BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 1711


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          ASSEMBLY THIRD READING


          AB  
          1711 (McCarty and Medina)


          As Amended  May 27, 2016


          Majority vote


           ------------------------------------------------------------------ 
          |Committee       |Votes|Ayes                  |Noes                |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |----------------+-----+----------------------+--------------------|
          |Higher          |10-3 |Medina, Baker,        |Bloom, Levine,      |
          |Education       |     |Chávez, Irwin,        |Williams            |
          |                |     |Jones-Sawyer, Linder, |                    |
          |                |     |Low, Olsen, Santiago, |                    |
          |                |     |Weber                 |                    |
          |                |     |                      |                    |
          |----------------+-----+----------------------+--------------------|
          |Appropriations  |19-0 |Gonzalez, Bigelow,    |Bloom, Levine,      |
          |                |     |Bloom, Bonilla,       |Williams            |
          |                |     |Bonta, Calderon,      |                    |
          |                |     |Chang, Daly, Eggman,  |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |                |     |Eduardo Garcia,       |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |                |     |Roger Hernández,      |                    |
          |                |     |Holden, Jones,        |                    |
          |                |     |Obernolte, Quirk,     |                    |
          |                |     |Santiago, Wagner,     |                    |








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          |                |     |Weber, Wood           |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
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          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 10% of  
               total undergraduate student enrollment by the 2022-23  
               academic year;
             b)   Provides that in each year between 2017-18 and 2022-23,  
               the UC shall increase resident undergraduate student  
               enrollments by 5,000 and decrease nonresident student  
               enrollment by 1,700.


             c)   Prohibits any UC campus at which undergraduate  
               nonresident enrollment exceeds 15.5% from enrolling a  
               number of new nonresidents in excess of the number of  
               nonresident undergraduate students enrolled in 2015-16.


          2)Requires, as a condition of receipt of Budget Act funds, 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  








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               among the various UC campuses; and,


             d)   For each campus, the purposes for which these revenues  
               were expended.


          3)Requires, by July 1, 2017, UC to establish a policy regarding  
            admission of nonresident undergraduate students to require  
            each campus to only admit undergraduate nonresidents that  
            stand in the upper half of those admitted undergraduate  
            resident students at that campus.  Requires related annual  
            reporting, as specified.
          4)Provides that UC will not be required to comply with the  
            nonresident/resident enrollment requirements in any year where  
            the Budget Act provides less funding than was provided to UC  
            in the prior year.      


          5)Provides Legislative intent that the enrollment changes will  
            be funded by a combination of state funding, savings from  
            operational efficiencies implemented by the UC, and increases  
            in nonresident undergraduate student tuition and fees.  


          EXISTING LAW:  


          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) 










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          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.  (California Constitution, Article IX,  
            Section 9)


          FISCAL EFFECT:  According to the Assembly Appropriations  
          Committee, General Fund costs for increased enrollment growth  
          are about $20 million in 2019-20, and $200 million in 2022-23.   
          The enrollment growth is also projected to be funded with $50  
          million worth of operating efficiencies and $250 million in  
          revenue for increased nonresident tuition increases.   


          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  
          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 reduction proposed in this bill, the UC will  
          continue to grow its non-resident student population at the  
          expense of resident Californians.









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          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  
          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.  


          In Fall 2015, systemwide, California freshman admissions were  








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          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.    
           


          California State Auditor Report.  On March 28, 2016, the  
          California State Auditor (CSA) released Report 2015-107,  
          entitled "The University of California:  Its Admissions and  
          Financial Decisions Have Disadvantaged California Resident  
          Students."  According to the CSA report, among other findings: 


          1)UC's decision to increase the enrollment of nonresidents has  
            made it more difficult for California residents to gain  
            admission to the university.  


          2)Since 2011, UC has required nonresidents to "compare  
            favorably" to residents; formerly, it had required  
            nonresidents to meet the standards of the upper half of  
            admitted Californians.  Since the change, UC admitted nearly  
            16,000 nonresidents whose scores fell below the median scores  
            for admitted residents at the same campus on every academic  








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            test score and grade point average evaluated.


          3)UC could have taken additional steps to generate savings and  
            revenue internally to mitigate the impact of its admissions  
            and financial decisions on residents.  For example, spending  
            on employee salaries increased in eight of the last nine  
            fiscal years.  UC publicly claimed that it redirected $664  
            million to its academic and research missions through an  
            initiative it developed called Working Smarter; it could not  
            substantiate the asserted savings or revenue amounts or  
            demonstrate how much of this amount directly benefited  
            students.  


          4)"Rebenching" has not completely resolved its unequal  
            distribution of per-student state funding across its campuses,  
            resulting in certain campuses continuing to receive less state  
            funds per student than others. 


          5)Even though UC asserts that the additional revenue from its  
            increased enrollment of nonresidents allows it to improve  
            education quality and enroll more residents, the university  
            does not give campuses spending guidance or track how they use  
            these funds.  Lacking such guidance or oversight, we found  
            campuses spend these funds in an inconsistent manner. 


          The CSA recommended, among other items, that UC revise its  
          admission standard for nonresidents to require campuses to admit  
          only nonresidents with admissions credentials that place them in  
          the upper half of the residents it admits, and that the  
          Legislature amend state law to limit the percentage of  
          nonresidents that the university can enroll each year. 












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          Analysis Prepared by:                                             
                          Laura Metune / HIGHER ED. / (916) 319-3960  FN:  
          0003093