Assembly Budget Subcommittee No. 2 on Education Finance

Good morning. We will start as a lonely Subcommitee this morning, but that's okay because you're all here. So we'll begin with the first panel on higher education, student housing. So if you can start to make your way up. This is our second hearing of the year on higher education. The first one focused on the overview of all three segments. Today, we'll also focus on all three segments on two intersectional issues, student housing and financial aid. The first will be our section on student housing.

This hasn't historically been a topic of this Subcommitee, nor the state Legislature. Yeah, we do have six chairs up here, but two and a half years ago, we held an informational hearing on student housing and really diving into this issue because we know it is, again, a cross cutting issue with two significant California issues, and that's the housing supply and demand crisis in California, a lot of times in our college cities, as well as the overall cost of college and housing being the largest driver of that, especially when tuition is covered many times with financial aid.

But housing is the biggest crunch. So two years ago, we did launch for the first time in California history, a program to help fund student housing out of the General Fund. And we have the grant program and now the revolving loan program. And today we're going to talk about the rollout of these two proposals. We know the governor's proposal has an idea to delay funding for that. That's something that we don't support, and we're going to be looking at other options.

I know the LAO laid out some options, so we have a few things on the table, but the issue we think is crystal clear. We have shovel ready projects that can make a big difference for students in college towns as well as cities who are facing tight housing markets. Next, we'll focus on our financial aid, talk about our recent actions last few budget years to fix financial aid and increase middle class scholarship and Cal Grant proposals or programs for our students.

This has been a landmark effort, and we're on our way to focusing on a debt free college in California. So two very important topics, and we will begin with our student housing discussion. So we have the Department of Finance and then LAO, the University of California, CSU, and our community colleges. So first, we'll have the Department of Finance lead us off.

Good morning, Chair and Members. Michelle Newland with Department of Finance. The Administration recognizes the importance of student housing the Governor's Budget faced very different outlook from the last two governor's budgets that we've had, and the Governor's Budget proposed a roughly $22.5 billion budget solution package for 2023-24 which included a variety of delays, reductions, and Fund shifts across the entire state budget.

So with that as a backdrop for the Higher Education Student Housing Grant program, which was established in 2021 and which allocated roughly $1.45 billion one-time General Fund in the 2022 Budget Act. The Governor's Budget puts forward $500 million one-time General Fund for 23-24, and it does propose a delay for a planned investment of $250 million one-time General Fund for 2024-25. In addition, the Governor's Budget delays the start of the Student Housing Revolving Loan Program from the budget year 23-24 to the year after 24-25.

And it also changes the allocation from a split of $900 million one-time General Fund in 23-24 and another $900 million one-time General Fund in 24-25 to instead be $650 million in 24-25 and $1.15 billion in 25-26. So effectively, the Governor's Budget maintains the overall funding commitment for these two student housing programs. But given the budget, excuse me, the budget outlook, the Governor's Budget proposes funding delays for these programs.

The Administration recognizes the importance of affordable student housing and the impacts to communities where these campuses are located and remains committed to student housing. But the Governor's Budget proposed delays to student housing given the overall architecture of the budget and the outlook that we faced in January. So with that, thank you and happy to answer any questions that you might have.

Okay, thank you. LAO.

Jennifer Pacella, with Legislative Analyst Office. So as you review the governor's proposals, we think there are at least a few factors to keep in mind. The first is that the student housing project proposals, the ones the segments just recently submitted to you and the Governor for review, they're in early planning stages. If funding were delayed or removed, there would be no immediate impact or disruption for students.

Second, data on the impact of the first round of grant funding is not yet available, so the state could wait until it knows more about the impact of the first round of funding before funding a second round. Third, more fundamentally, the role of the state in student housing hasn't yet been clearly identified. So housing historically has been self supported. The construction of new student housing beds has kept pace, slightly outpaced growth in enrollment since 2015.

And how much it takes to make a student housing project financially viable depends on many factors. The design of the building, students living preferences, families willingness to pay, alternative housing options, construction costs, financing costs. So the isolated, specific impact of the state isn't clear. And then fourth, there's other programs like the Cal Grant program, middle class scholarships, rapid rehousing programs that might be better avenues for improving the affordability of college and addressing student housing insecurity.

And the state has recently done significant expansions to those ongoing programs. So for these reasons, if the condition of the state budget was such that the Legislature needed additional solution, it could find up to 2.6 billion in additional budget solution by removing some or all of the remaining student grant funds and revolving loan funds.

So despite all of that, were the Legislature to want to provide some one-time funds for student housing moving forward, it could prioritize loans over grants and it could prioritize university projects over community college projects. So the state is likely to get more affordable beds under the loan program. Under the loan program, as campuses repay the loans, the loan fund gets replenished and the state is able to make new awards for new projects.

The loan program also has zero cost financing, which might be all that some student housing projects need to become financially viable. Given interest rates have risen, might rise further, it could be that more campuses view the zero cost loan fund as an attractive financing option. Regarding prioritizing among projects, the university project proposals were submitted on time about a month ago. The college projects were submitted just last week.

But much more importantly, the universities have much more experience with student housing projects, giving them a higher probability of being implemented successfully. So if the Legislature does want to provide some grant funds in 23-24, it could prioritize the highest payoff projects amongst the university projects that were recently submitted. It could use the statutory prioritization criteria. If you do that, the SAC State, San Jose, and UC San Diego projects rank highest using that criteria.

We would just note that if you do the UC San Diego project, that will put UC over its program funding cap, the CSU projects would remain under the CSU's allotted program funding cap. So with that, we're happy to answer questions.

Thank you. I'll certainly come back to you in a bit. Next, we'll hear from the segments. We'll start with the University of California.

Thank you, Chair McCarty and Members of the Committee. I'm Saya Vertan and I'll be speaking about university student housing with you today. University of California is committed to increasing the availability of campus provided student housing. We launched the Student Housing Initiative in 2016 and since then campuses have brought online over 25,000 new student beds. However, during the same time frame, the UC campuses increased undergraduate enrollment by about 20,000 students. While student housing initiative has formally ended, campuses have redoubled their efforts to construct new student housing.

Currently, campuses are planning nearly 22,000 new student housing beds to open between fall of 2023 and fall of 2028. This ambitious number of new student housing beds includes all of the projects that both have been awarded state grants and have applied for state grants. University of California campuses submit capital outlay projects each year for the UC region's capital financing plan. These projects include proposed capital projects and the acquisition of real property that supports the campus's long range development plan.

Many of the projects in the capital financial plan do not have identified funding sources. The latest 2022 to '28 capital financial plan included student housing projects with over 16,000 beds that have no available funding source currently. These housing projects together, both the ones with the funding plan and the ones without, total over 38,000 possible new student housing beds for the UC system. This extensive planning for new student housing projects demonstrates the campus's commitment to providing housing for our students.

Still, campuses struggle with building housing quickly enough to meet student demand due to enrollment growth and affordability needs. Many of the campuses are largely built out with available sites only near or in the surrounding community. CEQA litigation has also slowed down the development of some projects. The availability of financing can challenge the affordability of student housing projects. In the Budget Act of 2022, the Legislature appropriated 389,000,000 for the Higher Education Student Housing Grant Fund for the University of California.

The Legislature provided funding for five projects and planning funds for a 6th project, the UC Merced Merced Community College Joint project. The five funded projects proposed to provide 2,388 affordable student housing beds and another 1,011 regular student housing beds for a total of 3,399 student housing beds added to the system. For the 23-24 grant cycle, the University submitted six proposals totaling $500 million. Combined, these six projects would develop 3,738 new state funded affordable student housing beds.

In addition, these projects would develop an additional 1,869 regularly priced student housing beds for a total of 5,607 student housing beds added to the system. All of the projects that applied for state higher education student housing grant funds were included in the 22,000 planned new student housing beds figure I mentioned earlier. The university ranked the grant submissions on two criteria. Joint projects with community colleges were ranked higher and the secondary factor being the state cost per bed for the grant amount provided to UC. We look forward to the Legislature's decision on which projects will be funded in 23-24. Thank you for your time.

Okay, thank you. Next we'll hear from the CSU.

Thank you, Chair McCarty, good morning. My name is Elvyra San Juan, Assistant Vice Chancellor for Capital Planning, Design and Construction for the California State University. For the projects funded, affordable student housing projects funded 22-23, the progress has gone fairly well given the increases in construction costs and the uncertainty in equipment delivery from the contractors. To date, five of nine of our projects have received schematic design approval by our CSU board of trustees, with two more planned in the next few months.

The project delays reflect campuses needing time to discuss and assess options to address budget shortfalls such as co-funding with housing reserves or increased California State University bond financing or other methods have been reductions to scope that could include reducing the number of standard beds, not affordable beds, or reducing the square footage for amenities like lounging and dining space. The CSU originally planned to co-fund the grant funds with 266,000,000 in CSU funds. However, with the rising construction costs, that amount has grown to 317,000,000.

So in order to cover increased construction costs, CSU is increasing its funding by 51 million. For 23-24, as noted on page four, the CSU submitted three projects for the second round of grant funding. The total grant amount requested is just over 149,000,000 for projects at Sacramento State, San Jose State, and CSU Stanislaus. The CSU will provide 280,000,000 in co-funding for this round two. The CSU followed the criteria for project prioritization based on the ED code.

With regard to the remaining CSU funding, because of the cost increases, the CSU requests access to 12.2 million in remaining funding within the CSU targeted amount to cover cost increases for those campuses that cannot afford increasing the use of reserves or financing, typically because they're in a lower cost region so they can't increase rates or they don't have sufficient existing housing to increase their debt.

With regard to the Governor's Budget proposals to delay timing for the grant program, one way we could accommodate that would be to fully fund two projects, Sacramento State and Stanislaus, and fund the design and part of the construction for San Jose State, and then we can live within the amount of the proportionate funding for CSU, assuming that 500 million goes forward. With regard to the loan program, delay could potentially cause an impact to CSU providing affordable student housing.

But it could also be that with the additional time, we could work through some proposed changes on the financing structure to make it more streamlined. Thank you for allowing us to share our remarks.

Okay, thank you. Community Colleges.

Good morning, Chairman McCarty, Members of the Budget Subcommitee. My name is Lizette Navarette. I'm with the California Community Colleges. I just wanted to pause and appreciate what an honor it is to be serving on a panel of all women during Women's Empowerment Month. So really glad to be here and fighting for students affordable housing. I want to tell you about the California Community College's affordable student housing movement. As you heard the LAO mention, we have less experience in student housing.

That's because we've been very intentional in why we entered student housing. We are entering student housing because it addresses a basic need. One in five students have experienced housing insecurity over the last year, and this is consistent data that we see from our students. Why is this investment so important in community colleges? We serve 70% of California's higher education students, 70% of California's higher education students. And so we don't serve traditional students.

We serve post traditional students, working individuals who are struggling, just like all Californians, to make ends meet. This proposal, the proposal for the higher Education Student Grant funds, is one of the most progressive and most effective proposals we've seen move forward by the Legislature to truly address basic needs at its root, providing financial and economic stability and a path for equitable student success for our students.

I've provided a packet of information that gives you an update on round two of our projects of the California's Community College projects. We've moved forward very intentionally, really seeing affordable student housing as a path to equitable student success for our students and a way to really integrate student effort, student success into the overall ecosystem of our campuses. We've been also very engaged with our members and stakeholders, really thinking about how do we leverage the student housing movement to do much more.

And so our Board of Governors launched an affordable student housing task force to think about how do we take this even further. They approved 20 recommendations that include things like ensuring that campuses stay open all year round because our students don't need housing just during the academic year, they need housing all 12 months of the year.

They've also been thinking about how do we reserve some of the beds in housing so that they can be used for emergency shelter for our students, again, continuing to align to the basic needs agenda. So there's more here about the report recommendations. I won't go into detail on those, but you can see our mission and our driving impetus for these programs. For round two, we had a very thorough application process.

We looked at the statutory requirements, but we also looked at community need, unmet need in our communities. We looked at how student housing aligned to the overall master plan of colleges, what their plans were to provide an enriched student experience for students. Community Colleges submit 21 proposals, and of those proposals, they put forward 600 million of their own local dollars. The total proposals are 1.5 billion. There are four intersegmental projects, around 1,700 beds, and of the remaining projects, there would be 5,677 beds.

And a list is provided for you in the packet. Again, you can see a little bit more about the thorough considerations that we had. We looked at any augmentations, any contributions by the community, any alignment by the community, as well as overall ability to support their efforts. This Chancellor's Office has also established a robust new program, and as part of that, we're also ensuring that these projects are financially viable for the long term. We've created a total cost of ownership calculator.

You can see some samples of that in your packet. And that total cost of ownership calculator asks and provides resources for a college to consider. What does it mean to provide a safe student experience for our students? What are some of the costs to think about in the short term and out as far as 30 years?

And so, as you can see, the community colleges are ready for the affordable student housing movement, and we look forward to partnering with you in this round and hopefully in investments in future rounds of affordable student housing for our students. Thank you very much.

Okay, thank you. Questions? Go ahead, Mr. Alvarez.

Thank you. Good morning, everybody. Thank you for being here. My first question is kind of just a general one, why did it take, and anybody can provide your comments or opinion, why did it take so long for our university and college system to really start to engage on housing as we saw enrollment increasing in all of our segments? Just does anybody have a thought as to why it took so long to start investing this way? Lack of resources?

Is the question, sorry, Elvyra San Juan with Cal State University, the 22-23 money, why it took so long?

No, I just meant generally, prior to this big investment by the state, over the last couple of years.

For California State University, we've invested 1.6 billion from 2014 to '21. So we have made significant investments and that provided just under 16,000 new beds.

Okay. What I hear is that there was a lack of enrollment growth staying in line with increased housing opportunities. And so I just figured if we're attempting to have more students, you're going to need more housing for students. So just interested in that.

Member Alvarez, I'm happy to jump in on behalf of the California Community Colleges. So for California Community Colleges, in order to truly provide affordable beds, the state investment was really necessary. So Community Colleges have engaged in housing, something called rapid rehousing. That is usually done in partnership with community based organizations or others. But if we went at this alone, the best we can do is offer the same market rate that somebody can get at any rental unit.

So you need a subsidy.

So that subsidy is really helpful.

I have a question for CSU. Maybe I should ask the first question to everyone. We have a graph here. The Legislative Analyst Office provided on the 25 first round grants that went out, and all three segments received funding for those three. My understanding is that that funding associated with each of the campuses would ensure that that campus would build the number of units or the number of beds, in this case, that's been identified in this graph.

I heard issues related to construction costs, and anybody who's doing any development knows that. Should we at all be aware of any of these projects that have already been granted to you all and expect delays or request for more funding on any of the 25 first round projects? Maybe I'll go down through each one. Just a yes or no on your projects.

So, Member Alvarez, yes for CSU. We're asking for a block grant, so flexibility on 12 million to support potentially three of our campuses.

This is for the 25 that were already granted.

This is for nine that were granted to the California State University.

So the nine, the Humboldt, Fresno, Northridge, Dominguez Hills, Long Beach, Fullerton, San Marcos and San Francisco.

That's right. Roughly three of the nine campuses need assistance.

Three of the nine. Okay, what about at the University of California?

Thank you, sir. Saya Vertan, University of California. University of California is committed to using our own internal resources for any contingencies required by these projects, and we intend to deliver the number of affordable beds as agreed to. Two of the projects are currently experiencing delays. Those are the UC Berkeley People's Park, which has a lawsuit, and we do intend to appeal that to the Supreme Court.

And the second one is the UC San Diego project has run into some design issues and where we're exploring the possibility. We're working with the State Architect's Office on the plans, but if we can't come to a resolution, we may need to shift those funds to another student housing project that would also deliver the same number of affordable student housing beds, but we're still trying to work that out.

University of California, to return to your first question, as the segment we probably have the longest history of providing student housing, and many of our campuses are providing housing close to 40-50% of our undergraduates being housed. And we use a mechanism called the lease revenue bonds for that, which makes the housing sometimes a bit more expensive. The state has made it more affordable.

Right. So, just to be clear on yours, because I had real clarity on CSU, you think you'll be able to cover all the cost of all the projects, but if something like San Diego doesn't come to fruition, you can still deliver the 1,100 affordable and 208 standard rate beds.

That's correct. Our projects are experiencing inflationary costs, but we intend to handle that from internal resources.

And what about the Community College?

Yes. Thank you very much. So the California Community Colleges' projects are moving forward. Some of them are currently waiting for Department of State Architect approval. So DSA approval, and then they also have additional layers of Field Act approval. So the approval processes for our colleges are much longer than my colleagues at the UC and CSU. That being said, they are experiencing some inflationary costs. But colleges are looking at internal resources or utilizing the state treasurer's school finance authority as a gap.

And so they're exploring various options because we want to utilize these dollars for other projects so that we can expand more on affordable beds for our students in our system.

Okay. Thank you. Appreciate that. Specifically to the CSU, are the universities that are applying for housing, are those the ones that were the future enrollment? I don't know if there's a plan that CSU has in terms of campuses where they're going to try to allocate resources where there's high demand for attendance. Are you aligning the projects for housing with that same future plan of where you're going to be--lack of a better term--funneling more students to some of those campuses versus others? And do you know the name of that plan so I can make sure I say it next time?

It's the Increase Enrollment Plan.

Yeah. Okay. There you.

Sorry. But certainly a system wide approach to increasing enrollment throughout the system versus a campus by campus approach. So both Sacramento is doing well, San Jose, and I'd have to check on Stanislaus.

Well, that's for your new round. What about for your old round? The ones granted in the current year I guess?

For the old round, San Francisco and Humboldt have decreased enrollment, and those are the main two in eyeballing this.

Appreciate that. Thank you. I think I'll end with that and just make my comments now. I'm interested in the concept of us having a revolving fund and providing loans. Or maybe this will be a question. I think I know the answer, but please clarify. When you get a grant, as opposed to when you get a loan, does that subsidize your housing more or not? Because students are still paying some amount for housing and there's a revenue stream from that rent.

I'm just curious, if you're offered 0% loans, which you will not find anywhere else, is that not as beneficial to the subsidy given, if you will, for the student per bed? For all of you or for the LAO.

Yes. The more state money you give a project, it's very likely they'll able to have lower rents than otherwise.

Have we ever analyzed what that difference could be?

No. I think the reason we're in this space where makes policy so difficult is we don't know at what point the student will walk away. And universities are sort of a privileged landlord because they can have first year students there, and if occupancy falls, they can have second year students there, and they have wait lists, so there's no indication that they won't fill them. So now we're in this sort of hypothetical world of, well, just what rate do you want them to charge?

They still have to be able to charge a rate that covers their operations of the building, any maintenance needed on the building. But unfortunately, no, I can't tell you. At like $900, a student will walk away. And in addition, you have all these individual preferences about what people are willing to pay and how they want to live.

Well, just based on my own very unofficial and definitely not well informed knowledge of financing of housing, you're probably looking at at least a 15% discount with a 0% loan. That's typically a real estate deal. Investors are looking to make at least that amount of money, a 15% return. So I think we could probably safely assume 15% discount of what a market rate unit would go for.

I'd be interested in knowing whether that's significant enough of value that we move forward with an approach of having a loan program versus a grant program, especially in a year like this one. So I'll just leave it at that. I think that's my preference, and I think it makes sense. So, Mr. Chair, thank you. That's the end of mine.

Okay, thank you. Good questions. And maybe I'll just give a little bit of perspective here from this Committee and the proposals. And this was our bill that we worked on last year. I think Sabrina was a joint author of it as well. So this all started actually in your district? Not your district, your area.

UC San Diego is not quite your area, but three years ago, we were down there talking at a table with some UC chancellors, and essentially they said, we have a cadre of students coming in every year, so they have the demand there. They just don't have the financing to fund the project. So our proposals the last couple of years was not to own this issue, but to be kind of a bank and maybe spur a little bit of the projects to make them come to fruition.

So the idea of a 0% loan and just the financing as well, so it can come off of the UC or CSU and now the community college books. And so we'll get to the community colleges in a bit. But they're new to this equation. They haven't been doing a lot of student housing for decades. Certainly the UC and CSU have, so they're a little bit ahead of the game.

But we wanted to focus on how we can leverage what's currently happening around universities and help spur this, not own this. We're not going to be all of a sudden the state of California owning and operating and being the one for student housing, but helping make these projects happen that wouldn't happen otherwise. And I also want to note that in addition to the student housing costs for just the overall burden for college students is a priority.

And just in some of the college towns, it's like the vacancy rate for apartments is so, so low. So this impacts everybody, impacts people in the service industry who can't afford apartments in the areas. But what you said too, David, is so key is enrollment. We have some universities, especially in the UCs, where the cities say if you don't build more housing, you can't enroll more students.

That impacts people in our, you know, in Santa Barbara and Santa Cruz and UCLA and Berkeley and Davis, they have basically accords with their long range development plan that says we need to build x amount of more student housing to enroll more Californians who are applying in record numbers. So these really tie with our overall higher education perspective. And just, I know the Department of Finance laid out the budget overview and 100% agree we need to make some decisions on how to balance the shortfall.

But this is not an area that we're going to focus at, at cutting. We will look for other alternatives. There are other places in the budget. We could even talk about an hour where we can move money and delay other things. But this is such a priority for the Senate and the Assembly the last couple years and just checks so many boxes. Housing crisis, check. College affordability, check. Enrollment growth for students, check. So really addresses key issues that we're trying to address.

That being said, we don't want to pick winners and losers, and we want to pick winners. And I don't like the notion that we're going to push back some projects, potentially the community colleges who are newer to the game, but we can focus on the timing of the money. In all honesty, a lot of the community college projects, they're not ready for primetime now. Maybe they will be in 18 months from now or two years from now. They're just not ready in the pipeline.

So if you look at staging of money, we should focus on the projects that are most shovel ready now. And those seem to be most of the UC and CSU projects, a couple of the community colleges, the ones that team up with the other segments. So maybe that's something that LAO and our staff could work on. If we're going to do this, how do we focus on getting our biggest bang for the buck on our shovel ready projects?

But again, we do want to make sure that we can help some of the community colleges. So I will ask you a few questions now, Ms. Navarrett. Obviously, the community colleges are so diverse. I mean, there's nine undergraduate UCs and 23 CSUs, and there's, I don't even know how many community colleges anymore, 114, 15. So they're all different, and they all have different perspectives.

Some of them are thinking, yeah, if the state's going to be throwing out money left and right, we'll build housing, as opposed to like, UC and CSU, which already had housing on the books ready to go. And this kind of puts it over the top. So how do we ensure that we're actually focusing on projects that are a reality for the community college campuses and not just aspirational.

Thank you, Chairman McCarty. So of the lists that we've provided, all of these projects are not in an aspirational stage. They're all ones that have both demonstrated need, a viable financial plan, community support, and extensive student need. And so we see these as viable, pending available state resources in order to support and assist in decision making.

The thorough scoring criteria that we've been provided really ranks some of those, so that you can see where they land in some of these scoring criteria, anything from unmet need, high wait lists in the community, the financial planning, any of their own resource investments that's also included. And so we see the community college projects just as viable and demonstrating equal, if not more, need from the student perspective.

I also wanted to briefly address one of the questions of Assembly Member Alvarez around the subsidy and whether the loan really provides an opportunity for students to provide to cover the cost of financing. Many of the proposals that you see presented to you have really low rent costs, anywhere from $200 to $500.

So colleges aren't making any revenue, they're just covering their base costs, which makes it more difficult for community colleges to repay a loan without dipping into resources that support faculty or student services. So just wanted to add that context as well.

Okay, I have several more questions, but I'm going to ask Mr. Ting to go first because he has to run to another Committee.

Thank you, Mr. Chair. Just back to all the higher ed representatives. Just want to get a sense of how long or how shovel ready these projects are that they're applying for and how long the estimate is take to build these projects. If we could just go and why don't we just start with Community Colleges?

Thank you. Thank you, Assembly Member Ting. The proposals that have moved forward have really taken an innovative approach to stage their design projects so that they can move forward with CEQA pretty quickly and then they could begin within the next 12 months.

And then once they begin, what's the typical completion time?

A typical completion time, depending on the number of beds, is anywhere from 18 months to two years.

So within three years, roughly we could have projects that are fully up and ready to move into.

Correct.

Okay.

Thank you, Assembly Member Ting. For CSU, the construction starts for two of our three projects will be June of '24 and December of '24, and Sacramento would start June of '25. But what we're trying to do is phase our construction to start earlier to reduce our construction time. So start, for example, doing foundations first and get the structure up while we complete plan approvals. So we recognize every month we can save is money saved.

Is there a reason why there's such a large lag time?

Amount of it is getting through CEQA approval. We have to start design on a couple of them as well.

Okay, so I mean, you're starting the work. It's not that you just can't break ground yet.

That's right. We start design.

With the CEQA, how long is the typical CEQA timeline?

The most difficult may be the San Jose project based on the size. Otherwise for Sacramento and Stanislaus, they're on the master plan already.

And what about the projects that weren't funded that are still in application phase?

Those projects are moving forward rapidly. Five of the nine projects have already been approved by the board of trustees, so there'll be some that will be getting financing approval this year.

Okay, great. And you, UC.

Thank you, Chair Ting. The University of California applied for six projects, and all of those construction would start within 18 months. The opening dates would be for UC Riverside. They would open for fall 2025, UC Davis for fall of '27, and the rest for fall of '26.

Got it. Sorry. So going back to CSU, when would they open? You mentioned when they would break ground, but when would they open then?

Those would typically open 18 to 24 months later. Okay, so roughly '26.

I know we both have two programs. We have a grant program. We have a loan program. Can you help us understand, traditionally, you all finance this yourselves. Can you help us understand the benefit of both the grant program and the loan program in terms of helping you with your costs?

Thank you, Member Ting. The grant program certainly generated more interest from our campuses because you don't have to pay the debt back. So having 60, 40 million dollars debt free is desirable. We haven't asked the campuses solicited interest for the loan program yet, but we'll do that in the near future.

But say with the grant program, then the campus is saving money. Are they passing that on to the students? Are they spreading that out amongst all their housing projects? How are they using that cost savings? Because traditionally, every other housing project, it's self financed, so it has to pay for itself, is that correct?

Right. That's right. So the rates to the rental rates to the affordable student housing clients will be $300 to $400 less per month than the standard rate, so that it is being directly passed on to the students in savings.

And then do you target certain students, or is it just any students at first come, first serve?

Typically low income students, Pell eligible, for example.

Great. Thank you.

And at the University of California, the grant program allows us to charge lower rent for those affordable beds, anywhere between 15 and 40% lower than the traditional beds. If we went with the loan program, we think we could move faster on more projects, but the savings to the student would be a little bit less than under the grant program, and it would be for all the beds within that unit.

Got it. Thank you.

Yes. Similarly, some of our projects are all targeting low income students. Some of them have dedicated populations such as foster youth. And then the rental rates range anywhere from $200 to $500, so very affordable to a student. The loan program then doesn't allow that affordability, and so college would have to find other resources to pay that back.

With our grant program, traditionally, you all look for your own financing. With our loan program, our revolving loan program, what's the benefit to our revolving loan program versus, you all going to get your own financing, which is traditionally how you've done it.

For the University of California, the benefit of the loan program would be savings to the campuses that could be reinvested elsewhere on the campuses, potentially in financial aid. We also think that we could move a little bit faster in that we wouldn't have to go out and seek external financing and wait to bundle multiple projects together and sell them on the market, but rather approach the state, and as soon as there's money available, we could have a project funded.

So you could build these projects faster?

We think so, yes. I was saying in my opening remarks that we have about 16,000 beds across campuses identified, for which we currently have no funding plan. And if we had access to the revolving loan fund, that would provide us with a funding plan.

Thank you.

For CSU. I think there's more uncertainty in the loan program on timing. The interest rates for CSU on recent housing projects has been below 4%, and there's greater certainty in how we finance our projects. So moving to the loan program and the structure, there's more uncertainty. So it would take us a little bit longer to understand the process and how to submit the projects for approval and which projects get approved and when the money would flow for the loan program.

No, but my question was, traditionally, you finance them yourself. So what's the benefit of us having a revolving loan program versus is there any difference for you? You could go to the private market to get that financing as well?

So with interest rates increasing, I don't think we would get a 4% loan. So, theoretically, the interest on the amount of the bond, so the 4%, but I can't tell how much we would lose in the time going to the new process.

So, again, the state program will have zero interest. If CSU goes to the market, they'll have to pay something like 4%. It's that savings and the financing cost that they get to effectively lower their rates, their housing rates.

Last question. I think one of the reasons our Chair has been championing this program and we've been working on it, is we have some notion that your three institutions, the colleges, the universities, can all build housing faster than, say, a private developer in that area. Can you give me a sense of how much faster you think you could build housing than, say, a private developer who's building right across the street from a campus?

I don't know if you can answer that question or not or just have a sense of it.

Thank you member Ting. That's a little challenging to answer if the private developer does not have the entitlement for that project and they're starting from scratch. So if they don't have permits and had to change the zoning, it could take a bit longer for the privates.

But if they have the land and they're ready to go, it's fairly comparable in our CSU process to a private because we could probably get there start to finish in about three years or so very quickly with design, build systems, even including going to the board for financing approval.

But I guess you make a point that I guess the big difference is you have the land and you could build housing with that land that you have control of.

Assuming you can make it through the C four process and it's on the campus master plan already makes it much faster.

Right. But everyone has to go through the sequel process. That's not something that you specially have to go through relative to somebody else.

Happy to address. For the community colleges, I think similarly, there are some variations across the state, but if there are resources, then colleges can move about six months faster. Generally, the consideration then is where to find the gap in resources so that it doesn't have to come out of the pockets of students. So colleges would likely have to turn to their communities for resources or build it out out of their own funds, pulling from other programs.

And for the University of California, I'd like to echo many of the CSU's remarks. It takes us about three years to construct a project, a large scale project, from beginning to end. In the past, we have utilized public private partnerships for our dormitory construction because we did find that due to the financing aspect of it, they were faster.

Got it. Thank you. And again, I think given the huge. I mean, just to echo our Chair's comments, given the huge demand from each of your campuses, also the huge demand from each of the variety of student bodies, this seems like a very wise investment.

I think our assumption is that because you already control the land of your campuses, also being state agencies, that you all can build the housing faster than, say, other developers who, as the representative from CSU said that would have to go get entitlements, have to go through a much longer process to get even to the secret process. We think this is one of the fastest ways to get housing in California.

And because of all where many of your campuses are situated, you're in prime areas, in prime communities where housing costs are already very high. So building that housing in those communities also relieves housing pressures in the surrounding neighborhoods. So we think this is a really wise investment relative, not just for higher education, but it's a wise investment in terms of our housing, our housing crisis. So really appreciate the Chair for his leadership on this issue. And again, thanks for presenting today.

Okay, thank you. So back to my questions. This would be for our Community Colleges. And again, I know it's difficult because there's 170 something districts. They all have different plans and policies. So if we're doing more housing at the UC and CSU, most, I think every UC and CSU has at least one undergraduate, many times many more unit or complex on their campus. So they have a housing division. They know how to manage it. They have the food stuff. So this is a new endeavor.

So how are we working to ensure that these campuses essentially know what they're getting themselves into? Because building a project and the groundbreaking construction ribbon cutting, that's half the battle. The other half is owning and operating these projects. So how is that going to work out for some of these colleges that have never done that before?

Yeah, a couple of items that have been considered put forward, and you'll see in the Board of Governors task force report. So the community colleges are exploring updating a series of regulations that really help support and remove barriers to existing housing. The community colleges have also been working with financial aid, student services offices to integrate various plans and align student housing to master plans as well.

And so there's a lot of excitement on the ground for what this could mean to really transform the student experience and the life and livelihood of campuses on our colleges while also addressing students basic needs. The colleges that went through the first round will be part of a community of practice with the 12 colleges that already have student housing. And so there's a lot of shared knowledge there, including shared knowledge around Title 5, student experiences, campus life, and other knowledge that is really helpful.

The last piece that I want to highlight is that there are also lots of work from some of these colleges to create a common application so that when they enroll in housing, they also get access to other student supports that are available, such as CalFresh, which was championed by the Assembly as well.

So I'm not quite sure what that means. So Sac City College right here, I'm looking at the map. Their project, which I support, I hope they get it. It's a vacant park and ride area that's underutilized just south of Sutterville on the campus. They don't have student housing there. Now, Sierra is not in. Sierra is a different. So the only one the region has student housing is Sierra. That's a different community college district. So this would be the first ever to Los Rios.

And I know it's not your district, they how would they're going to hire a company to oversee this, or would they campus do it themselves? Basically, they're dorms. They have to have RA, they have to have food service, all that stuff. So walk me through how that would work with a campus who's never had that before.

For a campus that's never had this before, one, they're learning from their nearby college's expertise. They're also learning about some of the legal parameters that exist, some of the best practices on how to keep students safe, and then how to align campus housing to academic programs. And so that then gets into a staffing model that ensures that there is 24/7 support for students, including some of the common practices that are effective around RAs and others.

These campuses, the Los Rios, for example, also has already security and safety on campuses. So that is something that has been integrated in their plans. And then they're also looking at aligning the services that they provide there with everything that exists on the student services side of programs. Some of the proposals have also aligned these so that they can have tutoring nearby or in the area. So then you have a linkage to the academic programs as well.

And so it's a matter of both staffing up, which will, these are covered by the campus's non grant covered funds and working through the shared governance process to set up a structure for that. And many of these have also added this. That was one of the added questions that we included in our scoring criteria. What's your plan? Because similarly, we wanted to ensure that we were looking at colleges and helping them think about, it's not just brick and mortar. Now you have a structure that has to have life and services for students 24/7.

Okay, thank you. And I don't think it's insurmountable. I think it's just a bit more of a challenge. I'm not saying we shouldn't do community college projects because of this, but like you said, maybe some of the early adopters are going to be role models for the other ones. Not like we have to do a pilot per se, but this is new to many of the districts. And so I think there will be some learning as we go along.

If I can go back to the LAO and kind of my initial premise that assuming that we did want to continue with this course of having a state investment in student housing and figure out how that fits in our budget architecture. How could we prioritize and focus on the most shovel ready projects? There's a table here that says start date-all these start dates that I assume they're accurate, but I don't know.

Did the districts-I know our staff didn't put a typo in the table, but was there a wrong month put in from a January to December of one year? Have they been verified? Because that really is the key. We want to focus on a budget year, the budget year plus one, the out years, to make sure that we fund projects that are prime time now. So how could we make sure that we do that in our evaluation?

Yeah, we can help your staff go through the projects to pick the ones that are closest to shovel ready. Obviously, you have lots of considerations. In statute, you put that it was a priority to be shovel ready, but you also wanted them to have as many affordable beds as possible, that the going rate for those beds would be as low as possible, that they would be in areas that do have some unmet demand for housing.

But if shovel ready is your priority, we have that information available and can provide it to your staff.

Yeah. And we'd want to, I think, verify that that is accurate because sometimes it's aspirational. We plan to be shovel ready by next something or other, but we want to go back-

Because we could engage with the segments and additional conversations. But as we've been talking about, these are in early planning stages. So I think the universities are probably a bit better positioned to have sort of realistic construction dates, but they haven't for these projects. They just submitted entered architectural planning and working drawings and design. They don't know what kinds of obstacles will emerge. They don't know if they'll hit an issue with toxic substances, all the things that can emerge. So it's still a little bit of a gamble since they haven't even entered preliminary plans.

Yeah. And we want to trust, but also verify, and things can go wrong. All construction projects, things happen right outside our state capitol right here. Delays happen, whether they're weather or sequoia stuff or construction issues. That being said, I think that the affordability and all those other pieces are probably relatively close. If you look at the valuation, the variable piece is when they would start. So I think that's one thing that we want to evaluate.

And also, too, if the community college projects for the grant are really in the out years, one thing. Well, there's multiple options how you could fund this, you could just flat out fund it and deny this delay. You could look for other, assuming there's more revenue coming in and they may revise, which is probably unlikely, you could look for other places in the state budget, which we're going to hear one in like an hour and kind of redirect that here.

So you don't have to do delay here. Or you could potentially swap the grant with the loan money because the grant is now, the other one is delayed for a year out. But the grant projects aren't necessarily for the community college shovel ready and needed for a year. You could just change those two funding sources and have them both. So I think that's the second piece, too. If we could help evaluate the funding sources and how, we could make this a win win.

Yeah. And just something to consider as we work with staff to do that, because we were the ones to say, hey, if you have to choose between loans or grants, and again, we can help just on the timing side. But some of these projects that applied for a grant, they might not be able to balance out. If they move to the loan because the state subsidy will be less. They might have to go through some redesign work.

Yes, but if you were to signal how much is available for grants and loans, those who didn't get a grant could conceivably think about, well, could we still make a project work with just the zero cost interest? But it will require some going back to the drawing board. They couldn't just really.

Or we could change our rules on it. I think it's probably better to look at our policies for the grant versus a loan than changing the whole project so we can cross that bridge when we get there. The other piece too, of course, is a Revolving Loan Fund. Like Mr. Ting's question. The other bonus to it, of course, is it's by definition revolving. So it pays for itself, and over time, as it pays it back, we can replenish housing. That's it for now. Mr. Fong.

I'm sorry, did you want to answer a question first?

Sorry, Member McCarty. I would just say from a cash flow perspective, because we have a good 12-18 months to get through design. That's another way to accommodate this delay proposed by the Governor. So there is a risk that the money wouldn't come through in 24-25 but we could design around that. Then we at least would have certainty on the grant funding versus having to be split across grant and loan. That would cause greater uncertainty for California State University.

Okay, thank you. I think Mr. Storm wanted to address this.

I can stand if that's okay.

Yeah.

I don't want to disrupt the panel.

No, that would be bad. That would be bad. Yeah.

My name is Ryan Storm. I'm the assistant vice chancellor for budget. My colleague Vaisan Juan is representing the CSU as well as me. I wanted to clarify a couple things, especially along the lines of Assemblymember Alvarez's earlier questioning about the alignment of our budget reallocation plan to the housing.

First of all, if you turn to page three, I'll give you a tip about, give you a heads up to turn there real quickly first, but just to answer your question about the name of that plan, it's called the CSU Enrollment Target.

Yes, of your agenda. So to your question about what is that reallocation plan called for our enrollment? It's called the CSU Enrollment Target and Budget Reallocation Plan. And we release that on January 11 and we'll have a multi year phase in of that plan going forward. The other thing I wanted to point to on page three now is that during the line of questioning to my colleague, and she did a fantastic job. She's an expert in this field.

So I am definitely waiting in, in my zone where I shouldn't be. But just wanted to answer your question, Assemblymember Alvarez, about the alignment of that enrollment plan to these projects here. The vast majority of the beds that you see listed here are going to be at campuses where we anticipate significant enrollment demand. Okay. And we noted that there's San Francisco and Humboldt listed on there. And the question was, well, enrollment's softening there on those two campuses.

Keep in mind that those two areas of the state have significant housing cost crunches and availability, particularly in Humboldt, where there is discussion, albeit not very popular, of potentially housing students on a ship in order to meet housing needs. So it's a critical piece there, and there's a significantly sized project going in there.

The other thing that wanted to point out, too, is that when there was a line of questioning about the amount of contribution of the segments in addition to state grant funds for this project, you heard from the community colleges and you see that there'd be additional contribution by the segments. We are putting our own money into this as well. Roughly about 35%, on average, of the cost of these projects are CSU contribution funds that, of course, could grow with the cost of construction.

And then in some instances, we have some projects, particularly our San Jose State Project, that's in the hopper that we will be contributing from a system perspective, much greater than those amounts. I just wanted to clarify those three things.

Okay. Thank you, Ms. Cervantes.

Thank you, Mr. Chair. And thank you to each of our panelists for being here today to testify. I do just want to know and echo that I do have concerns about a delay, perhaps not materializing. I hear that the money will still be there. However, there are legitimate concerns that we do have to take a look at. Just looking at what cost due increase associated with the delay labor material, and will that affect the overall amount of beds that we could provide students?

And I don't know if that has already been answered, but how would a potential delay impact the number of beds that can be built?

For the University of California, for the projects that have already received funding, any construction delays will increase the cost of the beds, and that cost will probably be put on the regularly priced beds within that project. For those projects that are requesting funding, delays will not lead to a reexamination of the number of beds, but we'll look at the cost and the rent that has to be charged to the students.

Happy to go for the California Community Colleges. So delays, given the rising construction costs and inflationary rates, can result anywhere from 15% to 17% increases.

Community College projects are doing everything possible to keep their rental rates at the low level that they've committed and the number of beds, given the demonstrated need and the fact that we know we really need to prove ourselves in this space, and so many of them are going to their communities to seek philanthropic dollars or looking at their own resources to find additional funds to cover those costs. But they're doing everything possible to meet their commitment on this for many reasons, as stated.

Thank you, Member Cervantes. For the California State University, if there were to be a delay, the project, we would only partially fund construction is San Jose State, so we can start design so the cash flow would work for us. For what the governor's proposed, the risk would be if the subsequent funding for construction doesn't come through in 2024-25. That would put 517 beds at risk, affordable student housing beds.

Okay, thank you. This is certainly an important topic, and we will come back to this in the future. Thank you. We'll go on to our next item. This is related to financial aid and the Cal Grant program, and we've done so much in Cal Grant and financial aid reform in the past couple of years that we asked the LAO to just give us a high level snapshot of our financial aid systems in California and then some of our investments and alterations reforms. The last couple budgets.

Would you like me to begin then, or would you like to begin with the Department of Finance?

How do we have it laid out? Yeah, okay. That's right. Yeah. Why don't we just do the, why don't we start with the LAO? I think that'll be helpful for our new Committee Members. Just kind of give a 101 here on financial aid.

Happy to begin. So the sergeant is distributing a handout right now called overview of Cal Grant reform, and I'll be speaking from this for the next few minutes here. The Cal Grant Program is the state's long standing financial aid program. It has its roots in its scholarship that was created back in the 1950s. As you can imagine, over the years, the state has added various award types and various eligibility rules such that the program today is quite complex.

Over the last several years, the Legislature has had an interest in simplifying this program and updating some of the eligibility criteria. And to that end, in last year's budget package, the state adopted potential new rules for the Cal grant program, commonly known as Cal Grant Reform. The rules have been enacted in statute, but they have not yet been operationalized.

Currently in statute, they're subject to a trigger determination, meaning that next spring the state would determine, based on revenues, whether there is sufficient revenue available to move forward with Cal Grant Reform in 2024-25. On the one pager before you, there's a chart comparing the rules under the current Cal Grant Program compared to Cal Grant Reform. There's a lot going on here, but I'll try to highlight some of the key differences.

Under the current Cal Grant program, there are multiple award types, each with its own eligibility criteria and award amounts. There's a Cal Grant a that provides tuition coverage to Low and middle income students, a Cal Grant B that provides a mix of tuition coverage and non tuition coverage, known as the Access award for Low income students, and a Cal Grant C that specifically serves students in career technical education programs.

Under Cal Grant reform, the award types would be restructured into just two award types, a Cal Grant two available at community colleges and a Cal Grant four available at universities. There would also be several notable changes to the eligibility requirements. Traditionally, under the current Cal Grant program, students have only been entitled to an award if they are a recent high school graduate or a transfer student under a certain age.

A couple years ago, the state enacted some expansions under the current program so that the entitlement awards are also available to community college students regardless of age and time out of high school. Under Cal Grant reform, that would be extended to University students, so the age and time out of high school restrictions would be eliminated for them as well. In addition, under Cal Grant reform, the GPA requirement that's currently in place for community college students would be removed and the income ceilings would be adjusted.

Currently, the income ceilings are program specific. Under Cal Grant reform, they would be aligned with the ceilings for the Federal Pell Grant program, and those ceilings are generally lower than the current ones. There would also be some notable changes to award amounts under the current Cal Grant program there's a provision that prevents most first year students receiving a Cal Grant be award from receiving tuition assistance. That would be resolved under Cal Grant reform so that all University recipients are receiving tuition resistance.

And then on the non tuition front, there would also be some changes that differ by segment. Currently, all Cal Grant B recipients receive an access award of up to about one $600 annually. Under Cal Grant reform, community college recipients would continue to be eligible for that award, and the award would be pegged to inflation.

So it would go up year after year, which is something that hasn't happened for quite some time under the current program. At the universities, however, calculate recipients would not be eligible for the access award under Cal Grant reform. Instead, the state would expect this segment, CSU and UC to provide non tuition coverage for its students through its institutional financial aid programs.

At the bottom of this chart here, you'll see some numbers that the Commission provided last June as a budget enactment comparing the current Cal Grant program to Cal Grant reform. Based on these numbers, the eligibility changes under Cal Grant reform are expected to increase the number of new award offers each year on net by about 150,000 students. In addition, it would increase spending in the Cal Grant program by an estimated 365,000,000 in that first year.

I wanted to turn next to our comments on what comes next for Cal Grant reform. You'll hear from my colleagues at the Department of Finance that the governor's budget does not make changes to the trigger determination that was agreed upon last year, meaning that currently the state would determine next spring, likely in May, whether to proceed with Cal Grant reform in 2024-25.

Our main concern with this approach is that the timing of the trigger determination conflicts with the university admissions process. Campuses generally, tend to send financial aid offer letters to admitted students in the spring before the academic year begins so students can consider these offers when they're making their enrollment decisions.

If the state waits until next May to determine whether to proceed with Cal Grant reform in 2024-25 some students will likely need to make enrollment decisions before knowing whether they are eligible for a Cal Grant and how much aid they will receive under the program. This morning, I think you'll hear various options for addressing this concern. One option that we recommend is to make the determination one year in advance.

So as part of your 2023-24 budget process, determine whether to proceed with Cal Grant reform next year. This approach would allow the state to provide greater clarity to students next year and the financial aid that's available to them through the Cal Grant program, while also providing the commission in the segments with more time to implement any changes. Under this approach, if the Legislature determines that it does wish to prioritize moving forward with Cal Grant reform in 24-25, it would designate ongoing funding in its budget plan for this purpose rather than relying on a trigger determination that has an uncertain outcome. Thank you.

Okay. Thank you. Let's go back now to the Department of Finance to give an overview of your proposal.

Good morning, Chair McCarty, Assemblymembers. I'm Devin Mitchell, Department of Finance. So Lisa went over some of this, but just as an overview, California is the state's primary financial aid program and awards grants to students attending a UC, CSU, California Community College, or qualifying independent and career institution or technical school in the state. Cal Grant is an entitlement program, so students who meet all specified eligibility criteria will receive a community college, high school, or transfer entitlement award.

Additionally, students who do not meet all the eligibility requirements for an entitlement award but still demonstrate financial need are considered for one of the 13,000 grants dispersed through the Cal Grant competitive program. The 23-24 budget assumes expenditures of 2.3 billion to support the Cal Grant program in fiscal year 23-24.

We estimate that the program will provide more than 377,000 awards through the entitlement program next year, and we would just want to emphasize that despite a difficult fiscal climate that the state is facing, the budget maintains California's historic investments in financial aid and support for students pursuing public higher education. Just to talk about due to caseload adjustments, the Student Aid Commission has indicated reduced expenditures on the program of 209.7 million in the current year 22-23 and is projected to be 286.5 million in 23-24 based on the most recent estimates.

Lower participation in the Cal Grant program and reduction in financial aid disbursements are largely associated with the lingering effects of the COVID-19 pandemic. The driving factors are enrollment and retention declines in the Cal State University system and at California Community Colleges, and to a lesser extent, retention challenges in the UC system. Though these trends have continued so far in 2022-23, there are signs of a rebound in program participation.

Recent data has indicated small year-over-year increases among new students receiving a high school entitlement Cal Grant award, even as renewal awards continue to decline. Moreover, the implementation of AB 469 at the state level and the FAFSA Simplification Act at the federal level over the next few years is expected to increase financial aid applications by new students and consequently the disbursement of aid.

Again, so I thought Lisa summarized most of the structure of what Cal Grant reform would look like if it goes into effect, but just there is no additional action. Finance is continuing to monitor the state's long-term fiscal outlook as we get closer to May revision in 2024 when the administration will determine whether these changes will be implemented. Thank you.

Okay, thank you. Next, Student Aid Commission.

Good Morning, Chair McCarthy, Assemblymember Alvarez. Jake Brymner, deputy director for policy and public affairs at the California Student Aid Commission, and thank you for the opportunity to update you on what I know you realize as years-long effort to simplify and reform the Cal Grant. As your agenda notes, the last two years have been pivotal in this work thanks to the leadership of you, Assemblymember McCarty, this subcommittee, your colleagues in the Senate, countless supporters and advocates, and of course, our students.

With your prioritization of college affordability and student needs, we've been able to both expand access to thousands of students that were previously not eligible for any Cal Grant, while also deepening the support that we provide to students to address their total cost of attendance and not just tuition. And of course, we're not done with this work yet, but we know that we are now on the precipice of making truly transformative change with your continued support and our continued collective focus on these issues.

While our recent investments and policy changes have further expanded access to Cal Grants for students, resulting in actually over 95,000 more students being eligible this year than they would have been if we didn't have that new community college entitlement program. We've also made these programs more complicated, and our colleague from the LAO did a good job of walking through the before and after of the current Cal Grant and the proposed Cal Grant 2 and 4 under reform.

But I'll note, while there's three different award payment levels, there's actually eight different kinds of Cal Grants based on students' segment of enrollment, their time of application, their income, and even other factors. This maze of Cal Grant programs undermines our collective ability to give students and their family a clear expectation about what they can count on in receiving financial aid, as well as how our adult learners can plan for their education and arrange other parts of their life like work responsibilities accordingly.

And despite having eight different types of Cal Grant, we still have tens of thousands of students that slip through the cracks of financial aid because of various eligibility requirements. As noted by our colleague at the LAO, last year, the state budget agreement adopted the Cal Grant Equity framework that was embedded in the Cal Grant Reform Act, which would create the new Cal Grant 2 for community college students and Cal Grant 4 for students at four-year institutions.

And again, Lisa noted that this would help make an additional 150,000 students who are currently not Cal Grant eligible eligible for state financial aid. Every segment of California higher education would see more of their students gain Cal Grant eligibility under these changes, and it's important to note who are the students that we're excluding from Cal Grant today. They're very often our most financially vulnerable students and are largely Black and Latino students.

While last year's budget adopted this framework and also provided the Student Aid Commission with $500,000 in one-time resources so that we could begin the work to implement this new system and be ready for that trigger in May of 2024, we know that it came with this revenue trigger provision that Lisa was speaking to. The needed investment Lisa has already noted and is one that really California cannot afford to pass by at the Student Aid Commission.

We've already been hard at work since last July to begin to adapt our systems to prepare to flip on the Cal Grant reform switch come May of 2024. And as you'd imagine, there is a significant degree of complexity in that technical work of really preparing to pay out either two different systems of Cal Grant, as well as in how the Student Aid Commission can coordinate with our partners at our public higher education segments in particular so that we can communicate to students clearly as they're applying for financial aid before that May 2024 trigger date.

The good news here is that the large majority of students, over 90%, are going to be eligible for a Cal Grant no matter what we do in May of 2024. Of course, there will be a larger cohort of students that would be eligible and would get good news in May of 2024 if we can let them know that they are now Cal Grant eligible because we've enacted and funded Cal Grant reform.

That group of students is 182,000 students under Cal Grant reform relative to 31,000 students that we would notify in May or be able to tell about their eligibility for Cal Grant if we were to stay within the current Cal Grant program. So we know that this work is too important to delay for any longer, particularly as it relates to how financial aid impacts student decision-making around enrollment and course taking.

We know from student surveys and data on outcomes that one, perceived college costs are the top reason why students don't enroll, and two, students that receive a Cal Grant complete more units and persist at a higher rate than their peers who do not receive a Cal Grant. As California looks to how we ensure that we have the talent pipeline to sustain our workforce and dynamic industries and technology, healthcare, other STEM fields, we have to ensure that a lack of financial aid does not undermine our economic resilience and future growth.

We appreciate the focus of the Legislature and the governor on these issues, as well as the persistent advocacy from our students, who have all been really laser-focused on the systemic reform that we need to make so that the Cal Grant is more responsive to their needs today. With that, thank you, and I will look forward to any questions.

Okay, thank you. We're going to ask now our three segments to come on up and help us talk about the implementation of these Cal Grant changes. I don't think we have enough seats up here, but someone can stand there. But we'll hear from the UC, the CSU, and our community colleges. Or can they sit over there? Yeah, either one.

Good morning, Chair McCarty and members of the Assembly Budget Committee. Thank you for the opportunity to share my perspective on recent changes to the state's financial aid programs. My name is Shawn Brick, and I'm the executive director for student financial support at the University of California. For most low and middle-income American college students, the federal Pell Grant is the bedrock of their financial aid package.

However, the Cal Grant has that honor here in the State of California. The Cal Grant sends a powerful message to students. If you qualify, you can take your award to any public University in California and have your tuition covered. It's because of the strength of the Cal Grant program that the University of California can already use about two-thirds of our own institutional need-based grant to help students pay for things like basic needs, food and housing, other educational costs such as books and supplies, personal expenses, and transportation. The Cal Grant equity framework passed in the Budget Act last year will enhance the affordability of a UC degree and thank you on behalf of our students for those much-needed reforms.

There are some students who would have qualified under the old rules who would no longer qualify under the new rules, and vice versa. Those who would have qualified under the old rules and not the new rules tend to be more middle-income, and those who qualify under the new rules but not the old are, as Jake said, tend to be more low-income and are probably ineligible because of the non-financial criteria in the current program.

And I'll also note at UC that also includes it's primarily transfer students, so it also supports the transfer function, and the non-financial criteria, as you know, are age limits and the time out of high school that are in the current program. So the net change for the UC student body is positive. In other words, more UC students would newly qualify under the reformed rules than would lose eligibility.

AB 183, the higher education budget trailer bill for 2022, made the enactment, as was discussed earlier, operative only on whether or not the state's multiyear revenues beginning 24-25 could support the reform. As Lisa mentioned, the timing of the decision, whether or not the new or old rules will apply, is very important to a smooth experience for California students as they weigh their college choices. UC campuses admit students and make financial aid offers in March and April.

The financial aid offer from the campus provides a comprehensive view of all the aid that the student is eligible for, not just the Cal Grants, but their federal Pell Grant and University aid. That offer is then used by students and their parents to make a college choice by May 1 for freshman applicants and by June 1 for transfers.

If the state waits until April or May of 2024 to decide if Cal Grant reform will be funded, it will be too late for the university to provide accurate information to incoming students about their eligibility. Moving the Cal Grant application deadline from March to later in the spring does not help students interested in making an informed choice and who still need to accept an offer of admission from an institution by May 1.

Just as important, the information in the financial aid offer needs to be reliable for making that informed choice, so we encourage the Legislature to advise CSAC and in turn, colleges and universities whether or not the Cal Grant reform will proceed before CSAC or the universities begin making those financial aid offers that will allow us to give students and parents the best information possible. Thank you for the opportunity to comment.

Okay, thank you. CSU.

Good morning, Chairman McCarty and members of the committee. My name is Noelia Gonzalez and I am the system-wide director for financial aid programs at California State University at the chancellor's office. During the 21-22 academic year, we enrolled roughly 422,000 undergraduate students. We enrolled 60,000 new first-time freshmen and 57,000 new transfers. Almost 50% of our students transfer from a California community college, 51% of our undergraduate students receive a Pell Grant, 32% of our students are first gen, and 51% are underrepresented minorities.

Federal and state financial aid make a college degree affordable and accessible to thousands of California State University students. 60% of our undergraduate students do not pay tuition due to federal, state and CSU-provided financial aid. The CSU is working diligently with the California Student Aid Commission and other stakeholders to ensure that we are able to implement Cal Grant reform to its fullest. We are part of the Cal Grant Reform Committee that CSAC has put together to implement Cal Grant reform.

The committee has both CSU chancellor's office and campus representatives. Since CSEC is moving forward as the Cal Grant reform trigger will hit for the 24-25 and will be awarding students under the new Cal Grant 2, 4 rules for the 24-25 academic year, we've been asked to share with you some of the challenges we foresee for implementing Cal Grant reform. I would like to share those with you for the purpose of collaboration and partnership.

Thousands of students are relying on us to get this right, and the CSU is committed to doing so. We're concerned that the 24-25 Free Application for Federal Student Aid, or the FAFSA, is being delayed by the Federal Government and will not be out on October 1 of 2023. It is likely that it will not be released by the Department of Education until January 1 of 2024.

This is significant because it only gives students two months to file their FAFSA by that March 2 deadline to be considered on time. The FAFSA has significant changes and campuses will be working with their current students to ensure that they file their FAFSAs on time since that FAFSA will be so different compared to other years.

Campuses do like to begin awarding prospective students end of February, but with the state budget trigger for Cal Grant happening in May of 2024, we are concerned that those awards will need to be revised after the May 1 national intent to enroll deadline. We anticipate an increase in student and parent confusion, not to mention an increase in workload for understaffed financial aid offices. The trigger, coupled with the responsive and necessary revisions in May 2024, could impact over 150,000 of our fall 2024 applicants.

We're concerned with last-minute financial aid awarding changes having a negative impact on enrollment of new students. To avoid these potential confusing and negative disruptions in May of 2024, we concur with the LAO that the state should decide sooner rather than later on when to proceed with Cal Grant reform for the 2425 academic year. Thank you. I look forward to the questions.

Okay. Thank you. Finally, we'll hear from our community colleges.

Good morning. Lizette Everett with the California Community Colleges. I'm fine here. Thank you. Just wanted to mention our continued support for Cal Grant reform. As you know, this has been transformative and historic for our students, many of whom are working two jobs. With over 61% of our students working more than part-time, Cal Grant is essential for them. And so we ask that the Legislature not pull the trigger and continue its commitment to Cal Grant reform. This has also been so consequential for our students.

As you know, based on current data, for every $7 that UC and CSU students receive in Cal Grant, community college students only receive one. And so in our prior conversation, we talked about housing insecurities and the basic needs. The Cal Grant reform is really connected to that effort so that we don't continue to see basic needs and securities rise, especially as our economy enters uncertainty. So, again, want to thank you for championing this in prior years, and we urge you to maintain your commitment. Thank you.

Thank you. And I'm going to come back to you in a second. Lisa, maybe you can sit over there in that chair. Corner one. Yeah. So this was a major win in last year's budget in the past two budgets, and one of our most significant budget investments that we did, especially with our community college students. And he's not here anymore.

But I wanted to recognize Mr. Medina sitting at home in Riverside, who did come up here last week when we gave him an award for this work. And so this is a big, big deal, and we're not done yet. So we still have more work to do to fully implement the middle-class scholarship expansion, which will get us to debt-free college, which we'll talk about in the next panel here.

As far as this, the two biggest pieces, again, just to recap, we're no longer this arbitrary, aged-out restriction, because so many of our community college students start at 18 or they may start at 22 or 27, go work for a couple of years, have a family and go back. And we essentially discriminated against people who had lives in between going back to college. So no longer will that exist.

And we focus on the entitlement for community colleges that you said for all the dollars that we spend on financial aid, we're at the bottom one thing that we want to make sure as we roll this out. So the big picture. Yes, we don't want to start and stop. I think we want to go full speed. And it's complicated if we do that on the timing of this when we award this. And so we certainly understand that piece. All college students are different.

So students at UC, generally when they show up as a freshman, they get their award, they stay at UC, they graduate in four or five years, CSU, five-ish. We're trying to get it lower. Community college is not always that simple. Some students go two years and transfer, and at the end they're four or five years. Some students take longer, which is fine. All students have different paths. But the trick there is that this runs out.

And your Cal Grant is probably worth more valuable when you're at the four-year college than you are at the CSU. And so some students don't know that. And so how do we ensure that some of our community college students, when they now get this, they maximize this ticket to college and don't flounder it and don't show up at CSU or UC at three or four years, and then they're out of financial aid. So I'll start with you, Lisa.

Yeah, happy to address that. I think there are a number of really excellent reforms and transformations that the Assembly has championed that are really helping with that time intensity to degree and the ability for students to complete and maximize their Cal Grant, for example, equitable placement has been key. Some of the efforts that you've championed around basic needs so that students have these resources so that they can again enroll at a greater intensity.

We continue to urge you to advance those push us to implement with fidelity because that really is going to help students complete in time to utilize their Cal Grant within those resources. Our colleges are also ramping up within their financial aid offices and connecting all available resources as best possible. And so they're looking at ways to align various programs, tutoring, and other efforts to support their academic progress. And our faculty continue to lead in those efforts as well as our staff. So those in combination, I think help a broader effort, as you've highlighted that students do utilize their Cal Grants.

Maybe the Student Aid Commission and UC and CSU can help with this question as well. You want to go first, Jake?

Sure. And it's a really important point that you've raised, Assemblymember McCarty, one that we've thought about a lot at the Student Aid Commission, as you would imagine, and there's something of a chicken and the egg problem here. Students often aren't able to take the same number of units that they might otherwise because they don't have the adequate financial support. And we know very often with the best of intentions, students are advised to save and preserve their Cal Grant for after they transfer. In the process, though, they never complete those transfer requirements to be able to get to that four-year institution in the first place.

I referenced earlier and I made an allusion to it, but I'll just expand a bit on data that came from the UC Davis Wheelhouse Center that looked at receipt of different forms of financial aid by community college students and the difference in the units that those students completed and their ability to persist from term one to term two from year one to year two.

When students get a Cal Grant, we see from data that they complete more units and they're more likely to persist and to come back the next year. So I think that data to us indicates that it's really critical we provide them with that financial support so that they can take those courses, take one more course that term, maybe one less shift at work.

As you know, so many of our students are working full time and not able to take as many courses as would really be helpful to getting that momentum to transfer. So that's where we think expanding Cal Grant access for our community college students is going to be really important to re-enrollment, persistence, and ultimately helping more of our community college students move on to that transfer setting.

And I guess I would say, as I mentioned during my of comments, a lot of the students who would benefit from the reform at UC are ones that have come to us as transfer students. So I think it's a really important question. We already do quite a bit of outreach collaboratively with our community college colleagues. We have conferences advising them and I think we would want to, even more than we do now, underscore the importance of reserving that award for when you transfer.

I agree with Shawn. We do a lot of outreach with our community colleges. We hold conferences in the fall in terms of training to ensure that they're aware that there are limits on financial aid programs. We are concerned at the CSU that students will be transferring without Cal Grant eligibility because they've used their Cal Grant eligibility at the community colleges because they've been there three years. Right? So they'll only come with either a year or no eligibility left in their Cal Grant program. So that is a concern, as we do see that the majority of our transfer students are coming in with more than two years of attendance at the community college.

Especially there at CSU. And I know what you're talking about there. Is there any scenario where, perversely, be better off, they not had it at all? Because if they don't have any Cal Grants in community college when they show up, at least they now have eligibility for CSU. And now some may actually show up, haven't expired, all of their Cal Grant reward.

Right. I mean, I think in a perfect world, I'd like to see a two-year limit at the community college. That's my preference. Because when students transfer to the CSU, we do have really good graduation rates at the two years. So our community college students are successful when they get to us, they transfer in two years. So if they would at least have a minimum of two-year eligibility at the CSTU or at the four-year, I think that would be great.

Yeah. I think this is an unsettled issue that we'll have to just evaluate as we go along. But the big picture, we're spending a lot more in our budget for financial aid and the Student Aid Commission to help community college students.

Absolutely.

Chairman McCarty, can I add one more thing that I think is really important, as you are asking a really valuable question, which is, how do we ensure students have a Cal Grant available and then they can maximize it when they transfer? I think key to that is also ensuring that our four-year partners come and accept the associate degree for transfer as a viable option. And when they get there, they give them credit for the units that they've taken or earned.

We're finding that many of our students are having to retake many units at the CSU, which then adds time to their degree, and then that means that the time is ticking on their Cal Grant. So the need to accept those transfer agreements is so consequential, and it's connected to financial aid viability as well.

And Chair McCarty, if I may, just make one more point about our current policy as it relates to students who transfer to a four-year institution and what we would accomplish under Cal Grant reform. Right now, the only way to be sure that you're going to have a Cal Grant once you transfer.

And as I think Shawn was noting as his comments, you're either under age 28 or you've gotten the community college Cal Grant entitlement and you're using that portability of the word to take it with you to a four-year institution. So that's why so many of our students right now are transferring with zero years of Cal Grant eligibility.

And that's where we see some of the largest gains, as Noelia was noting in opening access to our transfer students, is by removing those age-based limitations that really don't reflect the nature of who we're serving at our community college students.

Do you think that we should have a trigger? Kind of like the CSU said that after your first or second year saying, hey, FYI, you're getting this for year three, you should know you continue this, you won't have any when you get to a UC or CSU.

I think more information for students is always a good thing. I don't know that we would want to have a policy that limits access.

Not limits, but just a notification like when you're buying something. Make sure you read this disclaimer.

Yeah. I think more information is always going to be helpful to students in trying to then inform those enrollment decisions.

I think that's a great idea to have that piece of information because I know we do that now at the CSU when students are reaching their fifth-year Pell Grant. Right? Because we know Pell Grant has six years of limit, we'll start reaching to students, letting them know you're getting close. Right? Let's move on to graduation because we don't want students to lose out on their funding.

Mr. Alvarez.

Thank you. First, recognize the work that I'm sure many of you, Chair, and others have done on reform. I think that was all good work and should move forward. But we have a question of how and when and all that. But my first basic question is the award offers goes from about 340,000 the current year to a projected according to CSAC in 24-25 wherein this might trigger to 491,000. But it's my understanding that we are reducing the income like the income limit. So to now match Pell Grant, if I'm correct, which is a lower amount, which means less families would now qualify for Cal Grant. First of all, is that correct or not?

So you're correct in that we would align the Cal Grant 2 and Cal Grant 4 income ceilings with that of the new federal Pell Grant formula. The piece I would note and why we would serve many more students and families is that there are many, what we call rationing devices that the state has instituted to limit how much we spend on Cal Grant that are not connected to financial status and keep out some of our lowest income students.

I just was speaking about the age cap for when students transfer. There's also for our community colleges who serve all California students, requirement that you submit a transcript and have a GPA minimum, which really is out of sync with you.

I was going to work through all those pieces because I just want to make sure I understood correctly, though. But so first and foremost, some will be no longer eligible because their income level is higher. That's a fact. Is that correct?

Yes. There is a population who would be eligible for what we call the Cal Grant A program today that would exceed the federal Pell Grant.

Do we know how many that would be?

Yes, we do. That number is, I want to say it's about 30,000 students, but I could get back to you with the specifics. It's 31,000 students.

But then you gain students who now are aged out under the current system, as you were just saying, that are over 28 and also the GPA requirement. And that's how you calculated the new number of awards of 491,000.

That's right.

Okay, thank you. Did I also hear you say that Federal Government is moving FAFSA deadline?

Okay, that's kind of important. So I just want to make sure I had that right.

Yes.

That's correct.

Okay. To January 1. Expected.

It's expected sometime. They called it the third quarter, but we're thinking they really mean January 2024. January 1. That's by law. They have to have it out by that date.

Okay. They're reformatting the application. What's happening?

Yes, it's called FAFSA simplification. It happened, I think, a couple of years ago at the federal level. And so they're quote-unquote, simplifying the FAFSA. That's still to be determined, but the delays in the programming of their system has caused them to not be able to release it on October 1, as we've gotten used to. Right? It's been great to have those extra three months for students to apply and really working with not just our current students, but our prospective students as well.

Yeah, I know we had in the fall an affair to help, it was at least 200 families. And so that additional time is very helpful. I know we have the next item, but these things are sort of related, and I want to ask. I'm trying to understand. It seems like when middle-class scholarship first came to be, it was truly focused on potentially middle-class.

But as time has progressed, more and more, maybe what you not consider middle-class individuals are receiving support through the middle-class scholarship. Why don't we just add more financial support to the Cal Grant program based on your income level as opposed to now having another? It's already complicated. I think Cal Grant reform was to try to make it less complicated. Now we're adding another award that gets calculated in the whole thing. Is there no way to simplify that, to increase Cal Grant for those students that are currently now receiving middle-class?

Ouch. That kind of hurts, Mr. Alvarez.

Oh, sorry.

Because we spent a whole year trying to do just that. That's the next item. So, the middle-class scholarship is part of our compromise proposal last year, and it was really kind of the Senate, but we agreed with them on that, that we want to expand it for everybody. So it's really the non-tuition costs. So historically, the middle-class scholarship paid for about a third to half your tuition for people in the middle class.

And so as we did the massive Cal Grant expansion, we basically revamped the middle-class scholarship to cover those families who didn't quite become eligible for Cal Grant but also give additional awards to cover the non-tuition costs, like books and housing and transportation. It still is complicated, but I think it's getting less complicated.

If I could just make one quick point about how these are really complementary reforms we view at the Student Aid Commission. And candidly, we're taking a little bit of a page out of the UC Office of the President Playbook and trying to provide more clarity to students about tuition coverage.

So what we'll be able to do with Cal Grant reform is say, if your family has an income that's below this ceiling on this table, before a student even applies for aid, they'll know that they're eligible for full tuition coverage for four years. We can't make those kind of assurances when we're talking to students today. And then the middle-class scholarship 2.0 grants will be there to help supplement those non-tuition costs as Chair McCarty was just pointing to, and provide some additional assistance to those students who might have formerly been a Cal Grant A student but are too high-income to earn a federal Pell Grant.

And that's where I was getting to with the questions, is the folks that the 30,000 families that we previously supported in some way and now might not be eligible for Cal Grant and how could middle-class help those students in particular? Because they're still at an income level that's not. The Pell Grant level is low, and we should help folks who are under that income, but there's still a lot of families with the cost of living in cities, in most major cities is really high.

And so I'm concerned about that gap. So thank you. That's the reason why I was asking that question. I think maybe a final question, clarity from Department of Finance. I thought I heard, but please clarify that in the May revision, we will get certainty from in the governor's proposed budget about whether we go with Cal Grant reform or not. Is that what you stated?

May revision of next year 2024.

Okay, so that seems to be a problem for all folks. And so I understand that that's a $365,000,000 commitment. Our chair has been really diligent about identifying our needs, but I feel like it's a decision that we need to make at some point. And it sounds like from the systems, in order for them to implement this most effectively, they need to know sooner rather than later. So I guess for me, the question is, can we make that decision in this year's budget, or is that still something that I don't know, Mr. Chair, in terms of that trigger, can we decide to make that policy now?

We could. That was the agreement in last year's budget that like many things in the budget, this governor and the prior governor has agreed to it, but funded in the out years with off ramps or triggers for implementation. Since last year's budget was passed, obviously the financial situation has gotten even more dicey. So I think we want to continue, but not just because our values, but also it's a practical issue, too. The awards for these financial aids are in the middle of this situation, so it's hard to start and stop and pull it back. So I think that's a worthy conversation.

I would say my final thoughts are if we can find a way, particularly to those students who are now drop off current level of eligibility, of making sure that middle class helps scholarships, helps those students be held harmless if you will, or potential future students, it would make sense to make this decision now, understanding that that is a cost, but it's one of the costs that we'll have to identify where we find the savings, and maybe we do that.

I'm open to hearing the discussion, but because I'm leaving the committee to actually attend, one that I haven't been at all morning, maybe the funding for at least next year comes from the Golden State Education Training Grants, which seem to be moving very slowly if much at all. Open to hearing again the testimony on that, but it seems like from the data currently in front of me, that could be a potential funding source. Thank you, Mr Chair.

Okay, thank you. Good questions. Okay, let's move on to the next, the middle-class scholarship update.

Is that finance you want?

Yeah, Department of Finance, LAO, Student Aid Commission, and then UC, CSU.

Thank you. Can you hear me? So the budget includes 856,000,000 to support the middle-class scholarship program in 23-24. This appropriation includes an increase of 226,000,000 one-time general gund delivering on the intent to provide this additional investment that was included in the 2022 budget. This increased investment will focus resources toward reducing astute it a student's total cost of attendance. Excuse me. MCS provides eligible undergraduates and students pursuing a teaching credential with scholarships.

The program is for students with family income and assets of up to $201,000. Award amounts are based on a student's available resources and the cost of attendance at their institution. MCS is not an entitlement program, so award amounts are shaped by the total number of students eligible and funding for the program appropriated by the budget each year. And in 23-24 we estimate that the program will provide more than 291,000 awards next year. Thank you.

Okay. Thank you.

Lisa Qing with the Legislative Analyst Office. We have a short handout that provides an overview of the recent changes to the middle-class scholarship program. Would you like me to go over those?

Yeah, maybe briefly, since it's just me up here.

Right. And much of this will be recapped for you. Well, the sergeants, I believe, have distributed this handout, which I'll be speaking from. As you know well, the state created the middle-class scholarship program about a decade ago to provide tuition assistance to certain CSU and UC students. As we discussed in the previous issue, the program was originally focused on those students who were above the income threshold for the existing Cal Grant program.

A couple of years ago, the state adopted a new set of rules for the middle class scholarship program that are being implemented for the first time this year in 2022-23. Under those new rules, students' award amounts are linked to their total cost of attendance rather than just their tuition aid tuition charges. And in addition, under the new rules, the program is open to students who are already receiving coverage through the Cal Grant or other financial aid programs.

This has significantly increased the number of recipients in this program, as you'll see in the chart that's on this one-pager here. Based on the commission's estimates underlying the governor's Budget, the number of recipients has increased from about 55,000 last year to an estimated 270,000 this year at CSU and UC. In addition, the state has made a corresponding increase in funding for this program, bringing it up to 630,000,000 in the current year, and higher at the governor's budget for 2023-24.

Now, at the current year funding level of 630,000,000, the state is estimated to be covering about 26% of each middle-class scholarship recipient's remaining costs of attendance. After accounting for their existing resources in the current year, the cost of fully implementing the program or covering 100% of each student's remaining cost of attendance is estimated to be about 2.4 billion for 2022-23 and that amount is likely to increase in 23-24 and in subsequent years as students cost of attendance rises.

So, as the Department of Finance has noted, the governor's budget does include an augmentation for middle-class scholarship in 2023-24, and with those additional funds, it's estimated that the state could cover about 33% of each student's remaining costs after accounting for their existing resources.

However, because the augmentation that would be provided under the governor's budget is one-time in nature that 226,000,000 would be removed the following year, our concern with this approach is that continuing students would come 2024-25 experience a decrease in their award amounts under this approach. Incoming students that year might also receive less aids than the cohorts before them.

To prevent these kinds of negative consequences for students, the state would likely face significant pressure to sustain the higher funding level that's adopted this year with one-time funds. As the Legislature determines what financial aid expansions it wishes to move forward with in the coming years, we recommend it first consider its options across both the middle-class scholarship program and the Cal Grant program that we discussed in the previous issue. As we've discussed, these programs can be complementary. The Legislature can, at this point, choose to proceed with expanding one or both programs in the near term. The programs do impact different groups of students and have different costs.

If the Legislature chooses to proceed with expanding middle-class scholarship in the budget year, we recommend it designate ongoing rather than one-time funding for this purpose, as ongoing funding would provide greater consistency in award amounts for students across cohorts, while also better reflecting the cost pressures that are associated with expanding a financial aid program in any given year. Thank you.

Thank you.

Thank you again, Chair McCarty. Jake Brymner with the California Student Aid Commission. As Lisa just noted, this is our first year awarding students through this expanded version of the middle-class scholarship program, going from about 55 to 59,000 students annually to now over 270,000 California students, including our Cal Grant students for the first time. I just spoke to a moment ago how we view this as a complementary change to what we're trying to achieve with Cal Grant reform.

And as Cal Grant reform increases that predictability of tuition coverage for our UC and CSU students, the middle-class scholarship is going to help provide that non-tuition cost support and help defray costs for some of those other students we were just speaking to. And every new dollar we put towards Cal Grant reform helps us get closer to that goal of fully funding debt-free college for our UC and CSU students as well.

Now, taken together, these are really going to be two transformative policy changes that put California on that path of achieving debt-free colleges, as we've been talking about. And now, this work has not been without challenges. I think for all of us, we could agree, the middle-class scholarship's new structure in looking at that total cost of attendance and first, maximizing the other forms of financial aid is quite complex to administer. And it's really unlike any other form of financial aid.

That last dollar nature of the program, as we call it in financial aid, is outlined in statute and sometimes can create situations that I don't think are in line with what policymakers intended when you were first targeting these funds toward this new program and expansion.

We are, of course, eager to continue to work with the Legislature, the administration, and our segments to refine the statutory structure of the program to avoid those issues while still maintaining that focus on both total cost and the utilization of those other forms of financial aid and maximizing federal and state aid first. And we appreciate the collaboration with our segment partners at UC and CSU. They've had to do really significant work to realign their systems with this new model of middle-class scholarship.

So while we know that there's been some of these issues in the first years, we're figuring out how to pay out students these new awards, we are confident that as we continue to move forward in year two of the program, that process will smooth out and that you will see more timely payments made to students of their awards in fall term. So with that, I just want to thank you again. Thank your colleagues in the Senate as well, and the administration for this really major investment for our California students.

Okay, before I get to UC and CSU, let me just ask a couple technical questions here. So remind us again, if a student is a Cal Grant recipient, how the money flows to the student. So the student is Cal Grant. They're at Sac State as a freshman, they get their tuition money. Where does the money go from the Student Aid Commission? Does it go right to the university or does it go to them and then they give it to the university?

Yeah. The financial aid is dispersed through our campus financial aid offices.

Yeah. So what happens to that hypothetical student?

They're on a roster that we establish at the Student Aid Commission. We get confirmation of enrollment status and then funds transfer from the Student Aid Commission to that campus.

To just pay that bill. And then will that same. That's for their tuition. So now that they get this middle-class scholarship for their non-tuition costs, many times our transportation, books or food, or housing, where does that second check go? To the student, and it shouldn't go to the university anymore.

I'll just add one other step that occurs with middle-class scholarships that's really unlike Cal Grant, which is we first get a roster from our campuses with the other forms of financial aid that that student's receiving. So we could do that calculation.

I get after the calculation, but where does the check?

The check still goes and it's dispersed through our campuses. And in some cases, that student may not be getting a Cal Grant. So some of those awards are still defraying tuition.

Well, let's assume that student gets the Cal Grant and they get this new middle-class scholarship, which is the non-tuition, basically add-on. Where does the money go?

Go ahead.

So once we receive the funds at the campus, we'll look to see if the student has any unpaid charges. So, for example, maybe campus fees or bookstore charges or housing if they're on campus and we'll pay those charges.

Let's assume they have none of those things.

We release the money to the students.

You get send them a check for $3,000?

Yeah. Or hopefully direct deposit, but yeah.

So it'll be in the several thousand? Like a couple of $1,000 probably.

For some students, yes.

Maximum?

Maxiumum, I think it's around 25 or 3000 is the highest award for this year. I'm sure there are some instances where it's been higher this year because it is so student-specific, but the average.

Couple thousand dollars.

I think we've had a couple of higher ones, but the average, I would say is around two to 2500.

And I kind of sidestepped your presentation. I'll get to you in a second. Then, secondly, kind of Mr. Alvarez's question. We had spent about $100 million a year on the old middle-class scholarship, which I think is great because many things in the state government do not focus on middle-class families. We have eligibility for all kinds of preschool programs, health care, and so the families that are just over Calgrunt eligibility, roughly 100 grand in high-cost areas, sometimes they're struggling, too.

And so this is the one thing in government where we did and we helped middle-class families between roughly 100 and 200,000. So I fully support that. We had a lot of support from our members, and now this is going to 630, which is great, which a lot of it. Are these smaller non-tuition grants to existing Cal Grant recipients?

I know it's not apples to apples, but is it fair to say that of the 630 kind of in this LAO chart, that roughly that 530 is new for those Cal Grant type students? Or are the existing middle-class scholarship families getting a little bit more, too? You know what I mean?

I follow the question, and we have generated tables that I don't know are in your agenda, but that demonstrates where the funds are going by income band, and I don't have that number in front of me right now, but we could certainly show that.

In the new middle-class scholarship, MCS 2.0, are there any? The existing middle-class scholarship kind of families, the 100 to 200 grand type families in UC, CSU, are they getting anything different, or are they still getting the same amount, roughly, of their discount on their UC and CSU tuition?

I'll welcome my colleagues to join in on this, but I think right now, because we're not at full funding of the program yet, it's still really just a percentage of their tuition award at this point since we're at that 26% of total cost. Of course, as that investment continues to ramp up, you will see a more significant amount of funds going to fully cover tuition with those other forms of aid and get to some of those non-tuition costs.

But we're going from, as the LAO thing, if this is correct, we're going from 105 to 630 million. So that's full funding, right?

We're fully using all the dollars that we can. But in terms of that total goal, of the 2.6 billion.

That's right, the $2.6 amount. Yeah, but of this, when we go from the. I mean, this is like a six-fold increase, which is great. This is a huge start. We're roughly a quarter of the way there to funding our truly debt-free college plan for California. But of this increase, what happens to those people? Kind of the other question some people have criticized, like, why are you giving a big windfall to these upper-income families? We have so much need for the traditional Pell Cal Grant recipients. And so I'm trying to understand here, are we actually funding the majority, at proportional money to those Cal Grant eligible students?

The bulk of the funds are going towards students who are in the Cal Grant eligibility still because it's that 26% of the total unmet need. That's the calculation I was referring to before. That amount, when you actually do the calculation for students who are above Cal Grant eligibility, is still just a portion of their tuition coverage other segments for the most part.

Okay, maybe if you can follow up and give us a table to better understand that. And that, I think, will help us with some of the concerns that have been raised, which is the Cal Grant change and reform has this trigger that we're not quite there yet, and this thing is kind know, locked and set in stone. Okay, sorry. We'll go back now to our segments and focusing on the implementation of this middle-class scholarship change.

Okay, thank you, Chair McCarty. Once again, Shawn Brick from the University of California. The expanded middle-class scholarship, or MCS 2.0, will help UC students pay for the total cost of attendance. As we've been discussing, the program promises to be hugely transformative and critical to our goal of making UC debt-free. At UC, the program went from a $32 million program serving about 11,000 students to $165,000,000 program serving 90,000 students this year.

So on behalf of our students, thank you again for your investments in these programs. They serve our students very well. I also want to thank our partners at the California Student Aid Commission. As Jake mentioned, they've been working very closely with us in the financial aid community to implement the new MCS. It's a very ambitious program with audacious goals, and we like audacious goals at the university. President Drake is really committed to a debt-free path to a debt-free education.

But perhaps because it is so ambitious, implementation has presented some challenges. Specifically, all of the elements that go into determining an MCS award for an individual student can change repeatedly throughout the year, so their cost of attendance can change, the FAFSA can be revised, so we get new income information, their enrollment status can change, and financial aid can come in later in the term. And that last point is the one that I believe may be resulting in some unintended consequences with the program.

If the Legislature were to exempt scholarships and emergency needs, basic needs emergency grants from the MCS calculation, students could have more certainty about their MCS support level and not have it adjusted during the academic year. For example, right now, if a student receives a $500 prize from their academic department late in the semester, their MCS goes down. And likewise, if a student receives a basic needs emergency grant, their MCS would be reduced. In some ways, this is not a new feature of MCS.

MCS 1.0 was also sensitive to other institutional financial aid. However, with MCS 20, many, many more low-income students are qualifying, and those are the same students who may need basic needs support. We, therefore, hope that the Legislature would allow scholarships to go against a student's self-help rather than against their MCS eligibility and exempt basic needs emergency grants entirely. And we've been working with committee staff on potential language.

Fixes like this aside, both MCS and Cal Grant reform are really crucial to meeting our goals under the compact to provide a debt-free education to all UC students by 2030. And equally as important was the increased commitment by the university for our own institutional aid and this will be our second year setting aside 45% of new tuition revenue as opposed to 33%. Again, thank you for the opportunity to testify before the committee and thank you on behalf of our students for making their UC degree more affordable.

Okay, thank you. CSU.

Thank you, again. Noelia Gonzalez for the California State University. I will cover four things in my remarks. What the CSU has been able to accomplish with MCS 2.0. I'll talk a little bit about our implementation difficulties, and I'll talk about ongoing difficulties and some potential solutions, and lastly, our plans for the 23-24 academic year. We are grateful to the state for the $450,000,000 investment in the CSU with the MCS 2.0 program. These funds will make college more affordable and accessible to our students.

We've seen students from zero EFC to higher EFC, so it is covering kind of a big spread of students with these funds, and students are definitely grateful for this investment. We've dispersed about 70% of our awards to the students and we are diligently working towards dispersing the remaining funds. We began awarding MCS 2.0 funds in January of 2023.

For the 22-23 academic year, we've dispersed almost 90% of the fall 23 funds, and spring funds started going out in early February, and we've dispersed about 55% of those spring 23 funds. The initial implementation of MCS 2.0 changes were very difficult. I think that we can agree all the segments, we've been working very closely together a lot, a lot of meetings to kind of get this program off the ground.

We did work tirelessly with our partners to implement all the changes to the middle-class program. All of our efforts have been in earnest, but we were unable to disburse those funds during the fall 22 semester, just due to a variety of issues. MCS 2.0 brought many changes that required the CSU to evaluate and rewrite our financial aid software that is provided centrally to all 23 campuses.

A project this size typically takes about eight months for our CSU to develop, test and successfully implement at all campuses. We didn't have that record layout until September of 2022 and so we didn't have eight months before the beginning of the fall semester to implement. But we were able to cut that eight months to four months and we were able to deliver to the campuses in December of 2022. So we were able to start packaging and awarding students in January.

Our students have expressed frustrations to us with the changes so late in the academic year, but we believe most of this is now behind us. We do have a few other challenges that are so persistent. As Shawn said, when we have a student that receives an award later on in the academic year, we know financial aid awards are not static due to many reasons.

So those kind of back and forth going with the Student Aid Commission and the campuses, reporting, sending things on rosters, we have a lot of questions around rules, probation, uneven award amounts. So if a student is full-time one semester and part-time the next semester, those are now uneven.

So we have had to clarify a lot of issues with the Student Aid Commission, but clarifying those issues and getting those questions answered will help us to award those students accurately and reduce the number of revisions to student awards. Since those financial aid awards are dynamic and not static and they do change throughout a student's academic year, we would like to be able to. I'm sorry. Since student colleges were not given the authority to calculate those MCS 2.0 awards, any change to a student's enrollment status or financial aid situation is sent to CSAC and then CSAC processes them and then they send us a response file back and then we have to adjust that package. This can sometimes result in an over or under award that also has to be resolved so that back and forth causes a delay to student awards.

We would suggest that instead of reporting every change to CSAC and awaiting the response, campuses would be able to determine the award amount using the regulations and then report the payment to CSAC. This will allow us to award students quickly and accurately. For the overawarded students. It does take some few rounds of back and forth to get that correct amount reported and paid since we must wait for that back and forth. Several weeks will pass before there is an accurate MCS 2.0 award.

These types of situations should be solved at the campus level and so CSU can then report to CSAC the award amount, which is how Pell Grant is managed. Eliminating the back and forth would allow us to release funds to students in a timely fashion.

CSU campuses should also be able to adjust reduce the MCS award if there are situations where the MCS award causes an overall overward. The way it's being administered today, we must first reduce other financial aid to make room for that MCS award. If allowed to make the necessary adjustments when we first award students, we'll be able to award and release funds to students and then report to CSAC that dispersed amount. Lastly, I'll mention our plans for the approaching academic year.

We are planning on estimating awards for the 23-24 academic year and releasing those fall 2023 amounts to students at the beginning of the fall 23 semester if the amounts are approved by CSAC and we have all of our reporting and our percentages in. Thank you for having us here today, but more importantly, thank you for making increasing state financial aid for our students a priority. We are committed to working through these issues to ensure our students receive the funding needed to get them to graduation.

Okay, thank you. A couple of questions here. So we're super excited. This was implemented last year's budget agreement and funded in the proposal before us. So for Department of Finance, are we at all concerned that we could launch this program because this is one-time money and then next year, like whoops, you don't get that money in the 24-25 budget?

I mean, it's too soon to say what the appropriation is going to be beyond 23-24.

Yeah, but would we be concerned that this is a program but it only has one time money in there?

I'm not sure I have much more to say about this.

Okay, how about the Student Aid Commission? Is that complicated for students when they get this award and like whoops, we only have it for one time? There's an expectation that they'll be getting this award when they're freshmen and then it's just a one-time award.

I think this goes back to that information and notification of students conversation we were just having in the Cal Grant context. It would be very consistent with how we'd implement MCS. We would just then the following year be awarding students at a lower amount if all other factors hold true. In terms of the number of students, their general eligibility, general total cost, this would be a piece in terms of the messaging to students that we would have to be sensitive to and conscientious of.

Okay, and then next question is this, is the launch of this a piece of this, as you said, so it's not insignificant. We're going from $100 million program to 630,000,000 and really making life easier for so many students, including students who have their tuition paid for. But that's not the true cost of college in today's reality. So what do we need to get to fully implement this? You said something in the twos. In the twos billion.

It's in the twos that may be as specific as I want to get here, only because there are so many moving parts with this kind of calculation, there are policy changes and other factors that will impact how you think about the estimated total cost of fully funding middle-class scholarship. So, for example, on the positive side, increases to the Pell Grant formula that we know are already coming to expand student eligibility and deepen the amount of federal aid they receive, that's going to help us get closer to the total cost goal.

Implementing Cal Grant reform gets us closer to covering more costs and having a higher floor, if you will, for what MCS sits on top of. There are changes in the other direction in terms of enrollment, of course, which we know is a priority for this subcommittee. Adding more students, you add more to that total cost. And the other piece would be other system policies in terms of.

I know there's been a discussion, at least in some analyses, around cohort-based tuition. We already have that for UC. If CSU were to establish such a policy that also increases what we think of as the total cost for fully funding MCS. Right now, if you were to ask me, within the current factors, assuming no changes, we're probably looking at 2.6, 2.7 to fully fund total, and then you could back out the amount we currently spend on MCS.

Okay. So if we wanted to have a debt-free college in California, we'd need additional $2.7 billion?

For our UC and CSU students, yes.

As of now, for UC and CSU.

If I may Chair, the 2.6 billion refers to the total cost based on the current level. So it's not the additional cost from what we're currently spending. In 22-23, the state is already providing about 630,000,000 from middle-class scholarship. And so we are estimating you would need to add roughly 2 billion on top of that and not including the one-time funds.

Gotcha. So 2 billion. It's not 2.6.

The 2.6 was the total cost. I'm sorry if I didn't make that.

So we saved $600 million just now. There we go. Great. So we just need 2 billion.

We're already going in the right direction.

Yeah, well, that would be monumental. We're trying to do a lot of things in California that cost way more than $2 billion ongoing. And I know it's not insignificant, but I think we're going to get there. I know that our governor, your boss, in his inaugural address just two months ago, talked about debt-free college, and this is kind of the future of California. I know the University of California using the terms debt-free college over and over.

And when I asked President Drake about that, we said that it's predicated on us doing this additional 2 billion. It would be nice to have free college, but I'm not certain that it's viable in our finances. And I'm not sure if my kids and Mark's kids or high school kids, it would be nice to have free college, but I don't think that's the best use of our money.

And so having a debt-free environment would be the first in the nation to doing this and really setting our young people on a path to financial stability and helping people get in the job market sooner as well. So win-win all the way around. So certainly hope that's in the near future here in California. That being said, can I ask UC to talk more about your vision of debt-free and how this plays into it? And potentially, if we didn't do this, how would you all get to the so called debt-free? I know the president has said that regardless of what we do here in the Student Aid Commission, this is the future for your university.

So at the University of California, as you mentioned, Chair McCarty, President Drake is very committed to this and so, and wanted to move ahead. In fact, in 22-23, we did use the state's definition for debt-free. So we are piggybacking on the middle-class scholarship definition of a self-help of about $7,900. And so this last year, in 22-23 we packaged new incoming California students with a zero EFC from low-resourced schools with that augmented financial aid.

And this coming fall, we'll be doing all new California zero EFC students with the same debt-free package, again using the state's definition of debt-free. So our plan is to continue to focus on those lowest-income students with our own return to aid dollars and expand that as the funding makes that feasible. But we would be relying on the $2 billion. We would be relying on the middle-class scholarship to address a large majority of the remaining students. That would make that feasible.

I think even if the state did not go down that route, we would still maintain a goal of having debt free for everyone by 2030. But it will take us quite a bit longer to get there. And in the meantime, we're going to focus our debt-free program on the zero EFC students.

Devin Mitchell, Department of Finance. The Golden State Education and Training grant program supports Californians who were displaced from employment as a consequence of the COVID-19 pandemic with a one time $2,500 grant to access educational or training programs intended to help grant recipients rejoin the workforce, and it was established in the '21-'22 budget consistent with estimated program expenditures.

The budget assumes that 100 million General Fund previously provided for the education sorry for the Golden State Education and Training grant program will instead be spent in '24-'25 as outlined in the fiscal plan, 200 million would be expended in fiscal year '24-'25, 100 million in '25-'26 and 100 million in '26-'27. Thank you. Thank you LAO.

Under the Governor's Budget, the proposal is essentially to delay funding for the Golden State Education training grant program into the out years. We recommend instead discontinuing the program at the end of the current year and removing the remaining unspent funds. The main reason for this recommendation is that the underlying need for this program has significantly diminished since it was first created. This program was created two years ago to serve workers who were displaced by the COVID-19 pandemic.

Since that time, the unemployment rate has declined significantly and is now comparable to pre pandemic lows. Moreover, the labor market has been very favorable for job seekers, such that they likely have the option of remaining in the labor market rather than returning to work. This is a trend that you've likely heard about in your conversations about community college enrollment trends. Related to these broader trends in the labor market, the Golden State Education Training grant program is reaching far fewer recipients than intended.

The original allocation for this program was sufficient to provide the maximum award to 194,000 recipients. As of January, about 5000 recipients, about 3% of that total, had been paid out.

Separate from the Golden State Education Training grant program, displaced workers do also have other options to access affordable education or training, including through the ongoing traditional financial aid programs we've been discussing today, such as the Cal grant program, as well as the California College Promise grant program at the community colleges and the federal Pell Grant program based on program spending. As of January.

We estimate that discontinuing the program at the end of the current year would yield roughly $470 million in one time savings through 2026-2027 relative to the Governor's Budget. Thank you.

Okay. Thank you. Jake Bremner with the Student Aid Commission. We're supportive of the change that's been proposed here, and we would suggest there are other additional modifications that we can make to program eligibility to ensure that the education and training grant program is an even more valuable asset to our talent pipeline in California. These grants can play an important role in this space as an additional tool in how we can recruit individuals that might be considering various pathways to reskilling and finding a new career.

Unlike the traditional forms of financial aid that Lisa just cited, these grants can be used at programs that are not currently eligible for federal or state aid. Like Cal Grant. These programs include adult education, short term or part time programs at our colleges, and qualifying workforce training programs. Through the eligible training provider list, I'd highlight that these grants of $2,500 can play an important role in helping individuals cover expenses outside tuition or program and registration fees.

We heard clearly from partners in the workforce and career training arena that it's very difficult to find this kind of financial assistance for individuals, even when the programs they're entering are supported by funds that are provided by our local and regional workforce development boards. Because this program is so unique relative to other traditional aid programs that we administer at CSAC, we really wanted to be thoughtful with how we rolled this out.

Last year, based on feedback from national experts, the Student Aid Commission launched a pilot phase of the program to learn what worked for the target population and begin to prime our partners at campuses for this new kind of program. This past August, we launched the public facing part of the application using a skip logic based form so that any individual, whether they've applied for financial aid or not, could pursue this assistance.

Between our pilot phase and the wider availability of the application now we're almost at 10,000 applications thus far, over 5000 and a half individuals who have received a grant, so slightly higher than the numbers you've got in your agenda. This last month, the Commission executed a contract for outreach and marketing on this program to help us reach potentially eligible individuals.

Given that this is a target population that's really difficult to reach from a communication standpoint as they're not already connected with a post secondary institution or a training provider. So while we've encumbered funds for this outreach work, we have not yet seen how this network activation approach that we'll be utilizing with local community partners and student ambassadors will bear additional applications, of course. And as Lisa just noted, we're relieved that our worst fears of the economic impacts from COVID-19 weren't really borne out.

As you know, it's been a much tighter labor market than we would have anticipated back in 2021 when the Administration developed the proposal for this program. This impacts the number of potentially eligible individuals for the grant, as well as our ability to reach them from the Student Aid Commission. As we move past those deepest impacts of COVID and look forward to potentially extending the duration of this program, the Student Aid Commission recommends that we consider making changes to eligibility for these grants.

Specifically, we recommend broadening access so that any individual who's been displaced from employment can access these grants without needing to make a connection to that displacement, to the COVID-19 pandemic. This change would help California position itself for any potential economic challenges that might bear out from the broader economic uncertainty that you're hearing so much about as it relates to our revenue forecast moving forward. Thank you.

Okay. Thank you. I don't really have any questions on this. I just note that this was without prejudice. This was established during a different era. COVID was very different at this point in time in May and 2021, and we were swimming in one time money, looking to make some investments. And so the environment has changed significantly, hence the inability to really get this program off and running. An hour ago, we talked about an oversubscribed program like student housing, where we need one time money to make a big dent in a top, top priority. So this seems like a great opportunity to redirect those resources.

I know LAO said sweep them back to the General Fund, but that could go to corrections or somewhere else. I'd rather keep it in higher ed and helping students. So I think that'll be our recommendation going forward. Thank you. Next. Issue number five, Student Aid Commission operations.

Okay, Devin Mitchell with the Department of Finance. The budget includes an increase of 1.41 million one time General Fund in FY '23-'24. $469,000 of which is ongoing thereafter to assess the Commission's current information technology system, address cybersecurity issues, and support two additional positions. This investment will help CSAC better handle the increased volume of sensitive student data due to the establishment expansion of financial aid programs in recent years, as well as the proliferation of efforts by malicious actors to compromise state agencies with ransomware attack. Sorry, with ransomware and other cyberattacks.

The budget also includes $241,000 ongoing to support a human resources position at the commission and to distribute toolkits to high schools to help students complete their financial aid applications. This position will help the commission better handle additional workload caused by the increase in overall staffing in recent years and fill vacant positions more quickly. The toolkits, meanwhile, are a targeted investment to help high schools as they adapt to state and federal policy changes aimed at getting more students to apply for financial aid. Thank you.

Okay, thank you. LAO?

I'll be brief on this issue. The only proposal we have concerns about is with the high school toolkits. This comprises $120,000 ongoing of the proposals that the Department of Finance described. To clarify, the toolkits consists primarily of printed materials that would provide information on and promote awareness of financial aid. For example, that could include resource guides, posters, postcards, notepads, stickers, and so forth. Briefly, our concerns are as follows.

First, the state provided several augmentations last year related to high school outreach around financial aid, both within the Commission's budget and on the K-12 side of the budget. Given these recent augmentations, it's difficult to determine what gaps remain. Second, the Administration has not demonstrated that sending these printed materials is likely to be an effective way to conduct high school outreach on an ongoing basis. And third, at this time, the proposal lacks some key details, such as the number of toolkits that could be supported.

Given these concerns, as well as, frankly, the high bar for new ongoing spending this year, we recommend rejecting this proposal. Thank you.

Okay, thank you. Student Aid Commission Jake Bremner still with the Student Aid Commission. As noted in your agenda, CSAC has seen significant increase in its responsibilities over the past several years as the Legislature and Governor have enacted or expanded programs, as well as set new policies like the universal financial aid application approach for our high school seniors. And of course, we're thrilled that these new investments and policies and what they're doing for students today and tomorrows.

However, we're struggling to keep pace from an administrative and infrastructure standpoint. While several of these new programs are quote unquote one time, they have significantly lengthy runways. For example, the learning aligned employment program runs until 2031. The Golden State teacher grant program, which we discussed last week at the Subcommitee, is currently scheduled to expend its final round of awards as late as 2026, at which point we at CSAC will still have another eight year period beyond then to track compliance of participants with their service commitments.

So while these programs came with some funding to support Administration, they did not come with adequate, or in some cases, any new staff positions hiring limited term staff who we can only retain for up to 24 months to support these programs is inefficient and creates risks in our administrative processes. We can only retain those limited term staff for, as I mentioned, 24 months.

That means that we have a revolving door of new hires that will need to recruit onboard and train, only to lose their knowledge and experience in a relatively short time frame. So while we're very grateful to the Governor and the Administration for their support of the resources that are in the governor's proposed budget for '23-'24 they're not sufficient to address the staffing and infrastructure deficits that we've identified at CSAC.

In the fall, the Commission requested a total of 17 positions to address our workload outside of the cybersecurity effort and $2.1 million in funding to support that, as well as those toolkits that we just heard about from LAO and I'll speak to in just a moment. These positions are critical to ensuring successful Administration and promotion of those programs.

Without adequate staffing, CSAC's not able to effectively implement other important efforts to ensure that our campus partners can effectively leverage our backend platforms or to as fully engage our partners in promoting these new opportunities for students. As the state's financial aid administrator, high schools and districts are understandably also seeking support from CSAC in promoting financial aid, helping students apply for aid, and equipping local staff toward these priorities in light of the new universal requirement for high school seniors to apply for aid.

So the Commission has seen a demand in assistance from our training, outreach and data teams, as well as in the resources that counselors can utilize to both understand financial aid themselves. Often, these counselors are not financial aid experts and to help them communicate with students about the financial aid applications. That's why these toolkits, supported in the governor's proposed budget, are so essential.

They're practical assets that can help our counselors understand aid and equip them with what they need to promote financial aid assistance opportunities and help students arrive prepared for those workshops. Simply put, financial aid assistance requires prepared individuals that can work with students and families.

While we have some online resources and tools that are of tremendous value to districts and communities, those alone will not meet the needs of our students and families, particularly if they're the first in their family to go to college, which I know we all see is so important to supporting. So, related to this last year, there was a $500,000 one-time allocation that was provided to the Student Aid Commission to expand what we call our cash for college program.

We've already hosted more than 275 workshops in regions throughout the state that did not previously have a cash for college organization receiving funding in that community. And we've also expanded the depth of support for our existing cash for college partners, resulting in 200 more workshops in the communities that they serve relative to the prior year.

So we want to and need to continue to do this work with our local partners, as well as to ensure that the Commission has the resources necessary to effectively execute on these major new opportunities for students. And with that, I'll leave my comments there. Thank you.

Okay, thank you. I think these changes are warranted, especially the prior conversation on implementation of Cal Grant reform and middle class scholarship and coordination with our students and segments.

With all this massive investment, we want to make sure that we do it right. So we are evaluating this and hear you and understand where the proposal coming from the Department of Finance is. So we will hold this issue open. No other Committee Members here asking questions on this item. So thank you. That concludes today's hearing. Important discussions today on financial aid and student housing, and we'll revisit this in the coming months.

We'll now go to public comment for anybody in the room, if you could please line up in the middle of the room and keep your comments to 1 minute or less, 60 seconds or less. Thank you very much. Okay, please proceed.

Hello. My name is Leslie Ta. I'm a student at Canada College and I serve as a San Mateo County Community College District student trustee. In 2018, a district survey showed that 6% of our students had been unhoused. In 2020, a survey showed that 44% of our single students and 52% of our students with families were considering or planning to leave their studies due to lack of affordable housing within commuting distance of our campuses. When it comes down to it, these are just numbers.

But these are numbers that represent people. 6% represents as many as 1380 students who are sleeping in their cars, tents or friends couches. Parents who are struggling to continue their education and provide for their families. At the same time, these are students who are striving to make a better life for themselves and their families. Yes, colleges need money to support themselves through the dip of enrollment. But don't take this money from the least fortune in our campuses.

By taking away the money the SB 169 allocated to higher education student housing, you are taking away a much needed resource for our colleges to support our vulnerable students. I ask that you maintain the full commitment of funding student housing for California community college students. Thank you for your time.

Thank you.

Hello. Rebecca Colleen, on behalf of the Community College Facility Coalition, speaking to the student housing item, we support the student Housing Construction grant program. We oppose the $250 million delay in that program, and we're actually neutral on the revolving loan fund. We do thank you very much for being a partner in building student housing and helping us to focus on affordable student housing. That's really important because construction costs will always rise.

A delay in those grant funds will ultimately mean that fewer beds will be built for community colleges. We believe that would be fewer projects approved out of that $750 million. We do have the need. You've seen $1.4 billion in funding requests from community colleges. Just a note on that. The districts were capped in the number of requests that they could submit in this round, so that doesn't represent the full need. We do not suggest prioritizing the revolving loan fund over the construction grants.

There's a couple of points here that I'd like to make. First, the construction grant program. It deepens affordability because our rents are only covering the operational costs on an annual basis. Right. So with the revolving loan fund, the rents have to cover both those operating costs as well as the loan repayments, and that's the cost of construction.

So we think that the RLF is going to be much closer to market rate housing, maybe slightly below market rate, but it doesn't give you that deep affordability that the state subsidy provides. Lastly, that RLF, it may not be accessible to all colleges across the state. We've got a scarcity of worker pipeline in some places, especially those where we've got growing populations. We want all colleges to be able to access the state program.

Thank you. Next speaker, please.

Hello, my name is Devon A. Hardy, and I'm the student trustee at Cabrillo College. I am a community college Member, and our housing is dire in the Santa Cruz County. I actually had to drop out of school, prolong my education because of housing in our community. And so one of the things that we really are pushing hard for is to hopefully get that funding for our community housing program at the Cabrillo College campus, which so many students are very excited to have on our campus. And that is it for me.

Thank you.

Thank you. Good afternoon, Chair McCarty. Melissa Bardo. On behalf of the Education Trust West, financial aid for college students has not kept pace with the cost of attendance. And with inflation at sky high levels, the consequences once again continue to hit students of color living in poverty the hardest. Last year, we were proud to support Cal Grant reform and excited to see this historic reform enacted, yet without a plan for full funding. This amounts to a promise not yet fulfilled.

Low income students cannot afford to wait any longer. We respectfully request that the Legislature maintain its commitment to Cal Grant reform and that any new financial aid investments prioritize low income students. First, equitable Cal Grant reform needs to include support for community college students and should be prioritized before any other financial aid reforms. In regards to staffing at the Student Aid Commission, we support the governor's proposal, but we note that it is modest compared to the staffing and administrative needs the Commission just highlighted.

If California is serious about debt free college, we must invest in the Commission's capacity to carry out this critical work and support local efforts to implement universal financial aid completion. For this reason, we request the legislature fully fund the Commission's $2.6 million request for additional staff. It will ensure that we protect the historic investments in financial aid from recent years. Thank you.

Thank you.

Good afternoon. My name is Molly Mcguire with the campaign for college Opportunity. We'd like to express our support for honoring the commitments made in last year's compax and roadmap. We believe these agreements are a timely strategy to ensuring stable and predictable funding increases to the segments that will allow them to close persistent racial equity gaps. That said, there is language in the compacts that merits additional consideration.

In certain instances, the compax provide the segments with excessive flexibility on funding and accountability standards, which should be revised to ensure base funding increases are expended on meeting the terms of the compact goals. The need to comprehensively reform the Cal Grant equity remains a racial equity imperative in college. The majority of low income students who are still ineligible for aid are black, latinx women and student parents. We respectfully urge the governor and legislature to prioritize new ongoing resources to fully adopt the Cal Grant Equity Framework.

The campaign stands ready to lend our time and expertise as a resource for any interested Members of the Legislature or their staff. Thank you.

Thank you. Good morning. Andrew Martinez, Community College League of California we are supportive of the investment in financial aid that is proposed in last year's budget. We hope that it'll be enacted next year in 2024. We think this supports what the colleges are doing to support our students basic needs. Financial aid is certainly going to allow us to get our students in and out at faster rate and get them to the next step in the pathway forward when it comes to housing.

We are encouraging the Legislature to support the affordable housing grants. We think that's a way to invest and support our students, again, who have an unmet need for our colleges to ensure that those are not having a place to live. Those programs will allow those people to have somewhere to stay. We believe we are meeting the moment when it comes to housing.

Sierra College and Lake Tahoe are planning to break ground this summer, Compton College by the end of the year, Kern College in the fall, and Casinovis is on track as well. So we think we are trying to get those projects shoveled ready and get them going and get them open as soon as possible, and we're on path. Thank you. Thank you. Good morning.

My name is Ray Diaz and I'm a student at UC Santa Cruz and the Vice President of the Student Housing Coalition, a coalition of students who are trying to find real solutions to the housing crisis currently facing us at UC Santa Cruz. So here I'm just providing comment on the real access to opportunity that legislation and reforms will have on students of color who are attending the University of California, Cal states and community colleges across our state.

So currently, as the Vice President of Student Housing Coalition, we work directly with students of color who are currently facing housing insecurity at our campus. A lot of our students are currently living in their vehicles, and we are currently trying to work with the University to provide safe alternatives for students to have access to water, basic needs, and other resources that students need to be able to succeed in these spaces of higher education.

If the State of California truly, truly wants to serve these students and have access to opportunity and pathways towards social upward mobility, then we have to tackle these problems and find solutions immediately to essentially provide these opportunities for students of color who have been underserved and who will come from communities of color, communities where the investments have not been there. And so it would really do a lot if we threw more into finding solutions for the housing crisis.

And so I encourage this Committee and the Subcommitee education and finance to continue to look for solutions on the housing crisis. It's grave at the University of Santa Cruz, where we have approximately 9% of students who have experienced some form of homelessness, according to the UC's own accountability report. And so we encourage you to check out UC Santa Cruz and check out the actual housing insecurities that are being faced by real students right now. Thank you.

Good morning. Alex Niles, President of the UC Student Association, wanted to make a quick comment in strong support of fully funding Cal Grant as the best way to ensure accessibility and close equity gaps from those marginalized. Students at UC also wanted to echo to voice strong support for not axing $250 million from the student grant program as the best way to most quickly and affordably address the student housing crisis.

I also want to say that as much as UC students are grateful for and support both the revolving loan program and the Student housing grant program, we want to acknowledge that neither of these programs will address the affordability challenges faced by the many students who will go through UC in the time before those new housing projects are built. Thank you.

Hi there. My name is Zenon Elliott Crowe. I'm a second year at UC Santa Cruz and chair of the Student Homes Coalition, which is the coalition between all three higher education advocacy organizations in the State of California. And I really just want to reiterate my support and our support for going ahead and keeping the revolving loan fund and keeping to fund these programs for student housing. You just heard from Ray and some other people that the crisis, especially at UC Santa Cruz, is dire.

I mean, you can walk through the parking lot and you see students living in their vehicles with solar panels and especially with the storms in Santa Cruz, where we've had entire piers wiped out. And now we're seeing the Baharo Valley is know these weather situations. Students are living in their vehicles and living on the streets, enduring this and still trying to get a degree. And so we're also happy to say that we need this investment in on campus student housing, but also off campus student housing.

And so actually, at 01:00 p.m. Today, we're going to be launching new critical student housing legislation in Capitol room 3117 to go ahead and create a new Bill that kind of targets the production of more student housing, especially near UC, CSU, community college and private four year nonprofit accredited institutions. And so again, I think with all these different proposals, know a crisis only happens when everything goes wrong. So we need to make sure we Fund everything that we can to make sure everything goes right.

Thank you. Good morning, chair McCarty. Matt Hinney with generation up, and also I'm currently a student at UC Berkeley, mainly here to, again, speak support, as with some of the previous public commenters on supporting student housing, first off, supporting the ongoing funding for student housing that the state has committed to previously.

As someone who testified in the legislative cycle on AB 1602 the need for that legislation is something that I personally, and also a lot of students as well, and the work that we've done critically value.

We know that students are not just feeling this in their capacities as trying to attend the universities colleges, which they're a member to, but every aspect of the campus community is affected when our students are not able to get the housing they need in order to attend and be committed to their campuses.

And not only this, with the already ongoing shortage of on campus housing, when students can't get that on campus housing, we know that they are pushed to off campus housing, and thus the local housing markets across the State of California, which we know are some of the most expensive rental markets in the country, which is why around college campuses, we need to make sure we're focusing on increasing production of more on campus housing and more off campus housing.

And to echo previous comments, I please urge everyone to please tune into room 317's 01:00 p.m press conference on producing more off campus student housing as well. Thank you very much. Thank you.

Hi, my name is Allison Chan, and I'm a student at UCLA and also part of Generation Up, and the Student Homes Coalition. I wanted to echo what everyone before me has said about advocating for more affordable housing. As a student who's living off campus, I know how hard it is to find affordable off campus housing, especially when on campus housing is not accessible. And I know that this is not just common across the UC systems, but across all three of the public systems in California.

And so I wanted to advocate for that, especially knowing that housing costs are the main driver of increasing college costs right now. Thank you so much.

Thank you.

Hello. I'm a second year at UC Santa Cruz, and I really just wanted to echo all of the anxiety surrounded by trying to find housing off campus in Santa Cruz. Many students have to start looking for housing in the fall quarter, starting in the spring quarter, which is months ahead of time. And not only that, but you're not even guaranteed that housing. We're competing with dual income families, which we personally cannot do as full time students and sometimes part time workers.

A lot of the time, students don't even find housing until a week before the fall quarter starts. So it's very difficult to find housing off and on campus, especially since we're only guaranteed it during the first year and not any of the following years. So I really just wanted to state how much anxiety, how much, honestly, depression that it creates within our communities. It's essential for us to really start funding this and ensure that students don't have to face that. Thank you.

Thank you.

Hi, I'm Sophie Nadel, and I'm here with the Student Housing Coalition from Santa Cruz. And I thought it would be best to give my personal experience with housing in the area because I feel like it's really true to a lot of students' experiences. So I'm a recipient of both the Cal Grant, the Pell Grant, and some UC grants specifically, and that covers almost all my tuition and some housing.

However, because the housing issues in town are so dire, no better word for it than dire, if I went anywhere off campus, I would be paying thousands a month over the surplus that I've been granted from the Pell Grant and the Cal Grant. Like an in town, one bedroom can go for three grand in Santa Cruz right now. I luckily got housing one week before school on campus in one of the excess buildings that they created for such situations.

But because I didn't get housing until a week before school started, I needed to buy a car to move to campus, and I had to buy a hatchback because I didn't know if I would be able to sleep anywhere. So in case of emergency, I bought a car with the sole purpose of being able to sleep in it.

I paid so much extra money just for the safety of being able to have a place to sleep at night because I didn't know if I could crash on a friend's couch, have on campus accommodations or anything in case of emergency. So please consider students like me when you guys are crafting these bills, because it's truly important. Thank you, guys.

You're welcome. First, we will hear from line 37.

Thank you. Thank you for your testimony for coming up here today. We have four people on the line and we'll just take those four, then we have to adjourn. Operator, please queue up the four. And again, please. No more than the four. Thank you.

Good afternoon. Chair Committee Stephanie Goldman, associate Director for the student Senate for California community colleges, of which more than 1.8 million community college students. Community college students are suffering through housing insecurity at a rate of one in five students higher than the other segments. This is due in part to the failure of our state to provide equitable housing options. The Legislature made history two years ago by telling every Californian they deserve dignity and respect with something as simple as having somewhere to live.

And I urge that said dignity be upheld in this year's budget. Additionally, affordable college is not just addressed by housing, but also by Cal Grant reform, which would help address the non tuition cost of living for community college students. We appreciate your consideration on both issues, but community college students need affordable housing and Cal Grant reform today. Thank you.

Good afternoon, Mr. Chair. My name is Parshan. I am the California Policy Director for UAspire here today to elevate a coalition. A letter from the Coalition of organizations that have been working over the past two years, especially over the last year, in implementing the AB 469 and FAFSA CADAA completion efforts.

We want to echo a number of the comments that our friends here have said earlier in the call in terms of singular focusing, elevating calibrate as a priority, and we hope to see that be reflected as we know you've been a champion of this effort. So we thank you for that. Another issue that we want to elevate, we would like to put in our support for the staffing needs of the FAFSA CADAA implementation, specifically with funding the CSAC staffing needs for that.

So the California Student Aid Commission right now needs about $2.6 million in ongoing funding to support 17 financial aid staff, 12 of them being existing staff that need to be made permanent, and five more additional staff, as well as funding that would include school keeps for high schools to support fulfilling the AB 469 requirement implementation and cash for college workshops through funding the one time basis funding from last year as an ongoing thank you.

And line 38.

Good morning chair McCarty and Members. My name is Shannon Thompson, policy specialist with the Cal State Student Association. I'm calling today to thank the Committee for your work to ensure Cal grant reform was adopted into the 202223 budget, though contingent on funding in the 202324 fiscal year. I urge the Committee, Legislature and the Governor to stay committed to ensuring this critical reform happens for our students.

The Cal Grant equity framework is the most important step we need to take in order to move towards a debt free pathway for our students. Thank you.

Thank you. And lastly, we'll hear from line 40.

Thank you chair McCarty, this is Ashley Walker with nosimate on behalf of North Orange County Community College District. We do want to request that the Legislature consider the full fulfillment in the current fiscal year for the student housing grant program. As you see in your packet, Stateworth College is ranked number eight on the list of student housing grant projects. That does mean our project is shovel ready. Our plans are outlined and approved.

Our ETA for completion of construction would be the fall of 2025, which is very short in terms of construction timelines. We do appreciate this opportunity. We want to note that 76% of our students in a recent survey for California community colleges said that they would attend full time if they had affordable housing and helping the state reach their vision for success goals in doing so. Thank you for your consideration and time.

Thank you. That concludes our public testimony. We'll adjourn.

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