BILL ANALYSIS                                                                                                                                                                                                    



          SENATE COMMITTEE ON EDUCATION
                              Senator Carol Liu, Chair
                                2015 - 2016  Regular 

          Bill No:             SCA 4               
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          |Author:    |Nguyen                                               |
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          |Version:   |May 28, 2015                                Hearing  |
          |           |Date:     July 15, 2015                              |
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          |Urgency:   |No                      |Fiscal:     |Yes            |
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          |Consultant:|Kathleen Chavira                                     |
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          Subject:  University of California:  tuition and mandatory  
          systemwide fees:  out-of-state students:  admission:  student  
          financial assistance

           NOTE:  This bill has been referred to the Committees on  
          Education and Elections and Constitutional Amendments.  A "do  
          pass" motion should include referral to the Elections and  
          Constitutional Amendments Committee.
            
          SUMMARY
          
          This bill proposes to add a new section to Article IX of the  
          State Constitution that would require, beginning with the  
          2017-18 academic year, that out-of state undergraduate students  
          make up no more than 10 percent of the total undergraduate  
          enrollment systemwide and at each campus of the University of  
          California (UC), prohibits the UC from providing state-funded  
          financial assistance to non-resident students, as specified, and  
          prohibits any increase in tuition or mandatory systemwide fees  
          for undergraduate students between the 2016-17 and 2020-21  
          academic years, inclusive. 
                                                              
            BACKGROUND
          
          Current law generally requires that a student classified as a  
          non-resident pay non-resident tuition. Current law authorizes  
          both the UC and the CSU to establish non-resident 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  







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          rates at comparison institutions, as identified by the  
          California Postsecondary Education Commission, must be  
          considered. 
          (Education Code  68050-68052) 

          The California Constitution establishes the UC, a public trust  
          to be administered by the Regents of the UC and grants the  
          Regents full powers of organization and government, subject only  
          to such legislative control as may be necessary to insure  
          security of its funds, compliance with the terms of its  
          endowments, statutory requirements around competitive bidding  
          and contracts, sales of property and the purchase of materials,  
          goods and services.  
          (Article IX,  (9)(a) of the California Constitution)

            ANALYSIS
          
          This bill proposes to place an amendment to the California  
          Constitution before the voters that:

       1)Beginning in the 2017-18 academic year:

               a)        Constitutionally prohibits out-of-state  
               undergraduate students from constituting more than 10  
               percent of the total incoming undergraduate class.

               b)        Constitutionally prohibits out-of-state  
               undergraduate students from exceeding 10 percent of the  
               total undergraduate enrollment of each campus of the  
               University of California (UC).

               c)        For these purposes, defines an "out-of-state  
               undergraduate" as an undergraduate student whose residence  
               was outside of California at the time he/she applied for  
               admission to the UC. 

       2)Constitutionally prohibits the UC from providing state-funded  
            financial assistance to any student, who in the absence of  
            such aid, would be statutorily required to pay tuition or  
            mandatory fees at higher than California resident rates.   

       3)Constitutionally prohibits undergraduate tuition and mandatory  
            systemwide fees from being increased during the 2016-17  
            through 2020-21 academic years, inclusive. 








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          STAFF COMMENTS
          
          1)Need for the bill.  The author is concerned that in November  
            2014, the UC Board of Regents conditionally approved five  
            years of tuition increases and informed lawmakers that without  
            more funding the system would be forced to cap enrollment of  
            California residents next year.  At the same time, the UC  
            would still be accepting higher paying out-of-state students.  
            On March 3, 2015 an announcement was made by Napolitano,  
            directing all UC campuses to maintain their current level of  
            enrollment for resident students and to allow some of the  
            campuses to increase the enrollment of non-resident students.  
            According to the author, the Regents have increasingly, looked  
            to non-resident students as a solution to UC budget problems.   
            As a result, California taxpayers have seen access limited to  
            these flagship universities for their children.

            According to the author, this bill would increase access to  
            higher education for California taxpayers by making it  
            possible for more in-state students to attend our universities  
            and halting increased tuition rates for the next five years,  
            protecting our students from paying more for their education.   


          2)Related activity.  In May 2015, the UC Board of Regents  
            approved increases in undergraduate non-resident supplemental  
            tuition of up to 8 percent per year for the next five years.  
            Additionally, the recently enacted 2015-16 budget contains  
            several related provisions.  Among other things, it provides  
            that funds currently being used to provide financial aid to  
            non-resident students must be available to enable more  
            resident students to enter the university at all of UC  
            campuses.  It also provides that funds generated by an  
            increase in non-resident tuition in the 2015-16 academic year  
            be used specifically to support an increase in the number of  
            resident students enrolled.  It also requires that systemwide  
            tuition and mandatory fees be capped for the next two academic  
            years.

            Finally, the Budget provides that no later than the 2016-17  
            academic year, the University is expected to enroll at least  
            5000 more resident undergraduate students as enrolled in  
            2014-15.








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          3)Net effect?  As noted in staff comment #2, the 2015-16 Budget  
            anticipates the use of resources from non-resident tuition  
            increases to support the enrollment of resident students. By  
            capping the proportion of non-resident students that can be  
            enrolled this bill would limit, potentially even eliminate, a  
            source of non-general fund revenue that could be used for  
            accommodating California resident students. As a  
            constitutional provision, neither the University of California  
            (UC), nor the Legislature, would have the discretion to modify  
            this cap.  Similarly, the 2015-16 Budget caps UC tuition  
            increases for the 2015-16, and 2016-17 academic years and at  
            the same time directs the UC to implement reforms to reduce  
            the cost structure of the University, and improves access,  
            quality, and outcomes.  This bill would constitutionally  
            eliminate fee increases for the next five years. 

            Fee revenue works interchangeably with General Fund support to  
            fund the core instructional mission of the public segments.   
            Constitutionally limiting student fee increases, while  
            well-intentioned, would also reduce the revenue options  
            available to the UC, and the Legislature, for offsetting  
            general fund reductions which may be necessary during  
            challenging fiscal conditions.  In the event of severe budget  
            reductions, the only options remaining could be to reduce  
            enrollment, limit course offerings, reduce programs and  
            services, and potentially compromise access and quality.

            In combination, the elements of this bill could have the  
            unintended effect of limiting access for California residents.  
            The Committee may wish to consider:

             a)   Is it the desire of this Committee to limit the tools  
               available to the Legislature for compelling the  
               constitutionally autonomous UC to direct revenue sources  
               outside of the general fund for the good of California  
               resident students? 

             b)   Are there more flexible ways to accomplish the goals of  
               this bill than constitutional changes? 

             c)   In light of recent budget actions, is this bill  
               necessary?
          








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          4)Non-resident students.  Non-resident students pay roughly  
            $23,000 per year more than California-resident students.  
            According to the UC, based on 2014-15 figures, compliance with  
            the provisions of this bill would require reduction in  
            non-resident enrollment systemwide by about 8,300 full-time  
            equivalent students, and a loss of over $100 million in net  
            revenue.  The UC further reports that it uses these funds for  
            support of programs central to improving graduation rates,  
            including ensuring adequate course sections are offered for  
            "bottleneck" courses, improving student advising, restoring  
            library hours and maintaining graduate student support for  
            purposes of instructing undergraduates.  
          
          5)Current status of out-of-state admissions.  The UC reports  
            that for the 2014-15 academic year, 13 percent of its  
            undergraduates systemwide were non-residents. The UC also  
            notes that the average for other comparable public  
            institutions nationally is 26 percent.  The chart below  
            summarizes the level of enrollment of non-residents at all  
            University of California campuses for the 2012 and 2013  
            academic years.  According to the UC, non-resident enrollment  
            has been capped for the upcoming academic year at those  
            campuses that have seen the largest growth, Berkeley (25  
            percent), Los Angeles (19 percent), and San Diego (17 percent)  
            has been directed to cap their enrollment of non-residents at  
            20 percent.  

          
























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          6)Financial assistance.  This bill applies the prohibition on  
            financial assistance to students who would statutorily be  
            required to pay tuition or mandatory fees at higher than  
            California resident rates.  While current law generally  
            requires that a student classified as a non-resident pay  
            non-resident tuition it also provides an exemption from the  
            supplemental non-resident tuition for specified non-residents  
            including current and former members of the armed forces and  
            their dependents. As such, the UC would not be prohibited from  
            providing these non-resident students with financial  
            assistance. 

          7)Related and prior legislation
          
            RELATED LEGISLATION

            AB 1370 (Medina) prohibits the number of undergraduate  








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            non-resident students enrolled at any UC campus from exceeding  
            the number enrolled in the 2015-16 academic year, requires  
            that beginning the 2018-19 academic year and each academic  
            year thereafter, that funds, generated from undergraduate  
            non-resident enrollment be directed to fund increased  
            enrollment of undergraduate resident students and requires UC  
            to annually publish a report that includes information about  
            the amount, method of distribution, and expenditure purposes  
            of revenues generated by undergraduate non-resident enrollment  
            at each campus including the number of California resident  
            undergraduate students admitted.  AB 1370 is awaiting hearing  
            in this committee.

            AB 1317 (Salas) also on the Committee's agenda today, requests  
            the UC Regents refrain from increasing the compensation of any  
            executive officer when the amount of mandatory systemwide  
            student fees and tuition of the university has been increased  
            at any time in the immediately preceding two years.

            PRIOR LEGISLATION

            SCA 22 (Rubio, 2012) was substantively similar to this bill.  
            That bill was set for hearing but pulled at the request of the  
            author and never heard. 

            SUPPORT
          
          National Diversity Coalition

            OPPOSITION
           
           University of California

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