  
          author, without the cap and budgetary language as proposed in  
          this bill, the UC will continue to grow its non-resident student  
          population at the expense of resident Californians.


          Background.  Historically, the state provided UC (and CSU) with  
          funding each year to support enrollment growth.  Enrollment  
          targets were generally set by using forecasts for high school  
          graduation rates and the overall population of 18- to  
          24-year-olds, and through negotiation with the segments as to an  
          appropriate per-student amount of funding, referred to as the  
          marginal cost.  The most recent marginal cost rate for UC is  
          approximately $10,000 for each additional student.  Due to  
          recession-era budget cuts and current administration preference,  
          enrollment targets have been eliminated from the budget.  No  
          enrollment targets have been included in the past two Budget  
          Acts.  

          The 2015-16 Budget Act provides UC incentive funding of $25  
          million General Fund if UC increases enrollment by 5,000  
          California undergraduate students by 2016-17.  UC was also  
          directed to use financial aid previously awarded to nonresident  
          students ($36.8 million in 2014-15) to support increased  
          enrollment of California students.  While the Fall 2015  
          enrollment data shows a slight drop in California resident  
          undergraduate enrollment, UC has indicated it intends to meet  
          the Budget Act requirement and increase California undergraduate  
          enrollment by 10,000 students over the next three academic  
          years.    

          The state has traditionally considered only resident students  
          when determining enrollment for UC because the state does not  
          provide funding for nonresident students. Current law allows UC  









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          to set nonresident enrollment levels and fees, requiring that  
          nonresident fees, at minimum, cover marginal costs. UC policy  
          also allows campuses to keep the extra revenue generated by  
          nonresident tuition.  Thus, campuses have a major incentive to  
          admit and enroll more nonresident students.  UC increased  
          nonresident tuition for 2015-16; undergraduate nonresidents now  
          pay $24,708 more than California students in tuition.

          In Fall 2015, systemwide, California freshman admissions were  
          reduced by 2.1% (1,319 students) from 2014 while nonresident  
          admissions increased by 13.2% (3,513) from 2014. 
          Nonresident students received 34% of offers at UC Berkeley, 41%  
          at UCLA, 39% at UC San Diego and 35% at UC Davis.  Fall 2015  
          enrollment figures show that UC admitted 1,319 fewer California  
          freshmen, but increased (new and continuing) nonresident  
          enrollments by about 4,700 systemwide (new nonresidents grew  
          1,182). 


          While UC has sought to limit nonresident enrollment at the  
          Berkeley and UCLA, other UC campuses have significantly  
          increased nonresident student numbers.  The Davis, Irvine, San  
          Diego and Santa Cruz campuses all report significant increases  
          in nonresident admissions during the past three years.   
          Nonresidents are currently 15.5% of undergraduate enrollments.    
           


          The chart below shows the change in new UC enrollments between  
          Fall 2008 and 2015.


          


           ----------------------------------------------------------------------------------------------------------- 
          |University |   2008    |   2009    |   2010    |   2011    |   2012    |   2013    |   2014    |   2015    |









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          |Enrollment |           |           |           |           |           |           |           |           |
          |           |           |           |           |           |           |           |           |           |
          |           |           |           |           |           |           |           |           |           |
          |-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------|
          |    CA     |  34,410   |  32,425   |  31,891   |  32,159   |  33,111   |  33,224   |  34,240   |  32,923   |
          | Freshmen  |           |           |           |           |           |           |           |           |
          |           |           |           |           |           |           |           |           |           |
          |           |           |           |           |           |           |           |           |           |
          |-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------|
          |    CCC    |  12,428   |  13,523   |  14,963   |  14,979   |  14,353   |  14,476   |  14,587   |  14,223   |
          | Transfers |           |           |           |           |           |           |           |           |
          |           |           |           |           |           |           |           |           |           |
          |           |           |           |           |           |           |           |           |           |
          |-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------|
          |Non-residen|   3,623   |   3,580   |   4,450   |   6,259   |   7,766   |   9,185   |   9,885   |  11,433   |
          |    ts     |           |           |           |           |           |           |           |           |
          |           |           |           |           |           |           |           |           |           |
          |           |           |           |           |           |           |           |           |           |
          |-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------|
          |%          |    7%     |    7%     |    9%     |    12%    |    14%    |    16%    |    17%    |20%        |
          |    Non-resident|           |           |           |           |           |           |           |           |
          |           |           |           |           |           |           |           |           |           |
          |           |           |           |           |           |           |           |           |           |
           ----------------------------------------------------------------------------------------------------------- 
          


          Concerns over nonresident growth. On August, 26, 2015, the  
          Assembly Higher Education Committee and the Assembly Budget  
          Subcommittee No. 2 on Education Finance held a joint oversight  
          hearing to review nonresident student enrollment at UC.   
          Testimony was presented by Ozan Jacquette, assistant professor  
          at the University of Arizona, College Of Education, and coauthor  
          of the working paper "Tuition rich, mission poor: Nonresident  
          enrollment and the changing proportions of low-income and  
          underrepresented minority students at public research  
          universities," (Tuition Rich).  According to Jacquette,  









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          increases in nonresident enrollment generate more tuition  
          revenue and increase academic profiles.  However, nonresident  
          students are more likely to come from high-income families and  
          less likely to be Black or Latino.  Jacquette notes that  
          increases in nonresident enrollment may exacerbate access  
          inequalities.  

          UC nonresident enrollment limitation.  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  
          released in November 2010, and included recommendations  
          regarding resident and nonresident enrollment, including that  
          the UC President ensure that the proportion of nonresidents  
          systemwide did not exceed 10%.  UC Regents did not adopt the  
          recommendations.   





          This bill would prohibit the systemwide undergraduate  
          nonresident enrollment from exceeding 15.5% of total  
          undergraduate student enrollment and would, until July 1, 2021,  
          prohibit any campus at which nonresident enrollment exceeds  
          15.5% from enrolling new nonresident students.  Currently UC  
          Berkeley, UC Irvine, UC Los Angeles and UC San Diego are above  
          the 15.5% rate.  Under the provisions of this bill, in the  
          absence of reducing undergraduate nonresidents or increasing  
          undergraduate residents to achieve a rate below 15.5%, campuses  
          would, until July 1, 2021, be prohibited from enrolling new  
          nonresidents.  This provision is intended to ensure that, as  
          nonresident students at campuses above 15.5% graduate,  
          nonresident growth (and associated revenue) can occur at  









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          campuses with lower nonresident rates.   





          Funding directed toward California resident access.  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  
          by nonresident enrollment is used to improve services and access  
          for California students.  Under the current UC nonresident  
          tuition structure, only those campuses that enroll nonresidents  
          benefit from the revenue generated by those nonresident  
          enrollments.  The author aims to ensure all campuses enrolling  
          additional resident undergraduate students benefit from the  
          revenue generated from nonresidents.  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 at all UC  
          undergraduate campuses.   





          UC Concerns.  UC has issued a letter of deep concern and notes,  
          "last year, President Napolitano directed that nonresident  
          enrollment remain flat at UC Berkeley and UC Los Angeles. The  
          University will again cap nonresidents at UC Berkeley and UCLA  
          for 2016-17 and will also impose a cap at UC San Diego for the  
          first time.   However, the 15.5 percent limit proposed in this  
          legislation would require reductions in nonresident enrollment  
          at those campuses as well as UC Irvine.  The University would  
          have to reduce nonresident enrollment at those four campuses by  









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          a collective 4,591 students at a total tuition revenue loss of  
          $179 million-a significant sum that would impair our ability to  
          provide a quality educational experience for California  
          students."





          Moving forward, in response to the concerns raised by UC, the  
          author may wish to consider an amendment to specify that this  
          provision shall be set aside when necessary to address fiscal  
          imbalance.  Additionally, the author may wish to consider an  
          amendment to allow a limited amount of new nonresident  
          enrollment at campuses above the 15.5% threshold.  For example,  
          UC campuses above the cap could be allowed to enroll new  
          nonresidents, but that the total number of undergraduate  
          nonresidents must be a specified number or percentage less than  
          the number enrolled in the prior academic year. 





          REGISTERED SUPPORT / OPPOSITION:




          Support


          California Federation of Teachers













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          Opposition


          None on File




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