BILL ANALYSIS Ó
SENATE COMMITTEE ON EDUCATION
Alan Lowenthal, Chair
2011-2012 Regular Session
BILL NO: SB 1466
AUTHOR: De Leon
AMENDED: April 9, 2012
FISCAL COMM: Yes HEARING DATE: April 25, 2012
URGENCY: No CONSULTANT:Kathleen Chavira
SUBJECT : Cal Grants.
SUMMARY
This bill, beginning in the 2014-15 academic year and until
all funds in the Higher Education Investment Tax Credit
Program Special Fund program are expended, establishes
eligibility for a Cal Grant recipient whose maximum
household income is $150,000 or less and makes these
provisions contingent upon legislation that creates the
specified fund.
BACKGROUND
Current law authorizes the Cal Grant Program, administered
by the California Student Aid Commission, to provide grants
to financially needy students to attend college. The Cal
Grant programs include both the entitlement and the
competitive Cal Grant awards. The program consists of the
Cal Grant A, Cal Grant B, and Cal Grant C programs, and
eligibility is based upon financial need, grade point
average, California residency, and other eligibility
criteria, as specified in Education Code § 69433.9. These
programs currently operate as follows:
Cal Grant A* High School Entitlement Program provides
tuition fee funding for the equivalent of four full-time
years at qualifying postsecondary institutions to
eligible lower and middle income high school graduates
who have at least a 3.0 grade point average (GPA) on a
four-point scale and apply within one year of graduation.
Cal Grant B* High School Entitlement Program provides
funds to eligible low-income high school graduates who
have at least a 2.0 GPA on a four-point scale and apply
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within one year of graduation. The award provides up to
$1,551 for books and living expenses for the first year
and each year following for up to four years (or
equivalent of four full-time years). After the first
year, the award also provides tuition fee funding at
qualifying postsecondary institutions.
Community College Transfer Program provides a Cal Grant A
or B to eligible high school graduates who have a
community college GPA of at least 2.4 on a four point
scale and transfer to a qualifying baccalaureate degree
granting college or university.
Cal Grant Competitive Award Program provides 22,500 Cal
Grant A and B awards available to applicants who meet
financial, academic, and general program eligibility
requirements. Half of these awards are reserved for
students enrolled at a community college and who met the
September 2 application deadline.
Cal Grant C Program provides funding for financially
eligible lower income students preparing for occupational
or technical training. The authorized number of new
awards is 7,761. For new and renewal recipients, the
current tuition and fee award is up to $2,592 and the
allowance for training-related costs is $576. Education
Code § 69430-69450)
Current law also authorizes the Cal Grant T program to
provide assistance to individuals who attend teacher
credential programs at colleges and universities approved
by the California Commission on Teacher Credentialing.
According to the California Student Aid Commission, The
Governor and California State Legislature have not
permitted new awards for the Cal Grant T program since the
2002-2003 academic year.
Current law requires that the maximum household income and
asset levels for the Cal Grant program be adopted and
defined in regulations by the California Student Aid
Commission and that these ceilings be annually adjusted
based upon changes in the cost of living. (EC § 69432.7)
The chart below outlines the income and asset ceilings for
new Cal Grant applicants for 2012-13:
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Cal Grant Income Ceilings
Family size: Cal Grant A & C
Cal Grant B
Six or more $92,600 $50,900
Five $85,900 $47,100
Four $80,100 $42,100
Three $73,700 $37,900
Two $72,000 $33,600
Cal Grant Asset levels
Dependent students $62,000
Independent students $29,500
ANALYSIS
This bill :
1) Expands, beginning with the 2014-15 academic year,
eligibility for Cal Grants to applicants with a
maximum household income of $150,000.
2) Makes the provisions of this bill contingent upon the
enactment of
SB 1356 (De Leon), which proposes the establishment of
a Higher Education Investment Tax Credit, as
specified.
3) Repeals the provisions of the bill on the date that
all funds in the Higher Education Investment Tax
Credit Program Special Fund (to be created by SB 1356)
are expended.
STAFF COMMENTS
1) Need for the bill . Due to California's fiscal crisis,
the state's contribution to higher education has
steadily declined, and since 2000, the author's office
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calculates that the share of expenditures borne by
students in the form of fees has tripled from 13
percent to 40 percent in 2011. According to the
author, this bill provides an opportunity to leverage
federal dollars to help offset skyrocketing college
tuition in California and make a public school
education more affordable for middle-income
Californians.
2) Cal Grants . The current maximum award for Cal Grants
A and B are equal to the mandatory systemwide tuition
fees at the UC ($12,192) and CSU ($5,472). With regard
to private for-profit and independent non-profit
institutions, the maximum award has been $9,708 since
2000, with the exception of two years (2004-2006),
where the award levels were reduced by 14 percent, to
a total of $8,322.
The Governor's budget proposal for 2012-13 includes
$300 million in cuts to the Cal Grant program. These
cuts are accomplished by reducing the amount of the
award for new and continuing students at the private
non-profit and for-profit institutions, and by
increasing the GPA requirements for new applicants to
the Cal Grant program from 3.0 to 3.25, Cal Grant B
Awards from 2.0 to 2.75, and Community College
Transfer awards from 2.4 to 2.75.
According to a recent Budget Subcommittee on Education
analysis, the GPA changes would affect approximately
24,700 students, 46 percent of which are at the CCC,
34 percent at the CSU, eight percent at non-profit
independent institutions, seven percent at private
for-profit colleges, and five percent at the UC. The
resulting savings for budget purposes of the GPA
changes is estimated at $97.2 million.
3) Contingency language . The provisions of this bill are
contingent upon the enactment of SB 1356 (De Leon)
which:
a) Establishes the Higher Education Investment
Tax Credit Program Special Fund.
b) Establishes a tax credit equal to 65% of
contributions to the Special Fund.
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c) Requires that all revenue in this fund be
allocated to the Student Aid Commission for
purposes of awarding Cal Grants to students
eligible pursuant to the provisions of SB 1466
(De Leon).
d) Provides for a repeal of the tax credit in
December 2018.
SB 1356 is scheduled for hearing in the Senate
Governance and Finance Committee on April 25, 2012.
The provisions of SB 1356 are also contingent upon the
enactment of SB 1466 (De Leon), currently before the
committee.
1) Optimistic language ? This bill sunsets its provisions
on the date that all funds in the "Special Fund" are
expended. According to information provided to staff,
this language is based upon projections that suggest
that contributions to the fund will be generous enough
that they will be available for Cal Grant awards even
after the sunset date of the authorized tax credit
proposed in SB 1356 (De Leon). Notwithstanding this
optimism, staff recommends the bill be amended to
provide that this section shall be in effect for as
long as the special fund exists or until all funds in
the special fund are expended, whichever comes last.
2) What's the cost impact ? According to an analysis by
the California Student Aid Commission (CSAC), if the
only change made to the Cal Grant Program was to
increase the income level to $150,000, the estimated
cost of these additional awards would be $112.9
million in 2012-13. Staff notes that these costs would
double, then triple, etc., as each cohort of awardees
is granted a renewal Cal Grant. Staff further notes
that the CSAC estimate of the costs for additional
awards if the income level was increased to $120,000
annually would be $81.6 million in 2012-13. While
there is no certainty how much funding would be
generated from the tax credit, the author cites
Franchise Tax Board estimates of about $300 million
per year, on average, in additional funding for
awards. Should a program be established that provides
an award for a student's first year, but that is
unable to guarantee the award for the entire four
years? Would it be more prudent/honest to extend the
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income ceiling to $120,000?
3) What should the priority uses for this funding be ? As
drafted, the focus of this bill is the use of any new
funds generated by the credit to allow higher income
families access to a Cal Grant. In 2000, the
Legislature made a significant change to the Cal Grant
program by creating an entitlement program, in
essence, promising that any graduating high school
student who met financial, academic and general
eligibility requirements would be guaranteed a Cal
Grant to assist in meeting their post-secondary
education costs. As noted in staff comment #2, the
current budget realities could result in the
elimination of almost one third of those students who
might otherwise have been served under the current
entitlement program, with the greatest reductions to
the Cal Grant B program, designed to assist the lowest
income students. While all families in California have
been affected by the cuts to higher education funding,
this year, the Governor has proposed to the
Legislature that it significantly "scale back" its
promise to the lowest income students in the state.
Should access to a Cal Grant for higher income
students be expanded prior to meeting the needs of our
lowest income students? Shouldn't any funds generated
by a tax credit first be used to ensure that,
regardless of budget actions, a Cal Grant can be
provided to students who would have otherwise received
it under the current eligibility criteria?
Staff recommends that the bill be amended to
prioritize the use of these funds for Cal Grant awards
as follows:
a) First priority use should be for awards to
students meeting entitlement eligibility for a
Cal Grant based upon the GPA, asset and income
levels that were established pursuant to
Education Code Section 69432.7, for the 2011-12
academic year.
b) Second priority use should be awards to
students meeting competitive eligibility criteria
for a Cal Grant that were established pursuant to
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Education Code Section 69432.7, for the 2011-12
academic year, up to the maximum level of awards
authorized in the Annual Budget Act.
c) Third priority use should be awards for
students meeting eligibility for a Cal Grant
based upon GPA and asset levels that were
established pursuant to Education Code Section
69432.7 for the 2011-12 academic year and,
notwithstanding subdivision (k) of Section
69432.7, a maximum household income level of
$150,000.
SUPPORT
California Catholic Conference
OPPOSITION
None received.