BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Kevin de Le�n, Chair
AB 640 (Hall) - Cal Grant Renewal Awards: Appeals Process
Amended: July 2, 2014 Policy Vote: Education 6-0
Urgency: No Mandate: No
Hearing Date: August 4, 2014
Consultant: Jacqueline Wong-Hernandez
This bill meets the criteria for referral to the Suspense File.
Bill Summary: This bill requires the California Student Aid
Commission (CSAC) to implement an appeal process for schools
that fail to meet the requirements to be a qualifying Cal Grant
institution because they do not meet cohort default or
graduation rate requirements, and specifically authorizes the
CSAC to consider cohort size and the likelihood of the
institution regaining eligibility in the following academic
year, in assessing whether an appeal should be granted.
Fiscal Impact:
Appeals Process: Potentially significant costs for the CSAC
to administer an appeals process for institutions that have
lost eligibility for participation in the Cal Grant program,
and are seeking reinstatement as an exception to Cal Grant
cohort default and graduation rate requirements. See staff
comments.
Reinstatement: Potentially substantial ongoing costs,
likely in the millions (General Fund) to the extent that
institutions successfully appeal, and have their
eligibility reinstated.
Background: Existing law authorizes the Cal Grant program,
administered by the CSAC, to provide grants to financially needy
students to attend college. 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. (Education Code � 69430-69433.9)
The 2012 and 2013 Budget Acts established new requirements for
institutional participation in the Cal Grant program, by
providing that:
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For the 2011-12 academic year, an otherwise qualifying
institution for the Cal Grant program must maintain a
3-year cohort default rate equal to or below 24.6% to be
eligible for Cal Grant awards at the institution.
For 2012-13, and every academic year thereafter,
colleges must maintain 3-year cohort default rates below
15.5% in order to be eligible for initial and renewal Cal
Grant awards at the institution.
For 2012-13 and every academic year thereafter, an
institution must maintain a graduation rate above 30% to be
eligible for Cal Grant awards at the institution.
There is an exception to these requirements for an
institution with a 3-year cohort default rate of below 10%
and a graduation rate above 20% through the 2016-17
academic year.
In addition, the budget required that, until July 1, 2013, an
institution that is ineligible for initial or renewal Cal Grant
awards because it fails to meet cohort default rate or
graduation rate requirements is eligible for a Cal Grant award
for 20% less of the fee portion of the maximum Cal Grant A and B
awards for those students who were enrolled at the institution
in the academic year prior to the institution's ineligibility.
It also prohibited the reductions from impacting the access
costs covered by the Cal Grant B award.
Finally, the budget required that the CSAC notify initial and
renewal Cal Grant recipients of these changes and the impact to
their awards, as appropriate. In addition, the CSAC is required
to provide affected Cal Grant recipients with a complete list of
all California postsecondary educational institutions at which
the student would be eligible to receive an unreduced Cal Grant
Award.
Existing law also requires the Legislative Analyst to submit a
report on the implementation of the changes to Cal Grant
eligibility implemented by the Budget Act of 2012 by January 1,
2013. (EC � 69432.7)
Proposed Law: This bill requires the CSAC to establish an appeal
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process for a postsecondary education institution that becomes
ineligible for Cal Grant participation because it fails to
satisfy the 3-year cohort default rate and graduation rate
requirements. This bill provides that, in assessing whether to
grant an appeal, CSAC may consider cohort size and the
likelihood of an otherwise qualifying institution regaining
eligibility in the next academic year following the
institution's loss of eligibility. This bill also states
legislative intent that the CSAC define a specific cohort size
or range that constitutes a small cohort for the purposes of an
appeals process.
Related Legislation: SB 1149 (Galgiani) was substantially
similar to this bill. That bill was held on the Suspense File in
this Committee.
Staff Comments: This bill requires the CSAC to establish an
appeal process for a postsecondary education institution that
becomes ineligible for Cal Grant participation because it fails
to satisfy the 3-year cohort default rate and graduation rate
requirements, but does not give any guidance about how the
appeals process should work, or establish criteria for actually
granting an appeal. The existing CSAC appeals process is for an
institution that believes it was wrongfully deemed ineligible.
In other words, it is limited to a data review to determine
whether or not an institution actually does meet the statutory
requirements for participation in the Cal Grant program.
There is already a statutory requirement to reinstate an
institution that, through a correction or revision to its cohort
default rate or graduation rate, is actually eligible to
participate in the Cal Grant program. This bill establishes an
appeals process for reinstating an institution that acknowledges
that is does not meet the the statutorily required cohort
default and/or graduation rate. It provides the CSAC with the
authority to make a subjective decision about the worthiness of
an institution to participate, and does not require alternate
standards or considerations for when an appeal might be granted.
It only authorizes the CSAC to consider certain basic factors in
its decision, including cohort size.
This bill states legislative intent for the CSAC define a
specific cohort size or range that constitutes a small cohort
for the purposes of an appeals process, which implies that the
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appeals process could be limited to institutions with small
cohorts. The broad authority granted to the CSAC under the bill
language, however, does not limit the CSAC to only considering
those institutions. Moreover, it does not provide guidance as to
how the impact of cohort size should be evaluated as a factor in
an appeal decision.
The CSAC will likely incur significant costs to establish and
administer the required appeals process, because it is
fundamentally different from its existing appeals process. The
most substantial costs to this bill, however, will likely be new
Cal Grant costs resulting from the reinstatement of disqualified
institutions. The cost is unknown both because the degree to
which institutions would be reinstated under the appeals process
is unclear, and because Cal Grant awards follow the student, and
students could take their Cal Grants to other eligible
institutions. As a point of reference, prior to the University
of Phoenix losing eligibility under the restrictions, students
used more than $20 million in Cal Grants at that institution.