California Legislature—2013–14 Regular Session

Assembly Bill No. 1456

Introduced by Assembly Member Jones-Sawyer

January 9, 2014

An act relating to higher education.

LEGISLATIVE COUNSEL’S DIGEST

AB 1456, as introduced, Jones-Sawyer. Higher education: tuition and fees: pilot program.

Existing law provides for a public postsecondary education system in this state. This system consists of the University of California, the California State University, and the California Community Colleges. Existing law authorizes these institutions to require that mandatory systemwide fees and tuition, among other fees, be paid by students at these institutions.

Existing law establishes the Student Aid Commission as the primary state agency for the administration of state-authorized student financial aid programs available to students attending all segments of postsecondary education.

This bill would require the Student Aid Commission, the Trustees of the California State University, and the Board of Governors of the California Community Colleges, and would request the Regents of the University of California, to jointly conduct a study of the effects of enacting, in future legislation, a Pay it Forward, Pay it Back Pilot Program. The bill would specify that the pilot program would be designed to replace the current system of charging students upfront tuition and fees, including for room and board, for enrollment at public institutions of higher education, and instead allow certain students to sign a binding contract to, upon graduation, pay a specified percentage of their annual adjusted gross incomes to the state or the institution for a specified number of years, as provided. This bill would further specify that the pilot program could vary by institution, as specified.

This bill would require the study to, among other things, identify at least one campus of one or more of the public segments of higher education to participate in the pilot program and establish an immediate source of funding for the first 15 to 20 years, inclusive, of the pilot program, as provided. The bill would require that the study be presented for consideration by the Legislature, and would require the Student Aid Commission to submit a report on the study to the Assembly Committee on Higher Education and the Senate Committee on Education on or before September 30, 2015.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

The Legislature finds and declares all of the
following:

(a) The Legislature recognizes that postsecondary education
has expanded opportunities for Californians to qualify for
high-quality jobs and entry into the middle class, providing clear
benefits to this state’s economy.

(b) In response to decreased state support, costs at the University
of California (UC) and the California State University (CSU) have
grown significantly over the past decade. In 2000, the total cost
of a year of education at UC was $15,000. By 2013, this figure
had more than doubled to $32,400. Costs at CSU are lower, but
still increased by nearly 70 percent in this period. These increases
far outpace inflation.

(c) Tuition at California’s public institutions of higher education
has been rising far more rapidly than family incomes. In 2000, the
cost of attendance for a UC student living on campus was 25
percent of California median family income. In 2009, this cost had
grown to 39 percent of median family income. Costs at CSU also
grew relative to incomes, going from 19 percent of median family
income in 2000 to 29 percent of median family income in 2009.

(d) The increasing unaffordability of a college education has
forced students to borrow more money to pay for higher education,
causing 51 percent of students graduating from four-year
institutions of higher education in California to borrow an average
of $18,879.

(e) In the 1970s, the General Fund provided $12 for every dollar
that students paid in fees; by 2009, this amount had fallen to $1.40
for every dollar in student fees.

(f) High levels of student debt are damaging not only to the
individual student’s ability to succeed financially but also will
have grave consequences for the future economy of this state.

(g) As of spring 2011, only 77.9 percent of UC students and
51.4 percent of CSU students entering as freshmen had graduated
within six years. For transfer students, only 79.6 percent of UC
students and 64.6 percent of CSU students had graduated within
four years.

(h) By 2025, California is projected to have a shortage of 2.3
million college graduates in the state’s workforce if the number
of young and older adults who go to college and complete a higher
education is not significantly increased.

(i) The Legislature finds that it must halt the decrease in this
state’s support for public education and, over time, must increase
its contribution to the funding of higher education.

(j) The Legislature finds that it must immediately seek another
approach to financing the students’ share of the cost of public
higher education in this state that will not result in students
graduating from California public colleges and universities
burdened with debt.

(k) There is growing interest in a new financing strategy.

(l) The Legislature recognizes that it is in this state’s interest to
study and recommend a potential pilot program.

SEC. 2.  

(a) The Student Aid Commission, the Trustees of the
California State University, and the Board of Governors of the
California Community Colleges shall, and the Regents of the
University of California are requested to, jointly conduct a study
of the effects of enacting, in future legislation, a Pay it Forward,
Pay it Back Pilot Program. The pilot program would be designed
to replace the current system of charging students upfront tuition
and fees, including for room and board, for enrollment at public
institutions of higher education.

(b) The pilot program would do both of the following:

(1) Allow a student who is a state resident, as determined by
the respective institution, and who otherwise qualifies for
admission to that institution, to enroll at the institution without
paying upfront tuition or fees.

(2) Provide that, in lieu of paying upfront tuition or fees, a
student may sign a binding contract to, upon graduation, pay a
specified percentage of his or her annual adjusted gross income to
the state or the institution for a specified number of years.

(c) The pilot program could vary by institution, in regard to
each of the following:

(1) The total cost of attendance at the institution required to be
reimbursed.

(2) The portion of the total cost of attendance to be paid by the
state.

(3) The number of years that a student shall be required to make
payments, as specified in the contract.

(4) The percentage of annual adjusted gross income required to
be paid by a student, as specified in the contract.

(d) The study of the pilot program shall do all of the following:

(1) Identify at least one campus of one or more of the public
segments of higher education to participate in the pilot program.

(2) Based on current research, and projections of state subsidies,
specify the number of years and percentage of annual adjusted
gross income for a contract at each participating institution that
would reimburse the nonstate cost of a student’s attendance.

(3) (A) Establish an immediate source of funding for the first
15 to 20 years, inclusive, of the pilot program, which would include
the establishment of a revolving fund for the deposit of payments
made under the pilot program, and consider the possibility of using
social impact bonds as an immediate funding source.

(B) For the purposes of this paragraph, the term “social impact
bond” means an agreement between a nongovernmental entity and
a public institution of higher education under which a student’s
cost of attendance is paid for by the nongovernmental entity in
exchange for a security interest in the payments made by the
student pursuant to paragraph (2) of subdivision (b).

(e) (1) The study of the pilot program shall be presented for
consideration by the Legislature.

(2) The Student Aid Commission shall submit a report on the
study of the pilot program to the Assembly Committee on Higher
Education and the Senate Committee on Education on or before
September 30, 2015.

SEC. 3.  

Section 2 of this act shall become inoperative on June
30, 2016, and, as of January 1, 2017, is repealed, unless a later
enacted statute, that becomes operative on or before January 1,
2017, deletes or extends the dates on which it becomes inoperative
and is repealed.