BILL ANALYSIS Ó AB 1711 Page 1 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, | | AB 1711 Page 2 | | |Weber, Wood | | | | | | | | | | | | ------------------------------------------------------------------ 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 AB 1711 Page 3 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) AB 1711 Page 4 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. AB 1711 Page 5 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 AB 1711 Page 6 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 AB 1711 Page 7 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. AB 1711 Page 8 Analysis Prepared by: Laura Metune / HIGHER ED. / (916) 319-3960 FN: 0003093