BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Kevin de Le�n, Chair
SB 1149 (Galgiani) - Cal Grant Program: Appeals Process
Amended: May 7, 2014 Policy Vote: Education 9-0
Urgency: No Mandate: No
Hearing Date: May 19, 2014 Consultant: Jacqueline
Wong-Hernandez
This bill meets the criteria for referral to the Suspense File.
Bill Summary: SB 1149 requires the California Student Aid
Commission (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 loan default rate and graduation rate requirements.
Fiscal Impact:
Appeals Process: Significant costs for the CSAC to create
and administer an appeals process for institutions that have
lost eligibility for participation in the Cal Grant program.
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:
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.
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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.
Current law 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
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
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likelihood of an otherwise qualifying institution regaining
eligibility in the academic year next following the
institution's loss of eligibility.
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. It only authorizes the CSAC to consider
certain basic factors in its decision.
The CSAC will likely incur significant costs to establish and
administer the required appeals process, but the most
substantial costs to this bill will likely 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.