Senate Budget and Fiscal Review Subcommittee No. 1 on Education
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Senate Budget and Fiscal Review Subcommittee No. 1 on Education California State Senate
Follow its sittingsSpeaker 2
Examples already underway are the CSU Buy procurement program, which went live in January, and allows universities to band together to buy materials and many products, or search for the best deals on products. And the new network involving Sonoma, San Francisco, and East Bay campuses that are consolidating numerous administrative functions into one program that will serve all three campuses. Phase one of that program went live in January with IT, procurement, and accounts payable, all operating from a shared regional framework. Phase two will involve human resources and payroll, and that is underway. These kind of projects, along with the integration of Maritime Academy with Cal Poly Slow, will constrain cost increases and likely save campuses or the system many millions of dollars over the next several years.
A few closing notes. The turnaround plans and the larger fiscal health monitoring framework are ongoing and evolving, including routine check ins between the chancellor's office and campuses, monitoring of progress, and there is a high likelihood that these plans will evolve and change along the way, depending on how different strategies are working. All of the activities I've discussed, as part of these plans, are in alignment with the CSU Forward strategic plan that the chancellor spoke about when she was here last month. That plan includes numerous specific goals that we believe will better serve more students, address state workforce needs, and meet the needs of our diverse student body. We appreciate the governor's budget proposals for CSU, and hope we can work with all of you to secure the funding that will be critical to making many of the changes I've mentioned today happen.
I'm happy to take any questions. Thank you.
Speaker 3
Good morning, Chair Perez and Senator Archuleta. Natalie Gonzales with the Legislative Analyst Office. We reviewed CSU's turnaround plans and as CSU just shared, the plans identify campus strategies for increasing enrollment, reducing costs, and raising additional revenue. We think pursuing all three types of strategies has potential. We also think that the specific strategies that CSU has outlined in the plan seem reasonable.
For example, expanding and improving outreach, pausing low enrollment programs, and adding or expanding expanding high demand programs, especially those with workforce opportunities. We suggest that the legislature ask CSU to provide regular updates over the next few years on the extent to which the identified strategies are yielding results. Regular updates could help the legislature in continuing to conduct oversight and assess whether further course correcting might be warranted. Thank you, and happy to take any questions at the appropriate time.
Speaker 30
Good morning, Chair Perez, Member Triletta, Alex and Ivelasquez with the Department of Finance. No specific comments to add, but happy to answer any questions related to the governor's budget proposals associated with the California State University. Thank you.
Speaker 1
Thank you and thank you for your presentation and appreciate you getting these turnaround plans and I understand that you all needed more time to produce them and are grateful for you submitting them because they're obviously, very critical. I know it wasn't included in this agenda, but I know in a past agenda we had some of the enrollment numbers and how those have looked over the years. And I think it's of huge concern that we've continued to see, enrollment numbers for a number of campuses continue to fall. And so my, you know, my hope is that with these turnaround plans, that we will see enrollment numbers begin to increase. But as was mentioned just a moment ago by the Department of Finance, I do think that it's very critical that you provide us all with regular updates on how this process is going and what implementation is looking like.
I would appreciate getting one, I think, an update from you all, a letter come August from each of these campuses just on how first implementation is going. That's going to be a critical moment because you all are going to be seeing your first enrollment numbers from students that are coming into the campus. And, you know, what it's looking like you've indicated for a number of campuses, executing on contracts for marketing programs to improve outreach to students, attracting back some of those students that you refer to as stopped out students and bringing them back to campus, which I think is very smart. That's something that we should have always been doing, to be quite honest. When a student leaves an institution and they have some college, no degree, it is very hard to bring them back once they ultimately drop out of the CSU or the UC.
And so having a targeted approach that really focuses on explaining to them what their pathway back into the institution will look like, and what kind of incentives that you all are going to be providing, to support them, whether they might be working, taking care of family, whatever that might be, I think is important. But also even just letting students know how many units they have left until graduation. You know, I've worked with many of the community colleges across the state that have been very successful in transferring students in a timely manner, notably Santa Monica College, Pasadena City College, and I've noticed that at those community colleges that have done very well in helping to bring students back, that they have very strong transfer centers that are able to communicate to students how many units they have left before they're eligible to transfer to institution. And that can be a real incentive for those students to come back to a university knowing that they just have one year of courses left at campus is a motivating factor in helping to explain how they're going to get there. So I think that you all have laid out a really nice plan to do that, but I think that plan is only as effective as it is if we're making sure that it's being implemented and if we're continuing to have oversight over that.
So come August, I'd really like an update from you all from all of these campuses on how this is going. And I would also like to receive a turnaround plan on a yearly basis that the budget subcommittee can hear until we see those numbers start to pick up. And I guess I'd love to hear your thoughts around that and the CSU being able to produce some of those documents when doing presentation for us at the budget subcommittee, and then in August being able to provide us with the written letter update.
Speaker 2
Yeah, I'm happy to continue working with you and your office on whatever you feel would be helpful in terms of keeping track of this. This is intended to be an ongoing evolving process with kind of continual check ins between the chancellor's office and campuses. One of the things that I think will be really beneficial in this process is the ability then to share best practices across the system. If one campus is doing something specifically that's really effective, that can be shared and replicated. On the stopped out students, I think you're right on there, and I think we have several campuses that are really focusing on that and having some success bringing students back, offering a little bit of financial aid if that is a barrier or other issues, really focus support for those kind of students to get to a bachelor's degree as fast as they can, and I think we'll see how those goes.
I will note, we obviously are in the kind of in for twenty five-twenty six, all but three of our campuses grew, and so actually, some of the enrollment numbers in these turnaround plans, the campuses actually are at a higher number for twenty five-twenty six than the plans which were developed in the fall indicate. And so we think that some strategies are already effective or starting to work, but obviously a lot more to come, and we this is now a process that is embedded in the entire system. All of the campuses, all 22, are working on these fiscal action plans and doing different strategies around enrollment and cost, and we will continue to do that. So I'm happy to kind of come back whenever you need and provide you updates. So, yeah.
Speaker 1
And I think that'd be helpful, and I'd love to hear a little bit more about how the Chancellor's Office is going to ensure implementation at the campuses because I recognize that the structures, you know, they are the ones that are going to be implementing this at the local level at each different campus, and what Sonoma State needs might look a little bit different than Humboldt versus San Francisco, right? Each of these areas are very different regionally in terms of their workforce needs. And so how are you going to be approaching ensuring that these turnaround plans are being implemented and that they're successful and troubleshooting with them as they're going through this process?
Speaker 2
Yeah, there will be kind of it's a continuing process, I think. I'm trying to find here, but a flowchart. Have kind of a process throughout the year in which this will kind of continue to be evaluated. We are developing metrics, and, you know, these are plans with specific activities that we can measure what's effective, what isn't, and then pivot toward the things that are most effective. So it truly is a system wide effort.
The chancellor's office able to provide technical assistance to campuses to ensure things are implemented, and then again, help support where there are things that aren't working, or where there are things that are working that we can spread around the system. So I think it is embedded now into the structure of the entire system.
Speaker 1
So is that something that you have regular meetings or updates on? Like, how do you continue to receive feedback from them just in terms of I mean, there's a number of things that are listed out in here in terms of just, you know, campus programming, right? There's, you know, I think I even saw descriptions about, you know, expanding, like, certain types of programs on campus, you know, engaging other vendors for marketing services to reach out to potential students. So what's the mechanism that you all use in order to continue to receive updates and talk with them about how they're improving their enrollment numbers?
Speaker 2
Yeah, there are both regular meetings with the chancellor's office, and then within the campuses, there are numerous committees that meet regularly that will be kind of updating these processes, gauging results, and then making changes, and moving again toward the effective strategies. But it is a system wide process. The Chancellor's Office this obviously started with the kind of fiscal and budget division, but the chancellor has made it very clear to campuses that she wants sort of campus wide involvement, and so every area of campus, academic affairs, student affairs, etcetera, will be involved in kind of monitoring it. These are particularly for these seven campuses, this is the plan. This is their marching orders for the next three years, trying to get back to the enrollment levels that those targets require, and so it is kind of an all hands on deck approach with continual kind of monitoring.
Speaker 1
And I want to hear a little bit more about some of the strategy with the stopped out students. I think one of the things that could be actually really beneficial about the approach that you're taking here is I see it as one that could overall help the CSU with increasing its graduation rates, particularly for four year students. Are students graduating in a four year time period and in a six year time period, right? As someone that was a student at the CSU system, I know that there's a number of students that will stop, right, and stop attending for either a quarter or two quarters and then return back to campus either because of life circumstances, financial costs, other things that are happening. And so when you're thinking about that and bringing those students back, I think the framework that you utilize there could also help with ensuring that students are graduating overall in a timely manner.
But I know that sometimes some of the challenges those students are facing are with finances, right? Those students that are leaving sometimes are accruing debt in the process, especially those that aren't finishing and that have pulled out loans, returning Pell Grants, unpaid student fees. So what kind of financial incentives are you seeking to provide them, and what are some of the ways that you're thinking about bringing some of those students back that have left and maybe have been disconnected from the campus for maybe a couple of quarters or maybe a couple years at this point?
Speaker 2
Yeah, I appreciate the question, and I think Dominguez Hills is sort of the campus that is, I think, most aggressively working on this, and so they have a specific unit that is doing outreach and then providing support to students as they come back, trying to offer some amounts of financial aid to return, and trying to find, for the students, the most sort of flexible program that they can get through to a bachelor's degree. And so, they've succeeded. They've had several 100 students return to campus over the last couple of years. So this is a program that sort of actually predates the turnaround plan, but it is a significant program in which they're essentially reaching out to students and offering as much support as the student needs to come back to finish their degree using technology, some online, but also, you know, financial support, clearing. We found a lot of students had some kind of hold on their enrollment due to a fine or a fee or something like that, clearing those kinds of things so that students can come back without having to worry about that kind of thing.
So I think there's multiple strategies. I think the important thing is that we have kind of dedicated staff working on this, bringing them back, supporting them along the ways, kind of monitoring their progress, and making sure that these students who are close really get to the finish line. We know that bachelor's degree is really important. Having some college, but no degree is not that effective in terms of data. I think bachelor's degree holders, you know, have less unemployment, more likely to have benefits, more likely to stay employed, and some college, no degree, much less so.
So but I think the intention here is the key, and the kind of wraparound support that we're giving these students.
Speaker 1
And so you said that you'll have dedicated staff at each of the campuses to be focused on working with stopped out students and with helping them with matriculating back into the campus?
Speaker 2
Yeah, and I would say some campuses are more aggressively pursuing this strategy than others, but there are several that are this is a key strategy, so yes. Okay.
Speaker 1
The last piece I wanted to mention, I noticed in many of the turnaround plans, there's a lot of discussion about AI and the use of AI to help with streamlining the process, which, you know, I know AI can be helpful and beneficial. I think we've also seen examples even in our own lives as we've seen AI tools be introduced to everything that we're utilizing, that sometimes it can be less than helpful. How are you going to be navigating safeguarding student privacy, but also making sure that students still have the benefit of that in person interaction with a staff member on campus, right? I think for a number of these students, especially when we're talking about stopped out students, there's a real benefit to making sure that they're interacting with a representative of the campus, with somebody that's able to provide them with response and, you know, actually be there to kind of walk them through the process rather than them running into issues with an AI tool that they might feel like turns them off and makes them not want to continue to look at returning to campus. So how are you going to navigate that situation and make sure that the priority is still on getting the student to talk to somebody in person.
Speaker 2
Yeah, I totally hear your comments, because I think that's right. I think we have very specific AI policies around privacy and that kind of thing, And I think the campuses that are using AI for outreach are combining that with human outreach as well. I think it's sort of all of the above, not one or the other. I think the campuses that are utilizing AI, I believe the intent is to allow AI to kind of help identify students, do some outreach, but then it frees up the staff to do more intensive outreach to solve more complicated problems if a student has an issue. So I think the intent is for the AI to be a tool to help the human staff do the work.
Speaker 1
Great, and I recognize this is all like in plan form right now, so I'm excited to see you all take this to implementation. So just to review what I said, and you know, we'll go ahead and we can discuss this more, but would like you all to do a turnaround plan presentation on a yearly basis to the budget subcommittee, so when we get started, which is typically in March, so that we can receive, a once a year update that way, and then to also provide us with a written update, in August in terms of how this is going. So come the fall, as you all are receiving that, you know, enrollment of new students coming in, and you all begin the implementation of this new plan that you have, just receiving a written update I think would be really critical as well. Okay, understood. And just wanted to make sure that
Speaker 2
I think that's a tight turnaround, but I'm happy to talk with you about that, but, yeah, I think we again, this is a kind of ongoing process, and so we will have plenty of updates to tell you about.
Speaker 1
Great. And, you know, as I want to be supportive, right, as the committee, as well as you all are going through this way, I see it as, like, your success is our success as the CSU system, and so I'm very invested in making sure that the plans that you all have laid out here, which I think are fantastic, that they're working and, you know, leading you all to seeing those higher enrollment numbers we want to see.
Speaker 6
Yes, thank you for presenting your findings and your report. It's quite intensive, and obviously you're concerned, as we all are, about enrollment because without that, that's the foundation. And I think that I'm hoping that you'd put together a recruiting team, a team. If this was a company, a corporation, and you were trying to find the best engineers, or the best scientists, or professors, or whatever it would be, you would put together a team, and that team would report to each president at each university. Going to the communities, going back to the high schools, getting ready to talk to those graduates from high school, getting ready to get to those graduates from the community colleges, and constantly be in touch with.
And it's amazing how here in the state, you know, we have lobbyists constantly talking to us about various things. Know, football coaches are out there recruiting. But if you know your fundamental problem is numbers, you'll be able to do that because you can prove success, you can show the future is down the road, and to be able to work with those not that are already in, but staying in, and then those that you hope to bring in, but those who are thinking about being part of the faculty, being part of the staff, being part of the student body. And I think that's so important. And of course, the dollars reflect what you do.
And it is what it is, I'm sorry. So if you increase your enrollment, the more stable your financial picture will be. So I'm hoping you would take that into account. And Madam Chair, I also I talked with the chancellor in reference to the ROTC program that is very successful at UCLA and SC that some of the young people that would like to look into that don't want to drive from Cal State LA all the way to UCLA to attend that class and drive all the way back and get in on that four zero five. Madam Chair, I just want to put it on the table that my ability to work with the Department of Defense and the Department of the Army and so on, because of my position as chair of the military and Veterans Committee, I have access to that.
So I'm going to work with one of the chancellors to maybe start a pilot program in a few of the schools that will be able to fund the program, which will help and recruit some of the young men and women that would like to look into having their education paid for in the Cal State system by the Department of the Army. So we're work together on that, so I invite you to share with my office and I can put that together. So I just want you to know, Madam Chair, that we're looking at that aspect because if that'll bring in students from across the state in different categories, that might increase, but also not be costly to you. So we'll work on that. But I think what you have, you know what you have to do, you have to implement it because not every school, university is gonna be, rising their numbers as as quickly as one other.
So it depends on that recruiting team. So please, if you could implement that, bring that back to us when you bring that report. I'd like to see what that looks like.
Speaker 2
Senator, I agree, and I think every campus does have kind of a recruiting team that is out in the high schools, the community colleges, and I think there are many facets of these plans that build on that and build or attempting to build stronger connections to the high schools and the community colleges with guaranteed admissions, sending letters to students saying, You are admitted to CSU. Yeah. The Transfer Success Pathway program that we have that connects students and allows them to have a guaranteed admission to a CSU, even as they're starting community college, so that we have more of a connection to the CSU from the beginning of the student's higher ed career. And so we're working on a lot of those strategies, and I appreciate that. And, yes, definitely want to work with you on CSU L.
A. And specifically the ROTC there. But I sent a bit of information to your office earlier this week, let's follow-up, and very interested in working with you on that.
Speaker 6
Good. And I'll put you in touch with the people that can bring That you would be great. Thank you, Madam Chair.
Speaker 1
Thank you. That will be it for issue number one. So we'll go ahead and move on to issue number two, which relates to the Bureau for Private Postsecondary Education. We'll start with staff from the Department of Consumer Affairs and the Bureau for Private Postsecondary Education and then turn to comments from the Department of Finance and the LEO.
Speaker 7
Good morning, Madam Chair. Okay. Good morning, Madam Chair and fellow member. My name is Taylor Schick, and I'm the Chief Fiscal Officer for the Department of Consumer Affairs. The department is a special funded consumer protection agency comprised of 36 boards, bureaus, a commission, committee, and a program.
The department accomplishes its mission by licensing and regulating over 3,400,000 licensees across more than 200 professional license types. We want to thank you for having us here today to discuss the Bureau for Private Post Secondary Education, its fiscal situation, and the request for 10,000,000 from the general fund to support its operations. To provide some background, the Bureau is supported by two special funds. The private post secondary education administration fund, which supports most of the bureau's operating expenses. And the student tuition recovery fund, which supports students that were financially harmed by the private post secondary institution in which they were enrolled.
The bureau's administration fund has been structurally imbalanced for many years, meaning that expenditures have been outpacing revenues, resulting in a declining fund balance. To ensure fund solvency in fiscal year twenty twenty one-twenty two, the bureau took a $12,000,000 loan and additionally secured $24,000,000 from the general fund to support operations through fiscal year twenty twenty four-twenty five. During this time, the bureau also conducted a study with the Foundation for California Community Colleges to explore options to bring the fund into balance and consider alternative revenue structures. The study offered several recommendations for how the bureau could balance the fund and address its revenue shortfall. However, it did not find sufficient options that would negate the need for increasing the bureau's annual fees, which account for approximately 90% of the bureau's revenue.
Speaker 9
This study was released to the legislature in February 2024. Since issuing that study, the bureau has taken steps to address its fiscal situation, including streamlining work processes and implementing recommendations from the study, such as transitioning administrative costs for processing student tuition recovery claims and the bureau's office of student assistance and relief from the administration fund to its student tuition relief fund. Despite these efforts, the bureau still needs to increase its annual fees to support ongoing operations, which the bureau is pursuing through the sunset review process this year. For twenty five-twenty six, the bureau is requesting 10,000,000 from the general fund to repay a $10,000,000 loan taken earlier this year to support litigation against the bureau. By utilizing the general fund to support the repayment of the loan, it will enable fee discussions to focus solely on what fee levels are required to support the bureau's ongoing operations, and restore fund solvency without being impacted by the costs resulting from that litigation.
Speaker 7
The fee levels proposed by the bureau in their sunset report include approval of this $10,000,000 Without the 10,000,000, the increase to the bureau's annual fees would need to be greater to account for the repayment of that loan. I'm joined today, by Deborah Cochran, Bureau Chief for the Bureau of Private Postsecondary Education, who will provide a brief overview of the program. Thank you.
Speaker 8
Good morning, Chair Perez and committee members. As Taylor noted, I'm the Bureau Chief of the Bureau for Private Postsecondary Education. The bureau licenses and regulates private postsecondary educational institutions operating in California. The bureau's mission is to protect students and consumers in California and beyond by conducting qualitative reviews of educational programs and operating standards, proactively combating unlicensed activity, impartially resolving student and consumer complaints, and providing support and financial relief to harmed students. As Taylor noted, the Bureau has taken several proactive steps to tackle a longstanding structural deficit in recent years.
These steps include streamlining processes, eliminating six positions, maximizing revenue generation where possible, and shifting student focused costs to the Student Tuition Recovery Fund. Because of these steps, as many as others, the Bureau is more effective than ever at achieving its consumer protection mission. Institutional reviews are targeted towards institutions and institutional characteristics and changes posing greater risk. A mix of proactive and reactive enforcement activities through required inspections and as needed investigations form the backbone of an effective monitoring scheme. Both educational efforts and disciplinary actions are increasingly effective at promoting institutional compliance with laws and regulations, and an integrated Office of Student Assistance and Relief team is increasingly able to support students directly while also enhancing the bureau's broader efforts to protect them.
With the federal higher education landscape in flux, a robust state oversight structure and agency for over private colleges is more critical than ever. At this point, the Bureau's fiscal challenges must be dealt with head on to maintain stronger consumer protection levels. The request here to cover $10,000,000 in litigation costs with general fund is intended to keep institutional fee increases to just what is required to maintain operations and no more. We appreciate the committee's consideration.
Speaker 9
Good morning, Chair and Senator. Lisa King with the Legislative Analyst Office. We had a few concerns with the proposed $10,000,000 general fund appropriation for the Bureau. First, we don't see an immediate need for this funding as the existing special fund loan that it took out earlier this year does allow it to fully cover its costs in the near term. More broadly, we see drawbacks to shifting these costs from special fund to general fund.
Typically, agencies cover their costs through fees that are paid by the entities they oversee and those costs do at times include litigation. We're concerned that shifting the Bureau's litigation costs over to the general fund could set a poor precedent, potentially increasing the state's general fund cost exposure if other regulatory agencies were to request similar assistance. We're also particularly concerned about taking this action at a time when the General Fund is facing its own structural deficit as using General Fund for this purpose would leave less funding available for other core state programs or for building fiscal resiliency. Given these concerns, we recommend rejecting the proposed $10,000,000 general fund appropriation for the bureau. We further recommend addressing the underlying structural deficit in the Bureau's fund so that it does not need to rely on general fund appropriations moving forward.
The legislature currently has an opportunity to address that underlying structural deficit through the Bureau's current sunset review. As part of this, it could approve fee increases so that the Bureau can cover its own costs moving forward. Thank you. I'm happy to take questions.
Speaker 22
Charlene Manning, Department of Finance. The Bureau is in a unique fiscal situation with a longstanding structural deficit that has been exacerbated by recent significant legal costs that make up over half of the Bureau's current state operations budget. While a special fund loan from the Bureau of Automotive Repair was provided to cover these legal costs, it was with the intent to also propose a one time $10,000,000 general fund investment to repay the loan immediately. This will negate higher fees being placed onto educational institutions which may or may not be passed on to students. This backfill will help the Bureau have narrowed conversations regarding fee increases that will only focus on historical and revenue shortfalls that have failed to keep up with the rising costs for the Bureau to operate.
Speaker 10
This proposal is not aimed to set a precedent but to address a unique situation. The backfill will not keep the Fund solvent, but it will ultimately reduce the fee increases charged to institutions by nearly 27%. Thank you.
Speaker 1
Thank you for the presentation. I wanted to know what is the status of the high polluter repair or removal account, and has the special fund loan to BPPE impacted any of the services from this fund?
Speaker 7
No, the high polluter repair removal account is in good standing. It has, I believe, well over twelve months in reserve, and the loan taken does not impact their ability to provide any of their services or perform their administrative functions.
Speaker 6
The, if the state of California, the governor's office, you know, hands you a Christmas present and that $10,000,000 is is removed, how is it that we're not gonna see it again? Is there something in the future that you've adjusted, you've learned, you've what what is going to change so we don't have to knock on the governor's door again to take care of this problem?
Speaker 7
So I think to the first part of that, I I would assume you know, we're going to address the fiscal insolvency of the bureau through a fee increase measure that we're pursuing this fiscal year through Sunset. The idea there is to raise fees to a certain level that both support the ongoing operations of the bureau, but would also restore a fund balance into good standing to support it into future years, at least through its next sunset of 02/2001. If you're discussing about, you know, issues that led to the lawsuit, Debbie can add a little bit more to that about actions that the bureau's taken to avoid this situation in the future.
Speaker 6
Yeah, and I think it's so important that, you know, everyone knows we want to help. The governor wants to help, but we don't want to keep feeding the same issue again and again, because I think the consumers that we have to deal with, the constituents, all of us, are gonna ask the same question. Why? So if we have a plan that's implemented that corrects it, you know, that's exciting, and that's what we're all looking for. But please continue.
Thank
Speaker 8
you so much, Senator, for the question. So, just, you know, without going into too much detail about the litigation that's been referenced, what I can share is that it is an issue related to a disability discrimination case regarding a former employee, and that this case and this instance occurred before I was appointed as bureau chief, before Department of Consumer Affairs leadership was appointed into their positions. And, you know, I think there's, you know, the Attorney General's Office, which represented the bureau and DCA in this, believed that the Bureau and DCA had a strong case. Ultimately, a split jury disagreed, which is what resulted in the litigation costs. You know, it does not this type of issue certainly does not align with the values of either the bureau or DCA.
And while there are some disagreements around the parameters of the case and the judgment, we've still taken steps, both at DCA and the bureau, to make sure that we are as accommodating as possible with employees with disabilities. Again, new leadership has come in across the board that is very committed to doing the best that we can within our roles. DCA has updated its zero tolerance and nondiscrimination policies, and also now requires all managers and staff to review these policies annually. The department's equal opportunity office promptly investigates complaints of disability discrimination, and managers and employees who violate the policy are held accountable. And we also remind management of their obligations to reasonably accommodate employees with disabilities and to promptly engage in the interactive reasonable accommodation process.
So, have been a lot of changes internally in terms of procedures, policies, and just, frankly, culture shifts.
Speaker 6
And it seems obviously we're being proactive. So as I look at the governor's office, they're being proactive. They know what they've got to do. They're going to straighten it out so it doesn't happen again and again. And that's my point.
And we've got to be there to support our universities, but at the same time, they've got to be upfront, they've got to be proactive, and they've got to be part of the community, and to be involved as much as possible, because you know, the impression is that things shouldn't happen like this, especially in a university. So I'm glad you're pointing that out. Thank you so much.
Speaker 1
And understand, you know, paying off that loan sooner rather than later to save on that interest also has benefits overall, right? So appreciate the presentation. We'll go ahead and we will move on now to our next issue. Moving on to issue three regarding updates on the Cal Grant program and we will start with the California Student Aid Commission, then updates from our three segments and then turn to comments from the Department of Finance and the LEO.
Speaker 5
Good morning. Tae Kang, Deputy Director at the California Student Aid Commission. Thank you, Chair and members of the committee for the opportunity to appear before you today. The California Student Aid Commission administers the state financial aid programs across all segments of higher education, supporting students pursuing certificates, associate and bachelor degrees, as well as critical graduate pathways, including the teaching profession. The Cal Grant Program serves as California's principal state financial aid program, providing need based grants to assist students in meeting the cost of attendance at the UC, the Cal State University, the California Community Colleges, and eligible private and vocational institutions.
The Cal Grant Program supports hundreds of thousands of students annually and constitutes a significant investment in student achievement and the state's long term economic vitality and workforce development. In the twenty five-twenty six fiscal year, CSAC continues to advance the Student Success Blueprint by promoting equity and enhancing the delivery of student centered services. These efforts include implementing real time payment processing to ensure earlier and more predictable disbursements of financial aid, as well as improving the accuracy of its fiscal reporting through strengthened payment data systems. CSAC appreciates the Governor's ongoing commitment to college affordability as reflected in the twenty six-twenty seven budget proposal, which includes an additional $337,000,000 in the ongoing general fund support of the Cal Grant program, representing an estimated 12% increase over the revised twenty five-twenty six levels. This increase is driven by projected 9.1% growth in program recipients and 2.3 increase in the average award, largely attributed to the planned tuition increases at the Cal State University and University of California.
CSAC estimates this approximately $65,000,000 of this augmentation is associated with covering the increased tuition costs. As the state advances towards the enactment of the final twenty six-twenty seven budget, CSAC respectfully urges the administration and the governor, Department of Finance, to sustain the robust commitment to college affordability through continued investment into the Cal Grant program. CSAC remains committed in partnering with the administration on targeted student focused enhancements, including expanded support for adult learners, such as broader eligibility for our transfer entitlement program, the modernization of our Dream Act service incentive grant program to better align with our student needs and updates to the Cal Grant C program through Trailer Bill Language. Thank you and I'd be happy to take any questions.
Speaker 11
Thank you, Chair Perez. I'm Associate Vice Provost Sean Brick for the University of California. The University of California is committed to making a UC education affordable to Californians. The main principle driving our financial aid policy is to ensure that qualified students can attend any UC campus regardless of their economic circumstances. And we could not achieve that without the state of California's help.
So on behalf of UC students, let me thank you for your support for the Cal Grant program, Middle Class Scholarship program, and all the other important state financial aid programs. We provided you with a handout on how UC's financial aid program works. And so figure one in that handout provides a visual summary of how UC's financial aid strategy combines federal, state, and university resources to make UC affordable. The chart has a lot of details, but I hope it provides a comprehensive overview, which I'll describe very briefly. So the height of the graph represents the total estimated cost of attendance, which includes not just tuition and fees, but all the other expenses like housing, meals, books, supplies.
And as we move from left to right on the graph, we go from the lowest income students to sort of middle income students. And as you would expect, as we go from left to right, we're expecting more of parents to contribute and the amount of grant assistance that they receive goes down. All UC students are also assumed to contribute to the cost of their own education through part time work and if necessary student loans. The student contribution or self help as we sometimes call it is represented by the blue section at the top. And you'll notice that the self help on the very far left for our lowest income students is lower.
This reflects our goal to try to reduce the reliance on student debt. UC uses its own need based grant to fill in the gaps, which is not quite, you can't quite see on the graph, but what I mean there is that UC will backfill with UC grant for any student with financial need who is missing a Cal grant or a Pell grant. So for example, a transfer student who doesn't qualify for a Cal grant because they perhaps exceed the age gap in the entitlement program would get an equivalent amount of UC grant or for our undocumented Californians, we would backfill for their missing federal Pell grant. Figure two in our materials shows how these various financial aid programs and their total contributions to UC students. So we provided $3,170,000,000 in total grant aid in twenty four-twenty five to our undergraduate students and about a billion of that or a third of it came from our own UC need based grant program.
In figure two, you'll observe that Cal grants and the UC grant remain relatively on par in growth over time. And the middle class scholarship shows a big jump in 2223 given the revamp of that program. Our average combined grant awards for students was $24,000 this last academic year, which is far more than the roughly $14,000 in tuition. So we do provide aid to help students with their living expenses. And we feel that UC's financial aid model is working.
We continue to see a decline in the share of our students graduating with debt last year. Sixty percent of California undergraduates at UC graduated without debt. And those who do graduate have debt that is nearly 50% less than the national average for bachelor's degree attainers. In figure three, chart A shows that debt trend for freshman entrance, and chart B shows that trend for transfer entrance. I did want to mention just a few less positive developments at the federal level that will impact UC students at both the graduate and undergraduate level.
Last summer, HR one or the One Big Beautiful Bill Act made changes to the student loan programs that will impact college affordability starting July 1. First, HR1 limits how much students can borrow through the federal direct loan program if they're not enrolled full time. Second, it places annual and cumulative limits on the federal parent plus loan program. And while only about 6% of UC undergraduates rely on the parent plus loan program, those who do rely very heavily on it. And then finally, on graduate student loans, Congress eliminated the graduate plus loan program for new borrowers and changed annual and aggregate loan limits in the federal direct loan program depending on whether or not the program is considered professional.
UC has about 7,000 students who borrow through the Grad PLUS loan program now. And so some of those students, those in the professional degree programs would have expanded access to the direct loan program, so their annual limit would go from $20,500 to about $50,000 But as figure four in our handout shows, even with that expansion, there's still an estimated 5,760 students who will not have their needs met through federal student loans. The Department of Education, Federal Department of Education definition of professional degree is very restrictive, and this offer, and it offers nothing to replace the elimination of grad plus for those students in such programs as nursing or teaching. UC does not have the funds to backfill for this loss of graduate loan eligibility. Therefore, these students will need to turn to the private student loan market.
And our biggest concern is that low income students without credit or financial assets will have difficulty obtaining those private loans and be prevented from pursuing their programs that are focused on really practical applications and skills for workforce needs. So this is an opportunity cost for the student, but it is also a loss for the state of California. Also, just want to end by thanking again the subcommittee and the legislature as a whole for all of the support for our students. The Cal Grant and the middle class scholarship programs are really essential to meeting our goals to maintain an affordable university and reduce the reliance on student debt.
Speaker 12
Good morning. My name is Allison Beer, Dean for Educational Services and support at the California Community College Chancellor's Office. College affordability is a core goal of the Chancellor's Office Vision 2030. As part of the strategic plan, we aim to increase with equity the number of California Community College students receiving Pell Grants and California College Promise Grants and the CCPG by 10%. We are working on increasing financial aid awards, though affordability remains a pressing challenge for our students, which has been worsened by continually increasing to total cost of attendance, especially at their living expenses and uncertainty of federal financial aid programs.
Ensuring that our students complete the free application for federal student aid or the California Dream Act application is the most impactful way we can maximize financial aid and ensure students have resources for meeting their full cost of attendance, including tuition and fees, as well as living expenses such as food, housing, transportation, and childcare. For the current financial aid cycle, we're encouraged to see that the total number of financial aid applications are increasing from recent years. The chancellor's office has continued to partner with California Student Aid Commission, our colleges, and other community organizations to support financial aid outreach and application assistance, in particular through our I Can Go to College campaign and partnerships to host cash for college workshops. While we are encouraged by the recent data, we're also concerned by impacts on some of our student populations, including students from mixed status backgrounds who do not feel safe in applying for federal financial aid out of worry of the well-being of their families and loved ones. The chancellor's office has been working closely with our undocumented student liaisons to provide them with information on how undocumented and mixed status students can apply for and receive financial aid.
We also remain in strong support of providing a universal pathway for any student to fill out the KDA if they so choose. In addition to support undocumented students and those from mixed status families, the chancellor's office has allocated to all of our colleges. The state funded $20,000,000 in emergency aid for KATI filers, and those funds are beginning to reach students directly. Additionally, leveraging funds from the twenty five-twenty six state budget, the chancellor's office is in the process of awarding grants to community based organizations that provide financial aid application to support perspective and current students. These state funds will help meet goals for increasing financial aid receipt and providing targeted support, including for undocumented students, those from mixed status families, and students in underserved areas such as rural communities.
Aid receipt among California Community College students has continued to increase as applications have increased. During the twenty four-twenty five academic year, California's 115 community college financial aid offices awarded over $4,300,000,000 in financial aid to over 920,000 students. This was a nearly 23% increase in the total aid awarded compared to the previous academic year. The largest source of federal aid for our students is the federal Pell Grant program, which accounted for over $2,200,000,000 in awarded aid. This is followed by our other state and institutional aid programs.
Our California College Promise Grant CCPG is the largest in terms of number of recipients with 850,000 students receiving a fee waiver totaling over $748,000,000 in support. This is the most accessible of our chancellor's office programs because it has the fewest eligibility requirements. Students only need to be in good academic standing and have unmet need of $1,100 to receive the fee waiver. We also have our California College Promise Program, and of its 91,000,000 statewide budget, approximately 49,000,000 is spent on fee waivers and direct aid to students. The remaining funds support counseling, academic services, and basic needs supports.
For Cal Grants B and C, the number of community colleges receiving the award has increased to two ninety nine million for over 170,000 students. However, this continues to represent less than 10% of our overall system wide student population. We have worked with CSAC to identify areas for easing administrative burdens, to Cal Grant receipts and strongly advocated for the Cal Grant equity framework to ensure greater affordability for largely older working student population attending community colleges. In addition, we have our Student Success Completion Grant. 125,000 students received SSCG, totaling $451,000,000 in aid.
Over time, SSCG eligibility has expanded, including higher award amounts for former foster youth and students with disabilities enrolled in nine or more units as long as they meet other eligibility requirements. We've been very encouraged to see the growth of this program, though funding at the state level has remained flat at 400,000,000. Many colleges have recently begun to report to the Chancellor's Office that they're running out of funding before being able to provide the awards to all potentially eligible students, resulting in unintended consequences and resource constraints for students who did seek to enroll in higher number of units to receive the award. So increased state funding is critical to ensure ongoing fidelity of this program as more students become eligible. And I will conclude my remarks with another top priority for the chancellor's office, which is equitable resources for our community college financial aid offices.
The current funding formula for state financial aid administration has not been updated in quite some time. When established, it accounted for only 118 colleges. Today, we have 115 that offer financial aid. The unchanged formula leaves colleges with a 6% funding deficit. Additionally, the funding formula only considers CCPG fee waivers despite massive growth in all financial aid application programs including Pell grants and, our other state aid programs.
Therefore, we continue to advocate for updating the student financial administration funding formula to reflect the actual number of financial aid applications and implementing a recurring COLA for financial aid administration. These changes are critical to ensuring California community colleges can effectively support students in accessing and receiving financial aid. Thank you very much.
Speaker 13
Good morning. I'm Doctor. April Grommel, and I serve as the Assistant Vice Chancellor for Strategic Enrollment Management at the CSU Office of the Chancellor. Thank you for the opportunity to speak on behalf of the CSU, serving more than 471,000 students across our 22 universities. More than 95% of CSU students are California residents, and our mission is grounded in access, affordability, and student success for the people of the state.
Ensuring that all Californians, regardless of income or background, have the opportunity to earn a high quality college degree. This is why Cal Grant is so important to our students and to our system. In twenty four-twenty five, CSU students received more than $152,000,000 in Cal Grant Access Awards, over $651,000,000 in fee awards, and nearly $32,000,000 in students with dependent access awards, and more than $6,000,000 in foster youth access awards. This aid is essential to keeping college within reach and helping students persist through graduation. Cal Grant is also critical to achieving our CSU Forward goal of ensuring that every student with a family income under $75,000 can graduate debt free.
Without sustained and robust support for Cal Grant, that goal is at risk. We urge continued investment in this vital program for the benefits of our students, our communities, and California's future. While Cal Grant is a critical part of aid for our students, federal student aid plays a critical role as well. We are closely monitoring the changes and impacts of HR1 that will become effective 07/01/2026, and I'd like to highlight several significant changes. The elimination of the Grad PLUS program will be especially harmful to graduate students who already have very limited access to grant aid.
In 2425, more than 2,600 CSU students borrowed $38,000,000 through the Grad PLUS program to help finance their education. Pro rating federal direct student loans based on enrollment intensity will also have major impact. More than 21,000 CSU students borrowed federal direct loans while enrolled part time. Nearly half of those part time borrowers (forty eight percent received only student loans and no grant aid, making them especially vulnerable to any reduction in available borrowing. Applying a 50% proration average to these loans means a loss of $97,000,000 in loan borrowing annually.
In addition, limiting Parent PLUS loans borrowing to $65,000 per student can create serious challenges to middle income families who are often not eligible for significant grant aid but still rely on federal borrowing to make college affordable and reasonable. We are also closely monitoring the projected Pell Grant shortfall and the serious implications it could have for the students we serve. In 2526, more than 253,000 CSU students were awarded federal Pell Grant totaling over $1,400,000,000 Any sustained shortfall could result in reduced maximum awards, more restrictive eligibility criteria, a shortening of the current six year eligibility limit, or the elimination of year round summer Pell in future academic years. Any of these changes would significantly affect college affordability, persistence, degree completion for low income students. In addition to federal and state grant aid, the CSU allocated eight fourteen million dollars to our state university grant program, which is our institutional aid program.
This included an allocation of an additional $55,000,000 generated from the tuition fee increase. The CSU has also updated our State University grant policy in twenty five-twenty six to provide cost of attendance based awards for low income students, expanding support for those with the greatest financial need and helping to address the cost of living while attending the CSU. I will also point you to the charts that were handed out. There's a couple things I'd like to highlight. One is that you have a chart about students who receive financial aid.
So 77% of our undergraduate students receive some type of financial aid and of those 72% had their full tuition and campus fees covered based on non loan aid. So that includes Cal Grant, middle class scholarship, our state institutional loan grant program, as well as scholarships and waivers. There's an additional 8% of students who also had their tuition waived. So 80% of our undergraduate students that are applying for financial aid are seeing their tuition and their tuition and fees covered. Thank you for your time and consideration.
I'm happy to answer any questions.
Speaker 14
Morning, Chair. Hugh Assalis Galena with the Department of Finance. For Cal Grant, the governor's budget proposes funding the grant for the twenty five-twenty six academic year at $2,898,000,000 This is an increase of $107,000,000 from the 2025 Budget Act. For the twenty twenty six to twenty seven academic year, the Governor's budget proposes funding the grant at $3,235,000,000 This is an increase of $444,000,000 from the 2025 Budget Act. These increases stem from growth in resident undergraduate student enrollment, increases in tuition at the UC and CSU systems, and the requirement for all high school students to apply for the Free Application for Federal Student Aid or FAFSA.
That concludes my remarks. I'm happy to take questions at the appropriate time.
Speaker 3
Good morning. Natalie Gonzales with the Legislative Analysts Office. Each January, the Governor revises Cal Grant estimates based upon the data that CSAC provides in the fall. We have reviewed those estimates. From the revised twenty five-twenty six spending level, the Governor's budget increases Cal Grant spending by $337,000,000 or 12%.
This brings total Cal Grant spending in twenty six-twenty seven to $3,200,000,000 We'd like to note that over the past three years, Cal Grant spending has been increasing at a higher rate than the ten year annual average of 3.7%. In 2425, Cal Grant spending grew by 13% and it's estimated to grow by 16% in twenty five-twenty six. We estimate that this higher spending in recent years is due both to larger award amounts as well as more recipients. As mentioned, the larger award amounts is primarily driven by the tuition increases at UC and CSU. The increase in Cal Grant recipients, one factor we believe driving this increase is the CCC Expanded Entitlement Program, which was created in twenty one-twenty two and has not yet reached full implementation.
Spending for the CCC Expanded Entitlement Program increased by 27% in twenty four-twenty five and is projected to increase by 21% in twenty five-twenty six and then by 9% in twenty six-twenty seven. CSAC prepared the Cal Grant estimates that are underlying the Governor's budget in October 2025 and these estimates will be updated at the May revision. Given the projected out year deficits, covering existing Cal Grant costs could be challenging even if the estimates come in lower in May. The state also will likely not have the capacity to further expand the Cal Grant program over the next few years. Thank you and happy to take any questions.
Speaker 1
Thank you for the presentation. A couple of things. One, appreciate that we have our different systems here to talk about just the impact of the Cal Grant for the students that they're serving and as well as the California Student Aid Commission, you know, I recognize that every single year as we have this discussion about the Cal Grant and its impact on students, and I've been a part of these discussions for a long time, that we've still not been able to make any movement on increasing the Cal Grant. This has happened year over year, and yet costs have continued to grow up dramatically for students, whether it's housing costs, transportation costs, food costs. And so the award doesn't go as far.
In addition to that, the number of awards that we give out has not dramatically increased either, right? We've been very hesitant to do that and obviously because of costs, and I recognize that kind of commitment is an ongoing cost that we'd have to estimate. I'd love to know if we were to give a Cal Grant to every student that was eligible, how many more Cal Grants would that be?
Speaker 5
Thank you for that question. Under the Cal Grant Equity Framework, or as we call it, the Cal Grant Reform, the proposal was to simplify our current complicated legacy Cal Grant program from eight programs into two. And entry into the Cal reform would bring in many of those students that you're referring to. And there was a fiscal cost associated with that. We had several different permutations of the reform as we identified which students would gain entry into the Cal Grant program.
And so depending on if we go with every single student, the cost would be in the millions, hundreds of millions of dollars to provide access to all of the students in California with a Cal grant. Ms. Gonzalez from the LAO, she mentioned the Community College Entitlement Program that came out in 'twenty one-'twenty three to the Governor's budget, And that program has effectively increased awards for students attending community colleges into 150,000 to 160,000 more per year. And even under the Cal Grant reform, that would also increase awards to community college students, specifically those who are adult learners. And so, we do expect that expanding the Cal Grant Program would increase costs at various levels.
And, you know, that's why we were very supportive of trying to get the Cal Grant reform in place because of some of the barriers that existed for entry into the Cal Grant program for many of our student populations.
Speaker 1
And I am very familiar with Equity Framework. I was working at the Campaign for College Opportunity, and it was one of my assignments when I had the opportunity to work on it with both Assembly Member Medina and Senator Leva back in 2022. So I recognize that was passed. The money was never appropriated for it, and it still needs to go into implementation in my opinion. But I guess what I'm more interested in hearing, you know, I've come into this role as a chair for the budget subcommittee, I have wanted us to focus more on the outcomes of the funding that we're administering.
But I think when we talk about cost, when we talk about what we aren't funding, that we need to think about it in terms of the metrics of the students that we're not serving that are actually eligible for the Cal Grant, right? And I know at least back then, back in 2022 from the numbers that we had, I think only one in every eight students that was eligible for a Cal grant was receiving one. I anticipate that that number has probably gone up in the last four years, you know, since I was looking deeply at this issue. And so I'm wondering, do you have numbers in terms of the students that are eligible that we are rejecting to receive a Cal grant every single year?
Speaker 5
Yeah, we do have numbers. There is also a financial component, financial eligibility component where there is maximum income ceilings that students must be under to have access to the Cal Grant. And then there is also a merit component where there is an associated GPA tied to the Cal Grant A and Cal Grant B. So, the Cal Grant Equity Framework would have removed some of those merit components, especially for those attending the community college. The income ceilings are there just to recognize students and families who are in need of financial aid assistance.
The data that we have been receiving is going to be further enhanced through Trailer Bill language that passed in the fall, where we receive financial aid data from our institutions, and we hope to provide a return on investment on not only Cal Grant programs, but all of the financial aid investments for the students here in California. But we can certainly provide you numbers on students who were not eligible for the Cal Grant program because of some of these barriers within the program in itself as designed right now.
Speaker 1
Yeah, I would love to see some of those numbers. And I mean, I can tell you based off the data we were looking at back then that those are primarily black and brown students that were turning away. It's a lot of adult learners, right, that would be eligible for that. With the merit component and requirements, I remember there being a major issue around people having access to transcripts that were returning back to go to college or university that weren't able to get that information, so they wouldn't even be able to compete or be eligible. You know, and rules that exist that I think are well intended, but that don't actually make sense in the application of those rules.
So I think it's really important for us to talk about some of those numbers because it's not just about us choosing to not put more dollars towards Cal Grant. We are actively turning students away from going to college or university. We are actively rejecting aid to students who would otherwise be eligible. And I think it's important for us to look at the kind of human impact that we're having when we make those decisions.
Speaker 5
You're absolutely correct. Our current one of our Cal Grant programs that we have right now is our Transfer Entitlement Program, which specifically looks at students who are in attendance at the community college and then transferring to a four year institution in the subsequent year. Currently, is an age restriction on that program. It's 28. And so, as we think about adult learners who are attending the community college and have hopes to transfer to a four year institution, that age restriction does limit who we can offer the Cal grants.
And so, that's why it's imperative as we're seeking to increase the age from 28 to 30, even maybe beyond 30, because we certainly know that there are adult learners beyond the age of 30. And so we feel that that is a good pathway for students to come back into higher ed is through the community college and then transferring to a four year institution. So there are these barriers within our Cal Grant program that does provide limitations for certain groups of students.
Speaker 1
I would love to know as well, you know, I think it was maybe two years ago now. I was going to say last year, but I think it was two years ago. There were a number of issues that were happening with the FAFSA application that created disruption for students to be able to receive financial aid. I knew because at that time I had a number of high school students that were working on my campaign, and then all of a sudden a number of them were having issues completing their FAFSA apps. And then I was on the phone with you all trying to troubleshoot this in real time.
And so have there continued to be lingering issues from that disruption that occurred in previous years, and how has that impacted just student aid distribution?
Speaker 5
Yeah, we are two years removed from the twenty four-twenty five Better FAFSA implementation. My colleagues up here, we survived those two years and it was very, very difficult, but we appreciate all of the efforts made by the state to extend priority deadlines, to extend intent to register deadlines. So, it was a collaborative effort across the state with higher ed institutions. There definitely was an impact financially that year. Everything was delayed.
Everything was late. And so even award packages for incoming freshmen were late and housing decisions, everything was just pushed back. I think we have normalized and we are definitely seeing a comeback this year in the 'twenty six, 'twenty seven FAFSA year. We saw increases to the financial aid, the FAFSA applications. We didn't quite see the same type of increase as we did with FAFSA with our Dream Act application, and I think primarily that was due to some of the restrictions that the better FAFSA implementation had in terms of access for our mixed status families, And so, that continues to be a lingering impact and lingering effect of the better FAFSA implementation to our students coming from mixed status households.
I think California has the most mixed status families across the state, so we continue to support them. We have provided access to the Dream Act application for those who are unable to gain access to the FAFSA and federal aid. And we are also hoping through last year's legislation support of 03/23, which would open up the Dream Act application for any California student. And so we continue to pursue that, and we hope that students wouldn't face any barriers. But we have rebounded from the twenty four-twenty five year and things have normalized and in fact it was a very good year in terms of FAFSA applications and CADA applications.
Speaker 1
And I'd love to know in terms of like the trends and the applications you've received so far this year, are things looking as expected? Are we seeing more or less? You know, I ran a bill last year and it was in partnership with you all, SB three twenty three, to make it easier for students to utilize the CADA as an application tool, and particularly because there were concerns about FAFSA and data sharing. Unfortunately, I think that we have probably even more data sharing concerns than we did before That has seeped into almost every aspect of our life. But at that time, there was real concern about financial aid applications and the FAFSA, the fact that the federal government owns that data.
Have you seen an increase in CADA applications and in students applying that? I know I've talked with staff and, you know, they've also talked about, you know, CSAC doing the work application process. You know, you all are able to begin adjusting some things on your end to kind of widen the ability to accept CADA applications as well, so do you see that that's necessary? Is that something that you all are working on?
Speaker 5
Yeah, thank you for that question. Yeah, we continue to advance our discussions to provide access to all students in California, especially those who are unable to access federal financial aid through the FAFSA application. Definitely, was some concerns raised around data and students' information. Our pursuit is to de identify as much of the data as student information on the DREAM Act application so that they are not categorized in a certain immigration population or student population. So, efforts are to de identify them and process them and evaluate them for financial aid eligibility here in California for all of the California programs.
We continue to see a rise in mixed status family applications, but we also see that students who are applying through the Dream Act application, because their aid is limited only to state and institutional aid, that later on in the process, that they will make a decision to convert their Dream Act application and do a FAFSA so that they can receive the benefits of federal aid. And so, we see that trend continuing, but these are all personal and family decisions that have to be made and, you know, with informed decisions to the best of their ability. And so, we see that trend happening. But the Student Aid Commission, we're committed to providing access and working with our institutional partners to open up the Dream Act application so that students, for whatever reason, whether it's fears or a system limitation to the FAFSA, open up the Dream Act application so that they can access state and institutional data.
Speaker 1
And that's helpful, I think, for you all to continue to have that communication with families as they have these questions come up, I think, is really critical, because it is a personal decision and, you know, I think folks are trying to weigh their options as, you know, there continue to be targeted attacks by the federal government. But as I mentioned before, I now feel like this data issue has become so wide ranging that I think people's thoughts on it have maybe shifted a little bit as well, which is concerning in a different way. I'd love to hear just from the segments just about your goals for student affordability. Are there plans to improve or increase financial aid for students in the next several years? You know, I know that there's always a discussion about trying to get to this point, right, ideally of getting to free tuition, right, or getting to very low cost tuition.
I know when we were working on the Cal Grant equity framework, there was actually a way that we were going to get there, particularly for students that had families that had a zero EFC, so that we would layer A to make it so that almost the full cost would be covered. So what are your thoughts around that, and what are some of your plans around that?
Speaker 11
For the record, Sean Brick from the University of California. We the university renewed its tuition stability plan, which is how we approach setting tuition. So when a student enters the university, they have the same tuition for up to six years. So no increases to that individual while they're at the university. But at the same time, built into that structure, we are setting aside a portion of any new tuition revenue for financial aid.
So that is our longstanding policy structure to make sure that as we do increase tuition, we're also making sure that we set aside money for financial aid. I would characterize our policy goal in that area as minimizing student debt. So we're trying to focus on not just tuition and fees, but on the total cost of attendance and making sure that what is remaining for a student to address themselves is something that they can manage, hopefully, with wages from a part time job. Of course, they do would they would continue to have access to student loans, however, if that is their preference.
Speaker 12
California Community College Chancellor's Office. We also look at total cost of attendance when considering our students affordability challenges and needing to increase access to aid. So, one of our core strategies has been supporting students complete their financial aid applications, ensuring that students can complete the FAFSA so that they receive their federal Pell Grant is a major opportunity for our students to better meet their cost of attendance. Beyond that, we've worked with the Department of Finance and the legislature to ensure that our existing state funded programs are hopefully funded with fidelity. So, for example, our student success completion grant program as eligibility, has expanded for that program and aid awards amounts for that program has expanded.
We are looking at additional needs for increasing the funding for that program at the state level to make sure that we can continue to award more students with that grant funding. I'd say we've also been thinking creatively on the regulatory side on what are existing areas that we can create more flexibility for students to access direct aid through our other categorically funded programs. For example, through our EOPS program, we recently completed a regulatory change that removed a $900 cap on how much direct aid students could receive through the program, and now they're eligible to receive aid through that program up to their total cost of attendance. We've also worked through our basic needs centers to leverage funding through that program to support students with emergency aid and other resources that can meet their total cost of attendance, as well as been partnering with other state agencies such as CDSS to increase outreach and access for public benefits programs for CalFresh, which can and Medi Cal, which can be essential in ensuring that our students have resources for their living expenses.
Speaker 13
April Gromo for the CSU. So as you're probably aware, the CSU has been doing a lot of strategic planning. So I already mentioned our CSU forward strategic plan, which is our system wide strategic plan. Our clear goal of making sure that any student from a family that makes $75,000 or less graduates debt free. Affordability is also in our student success framework as well as our emerging strategic enrollment management plan or framework that will hopefully be finalized this summer.
We are looking at total cost of attendance as a key value to make sure that students understand what affordability is and how we can use institutional aid. So although tuition increases are not anything that anyone wants to see, a third of the funding from those tuition increases are going to our institutional aid program, which is our state university grant program. So we are taking that funding and specifically focusing it on cost of attendance awards. We also have done a policy change within the CSU to provide our grant funding across the 22 campuses more intentionally, looking at the actual need of the students and making sure that the funding is there to support students that have, for example, for twenty six-twenty seven, we're looking at any student who has an SAI or student aid index under 5,000. If they're not eligible for Cal Grant, they would get a state university grant to pay their tuition and then also our neediest students getting cost of attendance awards.
We are also working partnering with different regions. For example, Riverside County, they have a strong Cal SOAP College Success Coach program. Riverside County is also where we piloted our direct admissions program. We're piloting CSU affordability training, making sure that coaches and high school counselors understand how to read an award letter. We have also invested in making sure that all 22 campuses that their award letter is actually the same so students and families can understand and compare award letters, understand direct and indirect cost, and understand what a student is actually having to pay for as part of their financial aid.
So we are looking at how we can scale that affordability training across the state. The CSU has a 90% admissions rate. So we are not having issues with students coming to us, getting admitted, but we need them to understand their affordability picture. And so this is really where we're focusing a lot of effort.
Speaker 1
Absolutely. Thank you. I think the final thing that I would like to request, particularly from the Department of Finance that we have here as well as well I think from the DOF actually. Have you all looked at numbers to see what a rollout of the Cal Grant Equity Framework would look like if we were to do a phased in approach? I mean, given that this was legislation that was passed in 2022 and it is now 2026, and it's been four years.
What would a phased in approach look like to begin implementation and to see what that cost would be? I know there's also other legislative proposals around the Cal Grant and estimating what that cost would be. So we may, in steps, begin increasing our Cal Grant aid award amounts.
Speaker 14
Hugo Slees Galena with the Department of Finance. When it comes to looking at the costs of a face in approach for Cal Grant reform, we don't have specific numbers on that. We have worked with or speaking with the Student Aid Commission. They've provided us that full implementation could go up into the hundreds of millions of dollars, which are financial resources that the state does not currently have at the moment. In terms of the slower resources, while that might be a more fiscally prudent way of going about implementing the full Cal Grant reform.
At the moment, state is not in a fiscal environment to fund that kind of proposal.
Speaker 1
Does the Department of Finance look at what the overall cost is when a student drops out of college or university and only retains some college, no degree, as a result of not receiving financial aid and support to complete their degree in a timely manner?
Speaker 14
When it comes to the estimates for our programs, we get our numbers from the Student Aid Commission. So that is not something we personally look into ourselves.
Speaker 1
Because I think for me that's part of my concern is, you know, I know that we're looking strictly just at like the cost numbers, right? But what I want us to also take into account is the outcome, because the outcome, the benefit, the reason why we invest into the CSU and the UCS systems, the reason why we invest into financial aid, like things like the Cal Grant, is for the purposes of students to graduate in a timely manner, to go on to earn their degrees so then they can enter into the workforce. And so when that isn't being realized and that's not being finished, then I think that becomes a real problem because then we have the system as it currently exists, a number of students who have some college, no degree, who haven't ultimately finished, and are not filling those critical jobs that we need, whether they be maybe nurses or whatever else. So I think it's really important for us to put that in perspective as well, that by continuing to not fund these programs and continuing to not expand these programs, that there is actually a financial detriment as well. So I think that that's also really important, and I would really appreciate if both DOF as well as the LAO could work on looking at a phased in approach for the Cal Grant Equity Framework, what that might look like compared to I know there are some other legislative proposals as well, but I'd like to see that financial cost.
I recognize it's a high cost. I recognize that we've been facing fiscal challenges, but at the same time, this is a discussion that we've now had for so many years, and I think that we really need to begin to make movement on.
Hi, Jennifer Louie with Department of Finance. I'm just following up with my colleague's comment and just to further state on behalf of the administration that as part of and I know it is not part of this hearing, but as part of the collaboration with the segment on college affordability, the administration has proposed a multi year compact with the segments as well as a roadmap with the community colleges and an emphasis with both amongst the segments including the community colleges is to focus on college affordability so that students may be able to graduate with a degree that's applicable to the workforce. And so, as part of the multi year call impact, it includes like affordability and so hence why the administration has made a long term commitment amongst the three segments. So, that is a part of consideration. And my colleague, Alex, who was part of the segments just left, but we just want to affirm that that is a part of consideration for the last several years in which we are in the final year of the compact, which has been discussed in prior hearings.
Speaker 15
So, I just want to make that clarification as part of the administration.
Speaker 1
appreciate that. I was there when the Governor signed the Cal Grant Equity Framework, and we all were in the gym at Cal State University Northridge. I appreciated him signing on to the bill because we put a lot of work into it, but money hasn't been appropriated for it. So, you know, until that happens, I think what we're talking about, which is making sure that we're meeting the financial need that students have had, the growing financial need that they've had, and actually beginning to slowly move on increasing that Cal Grant aid amount, not just the amount, but the number of students that are eligible for it, That is what I ultimately want us to get to. So, you know, I know that there's been discussion about that, but it is going to take resources and money and an investment.
And so that's what I'm interested in seeing is what some of those numbers would look like. I recognize we can't do it all at once. We can't go to full implementation. It would cost in the hundreds of millions, as was mentioned before. But what would a slow implementation of that bill look like?
Speaker 15
Jennifer Lou with the Administration Department of Finance. We thank you for your comment and as part of the May revision we would be always happy to discuss with the legislature as part of the final budget agreement. And so moving forward as always as part of the budget process we are always engaging with the legislature. Thank you.
Speaker 1
Great. I think that's it in terms of questions. Thank you all so much. We will go ahead and turn it over now to issue four relating to the middle class scholarship program. And I think we have some of our same presenters here, so we'll start with the California Student Aid Commission.
Speaker 5
Thank you, Chair Perez. Tae Kang, Deputy Director at the California Student Aid Commission. The Middle Class Scholarship Program supports to middle income undergraduate and teaching credential students meeting the cost of attendance at the University of California, the Cal State University, and the California Community College bachelor degree programs. It is designed to serve students who may not qualify for traditional need based aid, yet continue to face substantial financial aid barriers to higher ed. Middle class scholarship awards may be combined with other forms of financial aid, including the federal Pell Grant, the Cal Grant, and institutional aid, and may be applied towards the total cost of attendance.
I know we just had a discussion around total cost of attendance, and so that covers that, including tuition, instructional materials, transportation, and basic living expenses. Award amounts under the MCS program are determined based on each student's total cost of attendance and the level of other financial aid assistance received. Final award levels are contingent upon the number of eligible students statewide and the level of funding appropriated in the annual budget act. In twenty two-twenty three, the state implemented significant programmatic reforms to better align the middle class scholarship program with the actual costs incurred by students shifting the focus from tuition assistance alone to the broader total cost of attendance. So the middle class scholarship was changed in twenty twenty two-twenty twenty three.
We usually typically call it MCS two point zero. This change enables students to apply awards towards non tuition expenses, including housing and food. The 2025 budget that further advanced these improvements by streamlining program administration and enhancing coordination between the Student Aid Commission and postsecondary institutions, resulting in improved data exchange and more timely and predictable award determinations. The administration's current proposal to reduce MCS funding by more than 50% would substantially diminish the program's effectiveness. Under this proposal, award coverage would decline from 35% to 17.5%, thereby decreasing financial uncertainty for students and their families and potentially affecting enrollment decisions due to reduced affordability.
The Middle Class Scholarship Program remains a critical component of the state's efforts to maintain college affordability for California's working and middle class families. Recent reforms have strengthened the program's efficiency and responsiveness to student needs. A significant reduction in funding would undermine this progress by increasing financial volatility and impacting college affordability. CSAC respectfully urges the committee to preserve stable and adequate funding for the MCS program to ensure that students are able to plan effectively enroll and persist through completion. Thank you.
Speaker 13
morning again. April Gromo for the CSU. The middle class scholarship is a critical part of CSU's efforts to reduce student debt. In the twenty four-twenty five year sixty six percent of our undergraduate baccalaureate degree recipients graduated debt free. During twenty five-twenty six academic year, 214,000 CSU students received $690,000,000 in middle class scholarship funding.
The average award was $3,224 covering approximately 10% of the total cost of attendance. MCS funding allows us to strengthen our affordability efforts for our students, and our goal is that every student in California will be able to afford the total cost of a CSU degree. Reducing the percentage of MCS from 35 to 17.5% in the twenty six-twenty seven year will reduce the funding for our students by half to $345,000,000 The average award will go down to $16.12 dollars and will only cover about 5% of the total cost of attendance. A reduction to MCS alongside the changes with federal student loan programs will negatively impact our middle class students that do not receive any other need based funding. The other impact I'll just share is year over year.
Students receiving a 35% cost of attendance award and then going down to 17.5%, we could have students, as we were discussing earlier, that choose not to return to school because of the decrease in financial aid. The 2025 Budget Act provided some statutory changes to streamline the MCS program and reduce campus workload, which we are very appreciative of and welcome. Unfortunately, some of those changes came a little bit too late for us to fully deploy them for twenty six-twenty seven. We did implement some of those updates that we could, including counting institutional need based scholarship as self help aid, which has greatly reduced the fall twenty twenty five adjustments by an average of 15% system wide, easing our workload for our financial aid offices and simplifying the process for students. Thank you again for all of your support for these programs, and I'm happy to answer any questions.
Speaker 11
Sean Brick at the University of California. We also, like my CSU colleague, appreciate the efforts by the legislature and the governor to expand and simplify the state's financial aid programs, especially the middle class scholarship expansion and some of the simplification that's taken place. The middle class scholarship program lowers that self help, as we call it, at the University of California for many UC students, bringing us closer to that goal of a debt free education. The program provides scholarships to about half of our families with incomes under $60,000 So as observed in figure one in our handout, the awards are smaller for those low income students given that they are receiving many other dollars from the need based aid programs. True to its moniker, though, the middle class scholarship program does support middle class families with larger awards.
Again, we appreciate the legislature for hearing the concerns of our aid administrators and our students and taking action to implement those changes. As Doctor. Gromo mentioned, the change in the treatment of institutional non need based scholarships was particularly helpful and similarly reduced our need to revise awards for about 15% of our recipients. Additionally, with earlier setting of the phase in factor, our campuses are able to include the middle class scholarship upfront in financial aid offers for prospective students. And so this year we did, our campuses are using a 17.5% phase in, which was included in the governor's budget in our financial aid offers.
The data exchange required between the campuses and the commission continues to be a challenge because all of the different factors that go into calculating a student's MCS award are volatile. There's costs may change, their enrollment may change, and other financial circumstances may change. Those are all fluid elements. Like the CSU, we are also concerned about the proposed reduction in the MCS program in the governor's budget. At present, our average MCS award is approximately $3,200 per recipient.
And so the proposed $513,000,000 cut to the program would lead on average to a reduction of about $1,600 per UC recipient. And that represents 3.4 to 4.6% of the average cost of attendance depending whether the student is living on campus or off campus. Middle class scholarship program is very important part of our strategy to reduce student debt. And since that the program addresses the total cost of attendance, the program really would need to increase every year just to keep pace with inflation since it's addressing those costs that increase for students with inflation. Again, thank you to the subcommittee and our partners at the Student Aid Commission.
While I mentioned some of the ongoing challenges with MCS, it has been truly beneficial to our students and the revisions. Just to put some numbers on it, the revisions from twenty two-twenty three meant that MCS grew from a program providing about $32,000,000 to 11,000 UC students to a program that provides over $300,000,000 to nearly 100,000 UC students. So thank you again for your commitment to our students.
Speaker 7
Hugo Solis Galena with the Department of Finance. For the middle class scholarship, the governor's budget proposes raising the, twenty twenty five to twenty six scholarship from $918,000,000 to $1,054,000,000 which will be paid for in the twenty sixtwenty seven budget by a $136,000,000 one time general fund appropriation. This maintains the 35% level of unmet need for students as approved as part of the 2025 Budget Act. For the twenty six-twenty seven scholarship which will be paid for in the twenty seven-twenty eight budget, the Governor's budget proposes funding the scholarship at $513,000,000 general fund. This amount is the scholarship's base funding level and does not represent a reduction in funding for the scholarship as the previous increases above $513,000,000 were one time appropriations that were part of the 2025 Budget Act.
Speaker 14
This amount will also fund the scholarship at the 17.5% level of unmet need. I'm happy to take questions at the appropriate time.
Speaker 21
Natalie Gonzales with the Legislative Analyst's Office. We recommend the legislature consider adopting the governor's proposal to reduce middle class scholarship award coverage. Given both our office and the administration are projecting notable out year budget deficits, the legislature will have to consider cost containing solutions and this is the only proposed higher education budget solution. We recommend considering this solution as it may be one of the less disruptive choices the legislature faces when deciding how to limit out year spending since the Middle Class Scholarship Program is less targeted to lower income students and has significant overlap with the Cal Grant Program. Specifically, when the Middle Class Scholarship Program was created in 2013, it was intended to provide partial tuition coverage to higher income students at UC and CSU who generally did not qualify for a Cal Grant award.
Speaker 3
Unlike the Cal Grant program, these students did not have to demonstrate financial need in order to receive the award. During this time, the program served about 50,000 students and cost around $100,000,000 annually. In twenty two-twenty three, as noted, the program was revamped from covering partial tuition to covering a percentage of students remaining cost of attendance. Under this revamped program, students who received a Cal grant could now also receive a middle class scholarship award as they could use that award for non tuition costs. Today, the program serves about 350,000 students with household incomes up to $234,000 Of these students, about half of them are Cal Grant recipients, so many students are receiving both a Cal Grant and a Middle Class Scholarship award.
Though the impact of the award reduction will be felt differently among students, some students may have to work a few additional hours or take out larger loans in order to compensate for their smaller Middle Class Scholarship awards. The impact on the Cal Grant recipients could be smaller given that these students tend to have smaller middle class scholarship award amounts and this proposal would not impact their Cal Grant coverage. The Governor's budget also maintains the new budgetary approach of funding the middle class scholarship awards one year in arrears. Under this approach, the state is providing middle class scholarship awards to students in one year but paying for those awards a year later. To do this, the state is using a general fund cash loan to cover the payments to students.
Once one time funding becomes available, we recommend that the legislature give high priority to retiring this debt and returning to paying for middle class scholarship in the year in which costs are generated. We recommend that the state stop paying for the program one year in arrears because doing this can place the state in a difficult financial situation if its cash position weakens and it no longer is able to borrow internally to pay the cash loan. Thank you and happy to take any questions.
Speaker 1
So, you know, I have real concerns with the governor's proposal to reduce the middle class scholarship funding levels. I think you could probably imagine why just based off of what I said, you know, in the last section we were covering in regards to Cal Grant. I think dropping those levels from 35 to 17.5% and potentially taking financial aid away from students who were receiving it before at a time when housing costs and transportation costs and food costs and just about an electricity cost, just about every cost I can think of is skyrocketing. I have young college students who talk to me about how expensive it is to fill up their tanks so that they can get to school, and that price impacting their decision as to whether or not they're even going to be attending classes or hanging out with friends or visiting family. And then to propose also cutting back financial aid to me just doesn't quite make sense.
While I understand that there are fiscal challenges that we're facing, and I feel very strongly about having strong fiscal accountability and oversight over the dollars that we're spending and that those dollars are being utilized and being implemented effectively. And I think that the legislature as a whole needs to do a lot to address their structural deficit. I don't think that we then address our structural deficit and our budget deficit by cutting the middle class scholarship and financial aid for students. That That doesn't quite make sense to me. There are other places in the budget, as we've been looking into and discovering, where I think we need to have more robust conversations about how dollars are being spent and cutting back in certain programs, I don't think that this is one of them, especially when there's such a clear benefit to providing funding to students so that they finish their degrees in a timely fashion.
And we know the return on investment, and I know I had the UC and CSE folks, you know, calculate what that number was. When I was in school, it was something like for every dollar reinvested, it was like $4 and something cents back. And I think during the last presentation we received, that's gone up to like for every dollar we invest, it's like $9 we didn't get back. So when I think about it just in terms of outcomes, which again is I think where I want to continue to focus our discussion, that's a better return on investment than I think probably other places that we'd look into within our state's budget. So, I know that this, for some reason is always like a tussle point or a point of discussion with the administration now like looking back there has been multiple suggestions to cut the middle class scholarship and I think students need more financial aid, not less.
And there are a number of students, as was mentioned before, some of our adult learners who don't even have access to the Cal Grant or other forms of aid because of the way that we've designed them. And so there's, I think, structural issues that we need to work on in terms of the design of some of
Speaker 1
programs. Some of those issues can just be addressed by us implementing policies that we've already passed, but this in particular I think is really concerning and I think would have a really devastating impact on the number of students that we currently have that are enrolled in our institutions at a time when we need more of a skilled workforce and not less. I'd love to hear the systems and, you know, maybe even CSAC talk a little bit about what you're anticipating some of the consequences being if we were to implement the governor's budget and cut back on the middle class scholarship and what you anticipate seeing in your institutions?
Speaker 11
We I think we would, as I mentioned, would expect that the average award would be cut in half for each, you know, for each of the recipients. And I think for at least some of those students, then that would probably mean that we would see an increase in student loan borrowing. We don't have you know, we are actively trying to understand the all of the factors that have gone into the outcomes that we presented about the reduction in student loan borrowing, and at least one of those factors has to be the middle class scholarship. So it's very hard to predict exactly how much additional borrowing would take place, but we certainly know that students, like anyone else, are rational consumers. And if they don't have to borrow, they won't.
And so a decrease in the middle class scholarship, I would anticipate, would result in an increase in borrowing.
Speaker 1
And would you anticipate that your system would be able to offset any of that reduced grant amount if that were to happen?
Speaker 13
From a CSU perspective, the current award this year is $3,224. So we would as an average so we would expect that average to go down to about 1,612. As we've talked about students that are in that middle income that maybe their income levels are outside of Cal Grant. This is the only grant that they receive. So it's really MCS and borrowing.
So either they're going to especially for new students they may just forego altogether because they don't we have a large population of students that are loan borrowing adverse. So having that grant funding is what helps them balance not they pay for the rest out of their family's pocket or out of their own pocket because they don't want to borrow student loans. So it could be the meaning between going to school and looking at it from an affordability perspective and skipping altogether. So I think we can't understand the impacts. There's not a way for us to look at all of the students who get their admissions letter and financial aid letter and then don't show up at the CSU to go out and say to them, Why didn't you come here?
So that is something that we have to anticipate that some students will make a decision either not to go.
Speaker 1
No, I appreciate that. And I actually received a middle class scholarship right as I was graduating because the implementation, you know, of this program happened to go into effect right as I was exiting from school and, you know, just knowing the difference that it makes overall in terms of I also utilize loans, right, to get through my time at Cal State LA and just the overall financial impact that that has for students, I realize, right? I knew so many students, particularly during that time period, like twenty ten, who dropped out as a result of financial costs, right? We were facing some real financial costs here at the state and major budget cuts that had happened leading to increases in tuition. There were student success fees, as you probably remember, and it was really devastating.
And a lot of those friends that I saw leave, they never came back. And I, you know, it's troubling because those are, you know, folks that then don't have their degree and then are facing other challenging financial circumstances as a result in a very competitive job market. So all of this has a trickle effect, and I think it's really important for us to recognize that. Well, thank you all for that presentation. We're going to go ahead and move on to issue number five, which is capital outlay.
And this is capital outlay projects at the California Community Colleges. So we're going to start with the Chancellor's Office and then turn to DOF and LAO for further comments.
Speaker 18
Chris Ferguson, Executive Vice Chancellor of Finance and Strategic Initiatives at the California Community College Chancellor's Office. The Governor's budget proposes funding for the continuation of 29 projects that were approved in the last budget, the twenty five-twenty six budget, which totaled $748,000,000 once they come to, the state through all phases of the project. The governor's budget this year proposes roughly 400,000,000, just under 400,000,000 in additional state resources to support 10 new projects, that would move forward over time, again following the state public works board, processes to bring those projects to fruition. Of the 400,000,000 that the state would fund, there's roughly another $350,000,000 that would be provided locally to support those projects through to completion. We remain in strong support of the plan as we think this meets the facilities' needs of our system.
Clearly, our facilities' needs well exceed available bond resources, and would just continue to support anything that can be done to address our facilities' needs. Thank you.
Speaker 16
Good afternoon, Chair Perez. In 2000, Alexander Waldman with the Department of Finance.
Speaker 16
In 2024, voters approved proposition two, a state general obligation bond, which provided 1,500,000,000.0 for the state's community college facilities. The Budget Act of 2025 included funding for the design phases of 29 new projects with budget year state costs of 54,700,000.0 and total state project costs of 763,700,000.0. The 29 new projects in 2025 included five fire life safety projects, 16 modernization projects, and eight growth projects. The 2026 governor's budget includes $7.00 9,000,000 for the construction phases of those 29 projects approved in the 2025 budget act. The 2026 governor's budget also includes proposals for 10 new projects with a budget year state cost of 27,800,000.0 and a total state project cost of 399,400,000.0.
Speaker 26
The 10 new projects proposed for 2026 include seven modernization projects and three growth projects. In total, all the projects funded in 2025 and proposed in 2026 represent just over 1,250,000,000.00 of the Proposition two authority and would leave 249,300,000.0 remaining for future projects. Thank you. Happy to take any questions.
Speaker 9
Lisa King with the Legislative Analysts Office. I'll focus my comments on the 10 new projects that are included in the Governor's budget and in particular on the scoring system that the Chancellor's Office used to select these projects from among the broader set of district proposals. In general, we think the scoring system is reasonable providing a consistent and transparent way to prioritize among proposals. However, we've identified four potential issues that I'll briefly walk through and if any of these issues raise notable concerns for the legislature, it could direct the Chancellor's Office to adjust that scoring system and work with the administration to propose a new set of projects. The first of these issues relates to the split of funding between modernization projects and growth projects.
Speaker 23
Under the scoring system, modernization projects receive up to 65% of funding allocated each year. But when we look at the system's identified capital outlay needs, modernization actually accounts for a higher share of those identified needs, 84%. Our concern here is that providing insufficient funding for facilities modernization can lead to higher future project costs as well as potential programmatic disruptions. The second issue relates to the distribution of this funding among campuses. Currently, the scoring system does not account for whether a given campus has previously received Proposition two funding and so at the Governor's budget, we have some campuses receiving multiple Proposition two projects and other campuses that haven't yet received any funding under this bond.
Speaker 9
The third issue relates to local contributions. Although the scoring system does provide priority points to projects that have higher local contributions, we are still seeing this year that several of the projects proposed are at the lower end of the allowable range for local contributions, providing 25% to 35% of total project costs using district funds. The fourth and last issue relates to the type of space prioritized. Prior to 2020, the Chancellor's Office used an older scoring system that designated the majority of funding each year toward instructional space. The current scoring system no longer differentiates by type of space and we are seeing that under proposition two somewhat large share of projects are other types of space including gymnasiums and performing arts centers.
Thank you and I'm happy to take any questions.
Speaker 1
Thank you. I'd love to hear what processes do you have in place to address cost overruns that may occur during project timelines. I think that there may have been one of these projects proposed in my district that actually ran into some issues. I think they've since resolved them, I want to say, forgetting which district it was off the top of my head, but there was some sort of issue with with builder that they were working with. So how do you address and prevent some of those issues and make sure that there's not cost overruns?
Speaker 18
Yeah, certainly we want districts to move as quickly and expeditiously as they can to enter into contract to avoid those types of cost overruns. One of the biggest issues we've seen, and it's across the state, is the longer it takes to get into contract, the longer it takes to bring that project forward, the higher the costs go. So most of the time when we're submitting initial cost estimates for a project, they're based on a point in time with a projection of where we think those costs will ultimately land. But it is possible that due to inflation and other factors that the longer it takes to bring the project forward, can drive some of those cost increases. So certainly, we work with districts to try and minimize the likelihood that that occurs, but it does occur from time to time.
Secondarily, from a capital outlay perspective, you know, the ultimate limitation is the amount of available state bond resources. So the more that a project cost or the more that it draws down from a state bond, the fewer other otherwise available statewide projects that we can get to. So from our perspective, we're constantly pushing districts to, you know, maximize the value, value engineer wherever possible, that is always an option, and do all that they can to be as efficient and effective with the resources that are available so that we can maximize the number of projects that can be fulfilled statewide.
Speaker 16
Alexandra Waldman with the Department of Finance. I'll just add that once there's an appropriation in the budget, the state amount is fixed, so there's an established expectation that districts find local sources to fund the remainder.
Speaker 1
So understanding that the timeline piece is really huge because as you said, like the more a project gets delayed, the higher those costs go up. I think we're seeing that in a number of things that we're investing in here at the state. So how do you address that timeline to make sure that, you all are cutting down on that as much as possible? And but I, at the same time, recognize there's been real issues with like construction costs and getting materials.
Speaker 18
Yeah, so certainly from our perspective, we try to work with the Department of Finance and the State Public Works Board ultimately to move our projects forward as expeditiously as possible. We are subject to that traditional process with the state though for working drawing and working drawings and planning, construction phases, closeout phases. So we try to move that as fast as possible. There are projects though that can sit for a number of years because there aren't enough available state resources on our list, and those inevitably will lead to increased cost. On the value engineering side, I bring that up because what we are trying to do to try and help districts on the front end is say be as efficient as you can, design it with the materials that are available, do what you can to move as expeditiously as possible, and you know, on occasion there will be districts that we can push to enter into contract with contingencies, saying it's contingent on, you know, certain things occurring.
Not all builders or responsive contractors or sorry, responsive bidders are willing to enter into those types of arrangements, but sometimes they will be.
Speaker 1
I think that's it in terms of my questions on this item. Yeah. Thank you.
Speaker 1
heard all discussion items and since there are no further questions, we are now going to move on to public comment. If there's anyone in Room 2100 who wants to provide public comment on items that were on today's agenda, then please line up and we ask that you limit your testimony to one minute. And I will have on a timer. I'll try to make sure that timer is loud enough for you all to hear it as well. And we will begin.
Speaker 14
You. Hello, Madam Chair. I'm McKenna Mestaza with NextGen California and a member of the Financial Aid Big Table. As the state prepares to implement the federally required Workforce Pell Grant, we respectfully urge legislature to include a policy framework in a budget trailer bill to ensure clear accountability standards for educational programs and enhance affordability for students who are seeking workforce pathways. Implementing California agencies should be responsible for collecting these program outcome datas to confirm eligibility for workforce Pell Grants in a streamlined process.
Speaker 19
Any educational programs that are eligible for workforce Pell Grants should focus on proven models that protect students and advance their education or training in order to also enhance the affordability for students and fully leverage new federal dollars for both students and public institutions, modify the Cal Grant C program to align with Workforce Pell. Thank you, and we look forward to continuing to work with the legislature and governor to implement Workforce Pell in a way that maximizes benefits for California students.
Speaker 27
Good morning Chair Perez and committee staff. My name is Correa Payton and I'm here on behalf of Ed Trust West. College affordability remains one of the most significant barriers to earning a degree. We urge the legislature to consider additional investments to maximize state and federal financial aid opportunities for low income students who need financial support to enroll in college. We are grateful for the legislature's more than fifty years of support for the Cal Grant program, however, while Cal Grant awards for tuition at UC and CSU have kept pace with rising costs, support for nontuition expenses has fallen dramatically behind.
Speaker 20
Today, the maximum Cal Grant B access award is just $16.48 dollars less than one fifth of its original value. Even when combined with the maximum Pell Grant, students still face significant gaps, covering less than one third of average non tuition costs, contributing to widespread basic needs and security across our college campuses. We respectfully urge the legislature to invest in regional and college access infrastructure, fund 10,000,000 for ongoing support for student financial aid administration and increased Cal Grant B access. Thank you.
Speaker 24
Good afternoon, Chair Perez. My name's Andrea Terry. I'm an associate professor at Sacramento State, a double alum of the CSU, and I'm a member of the California Faculty Association. At Sacramento State, we're having serious issues with our budget. We're facing critical staff shortages that mean that we can't hire student assistants for research and other high impact experiences that employers want.
Speaker 21
Our full time faculty are decreasing. Our temporary faculty members are increasing, making our workforce more and more precarious. At the same time, class sizes are going up. We know that this isn't great for education. Along those lines, I urge you to support Assembly Member Fong's budget request for full compact funding for the current year and the twenty six-twenty seven budget year.
Funding increases should be directed towards instruction and direct student support, not administrator salaries. Further, I ask that you tie executive compensation to meeting enrollment targets. Thank you.
Speaker 20
Good afternoon, Madam Chair. Mario Guerrero, a Government Affairs Director with California Faculty Association, as well as faculty at Sacramento State. I won't repeat what my colleague just mentioned, but I will add just one piece. We know that the CSU is currently engaged in funding reallocation between campuses, that have higher enrollments and campuses that are not meeting enrollment targets. We're really concerned with any kind of effort to further, engage in that as it hurts those campuses that aren't meeting enrollment targets with their ability to rebound and really bring, students back to campuses.
Speaker 22
And it hurts the students that in those campuses that will feel less resources, less faculty. We also believe that executive compensation should be tied to a number of indicators, one of them being enrollment. If executives are going to be paid these high salaries, they should be responsible for ensuring that we meet enrollment targets. Thank you very much for your time.
Speaker 8
Good afternoon. Jessie Hernandez, on behalf of the Campaign for College Opportunity. We're grateful for the legislature's ongoing support of the Cal Grant program, which has helped California students cover the cost of college for more than fifty years. As California students continue to struggle meeting their total cost of attendance, a majority of which encompasses rising non tuition college costs, we urge the legislature to consider how Cal Grant awards can be strengthened to better meet student needs. Most Cal Grant recipients in California are Cal Grant B recipients and use this award to meet their non tuition college costs.
Speaker 23
To better help Cal Grant or to better help Cal Grant award recipients, support California students, we urge the legislature to strengthen need based financial aid by ensuring that the minimum Cal Grant B access award better addresses rising non tuition costs faced by our state's lowest income students. This will help students better meet their college affordability costs, and in turn, allow California to produce more college graduates, strengthening the state's workforce economy and democracy. Thank you.
Speaker 13
Good afternoon. Jessica Sacco on behalf of Children Now. Relative to Cal Grants, we would support additional funding for Cal Grants to ensure equitable access to higher education. Specifically, as co sponsors of SB ten oh six, we ask that the state set a new statutory minimum for Cal Grant B access. Related to the Student Aid Commission, we urge the committee to include $100,000,000 for the Golden State Teacher Grant Program.
Our teacher shortage is not over, and this successful program must be continued in order for the state to continue to recruit a diverse talent pool to the teaching profession. Thank you.
Speaker 31
Good afternoon. Sara Bula Bibsa on behalf of the Institute for College Access and Success. We respectfully urge the inclusion of trailer bill language to address critical college affordability and consumer protection issues. First, with the July 1 rollout date for Workforce Pell fast approaching, we recommend trailer bill language that establishes an implementation process which ensures federal compliance in addition to critical consumer protection guardrails for students and taxpayers that prioritize high quality programs, affordability, and strong economic outcomes. Second, we are grateful that the legislature has funded the Cal Grant program to help California students pay for college.
Speaker 24
However, support for non tuition costs has failed to keep pace with rising costs. The maximum Cal Grant B access award that helps students pay for non tuition essentials has stagnated, covering only about 5% of most students' non tuition costs, and had it kept pace with inflation, it would be closer to $9,000 today. We urge trailer bill language that indexes this award and supplemental awards available to student parents and foster youth to the annual inflation rate in alignment with SB 1,006 and as a first step to a phase in approach to Cal Grant reform, as you noted today, Cher. Finally, in a time of federal deregulation, we respectfully urge you to prioritize the Bureau's fiscal solvency through fee modifications and support their efforts to prevent over increasing fees to meet costs by securing a one time $10,000,000 allocation from the general fund. We look forward to continue working with you and the legislature to ensure these items are included in trailblazer.
Thank you.
Speaker 2
Morning, good afternoon chair and members. My name is Amada Madrigal. I am a first generation student, a former foster youth, and a student parent of three at UC Berkeley. As an undergraduate student parent, I proudly serve on the advisory committee for the California Alliance for Student Parent Success. I returned to college after ten years of professional experience to gain the pay equity I deserve, but survival math is holding me back.
Speaker 25
Nontuition costs for student parents exceed $37,000 annually. Every hour I spend readjusting my cost of attendance and applying for additional grants and scholarships I may not get to cover rent is an hour stolen from my studies, discussions in class, and my children. Survival mode is education. We know that parents in school create future learning opportunities for their children. I experienced this firsthand when my sixth grade son's teacher thought he used AI because his writing had become so sophisticated.
He told her, No, my mom helped me. By indexing the Cal Grant B, California protects this multigenerational cycle of success, ensuring that my children are prepared to be the state's future workforce. I urge you to include trailer bill language to index Cal Grant B access awards to inflation as proposed in SB ten-six. Thank you.
Speaker 10
Hello. My name is Joanna, and I am a current student at UC Berkeley. I'm 35 years old, nontraditional student who is also a four point zero at Berkeley. Last year, I found myself in $16,000 worth of arrears in tuition and housing that left me not being able to enroll in this semester. I hope that you use this as an opportunity to see that real students who are having to choose between housing and securities, trying to get an education while also being a parent who is already stretched to its limit, is having to show their competency while also trying to obtain their education just to try to better themselves and the future of their children.
Speaker 26
And all we ask is for support in trying to remove the barriers that are holding us financially from being able to obtain our education. Thank you.
Speaker 2
Afternoon. Manuel Bondrostro, Director of Policy at California's Together, as an organization focused on ensuring the success of English learners. We're also part of the California Educator Diversity Action Network, and we're here to ask for $100,000,000 to be added to the budget for the Golden State Teacher Grant Program. This is a critical investment that continues to support our teachers, especially our teachers in our high need areas, and as an organization focused on multilingual learners, this is a critical investment that also supports many bilingual authorized teachers across California, especially, and also teachers in other high need areas. Thank you.
Speaker 18
Good afternoon chair and all present. My name is Saray Rogers and I'm completing my post graduate degree at Cal State Dominguez Hills. As a Golden State teacher grant recipient, I'm standing here because this program made it possible for me to stay in the classroom and complete my credential. Without it, the cost of transportation and housing would have made it extremely difficult to stay on this path. It could have easily pushed me out.
Speaker 27
And I'm not alone. Across California, we are asking future educators to take on tens of thousands of dollars in costs just to serve in the communities that need us most. The grant removes that barrier. It protects the teacher to community pipeline for our schools. If we want equity, if we want stability, and if we want results, then we have to invest in the people doing the work.
I respectfully urge the state senators to restore and keep the full funding going forward. Thank you.
Speaker 4
Good afternoon. My name is Evan Gabbard, and I'm an educator from San Rafael City Schools. And like Saray before, I'm also a recipient of the Golden State Teacher Grant. Teachers are asked to take on thousands of dollars in debt and work for free during student teaching. It's a huge barrier to access.
The Golden State Teacher Grant lowered this barrier for me and a lot of my cohort members, and it allows me to impact the community that I grew up in. So I'm here to urge you to provide $100,000,000 for the Golden State Teacher Grant. Thank you.
Good afternoon. Oh, sorry. Good afternoon. My name is Braden Shower, and I am a teaching resident in first grade in San Rafael City Schools, and I am also a Golden State Teacher Grant recipient. The Golden State Teacher Grant was influential in my decision to become a teacher because it allowed me to get my teaching credential without needing to take out loans.
Speaker 28
Additionally, my mom received the Golden State Teacher Grant in 2021 and is currently serving in a high need school. We are urging for $100,000,000 to continue the Golden State Teacher Grant program because it not only makes teaching an accessible profession, but it supplies high need schools with effective qualified teachers.
Speaker 11
Good afternoon, Chair Perez. My name is Karen Escholante. I'm an associate professor at California State University San Bernardino in the College of Education. I'm here on behalf of the California Council on Teacher Education. We represent almost every teacher preparation program in the state of California, including the CSUs, the UCs, and the privates.
Speaker 29
When we invest in teachers, children, our most precious resource, do better academically, emotionally, and mentally. As my UC colleague mentioned earlier, teachers are not considered professionals. As such, we are not eligible for loans. So, are asking for $100,000,000 to continue the Golden State Teacher Grant. Thank you.
Speaker 15
Good afternoon, Chair Perez. My name is Stephen Elmasan, the Director of Policy and Partnerships at EdVoice. On behalf of a coalition representing nearly 70 organizations, including Ed Trust West, public advocates, and many organizations here today, We urge you to continue the Golden State Teacher Grant Program with a $100,000,000 investment, which is operated and administered by the California Student Aid Commission. Research shows that teachers are the most important school based factor in student success, but the kids who need qualified teachers the most have the least access. More than 22,000 GSDG recipients have committed to teaching in high need schools, including over 50 schools in Senate District 25 and many other school Senate districts that need more qualified teachers.
Speaker 30
Over 90% also plan to stay beyond their service requirement, helping build the stability that schools need. Now is not the time to end the program with proven results. GSGG needs $100,000,000 to maintain its impact. If general fund dollars are not an option, you can continue we urge you to continue the program through Proposition 98. Thank you so much for your consideration.
Speaker 12
Vincent Hi, good afternoon, Chair Perez. Vincent Rasso with the University of California Student Association. And on behalf of the 230,000 students that we represent, just want to flag that, you know, I've had the privilege to meet with hundreds of students, staff, and practitioners across the state, and there's no question that the total cost of attendance has become the center of the conversation on college affordability. So really, really appreciate your leadership, your remarks on today's panels, and this is why UCSA supports our coalition's effort to index the Cal Grant to inflation, including for students with dependent children and foster youth. And so that way their financial aid dollars do not continue to lose value, especially for the nearly 15,000 UC students who are on a Cal Grant B who live in some of the highest cost areas in the state.
Speaker 31
I definitely think we shouldn't lose sight of the long term vision for Cal Grant Equity Framework, but as we are dealing with troubling budget times, UC students are also urging the legislature to fund emergency dollars to financial aid to basic needs centers and housing case management, as well as our disability service programs, as well as expanded support for our underground scholars so that system impacted students have educational opportunity. Also, as recipient, I know you mentioned in your remarks, but I actually got moved from Cal Grant to MCS in my second year. And so, as we're considering ways to really try to reshuffle where those priorities are, really just want to flag how instrumental MCS was for me being here, being able to graduate. And so, just thank you so much.
Speaker 28
Good afternoon, Chair Perez. My name is Alex Karim, and I'm here with the Alder Graduate School of Education. And I'm here to urge the California legislature to provide $100,000,000 of new funding to Golden State Teacher Grant Program. At a time when fully credentialed teachers entering the profession is declining across the country, that's not the trend in California. The number of credentialed teachers has increased for the second year in a row, and this is after a major drop during COVID, and that's when GSTG was first implemented.
Speaker 32
It's because of investments the state has made in attracting and supporting teacher candidates, most notably GSTG, that we have been able to reverse that huge drop in credentialed teachers. Please continue to invest in programs that we know work, especially those like GSTG. They benefit the teacher candidates, but also the students in the schools in which they serve.
Speaker 19
Hello and good afternoon Chair Perez and staff. My name is Valentino Rodriguez, and I am a student at Sac State. As a first generation college student, college access was not easy for me. When it came to college selection, my biggest my biggest challenge was financial aid. I'm pleased with my experience at Sac State, but one major choice that led me to that decision was financial aid.
Speaker 33
Sac State gave me the best financial aid, and it was a logical decision for me because I was I will be able to leave Sac State debt free. But if I had better living assistance and financial aid, I would have attended u University of California, Berkeley, where I gained acceptance. But if I went, I would have been thousands of dollars in debt. My point being is that there are so many hidden costs and nontuition expenses that I was not aware of heading into college and that my high school did not prepare me for. I urge you to support SB 1,006 by Senator Padilla and the budget request because Cal Grant B access award recipients need aid that reflects the high ongoing non tuition costs that are a barrier to student success thank you
Speaker 13
Good morning Chair Perez. My name is Jamari, a student activist at Sac State and a young Latino activist here in Sacramento. As a former homeless student pursuing higher education, it's extremely important that the A that I other students like me gets reflects the real cost of different things such as housing, groceries, books, and so much more. Although I deeply appreciate the legislator and Governor's ongoing support of Cal Grant and college student success, more work needs to be done to in order to continue to improve the conditions in which students find themselves and do to not receive financial aid which reflects real costs. For these reasons, I and more, I urge you to support SB1006 and budget requests that would increase the current CalABee access award and index it to CPI.
Speaker 34
When students basic needs are met, students can thrive academically and have an enjoyable college experience without having to worry about external issues. Thank you.
Speaker 16
Good afternoon, Chair Perez. My name is Meli Iguchuku. On behalf of the Association of Independent California Colleges and Universities, we'd like to note that students receiving the expanded community college entitlement grant are currently unable to use their remaining eligibility at private nonprofit institutions. As a result, these students lose over $9,000 in Cal Grant support when they choose to transfer to our institutions. That affects about 500 students, each year.
Speaker 35
We hope that the state will support our proposed two year pilot expansion to better assist community college students seeking to continue their educations at our institutions. We also uplift the Golden State Teacher Grant Program and encourage new funding for this initiative. Thank you.
Speaker 3
Hi, I'm Osei Nijan, a policy intern at U Aspire and requesting rejection of the cuts on the middle class scholarship as thousands of students will be missing an opportunity to come and speak here. Then I second, I support the CSAC request for 24,000,000 one time over the next three years to scale with inflation. And lastly, I ask for an additional 10,000,000 in ongoing for Prop 98 funding for community colleges to build more capacity for supporting students. Sons and daughters across the world are looking to join the college opportunities and cannot come here to defend their voice, and it's up to you to determine the future of thousands. And then to end off, we would like to state to engage and address through the budget process how we can implement workforce Pell in California, including establishing guidelines for what types of programs could qualify and how to prioritize funds for our students without need.
Speaker 25
Good afternoon. Tanisha Herring on behalf of the NAACP California State Conference. On behalf of the state conferences, 57 branches and 23 youth units, we strongly urge the state to continue funding for the Golden State Teacher Program at a $100,000,000. Teachers are the single most important factor in student success, yet too many students, especially black students and those in high need schools, are taught by unqualified teachers. The GSTH program has already helped over 22,000 qualified educators serve where they're needed the most, and 91% of those participants plan to stay beyond their commitment.
Speaker 37
This program works, and it addresses racial and geographic inequities, and it's essential to ensure every California student has a fully credentialed teacher in the classroom. We ask that you secure its future today. Thank you.
Speaker 17
Afternoon, Chair Perez. Thank you so much for your time today. My name is Karina Paredes with Public Advocates, which is a civil rights law firm and advocacy org dedicated to dismantling systems of poverty and racial injustice. As co sponsors of SB ten zero six with TCAS and Children Noninterest West by Senator Padilla, I urge you to support this bill and budget request that would increase the current Cal Grant B access award and index it to the consumer price index. We deeply appreciate the legislature and governor's ongoing support of Cal Grant and college student success.
Today's analysis highlighted a modest increase to Cal Grant, but that is intended to cover the planned tuition increases only. Cal Grant B does not have a guaranteed automatic increase, which means that its value continues to decrease as the cost of living continues to increase. As basic needs and security persist, especially for our most vulnerable students, this is a smart and powerful investment that will benefit 300,000 students at all public and private higher ed institutions, and many more for years to come. We also urge the California Legislature to provide a 100,000,000 in new funding for the Golden State Teacher Grant Teacher Program as a strategic evidence based way to directly address our state's persistent teacher shortage and strengthen academic outcomes for kids. You so much for your consideration.
Speaker 29
Good afternoon. I'm Tara George, a UC Davis student and an intern for U Aspire, speaking against the proposed cuts to the middle class scholarship. I personally benefit from the scholarship, and it has created a noticeable impact in my life, allowing me to attend a UC and be here today. This half $1,000,000,000 cut is staggering, and I am certain it will lead to a decrease in college enrollment and graduation rates in the coming years due to the new financial burden. There is no acceptable reason to put hundreds of thousands of students and their families under incredible strain.
Speaker 38
It is absolutely necessary to maintain the current budget. In addition, I would like the state to engage and address through the budget processes on how we can implement Workforce Pell in California, including establishing guidelines for what type of programs could qualify and how to prioritize funds for our students with most need. Thank you.
Speaker 5
Good afternoon, madam Chair Perez, Senator Perez. I am Steve Seyanez, and I am speaking on behalf of Unidos U. S, formerly known as the National Council for La Raza. And we're here to support the Golden State Teacher grant and its funding, the continuing funding of $100,000,000 It's a vital tool for empowering Latino educators, ensuring that our classrooms across the state reflect the diversity of California and its students. While over 55% of California's K-twelve students are Latino, Only about 22% of the state's teachers share that same heritage.
Speaker 39
So, for those reasons, we ask you to support the continuing funding of the GSDG grant.
Speaker 1
Members of the public wishing to speak, I'd like to thank all the individuals who participated in public testimony today. If you are not able to testify today, please submit your comments or suggestions to the Budget and Fiscal Review Committee or visit our website. Your comments and suggestions are important to us and we want to include your testimony in the official hearing records. Thank you all and we appreciate your participation. We have concluded the agenda for today's hearing.
The Senate Budget Subcommittee one on Education is adjourned.
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