Assembly Budget Subcommittee No. 3 on Education Finance

Today we will be discussing different programs the state library UC College of the Law Scholarship Cal Kids College Savings program as noted in our agenda for the state library, the Governor has proposed pulling back and forgoing funding from the local library infrastructure program, which has provided significant funding for everything from H VAC systems and upgrades at libraries to construction projects to rebuilding and renovating some libraries impacted by fires and other disasters in our state.

We will also look at past spending on library programs, as we have done throughout the Subcommittee's hearings this spring. We are looking for unspent funding in the case that the May revenues require more cuts for UC College of the law, formerly Hastings. We will discuss the Governor's Budget proposal to provide an increase in operational funding for the college. While the proposal is very small, we need to scrutinize every dollar as we have been doing consistently in this budget Subcommittee. So, we look forward to this discussion.

And then finally, the Cal kids program opens college savings accounts for every newborn in California and for every Low income first grader. This is a complicated program with a very worthy goal to help more students go and prepare their mindset for college. But I hope we can talk today about how we can make sure Californians know about this program and take advantage of it. Only about 7% of families with an account have registered for the program, and that number has to be higher.

We will also offer public comment both now, if anybody in the public like to register now, or we can also take it at the end of the hearing. I don't see anybody coming up, so we will take public comment at the end, and with that, we will start with our first item. So if I could ask please, the Department of Finance Legislative Analyst Office and our state librarian to please come forward.

And I will start with the Department of Finance and then followed in the order of that I presented. So welcome and please begin.

Okay, yeah, good morning and good to be with you Chair Alvarez and Assemblymember Fong. Devin Mitchell with the Department of Finance. The Governor's Budget proposes to pull back 131.3 million one time General Fund of the 439 million in one time General Fund support provided for the local library infrastructure grant program in the 2021 budget act. The budget also foregoes planned one time investments to support the program of 33 million in 2024-25, 33 million in 2025-26 and 34 million in 2026-27.

We would add that this amount was an estimate based on the information we were working with when the budget was released in January, and the amount that is ultimately reverted will depend on program expenditures in the current fiscal year. Additionally, due to Low participation in the program, the budget also proposed withdrawing 34 million out of the 35 million appropriated in the 2021 Budget act to expand broadband access to isolated underserved communities through the California Collaborative Connectivity Grant, a partnership of local education agencies and regional libraries.

This proposal was included in AB 106 as part of the early action package that has since been adopted by the Legislature, was approved by the governor, and became law in April. Finally, the department is also receiving a position authority for a tribal and rural libraries focused library programs consultant that would be supported by federal funds from the US Institute of Museum and Library Services. Thank you. I'll yield to others on the panel and I'm ready to answer any questions at the appropriate time.

Thank you. LAO.

Morning Chair Alvarez, Member Fong. Ian Klein with the LAO. So we've reviewed the governor's proposals and we agree with scooping what is available to be pulled back from the local library infrastructure grant program. Just as a bit of background here, the estate provided 439 million in one time General Fund for this purpose in the Budget Act of 2021, with an additional 50 million being provided in the Budget Act of 2022.

So a combined 489 million and speaking with the state library, we've identified that as of January 30 of this year, of that original 489 million appropriated for the program, 448 million has been spent or encumbered, as shown in figure one of your agenda on page four. Given that 448 million has been designated as awarded, we recommend pulling back the portion that has yet to be encumbered, which totals 4.8 million.

Additionally, given the fiscal condition of the state, we have no concerns with the governor's proposal to pull back the additional 100 million, in one time General Fund that was to be provided for this program over the next three fiscal years. With that, I'll pause my comments, but I'm happy to answer additional questions.

Thank you. State librarian welcome.

Thank you, Mr. Chair. Assemblymember Fong. what? How can I be of help to you? I mean, what would you like to hear from the library?

We like to hear your comments on the the particular budget items presented.

Well, as Devin said, right, the early budget action has already saved the used the 34 million for broadband to help close the gap between available revenue and spending commitments, the building forward program. I think as Ian said, that's the more current estimate of where we are. Right. So the January budget is based on like October numbers, November, is that. Yes. Right.

So most of the, almost all of the 489 million for local library facilities has gone to something like 272 library projects in 38 counties or, or something like that. What we did do when we talked with finance about what the condition of the budget was going to be in January was projects that we gave people who hadn't turned in their paperwork. We gave them until December 31 to do that. And so there's a list of 1, 2, 3, 4, 5, 6, 7, 8, 9, 10 projects.

And I think that's what you were alluding to, the 4 million or, or so in projects that we put on hold just because they didn't meet that deadline and because we thought that was the responsible thing to do given the state's fiscal condition.

Thank you, appreciate all your comments. We will turn it over for questions from the committee. Mr. Fong.

Thank you so much, Mr. Chair. Thank you to our panelists. This question is for the state librarian in terms of. You just mentioned the, when we look at the report, over $400 million having allocated and different $489 million appropriated for this program, but $4.8 million remain unencumbered. Were there applications that were submitted that were not funded?

Yes, there's more than $300 million worth of projects, 99 different cities that we have reviewed that could go forward. Were there money to do so.

So there's $5 million not encumbered. Then why is that $5 million not encumbered if you had $300 million in applications?

Well, there's a variety of reasons. So some of the projects that we provided initial money towards that money isn't enough to cover the project. And so the state's contribution has reverted back to the state. There's a matching, there's a matching requirement in this program. Right. So some local jurisdictions have, I mean, I'm telling you what you know already, but with inflation. Right.

The cost of a lot of these construction projects has gone up and in some cases the price has gone up so much that the locals can't make their match and they've had to abandon the project.

Well, that's where we're trying to get information from you. So this is an opportunity to hear from you directly. So appreciate that.

Right.

And I'm happy to. We can detail all this for you if you'd like something more specific than what my recollection is.

Thank you.

Thank you to our state librarian.

I knew I should have sent somebody else.

For our libraries. Outside of this funding in the last few years and outside of development impact fees that are paid locally, are there any revenue sources of opportunity to fund projects in California? How are the projects coming together?

So there's, most libraries are parts of a city or county government. Again, I'm telling you what you know already. There's a handful of libraries that are special districts. Sacramento, for example, is one. Where was I just the other day? Altadena is one. And so special districts have a little more latitude, right. So they can pass a local bond measure, and then there's a guaranteed revenue stream. Right. That they can use to pay off the bond over time.

So for that finite group of libraries, there's maybe 11 or 12 in California. I mean, they have some, a little more flexibility in finding local borrowing to make projects happen. Cities and counties. Right. I mean, again, this is something you're familiar with, right. It's a two thirds majority to pass a bond. And some cities, like Riverside, a couple years ago, they had a one cent increase on the ballot. And then, so that was, I'm making it up.

But that was like, you know, item a on the ballot, and item b was, okay, do you want to spend this money on a new downtown library in Riverside? And so that passed by 65%. Like, yeah, let's spend it on the library. The general sales tax increase. Right. That's only a 51% vote. And so then Riverside use that to create this. It's really cool. State of the art library in downtown Riverside. So some local jurisdictions could do that, but not the ones who.

Right, not the ones who really benefit the most from libraries.

I'm curious, in the special district, has there any districts been formed more recently that you know of? I don't, but, you know.

Thank you. Not to my knowledge, although we just got a series of questions from the GAO. The Federal Government now is thinking about using federal library money to allow it to be used on capital projects. And so the GAO is doing the study to get a sense of what the need is out there. And so we just got a thing about how many special districts are there. So we're researching that. But to.

I've been here 10 years in this job, and no one, no new special districts have been formed, to my knowledge.

Okay, appreciate that. Thank you. We will move on to issue two, which is about the past appropriations. We have the same panelists, obviously. And so we ask to have the Legislative Analyst Office go first and provide their update on the report. And then finance, and then our librarian.

Thank you again, chair Alvarez. Member Fong. Ian Klein with the LAO. As you've heard in previous hearings, our office looked beyond the governor's budget to identify one time funding that had been provided but not yet spent or encumbered, beginning with the 21-22 budget, as shown in figure two of your agenda on page eight, the state library was provided with about 200 million in one time General Fund for various initiatives, of which about 68 million remained unencumbered as of January 1 of this year.

The vast majority of the remaining unspent one time funding comes from the statewide Imagination Library Initiative, which, as of January 1, had about $59 million unallocated. Given the projected budget deficit and consistent with the recommendations that we have made for other agencies, we recommend the unencumbered and unspent General Fund designated for one time initiatives also be reverted. With that, I am happy to answer additional questions.

Thank you so much.

Yeah. Again, Devin Mitchell with the Department of Finance. Nothing to add on these items in the agenda because the Governor's Budget does not include any additional action. But again, happy to answer questions. Thank you.

Thank you. Library.

Well, as Ian said from the Legislative Analyst's Office, the bulk of the remaining unencumbered funding at the library is in the imagination library. This is a program where any kid under the age of five. Any age under five can sign up and get a free book every month. It's present in a number of other states, all of them smaller than California. And the program is. There's 2.2 million kids under the age of five.

And so what this funding is for is the state to pick up half the tab of a book. A book is about $3 a month. And so the program is ramping up slowly. There's. There's elements of how the program works that make it more complicated in a state the size of California than, say, some of the smaller states that it's present in.

So if I want to sign up my daughter, which I wouldn't, because she's 31, but if I were signing up, you know, my kid, there has to be a local partner to pick up half of the tab for the book present in my zip code. And if there isn't, I just have to wait. And so in a county the size of Los Angeles, for example, there's 500,000 kids right under the age of five.

But there's a scattering of local partners in some cities, like Long Beach, I think Glendale is another one. And so that's been, I think, more challenging for, like, I say a State of California's size and diversity than, say, some of the smaller states where the program is present in.

Thank you. So in terms of the statewide imagination library, we heard that $59 million is unencumbered. What's the plan to scale it up?

Per the operational requirements that are established by the imagination library, State of California has to create a 501 to administer the program. We have that that's been created. They've hired a team of outreach people who are in the process of trying to find, you know, I hate, like, Low hanging fruit, but, I mean, they're trying to find the sweet spots. Where can we expand the number of zip codes as rapidly as possible, where this program can be available? And that's where we're at now.

I mean, there's been some mechanical difficulties in getting the IR's to provide the 501 C three certification that's needed. There's been a variety of kind of administrative hurdles that we didn't expect, but that's the plan.

So 2 point in LA County, is LA City and LA County libraries involved yet or.

No, not yet.

Are there plans to get them involved?

We've had conversations with them. What tends to work better are non public entities as partners. So like a nonprofit or, like United Way, for example. And so the chair of the 501 C three is the. Is Jackie Wong, who heads first five. And so she's been working to try and find these larger partnerships to help make more inroads in large population counties like Los Angeles. In 22 of California's 58 counties, anyone can call up and get a book for their kid. Right?

All of the zip codes are covered, but in larger counties, it's spotty.

And so in terms of program, you mentioned 2.2 million kids can qualify. How many have actually signed up for the program?

How many have signed up now? Yeah, it's approximately 70,000.

70,000 out of the 2.2 million?

That comes out of 2.2 million. Yes, that's true.

So what percentage is that?

Oh, let's see now. I definitely should have sent somebody else. It is a small percentage.

All right. For my guess materials, about 3%. Is that accurate?

If you say so.

So going to the point about how, as we heard, we're in a very challenging budget environment, how do you, with the $59 million? And you mentioned IR's other issues, is this something that you can scale up, or is this something that you feel that there's a lot of challenges going forward?

It can definitely be scaled up. There's been a slowness and what I think of as getting out of the blocks, I mean, just establishing a network of local partners that move the ball forward. Right. So it's frustrating for a parent, right, to call up and get excited about getting this book and then be told, hey, you're on a waiting list until we find a partner in your zip code.

So we've tried to structure the growth so that if you call up and want to sign up your kid, fine, you'll get a book here in a month. And so it is scaling up. Is it scaling up as rapidly as we'd like? No.

Are there opportunities, perhaps partner with school districts or somewhere else?

There are some jurisdictions. There's some counties that use local school districts as a partner. There's a number of counties where first five is the partner. There's some counties where they use service clubs like Kiwanis or Rotary. So it's a program that was structured. I mean, Dahle Parton started it for the town she grew up in, in Tennessee. So I think that's probably the root of this focus that they have on ensuring that there's a network of local partners.

But in some cases, you know, the legislation allows for the state to pick up the entire cost of a book. We've had some existing local partners say, oh, good. Like, we don't have two nickels to rub together. Why doesn't the state pick up the whole tab as opposed to, oh, the state's picking up 50%. Okay, we're gonna double our involvement in the program. So I think it's a, you know, in part, it's a function, maybe, of the economic environment, to some degree.

A function of the economic environment.

Well, well, right, so state has a 30, whatever it is. State has a $40 billion budget hole. So that means local jurisdictions are also having budgetary issues. Right. Which we know because local libraries contact us. So we're saying, okay, to service clubs, to people that are struggling to get by or having difficulty coping with inflation. Right. So their response is, can somebody else pick up the tab? Because we're struggling to be able to do it ourselves. So that's what I mean by that.

When we look at large systems like LA Public library. They put on a bond a few years ago to carve out part of their budget for libraries. So it has a better conversation with, like, John Zabel from the LA City library. I don't know. So I'm just trying to see how we can help.

I've talked to John, I've talked to Skye, Patrick, and they're weighing whether to participate in it and how that works for them.

Okay. So it sounds like there's a lot of challenges going forward if you're not able to get the large systems on board.

Well, I mean, telling you what you know already, you're from that area. Right?

So, I mean, John has 76 libraries that he has to worry about and all kinds of other issues. Right. Sky has. She's the second largest library jurisdiction in the country, behind New York Public Library. So it's like their budget is tight. We're asking them to do something else, like do they have the capacity to do it? It isn't that they don't care for the program, it's just that they have their hands full doing delivering first class service to the people in their jurisdiction.

All right, is there anything else that you guys like to add?

Okay.

Thank you so much.

Thank you for your questions.

Appreciate your answers. Thank you. Thanks, ma'am. All right, thank you so much, panelists. We'll invite our third panel up. BC College of the Law, San Francisco. Welcome. All right, welcome. We're on issue number three, budget overview for the UC College of the Law. We have Gabriela Chavez with the Department of Finance, Ian Klein with the LAO, David Fagan, chancellor and dean of UC college at Las San Francisco and David Seward, chief financial officer of UC College at Las San Francisco.

Welcome.

Good morning. Chair Assembly Member Fong, Gabriela Chavez with Department of Finance. The College of the Law, San Francisco is affiliated with the University of California system, but is governed by its independent board of directors. The college primarily enrolls the students seeking a Juris Doctor JD, but it also offers three law related master's programs, including a health joint health policy and law program with UC San Francisco.

The College of the Law, San Francisco expects to enroll approximately 1053 resident students in 2024 - 25, 988 will be JD students. The total residence fee for the JD program in 2024 - 25 is 50,625. The governance budget includes an increase of 2.2 million in ongoing General Fund to support operating costs. This represents a 3% in base augmentation. Happy to answer any questions you may have.

Thank you so much.

Next presenter, Ian. Morning Member Fong, Ian Klein with the Lao as mentioned by Department of Finance. The Governor's Budget includes a $2.2 million General Fund base augmentation. We recommend the Legislature reject this proposal given the fiscal condition of the state. Unlike UC or CSU, which had their proposed base augmentations deferred in the Governor's Budget, it was explained to us that the College of the Law was provided with their base augmentation as the college is a smaller agency with less access to borrowing and smaller reserves.

However, even without a base augmentation, the school would still be able to cover some components of their 24 - 25 spending plan as shown on page 16 of your agenda. They would cover this from revenue generated from other sources, primarily tuition revenue, which the college anticipates will generate 2.3 million in 24-25. I'll pause my comments here, but I'm happy to answer additional questions.

Thank you so much UC college good.

Morning Assembly Member Fong. I'm David Feigman, chancellor and dean of UC law San Francisco, formerly UC Hastings law. Let me begin by expressing my deep gratitude to the California Legislature and the Administration for the strong support we've received over the years. I've been a faculty Member at UC law San Francisco since 1987 and dean since 2016.

The state has been an extraordinary supporter, indeed partner of our institution throughout my time at the school, and I hope that the state has appreciated what we've accomplished with that support. For over 50 years, we have had a robust admissions policy of ensuring access to underrepresented groups, including those who have overcome systemic disadvantages and those that are first generation college students.

That work has been led by our legal education Opportunity program, begun in 1970, through which approximately 20% of our class is is dedicated to students who have successfully overcome severe disadvantages. Over the last five years, we have expanded that commitment in our first gen program and now about 24% of our class were the first in their families to go to college.

In addition, since I became dean in 2016, we have initiated an expansion of our footprint in the heart of San Francisco, which has primarily involved the building of student housing. In August of 2023, we opened our new 14 story building with 656 units of housing. That housing is not just for UC law students, but is open to graduate students from Bay Area programs, including a third dedicated to UCSF learners, and additional units occupied by graduate students from other institutions of higher education in the Bay Area.

In short, we are thankful for the state's budget support throughout our 146 year history and fully endorse the Governor's Budget recommendation for the college. This year. We will understand the budget challenges faced by the State of California and appreciate the Lao's recommendations seeking avenues to reduce spending, including identifying the governor's plan for UC law this year. However, the Lao itself explains why its recommendation isn't viable for UC law.

Quote, the Governor does not propose to defer this base augmentation as he does with the UC and CSU base augmentations. The Administration indicates it took a different approach for UC law because it is a small agency with less access to borrowing, unquote. I want to note that we do not expect declining JD enrollments. Our target this year is the same as it was last year. That is, we expect to bring in a class of approximately 400 JD students.

Finally, as noted by the LAO, our tuition is lower than our sister UC law schools, which of course is a positive factor for a school that seeks to serve the public interest. We likely will need to continue to increase tuition over time, but the provision of an affordable legal education represents a core institutional value. In summary, we run a first rate law school, leanly, in terms of staffing and compensation, in a way that specifically advances the state's interest in diversifying the legal profession.

But we depend on state support to achieve our public mission. Thank you for your time, and I look forward to answering your questions. I'm joined by my CFO, David Seward, here on the panel.

Thank you so much. Mister Seward, did you want to make any comments?

No, I'm just here to support the dean.

Thank you so much. Panelists, a couple quick questions. So when we look at page 17, it mentions the student housing project. Can you give us the latest update on the student housing project?

Certainly. This is for the renovation of our 1929 high rise building, which we were able to decamp the residents from upon the opening of the new housing facility at 198. The project is underway. We are fully contracted. Demolition has begun, as has hazardous material abatement. So we are in process. It's going to be a two phase project in order to sort of manage the some of the project risks involved in renovating an old 1929 building.

So with the state support, we are involved in that first phase. It will generate an additional, at a minimum, 252 additional housing units. And with the completion of that project in 27, we should be pushing about 1000 years of housing for graduate and professional school students from throughout the Bay Area.

Thank you. And in terms of going forward, what are the colleges enrollment plans over the next several years?

So we expect in the foreseeable and near future that we'll remain steady at around 400 per class. So total around 1100 over time, we are monitoring the situation on the backside. Of course, employment very often drives what the enrollment expectations should be.

And with the onset of artificial intelligence, we need to be mindful regarding changes in the possible market for lawyers, as well as where they might be placed, whether they might end up more in product council positions with tech companies as opposed to associates and big law firms. So we're always monitoring the employment situation as we contemplate what the enrollment situation would be.

Great. Thank you so much. Thank you, Mister chair.

Thank you. One question. Thank you all for being here. One question we've really focused on. This Committee is on enrollment of Californians. I don't know if you already touched on that or today, but can you give us a summary of your enrollment and where students come from? You want to do that? Sure.

Our nonresident enrollment is roughly 10% of the total student body under the education code. There is a different standard applied to graduate and professional school. Students.

Of our entering class will typically pull in eight to 10%. Many of these students become residents and as they go into their second and third years. But we do not rely on non residents as a significant revenue source because of that fact.

Is the tuition higher, though, for non residents?

Yes, it is a $7,000 premium for the non residents of the program.

Okay, thank you. Thank you all. Appreciate your time. Thank you for being here. We'll hold the issue open, and we'll move on to issue number four, which is Cal kids update. We have the Executive Director of the Scholarship Investment Board, Children's savings accounts initiatives from the board, the Legislative Analyst Office, and the Department of Finance. And we'll ask the scholarship investment board to begin this panel and then move on to the Lao and finance. Welcome to all of you, and thanks for being here. Please begin.

So thank you, Mr. Chair and members of the committee. My name is Julio Martinez, and I'm the executive director of the Scholarshare Investment Board, which oversees the state's 529 college savings plan and its initiatives such as CalKIDS. I am joined by my colleague, Noah Lightman, who serves as manager for the CalKIDS program and is here to help answer any questions that you may have.

But I first want to thank the subcommittee and its staff for historically being supportive of the Scholarshare Investment Board and its efforts to help families across the state prepare financially and save for the cost of higher education, including the creation of CalKIDS, which is the largest statewide savings program of its kind in the nation.

I am here this morning to provide you with an update on the CalKIDS program, and it is my hope to leave you with a greater understanding of how the program is structured, the positive impact it is having on families, and identify some opportunities where the legislature can continue to be supportive. To ensure its continued success, I would first like to provide some background on how the CalKIDS program was created and how it has evolved over the years.

In 2019, the CalKIDS program was originally established as a universal at Birth Children's Savings Account program that would provide a small seed amount for all babies born in the state, regardless of income household income. However, due to the pandemic, the program was placed on hold.

Unfortunately, then, in 2021, when the state had a budgetary surplus, the legislature and the administration revised both the scope and scale of the CalKIDS program to increase the seed amount of newborn children and include low income and other vulnerable public school students. Therefore, the program now has two components with some nuance. First, the original universal at birth component that automatically creates accounts and funds accounts for all babies born in the state, regardless of household income, on or after July 1 of 2022.

However, those babies born in the initial year of the program from July 1 of 2022 through 2023 of June 30 receive a seat amount of $25. Those babies born after July 1 of 2023 now receive a seat amount that is higher at $100. All babies, regardless, all babies, receive the supplemental incentives, which is dollar 25 for having their parents log in and claim the account and dollar 50 for opening or scholarship 529 are linking an existing one and linking it to their calcids account.

Now let's move on to the second component which automatically enrolls low income public school students in the first through 12th grade enrolled during the 2122 academic year, and it awards them with a minimum of $500. Students who are identified as homeless and foster youth get an additional $500 for for a maximum award of $1,500. Then in subsequent years, as the kids get older in school, we actually create accounts for the incoming first graders with the same amounts between $500 and $1,500.

So this program continues to grow every year with incoming new first graders. This context is important because the CalKIDS program is uniquely different compared to other CD state programs across the country. CSA programs typically have a starting point for children such as birth, kindergarten and first grade, and this allows for the gradual and steady growth and maturation of a program year after year. CalKIDS, on the other hand, was launched at the CSA program that serves a very wide demographic that includes all newborns.

Like I mentioned, regardless of household income and low income public school students enrolled in first through 12th grade, some of which had already graduated, and enrolled in our colleges and training programs by the time it launched. Despite the nuanced design of this innovative and still relatively new program, I am proud to share with the subcommittee some of the program's achievements to date, as of March 31, CalKIDS has had over 300,000 families claim their CalKIDS accounts.

Nearly 25,000 students have redeemed and used their funds for higher education expenses. Nearly 30,000 participant families began saving on their own through the state's 529 college savings plan. Of those families, families of parents of newborns have saved an average of $3,200 to date. For those parents of students, the average amount saved is around $2,500. These figures are a direct result of two main factors.

The first is the marketing support that SIB has received from the subcommittee and the administration, which has allowed us to mail notifications to each participant and their families. It also has allowed us to work with our media vendor to advertise a program using digital ad displays, social media and out of home advertisement.

The second are the partnerships that the SIB team has developed with key stakeholder groups across the state in all 58 counties, and they include school superintendents, principals, counselors, public information officers, statewide associations, hospitals, the higher education segments, community based organizations and elected officials, to name a few. While the overall participation rate to date for newborns and school aged children can understandably be viewed as low, I think it is important to remember the the program is still relatively new.

Each year, the program is adding approximately 700,000 new children, and it takes time to build trust among families who are generally very skeptical about programs that offer free money. Lastly, over the past three or four months, SIB has been able to make some modifications to the way it approaches its marketing and outreach strategies and practices that have proven to be both successful and promising for activities going forward.

Number one, when the program first launched, marketing was broadly designed to target either newborns, school aged children, or both. More recently, SIB has developed multiple unique strategies for smaller subgroups of participants, which include newborns students in first through 12th grade high schoolers or high school seniors, rather students pursuing and lastly, number four, the those students pursuing post secondary education, or perhaps those that are contemplating it.

For example, this spring, in April, SIB launched its first marketing and outreach campaign directed only at high school seniors in the class of 2024. This campaign consists of mail to leas, college access organizations, direct mail to the seniors themselves, digital and social media, and email. In just over a five week period, SIB has been able to increase the number of seniors that have claimed accounts from 26,000 to 45,000, which is a 74% increase.

Yet we still are only halfway, maybe a third of the way through this campaign, which should run between through June and possibly even July. With respect to newborns and their families, SIB has recently partnered with the Recorder Register offices for the counties of Los Angeles, Riverside, Fresno and Sonoma county so that the CalKIDS marketing materials are attached to the baby birth certificates. This has contributed to a sharp increase in claims. During the first quarter of 2024, CalKDIS has had over 21,000 claims for newborns.

This is a greater number than the total of newborn claims we had in the previous six quarters. There are also other factors that contributed to this growth, but I think the point is we're learning and things are improving. In the fall, we plan to apply similar tactics and strategies to those students in post secondary education because beginning this fall, we will have now three cohorts of students enrolled in our colleges or perhaps training programs, apprenticeship programs statewide that could use these monies.

Yet I think we just need to build stronger relationships with those agencies. Two, buy in from partners really matters while SIB mails information to all of our potential partners, including all school districts and individual leas in all 58 counties, it is one on one meetings and PowerPoint presentations with superintendents, principals, counselors and public information officers that really inspire key officials to go beyond simply putting a flyer in a kid's backpack.

Some of these school districts are actually having fairs where they bring in their chromebooks and they're actually helping them walk through the process and not simply sending an email out to parents. Therefore, it's really important to note that while the participation rate for students is 8% statewide, there are county offices of education districts and schools that have participation rates well above 20%. Three, there is greater urgency to claim an account as the children get older and closer to graduation from high school.

I think this is logical and as I touched on earlier, SIB is developing targeted strategies and campaigns directed at older students, especially seniors in high school and those already pursuing their post secondary education. However, it's important to remember that families with younger children often delay participating participation in programs like these because they're not ready to start planning financially for the cost of their children's higher education.

They have until age 26 to claim these accounts, so there really is no sense of urgency for the parents that are that have younger children, especially if those parents are low income the most. I think what matters most however, is that the child and their parents know that they have a college savings account already created for them. And the last point I think I know, I've been talking for a very long time and I appreciate your patience, is four is data sharing okay?

So partners are continually coming to sib asking for data because, especially on the student side, because it only applies to low income students and they don't really know who they are on their college campuses because we can't give them specific information about these students.

So we have now entered into a data usage agreement with the Riverside County Office of Education, which Noah will probably speak to you in a second, thanks to the subcommittee that authorized that pilot project, and we look forward to seeing what kind of positive outcomes come out of it and its implications for the possible expansion to other leas statewide.

As such, we look forward to continuing to make improvements to this program to ensure that many as many eligible families claim their accounts and consider saving on their own. We also look forward to continuing to work with your offices to promote the program, which can be done using our digital marketing assets and helping facilitate presentations to your constituents and community partners. With that, we'd be happy to answer any questions that you have. Thank you.

Thank you. We'll go to the LAO then.

Good morning, Chair Alvarez and Assemblymember Fong. Lisa Qing with the LAO. I'll focus my comments on a couple of technical items, starting first with a brief update on caseload adjustments in the CalKIDS program, and then turning to unspent funds remaining in Scholarshare's budget.

Regarding caseload adjustments, as you may know, the state budgets for the CalKIDS program based on projections of the number of newborns and first graders in the past two years, the actual number of newborns and first graders has come in somewhat lower than projected, leading CalKIDS costs come in lower than budgeted by a combined 120 million across those two years. As part of the normal budget process, the Administration has reflected the savings from these caseload adjustments in the Governor's Budget.

Separate from these caseload adjustments that are already reflected. We've been working with Scholarshare to identify any unspent funds that remain available in their budget and could potentially be reverted to address this state deficit. In total, we've identified 26.5 million in these unspent funds, with that amount coming from two previous allocations. First, there was a one time allocation provided in 2019 to 20 of 25 million to launch the CalKIDS program for newborns.

This one time allocation has largely not been needed because the state has since begun providing ongoing funding for that same purpose. So we recommend reverting the remaining 17 million from that allocation. The second place, where there are unspent funds, is an ongoing allocation that was provided in 2022-23 for a financial literacy outreach initiative for CalKIDS participants. Scholarshare is currently in the process of developing this initiative, and so the first two years of funding provided has largely not been spent.

We recommend reverting a combined 9.5 million from those first two years for this initiative. Under this approach, you could still retain the ongoing funding for this initiative in 2024-25 and onward in order to support it once it's up and running. Thank you. I'm happy to take any questions.

Thank you. Department of Finance.

Good morning. Jessica Deitchman, Department of Finance. I don't have a formal presentation prepared, but I'm available for questions at the appropriate time.

Thank you. I'll start. I actually have a series of questions. First. I'd say I am a fan of Scholarshare. I have two children and I started my 529 accounts there over 10 years ago. Appreciate the platform. It's easy to use and very, very good.

I want to ask about the participation, and actually what I'm going to ask of, of Mr. Martinez is if you can submit your testimony that you provided in writing, because you gave a lot of figures that I could not write them all down. So I'd appreciate any you can provide in writing. I was trying to keep track of the different numbers, but it was, there were, there were a lot of numbers.

So I guess the first question would be, is the $1.8 billion provided in 21-22 went to low income students of all grade levels for that year? How much of that actually, how many accounts were actually created as a result of that?

Mr. Chair, if you don't mind, I'll have ask no enlightenment to answer that question for you.

Please.

Thank you.

Mr. Chair. About 3.4 million accounts were created for a very large cohort of first through 12th graders from the 21-22 academic year.

So at 3.4 million, you said, and it's at $500 per student. So about a $1.7 million cost. Am I doing the math correctly?

Well, the actual cost is a little bit higher because some of the students, if they are foster youth, they get an additional incentive of $500, and if they're homeless students, they get an additional deposit of $500. So there are some children, a small subset of roughly two to 3000 children across the state, that qualify for the maximum amount of 1500.

Okay, so out of the 3.4 million. Sounds like several thousand actually receive the 1000 or $1,500 as opposed to just the 500. So I guess my question is and definitely would appreciate the figures of all those accounts and who they were created. Obviously not by name, but desegregated data. How much of the 1.8 billion has actually been utilized?

Great question. Because these accounts are automatically created and funded the moment we get the data from both. In this case, we're talking about the low income public school students. Once we get the data from the department, state Department of Education, we use that data to automatically create the accounts and Fund the accounts. So all of the children whom we've been notified of have an account in their name.

That's 3.4 million students.

That is correct.

And how many eligible students do we have in California?

In that original cohort of students? In 21-22, year 21-22 we had roughly 3.4 million children, and it was estimated to be roughly 3.6 initially. To Ms. Qing's point, initially it was estimated to be much higher, but ended up being much lower.

So I understand that accounts were created for children, but they still have to take a step, an action in order for that account to be their account. It's not just, it's sitting there right now. It's waiting for them to claim it, but it hasn't been unclaimed. Maybe my question would be how much of it has not been claimed out of all the accounts created?

Okay, so at the moment, are you asking all around for both newborn and school age or just school age children?

This is why I'd like to see your report in writing figures, because I. It's hard to keep track. So tell me, let's start with one.

This list, so you can have it in your hands.

Sure.

We'll take a copy.

And give them this paper for the members, please. And for staff. Do you only have one of those?

Here you go. And I'll share with. I'll share with them.

Oh, so is this, is this different than what's on page?

It should be the same.

Okay, so then we have that before us. So you. So here's a breakdown of the 3.6 million students enrolled in grades first to 12. Since that's who the accounts were opened or created for, 7.4 of those have actually been registered, or I called it claim, but registered. Is that correct?

That is correct. But I would like to note that the 3.6 million accounts that are noted here also include the incoming cohort of students that came in in the 22-23 cohort. So initially, we had roughly 3.4 million in the first. If they can give you a background. In the first year of the program, the program took a snapshot of all first to 12th graders, all in one. They came in one chunk. So that was 3.4 million children. Now, the program is not, it's not.

It's static. It's not dynamic, meaning that the kids will. The number of kids will not change unless they opt out of the program. But we can't add children to the program.

Right. So the only ones being added are the newborns or the first graders.

Correct. So each year that the program gets older, so the first graders move on to second grade. We now include roughly 270,000 incoming first graders to the program, along with roughly 450,000 or less newborns every year.

Let me ask about how we, and maybe if the IBA and finance want to jump in on this. You know, in the K through 12 discussions we've had, we're having difficulty identifying who are free and reduced. I assuming this is tied to similar income levels as free and reduced. We're having difficulties in accounting for that. And therefore, the cost of our meals program has been increasing from the state because the Federal Government is not participating.

If we do not have the data to prove that we have those students, I'm trying to understand where we're getting the 3.4 million figure from the 200. Additionally, every single year, whose data are we using to count for that? Because we're not collecting that level of specificity with all of our students in the State of California. So how do we know, how are we estimating these numbers?

Okay, you want me to take a stab at this or?

Go for it.

Let's start with you, and then I'll go to each person.

So, Mr. Chair, I think in the very beginning, that's what we kind of struggled with. And how do you identify who is low income and who is not low income? So we worked very closely with the Department of Finance and also with the State Department of Education. And what was recommended is that we utilize, especially during the pandemic, because during the pandemic, all children in California were receiving free and reduced lunch. So that wasn't really a good marker for us.

So what we relied on is really what is considered a unduplicated pupil. And an unduplicated pupil is a student that is either receiving free and reduced lunch is either whose parents or themselves are enrolled, participating in CalWORKS, MediCal, those kind of programs. And it's really a combination that is used to create a profile of these children and also the supplemental income forms that they collect at schools.

And so that's what created the profile within the State Department of Education, is, my understanding, the way we understand it. So they provide that data to us.

Okay.

Well, just so you know, we have a very low return rate on the forms from, from parents, so that's not a very good source of information, or at least not a good, thorough source. I think there's more information together. Finance, do you want to provide input on how you calculated these figures?

So I'll let maybe.

So I have the same information as my colleague at this color share, so I will have to get back to your office on that.

Okay.

My colleague at the LAO may have.

Yeah. Do you have any additional, I mean, when, when the legislature appropriated this money, they must have said, we counted this number of children using, you know, such and such formula. Is this the formula that was used?

So when the funding was initially appropriated for this program, the administration ran those estimates based on our review of their numbers. Our understanding aligns with what my colleagues on the panel have shared.

That line of question is because, just curious, whether those numbers are correct or not. And so how much of the, the accounts that get created are aligned with the reality of how many students are actually eligible, which I think requires some more work. What happened? The accounts are created. Are they created like any other? Are they targeted date funds? What kind of fund? What kind of account is created?

That's a very good question, because SIB was charged with creating a program of this scale within an 11 month period. Not only did we have the investments to be focused on, of course, the youngest of children, but also we're talking about children that were already of age to redeem and use their monies. Right. So what we did was to just ease the implementation. We split the children into two different groups.

So the children that are newborn all the way through fifth grade, their money is invested in a 529 account. That is enrollment year based, meaning that depending on their age and when, we anticipate then when they're going to be enrolled, it's like a target date fund.

Sure.

Right. The second part was a non 529 investment that is guaranteed to provide a rate of return between one and 3%. Right now, I believe, is roughly at either a 2.6%. So it's a guaranteed rate of return. It's not going to fluctuate, it's only going to move upwards in small increments, but it's guaranteed. And so that's how we invested their monies up until this point.

Okay, so everybody above 6th grade is in 1, 2, 3. What if they open the account? Can then they change their investment choice.

Okay, so this account that we're talking about, the CalKIDS account for, whether it's a newborn or a school age child, that account is owned by the state. So we control those monies. Okay, now we name the beneficiary, right? So the beneficiary will be eligible for these monies should they become enrolled and make a request. Right. Now, what we encourage families to do is to open up their own Scholarshare 529, which avoids them having to commingle money with the state.

By opening their own Scholarshare 529 account, they can actually log into their CalKIDS portal and link the accounts where they can see their own personal savings and the state's investment in their children all in one location.

Okay. So the state account is not static, but essentially it is. It's. It's a standalone. You cannot contribute to it. Obviously. You can't withdraw from it. What is the. What is the plan? Or what's the thought if at some age after. So whoever was in 12th grade, that first year is now theoretically in their second year of college, after they complete college, what happens with the account if it doesn't get utilized for their education?

The account, by design, will remain open and available to them until age 26.

Okay.

And that is a number that we worked on because we understand that a lot of children or young people, right, of high school, either work, join the military, or do other things. Entrepreneurship. Right. They open a small business, but ultimately, we made it available until they're age 26. Once they turn 26, that money automatically reverts back into the fund. Okay.

What are the statistics on--so the first through twelfth grade, you've got to be low-income, and you've got to, I assume, demonstrate that you are low-income in some way when you respond to those letters that we all got as parents--and those of us who don't think we qualified didn't respond--but how is the income, how do you verify that they're a low income student?

The identification of students that are deemed low-income is through the Local Control Funding Formula, where schools take that snapshot in the fall and fall census days. I think it's like the second week in October, and it's a combination of factors. Like we mentioned earlier, it's through the supplemental form that they submit, the supplemental income form, but also because--and also it was originally, I think, designed to kind of maybe use Free and Reduced Lunch as a factor, but that only became one of many factors. The other factors include, like I mentioned earlier, their participation in programs like CalKIDS, CalWORKs, CalFresh--

I guess the question is verification. We now provide free meals to every student in California so that no longer matters, and they're not even required to submit any income verification for that. You have schools like the ones that my children attend that are Title 1 schools, so low-income schools, but my children would not be considered low-income if we actually did a, you know, submitted our income information.

And so they should not be entitled to this program, presumably. And again, you know, we didn't pursue it because we knew we weren't entitled, but how are we verifying that students are entitled? Or are we just--if you send it to a school which qualifies as a low-income school and you've got students at that school that are not low-income, you send the letter to them, they reply that we want to claim the account. It just gets claimed? There's no additional step required?

Okay, I think I'm going to allow my--well, first of all, we've already identified the students, and only those students that are deemed eligible receive a notification letter, not every student in the school, which makes it a challenge, too, right? Because if you--even like Title I schools, it's not 100 percent that all children are considered low-income, and that's why I think a lot of schools do struggle and say, well, you know what?

How do we, instead of having everybody go through the exercise and disappoint some children, that's why there's a little bit of hesitation from schools. But nonetheless, it's important, and so a lot of schools have done some really creative things, and so I think I'm going to allow my colleague, Noah Lightman, to kind of respond to that as well.

Thank you, Mr. Chair, for the question. Noah Lightman, Staff Services Manager with the program. I want to clarify an important aspect of the program. We at the ScholarShare Investment Board do not determine eligibility. Eligibility is dictated in statute based off of the Local Control Funding Formula like Mr. Martinez described before. All the students are based on data that schools submit to the State Department of Education.

The State Department of Education then takes from their CALPADS data, essentially the list of unduplicated pupils, and shares that with us. So we at the ScholarShare Investment Board do not verify someone's income status.

Okay. I think that requires some follow-ups, but of the newborns then, let's focus on newborns, since we sort of exhausted the first through twelfth grade conversation. Newborns, everybody gets the 20--no, 50 dollars now?

It's--if you're, if you were born during the first year of the program, you get 25 dollars automatically, and now every baby after July 1st of 2023 gets a minimum of 100 dollars.

Oh, 100. Okay.

Plus some additional supplemental incentives that we offer them as well.

And that also is the type of account--because I've seen on your website, I try to get everybody I know to open a 529, actually--that does not require the matching or the---you've had some promotions on there that you'll get 100 if you put in like 25 automatically or something, you know, automatic deposits every month. 100 dollars is 100 dollars without any strings attached, essentially.

That is correct.

Okay. And so since the year 2023, July of 2023, every newborn gets 100, and so we've had 667,000 new births. I think that data is more reliable because those are all recorded, of which 42,000 of newborns, or percentage of six percent have actually enrolled. Do we have any data--I don't think you, you would--as to who those enrollees are? Are they actually from a particular region of the state? Are they from a potential income status that's of note? What data do you have on the registrations of the newborns?

That is a very good question. We have a lot of demographic data, and I'm going to let Noah Lightman kind of explain what kind of data we have and how we're monitoring that.

Thank you, Mr. Chair. So the Department of Public Health doesn't collect information on newborn parents' income status, but they do collect information on racial demographics of both parents, and what we can provide after the Committee is an update on who is actually engaging in the program based on that information, as well as, like you said, demographic--or, excuse me--geographical data, where there's larger uptick.

So we can imagine that in larger counties like San Diego, Los Angeles, Riverside, for example, there's larger uptake. Smaller counties, there's a little bit less, and this is where our outreach efforts are really focused to make sure that we're partnering with different county offices, local health institutions, WIC offices, Head Start programs, et cetera, in order to get the word out. But happy to follow up with that information after the Committee hearing.

Okay. Look forward to that. Then to the LAO. So then, because the accounts were created for the amounts, sort of the more significant amounts, including the what was anticipated surplus of 21-22 which was not, but that money was truly committed in the way that there was accounts created, the only available unspent funds according to your analysis at the moment, I heard two--and again, wrote numbers everywhere here--so 17 million dollars and I only wrote down the number. I don't remember what that was for. And then nine million dollars from the--I think that was the Outreach and Marketing Program. Can you confirm that that's the case?

That's correct. The 17 million is from the initial one-time allocation provided in 2019-20 to launch the program, and the 9.5 million is from the first two years of the ongoing appropriation for financial literacy outreach. It's five million annually.

Got it. Do you have any further thoughts on the unclaimed accounts?

We have nothing to add beyond what the panelists have shared.

Okay. That's talking bees, as Mr. Muratsuchi likes to say in this Committee. That's a lot of money.

Yes. So my understanding--

Creative ways to use that in this year's budget?

Well, my understanding from how statute is structured is that the funds will remain in the accounts until the students reach age 26, and so we haven't looked into changes to that particular policy.

So maybe 26 years from now, we'll see a lot of reversions and--okay. Well, hopefully not, actually. Hopefully people sign up because this is money that--although I would say, I wanted to ask more questions, just--I'm fascinated by 529s. I think they're really important. I know that in personal experience, talking to children and nieces and nephews about there's an account waiting for you.

It just sort of ingrained in their mind that college is sort of an option for them that they should consider for their future, and so I assume, I haven't read the research, but I assume there's some research that shows that. I would just be, can be more interested in learning about the impacts, particularly in these types of programs where we're creating it for them and the family's not really engaged.

I don't know that the--I'm not sure whether the impact, the research shows that the impact is there just because there's an account there and not because the family knows and talks about as a researcher, I'm fascinated by research. I think that's something that I'd be interested in learning more about. Like what, what is it about the 529 account that leads to the, what's described in our agenda as a tool to increase college access and completion?

So I think I'll be certainly looking further into that, but hope that enrollment continues to grow given that it's intended to go to the students who really could use the support the most. Knowing also, though, that we have financial aid needs once you do reach, like what Chair of Higher Education in his budget letter, which I read this weekend, wants to make sure that, like I do, that we look at Cal Grant Equity as a way to also provide financial support for students who need it.

So there are needs on both ends and so interested in how this program really creates that certainty for students in the long term. Appreciate you answering my questions. Mr. Fong, do you have some questions or thoughts?

Thank you so much, Mr. Chair, and thank you for uplifting the Cal Grant Equity and the financial aid reform that we're advocating for here in these very challenging times, and thank you so much to all of you for the presentation here today.

When I looked at page 19 of the report, it says there's also a pilot program to allow ScholarShare to enter in data sharing agreements with Riverside and LA Unified School District. I wanted to get a sense as to how those partnerships are working and have you seen increased participation through that data sharing agreements?

Thank you for the question, Assembly Member Fong, but I'm going to let Noah Lightman answer that question.

Thank you, Mr. Fong. So last summer, the Legislature mandated that we enter into an agreement with Riverside County to support efforts around identifying eligible students who have and have not claimed their CalKIDS account. So following the conversations with Department of Education, we worked with Riverside County Office of Education to develop a little bit of a workaround that wouldn't conflict with federal law around doing a data sharing process with them, given that the data that we're receiving is directly from the Department of Education.

So it took about six, seven months to actually create this data sharing agreement, and just a couple of weeks ago, we actually completed our first actual data exchange process, and so we look forward to working with them on a quarterly basis.

But specifically, has that increased participation or just more--are you still assessing the data?

I think we'll find out over time. So just a couple of weeks ago, we did our first data transfer and we're looking forward to seeing the results over time.

Sounds good. And then secondly, in terms of--Mr. Martinez, as you also mentioned-the Statewide Marketing and Outreach Program, was part of the funds spent for ethnic media and to really target families in language?

Yes. I'll let Noah speak to that, but absolutely. We last--prior to this recent allocation of eight million dollars, which we are about to--which we're in the process of awarding and finalizing the RFP for that, the previous year we were awarded by the Legislature and we really appreciated the one million dollars that we're currently using now in our marketing efforts. And I'll let Noah kind of talk about some of the, some of the efforts there that have been underway.

As Mr. Martinez was describing, we did a fall media campaign where we employed a vendor called Crossings Television that helped us create messages in a variety of different languages, but beyond that, just as a program, language access is critical. So a few of the ways that we are addressing that is we have our website translated into a variety of languages. Anyone can select it on the CalKIDS.org website. We're also in the process of translating our portal into additional languages.

Currently it's translated into Spanish, Tagalog, Vietnamese, and Chinese. And then right now, we're also in the process of translating a number of our marketing materials into a host of additional languages. So we actually just did a survey of over 3,000 eligible participants to give us a better sense of what are we doing well, what could we be doing better? That whole process resulted us really in revamping our entire marketing toolkit.

And so with that, our goal is to translate that content into as many languages as possible. We also do have a call center that has agents available, not just in English, but Spanish as well, and they use a language line too should callers call in additional languages.

Thank you for that. And then in terms of the participation, for the accounts that are registered, what is the participation level of parents currently contributing to the accounts?

Yes, that's a very good question, Assembly Member, and that is something that is showing some promising results, especially among families that are low-income. So we have had approximately--where is it at here? Give me a second here.

Just to clarify, is this also the one that's in our agenda? Would it be called the linked accounts?

Okay, thank you.

Yes.

Yes. So, as you can tell by the top two lines for newborns and students, but all the way far to the right where it says, 'new scholarship 529 accounts open and linked.' Okay. So we had, if you look at it, it's actually relatively equal between the number of participants that are newborn and school age. Roughly around almost 15,000 accounts have been opened by these families, right? And what's interesting is that we offer an incentive for the parents of newborns.

If you open and link an existing or a new account to the CalKIDS account with the ScholarShare 529 account, you get an additional 50 dollars, right? For the students, there is no additional incentive, although we have offered, like, a two-week promotion just to kind of test it, see if it would work, and actually provide us some good results that we hope to apply in the future. They are opening accounts, and so the average balance for a parent of a newborn is 3,200 dollars, 3,280 during this time period in this sheet that we gave you, and for the students, it's 2,533 that they're saving.

Thank you. And then lastly, in terms of the foster and homeless, I think anything we can do to continue to amplify that and to really get more folks registered, I think it's critical as we look at expanding opportunities for students there. So.

We agree with you 100 percent. I think when we work with school districts and different nonprofits and CBOs across the state, we are definitely trying to get as many of these students, especially because they're just the most vulnerable and they have the most, you know, financial investment in their name to kind of claim these accounts, and so we are definitely working hard at that as well.

Thank you, now. Thank you for the robust presentation. This is a program that I think is very critical to helping expand college-going rates and to really look at that going forward, and so look forward to seeing additional data as this program continues to move forward. Thank you so much. Thank you, Mr. Chair.

Thank you.

Thank you. Yeah, this is where I was going with my questions. I have a sense when you look at the newborn accounts and the student accounts, so the students accounts are all low-income individuals and the newborns are all income, and we've got the same number, roughly, of accounts for both.

And you look at the amounts that are being saved, those are higher amounts for the newborns in terms of the average account, which to me, just sort of signals the participation of this program is likely higher among people with higher incomes as opposed to our intended outcome of, you know, trying to get folks with lower income and the ones that we--I would assume the data shows that.

And that the intent of this when the Legislature moved this, and certainly my intent going forward is that students who otherwise would not see college as a pathway would as a result of an account. But if it's not, if those who are opting in and participating and are active are from income levels that would otherwise be college mindset-ready, then I'm not sure we're meeting its intended goals. So that's where my questions are about who's participating and getting more data on that, so we'll look forward to having that continued discussion.

Mr. Chair, if I can respond to that? And those are some very good, valid points. Okay, when the program was first conceived and designed and it was supposed to be at birth universal. And it's for a reason. I mean, we follow the research and it's considered best practice, and the primary reason is because when you have an all-inclusive program, it doesn't become a labeled 'a low-income program,' right?

And let's be honest. People with means will always have a way to, you know, to pay for higher education, not necessarily with the 25 dollars that we seeded in their account, but by removing that stigma, it becomes open-ended to everybody without the term 'low-income' in there. And the reality is, though, the vast majority of people that are taking on student loan debt are middle-class families, and now increasingly so is low-income families.

So while we understand the argument that very often is made, which is to kind of fund, you know, programs such as the Cal Grant programs at a greater clip, we strongly support that as well. But the reality is the average Californian is owing between 22,000 and 30,000 dollars in student loan debt when they graduate. Mind you, I've been doing this for almost a decade, and my son is 17 years old, and now we're looking at schools.

And even though I knew this and I've been preaching this, I nearly fell off my chair when you kind of go to these presentations on these college campuses when they tell you just how much it is. Even at UC Davis, for example, four years including housing, that used to be a small mortgage for families here in California, right? And we know that.

And so really what this program is designed to do is really inspire just a thought discussion about the financing of education because families would do either two things: not prepare and take on a lot of student loan debt or just say, 'you know what, higher education isn't really just for my child. We're going to look at other options.'

So we just want to kind of curtail that because the research does show that families that do have savings accounts, even as little as 500 dollars, are three times more likely to go to college and four times more likely to complete it. So really, it's an inspirational tool. By no means did we ever have--were under the illusion that the 500 dollars that we're investing in these children, or even the 1,500 was going to pay their way through college.

This is really designed to promote, inspire, and have these discussions in the household, and we think it'll--I mean, there's a lot of research that's bearing fruit, that's showing some positive results, and we would be more than happy to share that with you, but I think these programs in general, I mean, they're still kind of relatively young. The oldest program is really Maine, statewide program Maine. They've been around for about maybe 16 years, and so they're barely getting to their first cohort of graduates, but there is a growing body of research and hopefully we'll be able to demonstrate with this innovative project that it is inspiring more kids to go to school.

Well, yeah, no, I look forward to certainly reading research that you referenced. Probably should go back and see what discussions we're having in the Legislature when this was first thought of and what the goals were because there could be different goals for such a program, as you stated.

And if it's--it's definitely not to lessen the financial burden because it's not this amount of money, even in a--I mean, definitely in a one to three percent, it's not gonna grow. Maybe pays for books in one year's worth, and that's about it. So I get that. I guess I just need to--we need to really refine, what is our intent with this? Is the intent to get that college mindset going?

Is the intent to get more middle-income families--which I agree, it's becoming more difficult for them--to get them to be enticed into college savings because they will not have potential financial aid from the state available because they don't meet income? And if that's the case, then maybe we should be investing more in trying to entice more middle-income families. I think I'd like to understand what are we trying to accomplish with the program, and I think that's where I need to spend some time reviewing.

The last thing I'll say is, or question I guess I'd ask is, while it's minimal, low-income students who do have college savings then, is this going to count towards their student or family--I don't know what the number, the letters are now--but the family contribution when they do their financial aid? Because usually 529 accounts count as part of your assets and so there that reduces your financial aid.

And for a lot of low-income families, again, while it's not going to be probably more than a couple 1,000 dollars if you meet all of these different criteria, probably, by the time they get the funding, it's still 2,000 dollars less that they can--it's a 2,000 additional asset that then counts towards their family contribution towards college. Were there conversations about the impacts of that when this was envisioned?

Yes, Mr. Chair. So the way the program is designed is that disbursements from this program that go directly to the Institution of Higher Education, that's what happens when you log in. When you're ready to go, you have to meet certain criteria, right? You have to be 17 years of age, you have to be enrolled at a qualified Institution of Higher Education, and then you check off certain self-certifications that you've resided in California for the past 12 months.

And then you type in and it will autofill all of the eligible institutions, right? So let's say you go into UC Davis, you put the amount in whole or in part, that money is sent directly to the institution. Never touches the hands of the student. So that money is treated like a scholarship. Okay? Now families that save with a 529 Plan are subject to the impacts that you're referring to on the 529, but that is savings on their own.

Okay. Appreciate clarification on that question. Thank you. Thank you all for being here.

Mr. Chair, can I just add some comments? I realized I didn't get an opportunity to respond to Ms. Qing and her recommendations from the LAO, if I may?

Sure, go ahead.

Okay, so the first one is the 17 million dollars from the original 25 million dollar appropriation. I just want to make a couple of comments. One is: yeah, that money sat around for quite a bit in there unused, but first, more of a technical clarification, within the 17 million, there is 1.25 million that was allocated for admin support. Okay? Not all of it was designed for incentives. Okay? And then the rest, SIB kind of looked at it as a Rainy Day Fund because I would like to just remind the Committee that the supplemental incentive structure that is available to newborns isn't available 100 percent to every eligible child. It's designed based on certain assumptions.

So the assumptions were back in the day when the program first got approved, was that 20 percent of total newborns would claim their account, and of those 90,000 children, 20 percent of them, ten percent would actually open a ScholarShare 529 account and link it. So that--it's a fluctuating number that's going to become an unfunded liability from now until they're age 26, and we're talking about every incoming cohort of newborns. And so I just want to, you know, we understand.

I mean, I think we kind of underwent this very similar exercise when it came to the Governor's Scholarship Program a few years back where some money was clawed back, but I think so long as there's an understanding that there is a liability that exists within CalKIDS for these young participants.

Okay, thank you. Appreciate it.

Okay? And then lastly, with respect to the LAO recommendations for the Financial Literacy money, the 4.5 million and the five million both from 22-23 and 23-24, the reason why those monies are still there unspent is not because we didn't have the opportunity--except we only had three people running CalKIDS, okay?

Not only were they charged with, you know, putting up the program, launching it and actually marketing it and, you know, operating it, we were also charged, if you recall, with five million dollars to provide a grant program to local CSA programs. And that took some time to do as well, and which we did very successfully. We just didn't get enough time or staff resources or bandwidth to get around to actually implementing this Financial Literacy Program.

But thanks to the Legislature and the Administration, we were funded with one position last year to hire someone to actually put this program together. Now it took us till November to actually find someone qualified enough to actually put the program together. So we've had them since November and now since then, our SSM1 Level Manager has developed, he's done a landscape review of all best practices across the country, programs that actually exist and are doing well and actually consulted with experts, and he's got a strategy that he wants to put in place.

So all I would like to ask the Committee is to consider possibly restoring all or some of it for future use because I think there's a lot of good that can be done to use these monies to educate families, especially those that are low-income and can benefit from financial wellness programs, modules, and education to break down the barriers that prevent families from actually participating in the program. And that would be our request.

Thank you. I don't want to speak for the LAO, but just remind you that the recommendation also to maintain the five million ongoing for that program, so there is no recommendation to--on an ongoing basis, this would be a one-time, but I hear your point. Thank you. Thank you all. With that, we will have some public comments. If there is anybody in the public who would like to make comment, this is the time to do so.

We'll give you one minute to please state your name and share your thoughts, comments, or questions on today's agenda. And we will begin. Sir, thank you. Welcome.

Chairperson Alvarez, Assembly Member Fong, and Committee staff, my name is Niccolo De Luca. I'm here on behalf of the city of San Leandro. Just want to comment as it relates to the State Building for Library Facilities Improvement Program.

The city was so grateful to get 4 million back in '23 to build a brand new library in San Leandro. As of this time, over 2 million has not yet been dispersed. So certainly there's some anxiety and some fear about any funds being frozen or clogged back or what have you. So just really want to highlight the critical need for those $2 million to again create a brand new library. I also want to thank Committee staff for the thorough analysis and really appreciate all your hard work. So thank you very much.

Thank you.

Good morning. Leticia Garcia, on behalf of Riverside County Superintendent of Schools on item number four, CalKids. We're the proud pilot county in partnership with the Scholar Share investment board. As you heard earlier, we've had our first data share just a couple of weeks ago. I'm very excited about moving forward in a more robust way. So one of the specific things that our education experts are asking us is that we consider, especially as we enter into this last year of the pilot.

The two year pilot program is that we have data shares on a more frequent basis. Right now, it's quarterly. We'd like to see those on a weekly basis ideally. Just a couple of things that we're doing, because I know there's a lot of interest in this program. We are hosting the state treasurer tomorrow and Mr. Lightman in Riverside County. We're going to see three financial literacy lessons taking place live.

One in a second grade classroom, another one in middle school, another one in high school, and the culminating experience is that the kids are going to claim their accounts. So we are going to see many more kids claiming their accounts tomorrow. You're all more than welcome to, you know, we'd love to host you on one of these site visits.

And then in addition, we are submitting a proposal to the California School Boards Association, their annual conference in December, to co-host a workshop with the, with Scholar Share so that we can bring the best practices that our county is doing. And then elevate the numbers.

Thank you very much.

Hi, my name is Debbie Rauscher and I'm with John Burton Advocates for Youth. I'm here to request that the Assembly include language in the budget trailer bill to expand access to CalKids for foster youth, similar to that proposed by Assembly Member McCarty in AB 2508. When the Legislature adopted CalKids, the intention was to provide enhanced deposits for foster youth. However, these deposits are limited to children who happen to be in foster care only in the first grade, excluding anybody who enters the foster care system after the first grade from these payments.

Among all student groups in California, foster youth face the greatest barriers to achieving their educational goals. Just 10% obtain a degree, a rate that is one third the overall state completion rate. Abuse and neglect in the home, removal from family, and frequent moves contribute to these poor outcomes. While recognizing the major budget challenges this year, foster youth represent less than 1% of all CalKids accounts and this change could be easily accommodated within the existing program budget. Thank you.

Thank you for your testimony.

Good morning. Parshan with uAspire also here on behalf of the Northern California College Promise Coalition. Here to also echo the ask for this body to include the Assembly to include budget trailer bill Language to expand CalKids for foster youth we know that 93% of foster youth in California want to attend college, but they often cite affordability concerns as a reason that they don't.

Plus, the studies have shown that even with the college savings of less than $500, similar to what was echoed earlier, the sentiment of having that funding causes students to want to go to college more. And we see the studies show that 25% more likelihood for children with $500 or more to want to attend college and 64% more likely to want to stay in college.

And then lastly, 46% of all foster youth enter the system after the age of six, and these are nearly half are ineligible for the additional funding intended for the support of foster youth system under the current existing which is why we want to expand the program. Thank you so much.

Good morning. My name is Wednesday Pope and I am a current student at Folsom Lake College majoring in Business Administration and I will be transferring to a four year university this fall. I want to echo the request that the Assembly include budget trailer bill language to expand CalKids for foster youth. The CalKids program currently only applies to students in foster care in the first grade. Unfortunately, students like me are not eligible for this vital program.

I spent over eight years in and out of foster care starting as a newborn. However, never in those eight years was I actually in foster care in the first grade. I am also a first generation college student. Growing up, neither my biological parents nor my foster parents encouraged me to plan for college. Despite this lack of support, I still enrolled in college. However, even with financial aid, I struggled to make ends meet.

Having a CalKids account could have sent the message to me that college was possible, motivated me to engage in college planning, and provided me with resources to meet my basic needs while in school. Thank you for your time.

Thank you.

Good morning, Mr. Chair and Members. I'm Christina Di Caro. Here on two issues before you today for two clients. First, I'm representing the California Library Association on the issue of the library infrastructure grants. Your analysis does an excellent job of capturing the very strong concerns that we have with the suggested clawback of any unencumbered funds that could be directed for critical public library infrastructure projects. And these are the grants that have been used for serious ADA compliance issues.

Seismic safety upgrades, creation of family restrooms, HVAC installments. These are libraries that are being used as cooling centers for our public to pull back even one of the grant checks for these projects would be absolutely devastating. On issue number two, pertaining to CalKids, I'm representing the California Public Television group, all of the PBS stations in the state.

Our group recently met with the state treasurer's team and we talked about how could we use our bully pulpit to reach all the folks that are in need of these accounts. We are standing at the ready to help in any way we can. PBS, of course, reaches more children and parents in low income homes than any other children's television networks. So, as we say, we're ready to roll up our sleeves and see what we can do to help in that regard. Thank you.

Thank you, all. Appreciate your testimony. And with that concludes our meeting today. Again, notice that we are likely to meet on May 16 after the May revision return.