Under existing law, the California Student Housing Revolving Loan Fund Act of 2022, 2022 (loan act), the California School Finance Authority or the California Educational Facilities Authority, as applicable, provide zero-interest loans to qualifying applicants of the University of California, the California State University, and the California Community Colleges for the purpose of constructing affordable student housing and affordable faculty and staff housing, as provided. Existing law establishes the California Student Housing Revolving Loan Fund as a continuously appropriated fund in the State Treasury.

Existing law requires the Pooled Money Investment Board to determine whether moneys on deposit in the State Treasury, exclusive of the General Fund and other specified funds, is not necessary for immediate use and, if so, to determine the amount which is then designated as surplus moneys. Existing law creates the Surplus Money Investment Fund and requires the Controller to transfer surplus moneys to it, provided that moneys from a special fund are not to be transferred if that will interfere with carrying out the purposes that the special fund supports. Existing law requires that moneys in the Surplus Money Investment Fund be invested by the Treasurer as part of the Pooled Money Investment Account. Under existing law, moneys in the Surplus Money Investment Fund are continuously appropriated.

This bill would require require, upon appropriation by the Legislature, as described, the Controller to transfer $200,000,000 in the 202425 fiscal year to the California Student Housing Revolving Loan Fund from the Surplus Money Investment Fund and other funds in the Pooled Money Investment Account that accrue interest to the General Fund as a cash loan, for purposes of funding, commencing with the 202425 fiscal year, funding the program supported by the California Student Housing Revolving Loan Fund. The bill would require the loan principal and interest to be fully repaid on or before June 30, 2029, 2035, as described. By providing that moneys in a continuously appropriated fund may be used for a new purpose, and by depositing new moneys into a continuously appropriated fund, the bill would make an appropriation. The bill would require that loans made to applicants under the loan act from moneys made available pursuant to the cash loan be repaid at a 3% interest rate.

Existing law establishes the California Community Colleges, under the administration of the Board of Governors of the California Community Colleges, as one of the segments of public postsecondary education in this state. Existing law establishes community college districts throughout the state, and authorizes them to provide instruction at the campuses they operate and maintain. Existing law requires the governing board of a community college district, before establishing a vocational or occupational training program, to conduct a job market study of the labor market area, as specified.

This bill would make nonsubstantive changes in the latter provision.

SENATE COMMITTEE ON

Senator Anna Caballero, Chair

2023 - 2024 Regular Session

AB 2076 (McCarty) - California Student Housing Revolving Loan Fund Act of 2022: state fund loan

Bill Summary:

This bill requires the State Controller to loan $200 million from the Pooled Money Investment Account (PMIA) and deposit it into the Student Housing Revolving Loan Fund (SHRLF) for 30-year loans to the California Community Colleges (CCC), California State University (CSU), and University of California (UC) to support affordable student, faculty, and staff housing.

Fiscal Impact:

• The bill would provide a loan of $200 million, contingent upon an appropriation, from the PMIA to the SHRLF. Since the principal and interest for the loan would need to be repaid by June 30, 2035 or earlier, this bill would result in General Fund costs of about $246.6 million. This estimate assumes an interest rate of 4 percent and annual costs of $24.7 million over a ten-year period.
• The State Treasurer’s Office indicates the potential significant cost of using temporarily idle funds in the PMIA to make a long-term loan to the General Fund to pay for infrastructure that is inconsistent with the purpose of the PMIA and the funds that are deposited in the PMIA. Through the PMIA, the State Treasurer invests taxpayers’ temporarily idle money to manage the State’s cash flow and strengthen the financial security of local governmental entities. The PMIA is not a long-term investment vehicle, and all depositors can withdraw their funds within the constraints of the claim schedule process, which can be same day or next day claims. The State Treasurer’s Office indicates that loans of this nature impact the ability of the PMIA to help the state meet its day-to-day obligations, and provide Safety, Liquidity and Yield to all of the participants within the PMIA. Because the Treasurer must maintain sufficient liquidity to meet the daily demands of the State and local governments to pay their bills/withdraw funds, the PMIA primarily invests in short-term investments.

Background:

Existing law establishes SHRLF in the State Treasury to provide zero-interest loans to qualifying CCC, CSU, and UC applicants for the purpose of constructing affordable student housing and affordable faculty and staff housing. The law stipulates that all moneys in the fund are hereby continuously appropriated without regard to fiscal years.

Existing law appropriates $200 million from the General Fund, for the 2023-24 fiscal year, to be deposited in the SHRLF. Existing law also states the intent of the Legislature to appropriate the following in subsequent fiscal years to be deposited in the SHRLF: $300 million in the 2024–25; $300 million in the 2025–26; $300 million in the 2026–27; $300 million in the 2027–28; and $300 million in the 2028–29.

Existing law authorizes the State Treasurer to pledge any or all of the moneys in SHRLF as security for payment of the principal of, and interest on, a particular issuance of bonds by a designated lending authority. The Treasurer may invest moneys in SHRLF that are not required for its current needs, including proceeds from the sale of bonds, in eligible securities, as specified, all interest or other increment resulting from the investment or deposit of moneys from the SHRLF shall be deposited in the SHRLF.

The State Treasurer invests taxpayers’ money to manage the State’s cash flow and strengthen the financial security of local governmental entities through the PMIA. The PMIA has three primary sources of funds: the State GF; special funds held by State agencies; and moneys deposited by cities, counties, and other entities into the Local Agency Investment Fund. At the end of March 2024, the PMIA portfolio totaled approximately $156.5 billion. The daily investment activity in March 2024 averaged $2.754 billion.

Proposed Law:

This bill requires the State Controller, upon appropriation by the Legislature, to loan $200 million from the PMIA in the 2024-25 fiscal year, and deposit it into the SHRLF.

This bill provides that the loans made to applicants that are from moneys transferred shall be repaid at a 3-percent interest rate, and that the principal and interest for the cash loan made shall be fully repaid on June 30, 2035 or earlier without penalty.

This bill requires that the interest rate on the cash loan made shall be equal to the PMIA average monthly effective yield rate, as determined by the Treasurer. The interest shall be repaid from the General Fund.

Staff Comments:

AB 190, the Higher Education Trailer Bill (Committee on Budget, Chapter 572, Statutes of 2022), authorizes the California Educational Facilities Authority (CEFA) and the California School Finance Authority (CSFA) to develop the SHRLF to provide zero-interest loans to qualifying colleges and universities to construct affordable student, faculty, and staff housing. It requires the CSFA to develop an application and consider applications from qualifying community colleges, and for CEFA to consider applications from qualifying applicants of the UC and CSU. At the time, it was the intent of the Legislature to appropriate $900 million in 2023-2024 and $900 million in 2024-2025. However, SB 117 (Committee on Budget and Fiscal Review, Chapter 50, Statutes of 2023) amended the funding levels for the SHRLF and allocates $200 million for the 2023- 2024 fiscal year, with the intent to appropriate $300 million for each fiscal year from 2024–2025 through 2028–2029, totaling $1.7 billion, to be deposited in the SHRLF. Under SB 117, 75 percent of the $200 million must be available for UC and CSU applicants, and 25 percent for community college applicants.

This bill requires the State Controller, upon appropriation by the Legislature, to loan $200 million from the PMIA in the 2024-25 fiscal year, and deposit it into the SHRLF.

-- END --

SENATE COMMITTEE ON EDUCATION

Senator Josh Newman, Chair

2023 - 2024 Regular

Bill No: AB 2076 Hearing Date: June 5, 2024

Subject: California Student Housing Revolving Loan Fund Act of 2022: state fund loan.

SUMMARY

This bill requires the State Controller to loan $200 million from the Pooled Money Investment Account (PMIA) and deposit it into the Student Housing Revolving Loan Fund (SHRLF) for 30-year loans to the California Community Colleges (CCC), California State University (CSU), and University of California (UC) to support affordable student, faculty, and staff housing.

BACKGROUND

Existing law:

1. Establishes the SHRLF Act of 2022 and establishes SHRLF in the State Treasury to provide zero-interest loans to qualifying CCC, CSU, and UC applicants for the purpose of constructing affordable student housing and affordable faculty and staff housing. Stipulates that all moneys in the fund are hereby continuously appropriated without regard to fiscal years.
2. Appropriates for the 2023–24 fiscal year (FY), the sum of $200 million from the General Fund (GF), to be deposited in the SHRLF. States that it is the intent of the Legislature to appropriate the following in subsequent fiscal years to be deposited in the SHRLF:
3. $300 million in the 2024–25 FY;
4. $300 million in the 2025–26 FY;
5. $300 million in the 2026–27 FY;
6. $300 million in the 2027–28 FY; and,
7. $300 million in the 2028–29 FY.
8. Authorizes the State Treasurer to pledge any or all of the moneys in SHRLF as security for payment of the principal of, and interest on, a particular issuance of bonds by a designated lending authority. The Treasurer may invest moneys in SHRLF that are not required for its current needs, including proceeds from the sale of bonds, in eligible securities, as specified, all interest or other increment resulting from the investment or deposit of moneys from the SHRLF shall be deposited in the SHRLF.
9. Stipulates that moneys in the SHRLF may not be subject to transfer to any other funds, as specified, except to the Surplus Money Investment Fund. (Education Code (EC) Section 67329.1, et seq.)
10. Establishes the Pooled Money Investment Board (PMIB), consisting of the State Controller, State Treasurer, and the Director of Finance. The PMIB is required to meet at least once in every three months and must designate at least once a month the amount of money available for investments in securities, as specified, or in deposits in banks and savings and loan associations, or in loans to the GF and the type of investment or deposit. Authorizes the PMIB to increase the amount of surplus money normally available for time deposits with the express purpose of placing this money in banks that are members of a California job development corporation and who have made loans to such a corporation or to corporation-approved borrowers. The PMIB governs PMIA (Government Code Sections 16430 and 16480.1, et seq.).

ANALYSIS

This bill:

1. Requires the State Controller, upon appropriation by the Legislature, to loan $200 million from the PMIA in the 2024-25 fiscal year, and deposit it into the SHRLF.
2. Stipulates that loans made to applicants that are from moneys transferred shall be repaid at a 3-percent interest rate.
3. Stipulates that the principal and interest for the cash loan made shall be fully repaid on June 30, 2035 or earlier without penalty.
4. Requires the interest rate on the cash loan made shall be equal to the PMIA average monthly effective yield rate, as determined by the Treasurer. The interest shall be repaid from the GF.

STAFF COMMENTS

1. Need for the bill. According to the author, “By removing this program's funding, as proposed in the 2024-25 Governor’s Budget, there are few ongoing funding sources or financing tools to help California's public colleges and universities meet the growing need for affordable student housing. The Higher Education Student Housing Grant Program, for example, is currently oversubscribed.”

The author contends that, “loaning $200 million to the California Student Housing Revolving Loan Fund would leverage short-term funding to create an ongoing, self-sustaining funding stream to help finance affordable student housing at our public colleges and universities. This program is used to issue zero-interest loans to UC, CSU, and CCC campuses to construct an estimated 25,000 student housing beds below market rate, making student housing more affordable.”

1. The California Educational Facilities Authority (CEFA). The CEFA was established in 1973 and is housed in the Office of the State Treasurer, and was created for the purpose of issuing revenue bonds to assist private non-profit institutions of higher learning, in the expansion and construction of educational facilities. Because it is authorized to issue tax-exempt bonds, the CEFA may provide more favorable financing to such private institutions than might otherwise be obtainable.

The law specifically provides that bonds issued under this Act shall not be a debt, liability, or claim on the faith and credit or the taxing power of the State of California, or any of its political subdivisions. The full faith and credit of the participating institution is normally pledged to the payment of the bonds.

1. What is SHRLF? According to CEFA, on September 27, 2022, the SHRLF Act of 2022 was chaptered into law with the passing of AB 190, the Higher Education Trailer Bill (Committee on Budget, Chapter 572, Statutes of 2022), authorizing CEFA and the California School Finance Authority (CSFA) to develop the SHRLF to provide zero-interest loans to qualifying colleges and universities to construct affordable student, faculty, and staff housing. It would require CSFA to develop an application and consider applications from qualifying CCC, as provided, and CEFA to consider applications from qualifying applicants of the UC or the CSU systems, as specified. It was the intent of the Legislature to appropriate $900 million in the 2023-2024 FY and $900 million in the 2024-2025 FY.

However, on July 10, 2023, SB 117 (Committee on Budget and Fiscal Review, Chapter 50, Statutes of 2023) was chaptered into law amending the funding levels for the SHRLF and allocating $200 million for the 2023- 2024 FY, with the intent to appropriate $300 million for each FY starting from FY 2024–2025 through FY 2028–2029, totaling $1.7 billion, to be deposited in the Fund. Per SB 117, 75% of the $200 million allocation must be available for UC and CSU applicants, and 25% must be available for CCC applicants.

The SHRLF requires the development of a new revolving loan program under CSFA and CEFA. This SHRLF requires policy development, underwriting criteria, regulation development, forms development, and a loan tracking system. In addition, staff have to review the loan applications and make recommendations to their respective boards to approve the loans. Since this is a revolving loan program, it would be replenished through the repayment of loans, thus it would be ongoing. In addition, CSFA and CEFA would be empowered to issue bonds in the future to replenish SHRLF if the demand were there.

The author states that, “students who would typically not attend a college due to the high cost of living associated with that campus will then be able to attend since funds used via this program results in affordable housing. This will greatly benefit lower-income and historically marginalized communities trying to attain higher education.”

1. What is PMIA? Through PMIA, the State Treasurer invests taxpayers’ money to manage the State’s cash flow and strengthen the financial security of local governmental entities. The PMIA policy sets as primary investment objectives safety, liquidity and yield.

The Investment Division of the State Treasurer’s Office manages the PMIA. The PMIB governs the PMIA. The PMIA has three primary sources of funds: the State GF; special funds held by State agencies; and moneys deposited by cities, counties, and other entities into the Local Agency Investment Fund (LAIF). At the end of March 2024, the PMIA portfolio totaled approximately $156.5 billion. The daily investment activity in March 2024 averaged $2.754 billion.

Investment Division staff invest PMIA funds in a wide range of securities, using more than 100 brokers, dealers, banks, and direct issuers of commercial paper and corporate debt. By law, PMIA moneys can be invested in the following categories: U. S. government securities, securities of federally-sponsored and supranational agencies, domestic corporate bonds, foreign government bonds, money market mutual funds, interest-bearing time deposits in California banks, savings and loan associations and credit unions, prime-rated commercial paper, repurchase and reverse repurchase agreements, security loans, banker's acceptances, negotiable certificates of deposit and loans to various bond funds.

Through the PMIA, the Investment Division manages two programs of particular note: the LAIF and time deposits.

The LAIF allows cities, counties and special districts to place money in a major portfolio and, at no additional costs to taxpayers, use the expertise of Investment Division staff. Participating agencies can withdraw their funds from the LAIF at any time. At the end of March 2024, the LAIF had 2,346 participating agencies and a balance of $21.0 billion.

Under the time deposit program, the PMIA provides money to community banks at competitive rates. Eligible institutions are commercial banks, savings banks, and credit unions that are federally insured and licensed to accept deposits in the State of California. Banks which receive time deposit funds can use the money to expand economic opportunity and create jobs in the communities they serve. At the end of March 2024, the PMIA had 152 time deposits totaling $5.1 billion in 55 institutions.

1. Arguments in Support. According to the UC, “University students are struggling to find affordable housing options throughout California. University of California campuses reported over 16,000 students signed up for waitlists for campus housing. University of California has approximately 6,500 student beds across the system that could be built if funding were available. The California Student Housing Revolving Loan Fund would allow campuses to proceed with these projects to create more available campus housing for students.”

The CSU Office of the Chancellor states that, “Because of the state’s current budget shortfall, the funding [SHRLF] was pulled back in the Governor’s January Budget proposal. By utilizing the funding within the Pooled Money Investment Account, AB 2076 represents a creative approach to secure the necessary funding to initiate this important revolving loan program. The zero-interest loan program is critical to providing affordable housing and address the needs facing so many of our students, staff, and faculty.”

SUPPORT

None received

OPPOSITION

None received

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 2076

Author:(McCarty)

As Amended Ver:May 16, 2024

Majority vote

SUMMARY

Requires the State Controller, upon appropriation by the Legislature, to loan $200 million from the Pooled Money Investment Account (PMIA) in the 2024-25 fiscal year, and deposit it into the Student Housing Revolving Loan Fund (SHRLF), which provides 30-year loans to the California Community Colleges (CCC), California State University (CSU), and University of California (UC) to support building affordable student, faculty, and staff housing. Stipulates that the CCC, CSU, and UC must repay the loans at a 3% interest rate.

Major Provisions

1. Stipulates that the loan principal and interest (as enumerated in the summary) must be fully repaid on or before June 30, 2035. The loan may be fully repaid sooner than that date to avoid incurring a penalty.
2. Requires that the interest rate on the cash loan must be equal to the PMIA average monthly effective yield rate, as determined by the Treasurer. The interest must be repaid from the General Fund (GF).

COMMENTS

The California Educational Facilities Authority (CEFA). The CEFA was established in 1973, is housed in the Office of the State Treasurer, and was created for the purpose of issuing revenue bonds to assist private non-profit institutions of higher learning, in the expansion and construction of educational facilities. Because it is authorized to issue tax-exempt bonds, the CEFA may provide more favorable financing to such private institutions than might otherwise be obtainable.

The law specifically provides that bonds issued under this Act shall not be a debt, liability, or claim on the faith and credit or the taxing power of the State of California, or any of its political subdivisions. The full faith and credit of the participating institution is normally pledged to the payment of the bonds.

What is SHRLF? According to CEFA, on September 27, 2022, the SHRLF Act of 2022 was chaptered into law with the passing of AB 190, the Higher Education Trailer Bill (Committee on Budget) Chapter 572, Statutes of 2022, authorizing CEFA and the California School Finance Authority (CSFA) to develop the SHRLF to provide zero-interest loans to qualifying colleges and universities to construct affordable student, faculty, and staff housing. It would require CSFA to develop an application and consider applications from qualifying CCC, as provided, and CEFA to consider applications from qualifying applicants of the UC or the CSU systems, as specified. It was the intent of the Legislature to appropriate $900 million in the 2023-2024 FY and $900 million in the 2024-2025 FY.

However, on July 10, 2023, SB 117 (Committee on Budget and Fiscal Review) Chapter 50, Statutes of 2023, was chaptered into law amending the funding levels for the SHRLF and allocating $200 million for the 2023- 2024 FY, with the intent to appropriate $300 million for each FY starting from FY 2024–2025 through FY 2028–2029, totaling $1.7 billion, to be deposited in the Fund. Per SB 117, 75% of the $200 million allocation must be available for UC and CSU applicants and 25% must be available for CCC applicants.

The SHRLF requires the development of a new revolving loan program under CSFA and CEFA. This SHRLF requires policy development, underwriting criteria, regulation development, forms development, and a loan tracking system. In addition, staff have to review the loan applications and make recommendations to their respective boards to approve the loans. Since this is a revolving loan program, it would be replenished through the repayment of loans, thus it would be ongoing. In addition, CSFA and CEFA would be empowered to issue bonds in the future to replenish SHRLF if the demand were there.

What is PMIA? Through PMIA, the State Treasurer invests taxpayers' money to manage the State's cash flow and strengthen the financial security of local governmental entities. The PMIA policy sets as primary investment objectives safety, liquidity and yield.

The Investment Division of the State Treasurer's Office manages the PMIA under statutory. The Pooled Money Investment Board (PMIB) governs the PMIA. The PMIA has three primary sources of funds: the State GF; special funds held by State agencies; and moneys deposited by cities, counties, and other entities into the Local Agency Investment Fund (LAIF). At the end of March 2024, the PMIA portfolio totaled approximately $156.5 billion. The daily investment activity in March 2024 averaged $2.754 billion.

Investment Division staff invest PMIA funds in a wide range of securities, using more than 100 brokers, dealers, banks and direct issuers of commercial paper and corporate debt. By law, PMIA moneys can be invested in the following categories: U. S. government securities, securities of federally-sponsored and supranational agencies, domestic corporate bonds, foreign government bonds, money market mutual funds, interest-bearing time deposits in California banks, savings and loan associations and credit unions, prime-rated commercial paper, repurchase and reverse repurchase agreements, security loans, banker's acceptances, negotiable certificates of deposit and loans to various bond funds.

Through the PMIA, the Investment Division manages two programs of particular note: the LAIF and time deposits.

The LAIF allows cities, counties and special districts to place money in a major portfolio and, at no additional costs to taxpayers, use the expertise of Investment Division staff. Participating agencies can withdraw their funds from the LAIF at any time. At the end of March 2024, the LAIF had 2,346 participating agencies and a balance of $21.0 billion.

Under the time deposit program, the PMIA provides money to community banks at competitive rates. Eligible institutions are commercial banks, savings banks and credit unions that are federally insured and licensed to accept deposits in the State of California. Banks which receive time deposit funds can use the money to expand economic opportunity and create jobs in the communities they serve. At the end of March 2024, the PMIA had 152 time deposits totaling $5.1 billion in 55 institutions.

According to the Author

According to the author, "by removing this program's funding, as proposed in the 2024-25 Governor's Budget, there are few ongoing funding sources or financing tools to help California's public colleges and universities meet the growing need for affordable student housing. The Higher Education Student Housing Grant Program, for example, is currently oversubscribed."

The author contends that, "loaning $200 million to the California Student Housing Revolving Loan Fund would leverage short-term funding to create an ongoing, self-sustaining funding stream to help finance affordable student housing at our public colleges and universities. This program is used to issue zero-interest loans to UC, CSU, and CCC campuses to construct an estimated 25,000 student housing beds below market rate, making student housing more affordable."

The author states that, "students who would typically not attend a college due to the high cost of living associated with that campus will then be able to attend since funds used via this program results in affordable housing. This will greatly benefit lower-income and historically marginalized communities trying to attain higher education."

Arguments in Support

According to the UC, "University students are struggling to find affordable housing options throughout California. University of California campuses reported over 16,000 students signed up for waitlists for campus housing. University of California has approximately 6,500 student beds across the system that could be built if funding were available. The California Student Housing Revolving Loan Fund would allow campuses to proceed with these projects to create more available campus housing for students."

The CSU Office of the Chancellor states that, "Because of the state's current budget shortfall, the funding [SHRLF] was pulled back in the Governor's January Budget proposal. By utilizing the funding within the Pooled Money Investment Account, AB 2076 represents a creative approach to secure the necessary funding to initiate this important revolving loan program. The zero-interest loan program is critical to providing affordable housing and address the needs facing so many of our students, staff, and faculty."

Arguments in Opposition

None on file.

FISCAL COMMENTS

According to the Assembly Committee on Appropriations, one-time General Fund cost pressures to repay the loan of $200 million plus 1% interest equal to the Pooled Money Investment Account average monthly effective yield rate. The yield rate in 2024 has hovered in the 4% range. Institutions of higher education receiving loans would be responsible for paying the remaining 3% in interest.

VOTES

ASM HIGHER EDUCATION: 9-1-1

YES: Mike Fong, Ta, Arambula, Boerner, Chen, Irwin, Jackson, Low, Muratsuchi

NO: Essayli

ABS, ABST OR NV: Quirk-Silva

ASM APPROPRIATIONS: 12-3-0

YES: Wicks, Arambula, Bryan, Calderon, Wendy Carrillo, Mike Fong, Grayson, Haney, Hart, Pellerin, Ta, Villapudua

NO: Sanchez, Dixon, Jim Patterson

UPDATED

VERSION: May 16, 2024

CONSULTANT: Jeanice Warden / HIGHER ED. / (916) 319-3960 FN: 0003391

Date of Hearing: May 8, 2024

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Buffy Wicks, Chair

ABPCA Bill Id:AB 2076

Author:(McCarty) – As Amended Ver:March 19, 2024

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill requires the Controller to transfer $200 million to the California Student Housing Revolving Loan Fund in the 2024-25 fiscal year.

The loan principal and interest are to be fully repaid by June 30, 2029. The interest rate on the loan is to be equal to the Pooled Money Investment Account average monthly effective yield rate, as determined by the Treasurer. The interest shall be repaid from the General Fund.

FISCAL EFFECT:

One-time General Fund costs to repay the loan of $200 million plus interest equal to the Pooled Money Investment Account average monthly effective yield rate. The yield rate in 2024 has hovered in the 4% range.

COMMENTS:

Background. The 2022 budget act authorized the California Educational Facilities Authority and the California School Finance Authority to develop the California Student Housing Revolving Loan Fund to provide zero-interest loans to qualifying colleges and universities to construct affordable student, faculty, and staff housing. It was the intent of the Legislature to appropriate $900 million in the 2023-2024 fiscal year and $900 million in the 2024-2025 fiscal year.

However, a subsequent budget action in the following year amended the funding levels for the California Student Housing Revolving Loan Fund and allocated $200 million for the 2023-2024 fiscal year, with the intent to appropriate $300 million for each fiscal year from 2024-2025 through 2028-2029, totaling $1.7 billion.

The Governor’s January budget proposes to rescind funding for the program. This bill provides $200 million in the 2024-15 fiscal year.

Analysis Prepared by: Natasha Collins / APPR. / (916) 319-2081

Date of Hearing: April 23, 2024

ASSEMBLY COMMITTEE ON HIGHER EDUCATION

Mike Fong, Chair

ABPCA Bill Id:AB 2076 (

Author:McCarty) – As Amended Ver:March 19, 2024

SUBJECT: California Student Housing Revolving Loan Fund Act of 2022: state fund loan.

SUMMARY: Requires the State Controller to loan $200 million from the Pooled Money Investment Account (PMIA) and deposit it into the Student Housing Revolving Loan Fund (SHRLF), which provides zero-interest 30-year loans to the California Community Colleges (CCC), California State University (CSU), and University of California (UC) to support building affordable student, faculty, and staff housing. Requires the General Fund (GF) to repay the loan with interest to the PMIA. Specifically, this bill:

1. Stipulates that the loan principal and interest (as enumerated in the summary) must be fully repaid on or before June 30, 2029. The loan may be fully repaid sooner than that date to avoid incurring a penalty.
2. Requires that the interest rate on the loan must be equal to the PMIA average monthly effective yield rate, as determined by the Treasurer. The interest must be repaid from the GF.

EXISTING LAW:

1. Establishes the SHRLF Act of 2022 and establishes SHRLF in the State Treasury to provide zero-interest loans to qualifying CCC, CSU, and UC applicants for the purpose of constructing affordable student housing and affordable faculty and staff housing. Stipulates that all moneys in the fund are hereby continuously appropriated without regard to fiscal years.
2. Appropriates for the 2023–24 fiscal year (FY), the sum of $200 million from GF, to be deposited in the SHRLF. States that it is the intent of the Legislature to appropriate the following in subsequent fiscal years to be deposited in the SHRLF:
   1. $300 million in the 2024–25 FY;
   2. $300 million in the 2025–26 FY;
   3. $300 million in the 2026–27 FY;
   4. $300 million in the 2027–28 FY; and,
   5. $300 million in the 2028–29 FY.
3. Authorizes the State Treasurer to pledge any or all of the moneys in SHRLF as security for payment of the principal of, and interest on, a particular issuance of bonds by a designated lending authority. The Treasurer may invest moneys in SHRLF that are not required for its current needs, including proceeds from the sale of bonds, in eligible securities, as specified, all interest or other increment resulting from the investment or deposit of moneys from the SHRLF shall be deposited in the SHRLF.
4. Stipulates that moneys in the SHRLF may not be subject to transfer to any other funds, as specified, except to the Surplus Money Investment Fund (Education Code (EC) Section 67329.1, et seq.).
5. Establishes the Pooled Money Investment Board (PMIB), consisting of the State Controller, State Treasurer, and the Director of Finance. The PMIB is required to meet at least once in every three months and must designate at least once a month the amount of money available for investments in securities, as specified, or in deposits in banks and savings and loan associations, or in loans to the GF and the type of investment or deposit. Authorizes the PMIB to increase the amount of surplus money normally available for time deposits with the express purpose of placing this money in banks that are members of a California job development corporation and who have made loans to such a corporation or to corporation-approved borrowers. The PMIB governs PMIA (Government Code Sections 16430 and 16480.1, et seq.).

FISCAL EFFECT: Unknown

COMMENTS: Purpose of the measure. According to the author, “by removing this program's funding, as proposed in the 2024-25 Governor’s Budget, there are few ongoing funding sources or financing tools to help California's public colleges and universities meet the growing need for affordable student housing. The Higher Education Student Housing Grant Program, for example, is currently oversubscribed.”

The author contends that, “loaning $200 million to the California Student Housing Revolving Loan Fund would leverage short-term funding to create an ongoing, self-sustaining funding stream to help finance affordable student housing at our public colleges and universities. This program is used to issue zero-interest loans to UC, CSU, and CCC campuses to construct an estimated 25,000 student housing beds below market rate, making student housing more affordable.”

The California Educational Facilities Authority (CEFA). The CEFA was established in 1973 and is housed in the Office of the State Treasurer, and was created for the purpose of issuing revenue bonds to assist private non-profit institutions of higher learning, in the expansion and construction of educational facilities. Because it is authorized to issue tax-exempt bonds, the CEFA may provide more favorable financing to such private institutions than might otherwise be obtainable.

The law specifically provides that bonds issued under this Act shall not be a debt, liability, or claim on the faith and credit or the taxing power of the State of California, or any of its political subdivisions. The full faith and credit of the participating institution is normally pledged to the payment of the bonds.

What is SHRLF? According to CEFA, on September 27, 2022, the SHRLF Act of 2022 was chaptered into law with the passing of AB 190, the Higher Education Trailer Bill (Chapter 572, Statutes of 2022), authorizing CEFA and the California School Finance Authority (CSFA) to develop the SHRLF to provide zero-interest loans to qualifying colleges and universities to construct affordable student, faculty, and staff housing. It would require CSFA to develop an application and consider applications from qualifying CCC, as provided, and CEFA to consider applications from qualifying applicants of the UC or the CSU systems, as specified. It was the intent of the Legislature to appropriate $900 million in the 2023-2024 FY and $900 million in the 2024-2025 FY.

However, on July 10, 2023, SB 117 was chaptered into law (Chapter 50, Statutes of 2023) amending the funding levels for the SHRLF and allocating $200 million for the 2023- 2024 FY, with the intent to appropriate $300 million for each FY starting from FY 2024–2025 through FY 2028–2029, totaling $1.7 billion, to be deposited in the Fund. Per SB 117, 75% of the $200 million allocation must be available for UC and CSU applicants and 25% must be available for CCC applicants.

The SHRLF requires the development of a new revolving loan program under CSFA and CEFA. This SHRLF requires policy development, underwriting criteria, regulation development, forms development, and a loan tracking system. In addition, staff have to review the loan applications and make recommendations to their respective boards to approve the loans. Since this is a revolving loan program, it would be replenished through the repayment of loans, thus it would be ongoing. In addition, CSFA and CEFA would be empowered to issue bonds in the future to replenish SHRLF if the demand were there.

The author states that, “students who would typically not attend a college due to the high cost of living associated with that campus will then be able to attend since funds used via this program results in affordable housing. This will greatly benefit lower-income and historically marginalized communities trying to attain higher education.”

What is PMIA? Through PMIA, the State Treasurer invests taxpayers’ money to manage the State’s cash flow and strengthen the financial security of local governmental entities. The PMIA policy sets as primary investment objectives safety, liquidity and yield.

The Investment Division of the State Treasurer’s Office manages the PMIA under statutory. The Pooled Money Investment Board (PMIB) governs the PMIA. The PMIA has three primary sources of funds: the State GF; special funds held by State agencies; and moneys deposited by cities, counties, and other entities into the Local Agency Investment Fund (LAIF). At the end of March 2024, the PMIA portfolio totaled approximately $156.5 billion. The daily investment activity in March 2024 averaged $2.754 billion.

Investment Division staff invest PMIA funds in a wide range of securities, using more than 100 brokers, dealers, banks and direct issuers of commercial paper and corporate debt. By law, PMIA moneys can be invested in the following categories: U. S. government securities, securities of federally-sponsored and supranational agencies, domestic corporate bonds, foreign government bonds, money market mutual funds, interest-bearing time deposits in California banks, savings and loan associations and credit unions, prime-rated commercial paper, repurchase and reverse repurchase agreements, security loans, banker's acceptances, negotiable certificates of deposit and loans to various bond funds.

Through the PMIA, the Investment Division manages two programs of particular note: the LAIF and time deposits.

The LAIF allows cities, counties and special districts to place money in a major portfolio and, at no additional costs to taxpayers, use the expertise of Investment Division staff. Participating agencies can withdraw their funds from the LAIF at any time. At the end of March 2024, the LAIF had 2,346 participating agencies and a balance of $21.0 billion.

Under the time deposit program, the PMIA provides money to community banks at competitive rates. Eligible institutions are commercial banks, savings banks and credit unions that are federally insured and licensed to accept deposits in the State of California. Banks which receive time deposit funds can use the money to expand economic opportunity and create jobs in the communities they serve. At the end of March 2024, the PMIA had 152 time deposits totaling $5.1 billion in 55 institutions.

Committee comments. This measure requires the GF to repay the loan, as drawn down upon by the UC, CSU, or CCC, with interest to the PMIA. As currently drafted, Committee Staff understands that some stakeholders may not necessarily interpret the current language of the measure in the same manner, that a UC, CSU, or CCC would have to pay back the PMIA with interest. Committee Staff also understands that the intent of the author is for the UC, CSU, or CCC, to pay back the money they receive through the SHRLF, per the initial terms of the SHRLF and that the GF would pay back the PMIA loan with interest over the five-year term.

To alleviate any potential ambiguity, moving forward, the author may wish to work with all appropriate stakeholders to ensure that no uncertainty remains in terms of the structure of the terms of repayment.

Arguments in Support. According to the UC, “University students are struggling to find affordable housing options throughout California. University of California campuses reported over 16,000 students signed up for waitlists for campus housing. University of California has approximately 6,500 student beds across the system that could be built if funding were available. The California Student Housing Revolving Loan Fund would allow campuses to proceed with these projects to create more available campus housing for students.”

The CSU Office of the Chancellor states that, “Because of the state’s current budget shortfall, the funding [SHRLF] was pulled back in the Governor’s January Budget proposal. By utilizing the funding within the Pooled Money Investment Account, AB 2076 represents a creative approach to secure the necessary funding to initiate this important revolving loan program. The zero-interest loan program is critical to providing affordable housing and address the needs facing so many of our students, staff, and faculty.”

Prior legislation. AB 1602 (McCarty) of the 2021-22 Legislative Session, which was held on the Suspense File in the Senate Committee on Appropriations, would establish the SHRLF Act of 2022 to provide zero-interest loans to qualifying applicants of the UC, CSU, and the CCC for the purpose of constructing affordable student, faculty, and staff housing.

Committee Staff understands this measure was held because SHRLF was ultimately adopted into the Annual Budget Act.

REGISTERED SUPPORT / OPPOSITION:

Support

California State University, Office of the Chancellor
University of California

Opposition

None on file.

Analysis Prepared by: Jeanice Warden / HIGHER ED. / (916) 319-3960