BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 1501 (Perez) - Middle Class Scholarship Program
Amended: May 25, 2012 Policy Vote: Education 6-1
Urgency: Yes Mandate: No
Hearing Date: August 6, 2012
Consultant: Jacqueline Wong-Hernandez
This bill meets the criteria for referral to the Suspense File.
Bill Summary: AB 1501 establishes the Middle Class Scholarship
Program (MSCP), to be administered by the California Student Aid
Commission (CSAC), beginning with the 2012-13 academic year, and
provides for a continuous appropriation for purposes of funding
the program, contingent upon the enactment of AB 1500 (Perez).
This bill is an urgency measure.
Fiscal Impact: The first-year costs of this bill will be
approximately $1 billion, primarily in new state financial
aid/scholarship distributions. Funding is contingent on
enactment of AB 1501 (Perez), which is on the Assembly Floor.
CSAC: $130,000 in annual personnel costs to manage the MSCP.
Cal Grant: Potentially substantial savings to the Cal Grant
program, to the extent that excess MSCP funds flow to Cal
Grant. To the extent that expanded Cal Grant funding covers
additional students, it may supplant institutional aid, as
well.
Background: Existing law establishes the CSAC and outlines its
responsibilities which include, among other things, the
administration of the Cal Grant program. Existing law further
establishes the Cal Grant Program, to provide grants to
financially needy students to attend college. The Cal Grant
programs include both the entitlement and the competitive Cal
Grant awards. Eligibility for the program is based upon
financial need, grade point average, California residency, and
other eligibility criteria. (EC § 69430)
Existing law requires the University of California (UC) and the
California State University (CSU) to annually report on their
respective institutional financial aid programs. (EC § 66021.1)
Existing law also requires the Board of Governors of the
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California Community Colleges (CCC) to annually evaluate and
issue reports on the fiscal and educational effectiveness of
community college districts according to outcome measures
cooperatively developed with those districts and to provide
assistance when districts encounter severe management
difficulties. (EC § 70901)
Proposed Law: AB 1501 establishes the MCSP under the
administration of the CSAC. More specifically it:
1)Establishes a program to provide scholarships for mandatory
systemwide fees at the UC and CSU; funds grants to cover
fees, books, and other educational costs at the CCC.
2)Declares that an undergraduate student enrolled at the UC or CSU
is eligible for a scholarship in an amount that, when
combined with other financial aid received by the student, is
at least 2/3 of the amount charged that student in the
academic year for mandatory systemwide fees if the student:
a) Has a household income that does not exceed $150,000,
except that, students with an annual income above $150,000
but below $160,000 may receive an award reduced by 10% for
every thousand dollars in excess of $150,000; b) is exempt
from paying nonresident tuition; c) submits a
Free Application for Federal Student Aid (FAFSA), or, if
unable to submit a FAFSA, submits an equivalent application;
and, d) makes timely applications for other publicly funded
student financial aid programs for which he/she is eligible.
3)Requires the UC, CSU and CCC to report on the implementation of
the bill's provisions, as specified, as part of existing
annual reporting requirements under specified state law.
4)Authorizes the appropriation of an amount to be determined by
the CSAC, when combined with other financial aid sources,
that covers at least 2/3 of the amount of mandatory
systemwide fees.
5)Continuously appropriates the amount determined necessary by the
CSAC from the Middle Class Scholarship Fund (MCSF), proposed
to be established by AB 1500 (Perez), to the CSAC for
allocation to the UC and CSU, as specified.
6)Provides for the appropriation of $150 million from the MCSF to
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the Chancellor of the CCC to allocate to districts, on a
full-time equivalent (FTE) student basis, to provide grants
to students to reduce the impact of enrollment fees, to cover
the cost of textbooks, or to be used other educational
expenses.
7)Provides that, in any academic year, any funds remaining in the
MCSF may be expended for purposes of the Cal Grant Program
after funds are allocated to all eligible students.
8)Provides that the provisions of this bill are contingent upon
the enactment of AB 1500 (Perez).
Related Legislation: AB 1500 (Perez) is the funding mechanism
bill upon which this bill relies. It makes the single sales
factor apportionment formula mandatory, revises the rules for
assignment of sales, and requires that revenue derived from
those changes be deposited in the newly MCSF. That bill is on
the Assembly floor.
SB 1466 (De Leon) expands eligibility for a Cal Grant, beginning
in the 2014-15 academic year to a student whose household income
is $150,000, subject to specified funding prioritization, and
contingent upon SB 1356 (De Leon), that creates the Higher
Education Income Tax Credit. Both bills are awaiting action in
the Assembly Appropriations Committee.
Staff Comments: This bill would dictate the spending priorities,
rules, and restrictions of the MCSF, a newly-created fund for
the purposes outlined. Absent the companion bill's funding
mechanism, this bill would not go into effect.
The MCSP, the program that provides the scholarship funding,
would be managed by the CSAC which would require 1 PY programmer
(to make changes to CSAC's IT systems to accommodate the new
program) and 1 PY to manage the actual program, the segment
disbursements, payment management, segment coordination, and
verifying student eligibility. The CSAC estimates incurring
$130,000 in initial implementation costs, and $130,000 in annual
costs.
Assuming the MCSF has sufficient revenue to fund the MCSP, this
bill would likely result in the following fiscal impacts to the
segments:
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CSU: Approximately 150,000 students will receive the Middle
Class Scholarship, and be entitled to two-thirds of the average
paid tuition of $5,500. The first-year cost of the program would
be about $550 million.
UC : Approximately 44,000 students will be entitled to about
$7,000 each per year. The first-year costs of the program will
thus be about $310 million.
CCC : This bill entitles the CCC to $150 million, with discretion
granted to community college districts to determine what type of
aid is provided (either for fee waivers or in grants to reduce
other student costs).
Any remaining funds are to be allocated to the CalGrant program.
Staff notes, however, that it is unclear if the MCSF revenue
must be included in the Proposition 98 calculation. If the
revenue were subject to inclusion in the Proposition 98
calculation, and to the maintenance factor approach adopted in
the 2012-13 Budget, 40% -95% of this new revenue (in any given
year) could go to Proposition 98. If the majority of the revenue
went to Proposition 98 funding, that funding could not be used
for UC or CSU student scholarships. If there were insufficient
funds available in the MCSF to fully fund the MCSP, it is
unclear what the distribution of the available resources would
be among the segments.