Assembly Budget Subcommittee No. 3 on Education Finance

Good morning, everybody. Welcome to our Assembly Budget Subcommittee Number Three on Education Finance. I am Chair Alvarez. We will begin today's hearing. We're going to do things slightly differently today. For those of you who may be here for public comment, which we typically do at the end, as we've done before in this committee, I will allow all those who have even shorter public comment to come up first.

Sometimes it is helpful, given that you all know the agenda, to give some comments before we hear from the presenters. It allows us to ask further questions and provide other feedback.

So, we will do that today at the beginning of our of our--oh, all right. Here we go. Good morning, once again. Calling to order the Assembly Budget Subcommittee Number Three on Education Finance. For today, we will take at the beginning of the committee the--some public comment in a very much shorter version, 30 seconds.

Sometimes it's helpful to receive that public comment as input for us prior to us hearing our panels, and so I will give those of you who have--who would like to share some very brief public comment to do so now and not have to wait till the end of the couple hours of hearing.

So if anybody like to make brief comments, now is your opportunity to come forward. Give you 30 seconds. Seeing none, you all want to get your full minute at the end and that's okay too. So with that, we will begin our subcommittee hearing today. Just give me a moment. So today's hearing is on financial aid.

The hearing will focus on issues around financial aid, California Student Aid Commission, and also as it relates to FAFSA, Cal Grant, and all the other items related to financial aid. We know that this is one of our highest priority with over $3.5B in Cal Grant and Middle-Class Scholarships in this current budget, and each higher education segment obviously also uses their institutional aid programs to help students cover costs.

However, we know that still about half of the students in California receive financial aid, but the other half do not. That's compared to about one-third of students nationwide. In addition, the federal government provides significant aid, and that obviously is of interest and significance this year given the uncertainty that exists in our federal government. California students receive about 12 billion annually in student loans, Pell Grant, and other programs such as student work--work study programs.

So, we know students are struggling, and we still face some very difficult decisions this year due to the overall state budget problem, but we must continue to be focused on providing support for our students, and for that, we will be focusing our hearing today on how we accomplish that, how do we provide more support to more students in California given our limited resources.

We know that Cal Grant is a priority. We've heard a couple of our colleagues mention it, it is a priority for us, but it does seem unlikely that in a year like this, the 156 million required in ongoing funding to implement is challenging, but I think we can talk about ways how we can adapt pieces of the reform in order to go forward and to help more students be able to have access going forward. So with that, I will now go on to our colleagues, see if there's any general comments on on today's topics.

Seeing none, then we will begin work with Issue Number One. If we can have the panel come forward? This is for the FAFSA/CADAA Update, and we have our Student Aid Commission here. So I ask you to please introduce yourself for the record and why don't we go from left to right--our left to right, your right to left. Welcome.

Good morning, Chair Alvarez. I'm Jake Brymner. I'm the Deputy Director for Policy and Public Affairs with the California Student Aid Commission.

Good morning. Good morning, Chair Alvarez and committee members. I am Dr. Aprí Medina of Student Financial Support at the UC Office of the President.

Good morning. Noelia Gonzalez, Systemwide Director for Financial Aid Programs at the CSU Chancellor's Office.

Good morning. My name is Gina Browne, Assistant Vice Chancellor for the California Community College's Chancellor's Office.

Good morning, subcommittee members. We appreciate the concern from the Legislature on this important issue and how our students are accessing financial aid. We at the California Student Aid Commission are working diligently with our segment colleagues, with counselors, and with college access organizations across the state toward rebuilding application rates this year after a very challenging 2024 due to the complications in the launch of the new FAFSA that debuted that year.

That new FAFSA launched on January 1, 2024, and as your agenda notes, had technical issues that prevented thousands of students from applying for aid, particularly those where one or more family member do not have a Social Security Number or mixed-status families.

Pew Research estimates suggest that at least 12% of California students in K-12 schools are from mixed-status families, so they're really a significant part of our state. Last year's challenges required that California extend the priority state aid deadline not once but twice.

Thanks to the Legislature's urgent actions with Governor Newsom, we were able to help rebound between April and the fall, offsetting a good deal of the declines in applications. The Student Aid Commission took action as well to make the California DREAM Act application available to students that were unable to apply for federal aid through the FAFSA due to those barriers that were confronted by what are officially referred to as non-SSN contributors, those parents without a Social.

While many of the technical issues within the FAFSA were resolved this fall through a beta testing process, unfortunately challenges remain. The FAFSA launch was delayed again this year from October 1 to December 1.

This meant that students had 60 fewer days to apply. December itself is not an ideal month to launch an aid application, given the holidays. This application cycle--and those of the prior two years, they all started on different dates. They had different priority aid deadlines, which makes comparisons a little bit tricky.

We believe that the most helpful way to compare application rates is to look at how many days students have left to apply before that deadline, which is the most sensitive for our first-time students that need that financial aid information to make an informed decision about their enrollment into higher education. Using that as the basis of comparison, the situation was dire as of February 24.

Approximately 193,000 FAFSAs and 3,500 California DREAM Act applications had been submitted for the 25-26 academic year by our California high school seniors. That meant that we were around 21% behind prior years of FAFSA submissions and 27% behind for California DREAM Act applications based on the days remaining in the deadline.

This is what made extending that priority aid deadline so urgent. The California Student Aid Commission is grateful to our partners at the University of California system for working with us to extend the deadline through existing provisions in state law that authorize CSAC to approve requests to extend the deadline when extenuating circumstances prevent students from applying for aid like the delayed launch of the financial aid applications.

This process was also facilitated by legislation authored by Assembly Member Fong last year, so thank you for your help with that. We didn't think we would need it as quickly as we did. Last Tuesday, our Executive Director, Dr. Daisy Gonzalez, approved an extension of the priority aid deadline by 30 days, the most allowable under this provision, shifting the deadline from March 3rd to April 2.

Now, when comparing the same numbers of applications for this upcoming year that I just mentioned with those prior years and factoring in this additional time that students have, we are getting closer, but we are still behind. For our FAFSAs, we appear to be about 5% behind where we would have been in the prior years, even with that additional time.

There are other challenges that also remain, and some student populations in California are more directly impacted by technical issues and data privacy concerns. While the FAFSA launched with relatively few glitches compared to the prior year, in the past two weeks we've seen a significant increase in students encountering problems, again, for students from those mixed-status families where one or more parent doesn't have a Social.

Workarounds were able to resolve issues earlier in February, but over the past two weeks, partners across the state, our Cash for College and our CalSO organizations, are reporting that those workarounds are no longer functioning reliably or for all students that they're trying to work with.

For students from mixed-status families, there was a 31% decline in applications as of February 24 before we consider that deadline extension. Even after factoring in that deadline extension, our students from mixed-status families still appear to be about 10% behind where they've been in prior years, so double the rate of the decline that we're seeing for high school seniors overall.

Last year, the Department of Education maintained a running list of known issues in the FAFSA and recommended workarounds, but this year the department is communicating that the application is fully functional. Students and counselors are also reporting to us at CSAC that they're unable to secure assistance on these issues at the Federal Student Aid Call Center.

There are media reports that we could share that have suggested that about 10% of federal student aid staff have accepted that buyout offer that was extended to federal employees, and that was before an even more recent message this past week that was from Department HR, Department of Education HR specifically, that offered employees another voluntary separation program opportunity.

CSAC has convened an implementation workgroup over the past year to bring partners from higher education, K-12, and the community together to respond in real time to these kinds of challenges in the aid application process. California must also come together to provide students with clear information about the options available to them when applying, including use of the California DREAM Act application, while also informing them of the associated trade-offs such as foregoing federal financial aid.

We are concerned that many students are still receiving conflicting information regarding those options and may not have time to successfully complete an application even with this deadline extension that we just approved last week. So we have more work to do and look forward to the Legislature and administration support as we work together to ensure students have continued access to as much of the financial aid that's available to them. Thank you.

Thank you. Do we have any initial questions from my colleagues? Maybe I'll start off, because in our agenda, I believe the numbers that you prepared were based on the March 2nd deadline. This is on page four, the matrix with the percentage-- both the raw numbers and the percentage difference. I know last year we had the extension and so we have, we you probably have some data points.

Where are we in relation to this new extended--although I will just note, this was just, as of, I believe, a couple weeks ago, and it's pretty alarming that we're talking about 250,000 plus students that were behind the trend of prior years. That's, that's quite substantial. But where are we now in relation to the new April deadline?

Thank you for the question, Assembly Member. So we are, with that additional time, closer--we have those additional 30 days--we are closer but still behind where we've been in prior years even compared to the better FAFSA year, which was a very challenging year to get applications during the spring.

So we are still, for our overall high school senior population, about 5% behind and for those mixed-status families about 10% behind relative to the priority aid deadline, which we use because that's how students can apply for financial aid and be considered for the most possible aid, particularly before those registration deadlines come up in May.

Have any of your either sites and open to the segments or partners that do the work, have they been reporting any specific concerns as it relates to anything in specific, whether it's data privacy for any number of reasons? Is there anything that stands out?

I know, you know, the events we've done in the past, we don't entirely collect data ourselves when we do these events in the community, but I think it might be good to--if you are hearing a trend--to understand what those are.

Yes, we are certainly hearing from partners across the state that since the beginning of this application period which started in December, there have been students who might be California DREAM Act filers or those mixed-status families that I've been speaking about in my comments earlier who have expressed to counselors that they are very concerned with sharing their families information via these financial aid applications.

This has required some additional work with those families. Each situation is really unique. In some instances, families may have already submitted a FAFSA for an older sibling, in which case parental information is already held by federal student aid. You're not really increasing risk posture that way.

However, for many other families, this might be the first time that they're interacting with a financial aid application and that really requires a substantial deal of personally identifiable information now based on those better FAFSA changes in a way that the FAFSA of years past did not. This was one of the issues we were dealing with last year.

In addition to that, the reports of federal funding freezes, the potential elimination of the Department of Education have really contributed to some misinformation, particularly in social media about the availability of financial aid and the idea that there just might not be financial aid that's there in the next academic year.

And then that has now more recently been compounded by the return of these technical issues that I think we were really eager to see resolved earlier in the cycle, but unfortunately have come back just over the past couple weeks.

So I would say we're dealing with several different kinds of issues that are all contributing to this environment in which we're seeing fewer applications submitted by our high school seniors, but particularly for those populations who might be California DREAM Act filers or those mixed-status families.

So you're seeing that the trend is the new filer, the high school seniors or the first-time college, if you will, student, and then in the--what other data do we have though beyond that as to whether returning students are not applying? And I mean, do we know whether there's--do you know whether the student graduated or not? If someone doesn't apply, it could mean any number of things. Do you know whether--do you have the data to tell you, well, that student graduated or moved on to another state or whatever? What kinds of data do you have on that front?

Appreciate the question, Assembly Member, and I'm looking through my notes because you're raising a point that I wanted to make sure that I could hit on today. With renewing students, first of all, I'll respond to the time sensitivity issue. For students renewing their Cal Grant, there's not the same deadline as our first-time filers.

So that's where, right now, we're focused on looking at that first-time filing rate. We'll talk more about the Middle-Class Scholarship. That does have a unique deadline for very specific reasons. We are tracking slightly below on renewing students as well, but we have a different way of being able to work with our system colleagues to communicate with those students once they're in the financial aid system. So I think we have more optimism that we're going to be able to continue to work with those students to apply for aid and renew their applications.

However, we do have data limitations at the California Student Aid Commission in terms of what we receive on student enrollment, persistence, and completion. We just know essentially when they've final--when they've used up the remainder of their Cal Grant.

That really limits our ability to analyze the impact of financial aid programs, but also to provide you with as much information as you might want to understand application trends.

So under the current Cal Grant system, someone might have ran out of aid. That doesn't mean--and so they're not applying anymore--that doesn't mean they completed. They just ran out of aid?

Yes. That's correct.

Yeah. Let me ask the systems on--the three of you--on--if my math is, my estimate math is sort of correct. I think if I aren't there in terms of headcount, roughly a million students at Community College, roughly 400 something thousand at CSU, and roughly 300,000 at UC? Is that--can you correct that if I'm off?

Sure. We have upwards of 1.8 to 2.1 million students.

Okay. And FTEs is what's closer to one million?

Right. That's correct.

Okay. So, so just doing that math. I'm sorry, go ahead. What about--

Yeah, the CSU is about 460, 465. Total headcount.

Okay.

About, about 300,000.

About 300. So, so we're talking about roughly 2.5 million individual students. And in a, in a good year--and I'm sure it wasn't that many less students, but 24-25 current year--only one million completed FAFSA, an additional 17,000 completed CADAA, so we're talking about well over a million students that didn't submit any financial aid application.

Is that roughly correct? Would you all sort of agree? You all have probably different levels of FAFSA completion at your systems? Can we--do you know how many of your students at each of the systems complete financial aid?

We don't have figures. I would defer to my colleague at CSAC, but generally we did inquire with our financial aid directors and they actually noted that we are up generally year over year at the UC system. So whether that's, you know, continuing students or incoming students, I'm not exactly certain, but that's been the general feedback from our aid directors.

And at the CSU, we're also slightly up. Over 80% of our students actually receive financial aid.

80%. Okay.

And closer to 90% submit an application because we do have a population of students that submit an application but are loan-only, and they don't accept those, so we don't count them as receiving.

Okay. Do you know at Community College?

For the Community Colleges, we would also have to defer to CSAC for the actual amount of applicants. However, about half of our students receive financial aid.

Thank you for sharing. Do you all have an average of the financial aid, non-loan component financial aid grant aid that is received? And everybody's different, I know, but do you have an average for per student that you can share with us?

I'd have to pull out a calculator. I can tell you that we did disperse 3.5 billion in financial aid, and of that, 176 million was loans.

Okay. No, you guys don't have--do you have by segment the financial aid amount average?

We have total numbers for state aid. However, federal aid or institutional aid is administered at that campus level and we don't receive that data.

What is the state--what is the state aid?

The state aid average, I would have to get back to you, Assembly Member, on what that looks like broken out by recipient.

Okay.

I think our average per student grant funding is around 11 to $12,000.

And that includes state and federal aid?

State and federal aid. Correct.

With loans, it's more around the 13, 14,000 if we include the loans.

Okay.

I just asked, do you have anything you can share?

I'd also have to do my calculator, but I have like, there's like 128,000 gift aid recipients, and of that, we've given out about three billion in total gift aid.

Three billion per year?

That was just for 23-24.

Okay. And that's all aid? Institutional and--

Correct.

Okay. I guess I asked that question just for my colleagues, and this is my last question, just to try to get a sense, as we're discussing all the items today and higher education funding going forward, how much--you know, I'm going to try to do it back in the envelope here as soon as I give you a chance to ask your questions and comments, but how much every one million dollars means to, in terms of aid, to students at our three public systems. So--but with that, I'll turn it over to Mr. Fong.

Thank you so much, Mr. Chair, and thank you for the presentations here this morning. Following up on my--on the Chair's comments about the decline, we know it's concerning and alarming in terms of the numbers, 25% drop in the FAFSA, CATAA over 50% drop. The question I have is how are we engaging with our students to make sure that they're accessing financial aid, especially with this deadline extension?

I'm happy to start, Assembly Member Fong. That is really the critical work that we are undertaking right now with partners across the state. So we do have some things that we do year-in and year-out to try to work with students to apply for financial aid, and we have some activities that we've really targeted to utilize this additional 30 days to help as many students apply for financial aid as possible.

So we host Cash for College webinars online where students can come and get free assistance to understand the financial aid applications and ask their questions so that they can complete applications. So I have to make a plug for that. We still have webinars throughout the rest of this month that we invite students and families to join.

We have organizations that receive state funds via the Student Aid Commission to also do that work on a local basis so that if families prefer to come in-person to get that help, they can join one of those workshops that are held across the state. Last year, between those webinars that we hosted or those local workshops, there were over 1,400 event opportunities, virtual or in-person, where families could get that free assistance.

We have the California Student Opportunity and Access Program, Cal-SOAP, which does that work on a regional basis and brings together local educational partners through a consortium to provide more focused, more targeted assistance to specified student populations in the Education Code, particularly low-income students, first-generation students, those who are going to have additional challenges in applying for financial aid.

In addition to those activities, we're also thinking really strategically about our statewide communications and in the context of limited resources that we have at the Student Aid Commission this year, how we can try to amplify those local efforts. So we solicit philanthropic funds from a number of foundations that enable us to do communications work and outreach.

So some of your students in targeted communities will be saying promoted social media content from the Student Aid Commission to try to help drive turnout and participation in those workshops or those webinars.

We're also utilizing California Department of Education data to give our high schools and give our counselors data on how many of their students have applied for financial aid and trying to amplify that data so that we can help support local action and targeted outreach.

We also use that data that we receive where we get student mailing addresses to send postcards. We're actually mailing over 40,000 postcards in just the next few weeks, so check out your mailboxes if you haven't applied for financial aid yet, and those postcards are intended to help give students a reminder about financial aid, easy accessible information where they can then go and get that help applying.

And then finally, I'll note that given the challenges that I was speaking to earlier, for our undocumented students, our mixed-status families, we've created dedicated resources for those families that answer their specific questions and respond to concerns that they might have about data privacy or what kind of financial aid is available to them.

We've also now, utilizing those additional resources that we've received philanthropically, we've translated these into over five or six different languages based on the languages that are most often spoken by families that are contacting the Student Aid Commission through our Call Center or report that they're speaking a language other than English at home when they submit a California DREAM Act application.

And then finally--and I'm sorry, I know I'm going long here--but we're doing a lot to try to respond to this issue. We're working with our implementation workgroup colleagues and I'm looking here at my fellow panelists because their institutions and systems are all part of this working group where we're disseminating resources and trying to create this venue where in real time we can discuss these issues together and identify how we can proceed in a coordinated way so that there's aligned communications and that we're all putting resources on the table to support that local work that our college access professionals are undertaking right now to help students.

Thank you. Anybody else?

So at the University of California, in addition to our partnerships with the California State Commission, we are also leveraging social media. In fact, I just saw a story on my Instagram out of the UC system to advertise the financial aid deadline, the extended deadline. We also communicate to all of our UC applicants.

We, we've done that for years, typically at time of application to inform them of the financial aid opportunities. This year we're doing a second communication to all applicants as a result of the deadline extension. And so that's coming out actually this--shortly.

In addition to that, all of our campuses participate in their own versions of like FAFSA workshops and communicating with their continuing students. I will note for the mixed-status family students, we also sent out template communication to our financial aid campuses so that they could communicate to those continuing students about their options, fully transparent and ensuring that they understood the opportunities through their aid applications.

Thank you.

At the California State University, we handle--at the Chancellor's Office, we do our prospective students. So we send out emails. We do full social media campaigns. We also have targeted communications to our mixed family students to make sure that they are aware of the resources that are out there.

We work very closely with our high school partners as we know that they are boots on the ground, so we do monthly emails to them to make sure that they are notifying and working with their students to let them know it's time to apply for financial aid and that the--now we will be sending one, that the deadline has been extended.

And then our local, our campuses work very strongly with their current students that are on the campuses. They do workshops with their current students, they look for the special population.

So they work with, for example, EOP, the Educational Opportunity Program, Athletics, Housing, Academic Advising, to make sure that their current students are submitting their applications and submitting them on time because our State University Grant Program also uses April--we'll be using the April 2nd deadline. And then our local campuses, as their staffing permits, will do community events. They'll work with Cal-SOAP, they've teamed up with other community partners to go out into the community to hold financial aid workshops.

Great, thank you.

In addition to all of that, the California Community Colleges believes that information is key for students. We want to make sure that they have the information and feel empowered to make the decision that is best for them, make sure that they understand what's at stake if they do not complete the financial aid applications.

And additionally, we want to make sure that we engage with our community partners, community centers, community-based organizations, churches. We employ peer mentors to work with students to help them understand the importance of completing the financial aid applications, and one of the things that is really key for us is that we follow up with students that have incomplete applications. They started, got stopped somehow, and so our staff, our college staffs, really make sure that students can get that application submitted.

Great. Thank you so much. And in terms of the--I'm glad you mentioned Cal-SOAP. I've partnered with Cal-SOAP on a number of seminars in my district and a number of colleagues have as well, and the college fairs and other opportunities to really provide financial aid opportunities.

But I think anything we can do in the next few weeks is really critical, and so I really encourage all the efforts that are happening and all the partnerships that are happening, really make sure we get the information out in language and that we're trying to protect our students' information as well.

And so a follow-up question is, similar on privacy--and I know the Chair mentioned this as well--but what are we doing to continue to protect our students and to make sure that their data is protected and they're not being accessed?

I just also want to put on record, I've also introduced a resolution, ACR 40, to express the state's priority in protecting student data and ensuring that the documents are able to access financial aid, and going forward, how we can continue to protect our students' data. So any thoughts on that?

Yes, Assembly Member Fong, and thank you for introducing that resolution. It's really important that we can come together across California to send as much clear, reliable information about state protections for students as we can right now because there is so much misunderstanding, mistrust amongst the students that we've been--I've been talking about today, our California DREAM Act filers and those students from mixed-status families. So we at the Student Aid Commission have put forward several guidance memos for our local practitioners.

These are new issues that many of our counselors and college access professionals have not navigated before with their students and families where they're being asked immigration law related questions or they're being asked questions about tax filing status because it affects how many of our families are thinking about which application they might want to utilize.

So we're trying to provide as much as we can to advise professionals about existing state laws that dictate how California schools and higher education will remain accessible to all of our students, regardless of their documentation status.

We've also been putting forward--and I mentioned the two dedicated landing pages on our website and then many resources that you could find there and materials that are meant for students where we're trying to advise them or remind them that the California DREAM Act application stays in California.

Data from that application is never sent to Federal Student Aid. Of course, there's a trade-off there, that it means that those students are not considered for things like the Pell Grant or subsidized loans, but we think it's really important that students know that that's an option for them because we know that that is really one of the concerns that they're weighing right now.

And to the point that our colleague from the Community Colleges made, we believe that we should empower families with this ability to make an informed decision about what's right for them.

For us, the worst potential outcome is if a student chooses to forego applying for financial aid, because we know that is such a significant indicator of whether they're going to see higher education as attainable, accessible, and of course, affordable, and as an option for them after they graduate or if they're trying to come back and to reskill after having been in the workforce.

So those are some of the things we're doing right now. We've of course, also looked at our own data collection practices to make sure that we are collecting as little information as possible that might indicate anything around status, but is everything we need in order to make a timely determination about state aid.

Great. Thank you so much. Did you want to add in?

Ditto. So we're just making sure that our financial aid office staff know the laws, know the obligations that currently exist regarding protecting student data.

Great. Thank you so much, everyone. Thank you, Mr. Chair.

Thank you. Ms. Patel.

Yeah, thank you very much, panelists. Thank you, Mr. Chair, for allowing me time to ask a couple questions. Coming from a public education K-12 background as a school board trustee, I have been a huge champion of our counselors.

However, with chances of there being Prop 98 cuts, we're anticipating, we're already hearing on the ground March 15th noticing going out, and that could impact our school counselors as well, and they are the direct, trusted point of contact for a lot of our students.

Our students have worked with these counselors over the course of their high school careers. And so looking, going forward, I know you guys are doing an amazing job trying to get as many students applying for these programs as possible and I commend you for that work. It's not easy. I have three teenage kids.

We've been through this, and we know that getting over the first application is the hard one, and those are the ones that are filling out, families are filling out when they're in high school. If we can get them to do the one in high school, the next one when they're in college is a little easier and the ones for the siblings are a little easier because now they know the system.

So it's starting that habit. What can you, what support are you able to provide or can you going forward for our high school counselors? I know you specifically outlined memos and things. Is there training or collaboration between like community colleges and our high schools or the local CSU, UC, working with those counselors directly?

I'm happy to start, Assembly Member. It's so such an important point because there's an information gap in financial aid, but there's also often a trust gap, and it's really that person-to-person connection that helps a first-generation family, especially who's really skeptical of there being aid for them, make that leap and choose to take an application out.

We not only conduct training through Cash for College that's really for students and families, we also train college access professionals who aren't counselors, but we have a separate series, our annual statewide financial aid workshops that are intended for professionals, including our high school counselors and other folks who might be working on campus.

We do that in partnership with our system colleagues. So those happen across the entire state and in-person format. They're usually like a half day long, you know, very intensive refresher on what's happening in financial aid. I also mentioned the data that we're publishing.

So we receive data from the California Department of Education that allows us in a way that's unique and actually gets to one of your earlier questions, Assembly Member Alvarez, about what share of students are applying.

The really only--the only sector that we can give you something definitive right now is our K-12 schools because we receive data on where all those high school seniors are enrolled in their senior year and we match that against our financial aid application data.

So we can in real time not only publish the big statewide number for what percentage of seniors have applied, but we can give those counselors at the school site very specific data about these students have applied for financial aid, these students have not yet applied for financial aid, so that they can target their efforts.

And then of course, we're regularly publishing information and resources to try to support that work not only on the students and families facing materials, but for professionals so that they can be advised as there's a lot happening right now with potential changes to Department of Education, concerns about data access, we want to make sure that they're kept advised of those changes and what that's going to mean for state aid.

I love that you brought up the data because that is essential for us to know whether the programs are efficacious, right? We need to be able to see whether our targeted outreach is actually having the intended impacts to the intended student populations that we're targeting or we're--not targeting; targeting is a very harsh word--that we're trying to support.

So I would love to see a way for us to look at returning students--so students that are enrolled in our community colleges and public universities--to see what the drop-off rate is and which populations are dropping off.

If it's people no longer needing the aid, well that's lovely, right? That's a bright shining star. But if it's families that are struggling, continuing to struggle, not feeling safe or secure in handing over their personal information, it would be helpful for us to know that so we can try to work on further protections for those community groups.

If I may, Assembly Member, we actually--I mentioned this dashboard that's existed for years for high school students. I have to also thank our colleagues at the Community College Chancellor's Office because we've published the first phase of a community college-facing dashboard that seeks to do the same thing using the data we have about enrollment by college and matching that against student records for financial aid application.

There's some complications that come in with that because students are listing multiple colleges on their financial aid application, but the this is the first time we published this in the fall, the first time that we've been able to release something like what we have. We call it the Race to Submit.

It's a friendly competition amongst our high schools which also spurs some focus, the first time we've been able to do something like that for our community colleges. So we're really excited to continue to build on that, but we think that's another really important tool for understanding access rates across colleges.

I also want to note a really important policy change that was made back in 2021 when the state budget established and then companion legislation, AB 469, established a universal financial aid application policy for our high school seniors. That policy required that local school districts work with students to apply for financial aid or opt out before they graduated.

And this was really an intentional way for us to try to get our seniors to apply before they leave to your point about those being the first-time applications and really a high stakes piece for us. In that first year of implementation, California went from 68% of high school seniors applying for aid before the fall to 74% applying for aid, which is, when you look at the total number of students, it's tens of thousands of students that we added.

We led the nation in the growth of financial aid applications, not only in volume, which is easy in California, but by percentage. So while there's more work to do for our seniors, and we've talked about that today, we know there's an even greater challenge for our community college students.

That's why CSAC is sponsoring legislation this year, Senate Bill 305, to try to bring that systemic approach to our community colleges and have that same universal policy that as they're being onboarded or they're going through orientation, that we can all work with them to apply or to opt out, but that they've been given that opportunity.

Yeah. Any other input or--he's got it. Good? Thank you. Appreciate that. Thank you, Mr. Chair.

Of course. Thank you. Thank you all for your questions. I think we're going to get more into this topic of data and having the right data for us to analyze correctly in this next item, which is, Issue Two is our Cal Grant and Institutional Aid Update. I think it looks like we'll have the same panel on board, so we will turn it over to you all to share your thoughts. Oh, Department of Finance is joining us, and Legislative Analyst Office, you can sit up up here to make sure we have enough seats.

So then why don't we do the traditional thing then and allow finance maybe to kick us off if there's some thought, some comments from Department of Finance and then we'll go to the others. Welcome.

Thank you. Good morning Chair Alvarez and Members. I'm Aman Singh from the California Department of Finance and I'll be covering financial aid topics with you this morning. The Governor's Budget assumes a total financial aid expenditure of $3.1 billion in 2025-26 which will serve over 750,000 college students in the state.

Of the $3.1 billion total, 2.6 billion will be allocated to support Cal Grant. Cal Grant is the state's largest financial aid program and is expected to reach over 417,000 students in the upcoming aid year. The budget also provides $527.2 million for the middle class scholarship, which is the state's second largest scholarship program.

Next, the budget includes $50 million in one time General Fund support to the Golden State Teacher Grant Program. This one time support is intended to keep the incredibly popular grant program running for an additional year.

The Governor's Budget utilizes estimates provided by the California Student Aid Commission to determine student caseload levels for the state's various financial aid programs. Finally, the budget provides 201,000,001 time General Fund to support core operational costs and student retention at the California College of the Arts, which is a private non profit college located in San Francisco. That concludes my summary of the Governor's Budget proposals for financial aid. I'll be happy to take questions at the appropriate time.

Thank you. Do you have some comments by the LAO?

Good morning Chair Alvarez and Members of the Committee. Natalie Gonzalez with the Legislative Analyst Office. I'll be discussing some data we have on Cal Grant from the revised 2024-25 spending level. The Governor's Budget increases Cal grant spending by $109 million, or 4.5%. This brings total spending for Cal grants in 25-26 to $2.6 billion.

The higher spending is driven by projected increases both in the number of recipients and average award amounts. As you'll see on page 8 of your agenda, CSAC projects a 1.3% increase in the number of Cal grant recipients in 25-26. It also projects a 3.2% increase in average Cal Grant award amounts.

This is primarily driven by planned tuition increases at both UC and CSU. As Cal Grant awards generally cover full tuition at both of these segments. The Administration will revise these estimates as part of the May revision. These estimates will likely change given CSAC is continuing to unpack how different factors might be affecting estimates. Thank you and happy to take any questions.

Thank you. Do the segments have comments on this item? We'll start with UC, then CSU, then Community College.

Thank you Chair Alvarez and Committee Members. On behalf of the University of California, I just want to take this time to thank you for the opportunity to speak with you today about our financial aid policies, goals and outcomes. So again, for the record, I'm a Doctor. Aprí Medina, Director of Policy and Analysis with student financial support at the UC Office to the President, I am also a proud UC alum and a grateful beneficiary of financial aid. I know from personal experience the impact of our generous financial aid programs like the Cal Grant.

I grew up in Fresno to a Low income family with an immigrant father who worked in the fields as a child and my parents instilled in me the drive to pursue college, but it was financial aid that allowed me to attend.

The University of California is committed to making UC education affordable for all Californians and the main principle driving our financial aid policy is to ensure qualified students can attend UC regardless of their socioeconomic economic circumstances.

The incredible support from the State of California and our partners at the California Student Aid Commission make it possible for us to provide financial aid that keeps UC affordable. So I provided a handout of how UC's financial aid program works. It provides a visual summary of UC's financial aid strategy.

The chart has a lot of detail, but I hope it provides a comprehensive overview and I'll be brief in my description of it. UC financial aid is based on total cost of attendance which includes not just tuition and fees, but also costs like housing and meals.

The height of the graph represents the total cost of attendance and parent income is a central measure for dependent students who receive financial aid. And as we move from left to right on the graph, we go from lowest income students to middle income students.

And I will note that independent students typically fall at the Low end of the range. And as you would expect, the amount that we ask parents to contribute goes up and the amount of grant assistance goes down along that same path.

To make sure that the student contribution is manageable, UC uses its own need based aid to fill in the gaps. That includes backfilling with UC Grant for any financially needy student who is missing a Cal Grant or a Pell Grant.

So for example, if we get a transfer student for one reason or another did not qualify for the Cal Grant program, we will backfill with University grant if they have sufficient need. Additionally for our undocumented Californians, we backfill for their missing Pell Grant.

All UC students are assumed to contribute to the cost of their own education through part time work and if necessary, student loans. That student contribution, or self help as we call it is represented by the blue section at the top. And then you'll notice that the self help on the left for our lowest income students is lower.

This is for our UC debt free program. The middle class scholarship program, while it's not pictured, does lower the self help for the rest of UC students, bringing us closer to the goal of a debt free education by 2030. And I'll note that this financial aid model is working.

UC continued to see a decline in the share of our students graduating with debt. Last year, nearly 60% of California undergraduates at UC graduate without debt. The those who do graduate with debt have nearly 50% less debt than the national average for bachelor degree, bachelor's degree attainers.

And in my professional experience, you know, it's given me the opportunity to speak with financial aid colleagues across the nation and they are in awe of the level of support we are able to provide as a result of having such strong state partners in California. Thank you for your time and I am available for questions.

Thank you.

Thank you, thank you for having us. On behalf of the CSU, we're happy to be here to present about our financial aid programs at the California State University. Our mission is to provide a quality, accessible and affordable education and therefore students should not be precluding from attending or succeeding at the California State University because of cost.

Currently we have our biggest students financial aid program which is a state University grant program that we award to students that meet the criteria for the program and do not have another fee paying grant, for example Cal Grant.

We are working towards having the state University grant meet more of a cost of attendance through the goals set by the Board of Trustees that they passed in 2024. That is a goal that we are working towards as we see our state University grant funding increase due to our fee increases we have.

Last year we awarded close to $700 million in State University grant funding. However, our total state CSU funding to students was over $1.0 billion and we awarded it to about 215,000 students. That includes State University grant fee waivers and scholarships funded by the CSU.

We are very proud of the fact that 60%, 66% of our students that graduated in the spring of 2024 graduated debt free and that debt that they have for the students that did borrow was around $15,000 is what they graduated with.

So we are trying to Fund more and more students with free dollars, meaning money that they don't have to pay back to ensure that they're graduating. If they need to borrow loans, they are only borrowing a small amount so that those payments are affordable. Thank you.

Thank you again, Gina Browne for the California Community College Chancellor's Office. Thank you for allowing us this opportunity. College affordability is one of three goals of the California Community College's Vision 2030, which is equity and support.

Our goal by 2030 is to increase with equity the number of California community college students receiving Pilgrimage Pell Grant California and the California College Promise Grant by 10%. And while the amount of financial aid dispersed increases every year, college affordability continues to be one of our most urgent and pressing concerns.

For the 23-24 academic year, California's 115 community college financial aid offices dispersed 3.5 billion in financial aid to 860,000 students. The Pell Grant is the largest source of financial aid for community college students and accounted for 1.75 billion. This is followed closely by, well, not closely. This is followed by the Chancellor's Office. Other financial aid programs.

The California College Promise Grant, formerly known as the BOG fee waiver. This is the largest in recipients with 758,000 students receiving a fee waiver valued at 654 million. It is the most accessible Chancellor's Office program because it has the fewest eligibility requirements.

Students only need to be in good academic standing with the College and need 11, $1,104 in unmet need. We have our Student Success Completion Grant and while There was increased SSCG spending of 369 million for 23-24 and with more than half of that awarded to students enrolled in 12 to 14.9 units.

Over time, SSCG eligibility has expanded, including higher awards for former foster youth. And beginning next year, students with disabilities enrolled in nine plus units are eligible as long as they meet all other eligibility requirements. Our California College Promise, also known as AB19. Of its $91 million budget, 49 million was spent on fee waivers and direct student aid.

The remaining funds supported counseling, academic services and basic needs. We anticipate an increase in direct aid spending as emergency relief funds have decreased. In regards to Cal Grant, community colleges dispersed 260 million to only 150,000 students, which is highlighting the outdated Cal Grant system designed for traditional students.

Our students are older and most of them work to achieve their dreams of transferring to a four year University earning baccalaureate degrees. And entering the workforce with a livable wage.

And it is for this reason that the Chancellor's office will always keep an eternal flame lit and strongly advocate for the Cal Grant equity framework to ensure community college students can afford the true cost of attendance.

I will conclude my remarks with a top priority for the Chancellor's office, and that is equitable resources for community college financial aid offices. The current funding formula for financial aid Administration is outdated. When established, it accounted for 108 colleges, and today we have 116. Yet the formula remains unchanged, leaving colleges with a funding deficit.

Additionally, the formula only considers CCPG fee waiver data. Despite massive growth in all financial aid applications, Pell Grants recipients have increased by well over 100% and CCPG recipients have increased by 250%.

In the light of that, we advocate for updating the formula for financial aid office Administration and implementing a recurring cost of living adjustment for financial aid administrative funding. These changes are critical to ensuring California community college students can effectively. Excuse me, colleges can effectively support students in accessing and receiving financial aid. Thank you for your time.

Thank you. Okay. Do you want to share some comments?

I'll be very brief. Assemblymember Alvarez and our colleagues really covered the update on our projections for financial aid participation. We will of course continue to monitor financial aid applications in real time and apprise the Administration and this Committee as we see any additional data that might suggest where we're going to land for 2526 or for financial aid delivery this year.

I wanted to just very briefly address a few of the points that are in the Committee analysis and that were raised by our other panelists here. First, our California student aid commissioners adopted a Student Success blueprint in December with three key goals around equity for students in access, equity and support, and equity in success.

I note this because our equity and access goal makes a point of referencing the need to expand access to Cal Grant for Low income students while further simplifying the program to increase its predictability for students and families as outlined in the Cal Grant Reform act provisions that remain in state law but unfunded and appreciate the leadership of this Subcommitee in championing those reforms.

As our colleague from the community colleges noted, there are tens of thousands of students who are applying for financial aid and I think on paper you would assume that they were recipients of state aid, but they are precluded from accessing this support due to barriers that are outside their financial status or their ability to benefit from what we offer at our California post secondary institutions.

The Student Aid Commission remains supportive of these Enhancements to our state's landmark Cal Grant program and its ability to better serve low and middle income families. And we're ready to advise the Legislature and Governor as you consider potential means to Fund or to phase in these important reforms.

The agenda, and we got into this a little bit in the earlier item notes, the limited data that the Student Aid Commission receives to comprehensively analyze the impact of student of state aid programs.

While prior state legislation required institutions receiving state funds via the Cal Grant program to report on student outcomes, that data is limited to just aggregate level reporting.

This means that we at the Student Aid Commission don't have the data to fully analyze the impact of financial aid on student enrollment, persistence and completion as we do not receive that unitary student level data.

CSAC handles millions of student records each year and we have systems in place to safely receive data that would enable our research into this return on investment for state aid programs.

If we had that unitary level data, that student level data, rather than just the top line aggregates, the Student Aid Commission will not be able to receive all of this data for all institutions from the cradle to career data system.

Which is why we propose that Cal Grant participating institutions be required to report such data to CSAC when that data is not available to us via the cradle to career data system.

And that would allow us to finally be able to analyze the impact of the investments that really are the envy of the nation, as our colleagues point out, but that we're currently really unable to fully understand due to those limitations. So with that, I'll pass it back to you for any questions.

Thank you very much to all of you. Appreciate it. I just wanted to say thank you also to the UC presentation. The graph that was handed out to all of us I think is really helpful in trying to explain to just the General public at the end of the day, what we're trying to do at this Committee and through our priorities is to ensure that more access to higher education exists.

And that certainly is the case through our financial aid system. And so I think it's a, it's a very useful tool just to understand. And you know, we're public officials, so our, our salaries are public.

So I, it's very easy to just sort of point ourselves out where very easily on this graph salary making 150,000, which is, you know, typical again of the Legislature. And if you have a spouse, you're definitely in that range.

It gives you like a pretty precise understanding of what your commitments need to be in order to achieve a college education at the UC. For your student. And I think that's, that's very useful. And the same goes for if you're, you're somewhere else on the spectrum.

So appreciate that and thank and look forward to seeing more information data like that from our other systems as well to, to be able to communicate this very clearly to our, to the public. I'm only going to focus on this point of data though, because I am very intrigued.

You know, currently the limited student data is done in an aggregate basis. I like to ask the segments if there are challenges to implementing data sharing with CSAC on a student based student level so that these type of analyses can be performed on a more regular basis.

Is that something that you considered has been discussed in the past and what are some of the challenges that you've identified? We'll start with community college first.

Sure. Thank you for that question. One of the biggest challenges for the community college is that we receive data after the academic year has ended. So we would share that with, we could share that with csac. But again that data is a year old. And then there's another challenge is just it's a massive system. And so making sure that colleges submit their data to us so that we can then share that with CSAC is a challenge.

Yeah. And I know that the chancellor's very active in trying to create a system wide system for this system wide data system for the entire state in order to be able to have access to that data which some was funded last year in the budget. There's some budget requests in the current budget.

And so should that system come to fruition, would it be a much simpler process to share the data?

That is correct.

Okay. What is the implementation time frame? Not that I expect you to know that, but do you happen to know that?

You're right, I don't know that

We'll have to ask that to them.

We'll have to get back to you..

How about at CSU?

So we collect a lot of data internally for graduation rates. For example, our most recent initiative of GI 2025, we have not collected data as to how Cal Grant impacts that. We do collect it for the Pell Grant students.

Yeah.

I wasn't prepared to talk about data sharing today, so I wasn't. I'm not sure where our expectations.

I think we'll ask to get back with you on that and certainly for your future CSU presentations. I think it'd be a question to be prepared with. Appreciate that at UC.

We also, as was mentioned, typically are sharing aggregate information. I think the cradle to Career. We actually Members out of the office of the President that are sitting on that working group there. And I also was not prepared to talk about data sharing.

But I will say that as long as, you know, one concern would be duplicating efforts. So as long as we're minimizing the number of reporting streams, I think that would be advantageous for our campuses.

Sure.

Our campuses are stretched in terms of building capacity, in terms of IT infrastructure, to be able to, you know, report as well.

Yeah, I would agree. We're not looking to create another level of bureaucracy or work, but certainly having the right information is important, critical. So I think our team will follow up with each of the segments and try to figure out how to make this happen. I think. I think it's an important thing to discuss and achieve, hopefully.

Any comments from finance or LAO on that issue? No, thank you. I'll turn to my colleagues. Mr. Fong,

Thank you so much, Mr. Chair, and thank you to all our colleagues for the presentations and also in the Chair's opening comments. I also want to uplift this as well, but we know it's a challenging budget year, challenging budget times, and a lot of unknowns out there.

But to implement components of Cal Grant reform is something that we're going to, I'm going to continue to advocate for, and I know my colleagues have uplifted that as well.

Going forward, when we look at Cal Grant reform to remove GPA requirements for community college students, remove age and time out of high school, we know that will really impact our community college students in that segment as well.

But when we look at the declining numbers, at least right now, in terms of our FAFSA applications and CADA applications, and with the proposal of the 1% increase, 2.6, I mean, $109 million ongoing General Fund, do we anticipate maybe a larger financial aid package for students if the numbers in terms of the caseload drops?

So the nature of the Cal Grant program, Assemblymember Fong, is that there's defined amounts that each student will receive. So that on its own won't necessarily change the amount that students could receive through state aid.

However, if we can work with our students to help them apply at greater rates, that's what can unlock not only federal student aid for those students who qualify for that, but financial aid programs at our community colleges, like the Student Success Completion Grant, are only available to students once they are a Cal Grant recipient and they meet those unit level requirements that our colleague was speaking to.

So that's a really important way that we can not only open up access to Cal Grant and to programs we administer at csac, but to how we can open up doors to other financial aid opportunities that exist for our students at community colleges.

Absolutely. Thank you. Did you have any other additional comments?

I'll just note that we are supportive of certain aspects of the Cal Grant framework at the University of California. I think we are concerned impacts to our students. So in the net. In the most recent analysis out of the California State Commission, I believe that there's a net loss to UC students under the framework. But we're happy to revisit those discussions in the future.

Okay, thank you. CSU or Community College.

Exactly. Same as the UC for the California State University system. We would be concerned of the impact to our students and a reduction of the number of students and the funding that they would be receiving at the CSU system.

Thank you. Community Colleges.

100% support.

Thank you. And so as we continue to have conversations around this, definitely want to uplift those forms, but I hear the opportunities and concerns as well. Those are all the questions I have. Thank you, Mr. Chair

Thank you, Mr. Fong. Ms. Patel?

Sorry for being behind all of you. Thank you. Mr. Chair. My one question. I'm looking at these charts and tables that are provided in our briefing materials specifically around the Cal Grant reform. You were presented two options. Reducing or removing the GPA requirement, bringing the credit transfer rate from 16 to 9.

Are those presented as two different options or are they a combined package together?

I think this question is to. Oh, sorry. We discussed this quite a bit last year. So to CSAC probably better because. Yeah, sure.

Thanks. Thank you, Mr. Chair. So there is a significant cost with making all the reforms that were adopted back in the prior budget but remain unfunded, that take eight different Cal Grant programs and streamline them to just two so that we could provide something like our UC colleagues do that really clearly depicts what financial aid is available for students before they even start an application.

It's one of the major challenges we have right now with financial aid. When you have eight different sub programs, it's really difficult to clearly convey to students and families what they can access.

However, because of that additional ongoing cost and some one time cost for a transition period, we advised the Subcommitee and others on options for how to phase in elements of that reform at a lower cost point so that we could start to work toward full adoption.

One of the most significant drivers of cost is a requirement for our community colleges for those students that they have a 2.0 minimum GPA or just the ability to turn in a transcript. For many of these students, they might have had that GPA.

But how you get a transcript and turn that in and show eligibility is a challenge. And it really doesn't fit with the open access nature of our colleges where institutions have second chances. We want to bring students back in to help them access that reskilling and upskilling opportunity that colleges provide.

So with that being one of the largest places where we see increased student access, particularly for student parents who qualify for an addition for $6,000 for non tuition costs, in addition to the tuition coverage that they received through the Promise grant, we were working with the Subcommitee to identify means of phasing that in.

And really that throttle of the GPA requirement was something we were looking at. So one option that we presented last year was rather than fully eliminating the GPA requirement in its entirety, lowering the number of units that you needed to be able to depict that met that.

So you're progressively reducing it from 16 to 9. Do you anticipate lowering it further?

That would be the goal would be that we would be able to get more students in sooner and start that process now while still working towards the goal of not only eliminating that requirement, but streamlining these programs. Because.

Because until we have a state aid system that doesn't take a master's degree in counseling to communicate to students and families, we know we're not gonna be able to work with our prospective first generation students through the most significant barrier to their enrollment, which per survey data that's been out there for years, is cost.

So that would be the goal, is to eventually work toward full elimination and streamlining these programs.

Wonderful. Thank you for clarifying that. That brings me to a follow up question since you explained it so nicely. Are we able to track completion rates with these cohorts of kids where we're bring that level and are we seeing that it doesn't? Are we seeing better success rates because we're reducing those barriers?

So we would love to be able to answer that question more definitively. That was the data conversation. We were just having that. Right now we rely on third parties to help present that kind of analysis.

So there has been research done by the UC Davis Wheelhouse center that depicts how financial aid receipt impacts community college student unit intensity, persistence, term over term, year over year and throughput.

But that's because they have access to enrollment data, they have access to our financial aid data and they're able to conduct that analysis based on that snapshot of the data that they receive.

We believe that having that ability to continuously monitor these trends and be able to advise the Legislature and Administration on the impact of these aid programs will help you all understand where you can target investment and where we're seeing the most impact of financial aid.

So we'd love to do that and we hope we can work with our colleagues to get that data in a way that's not duplicative of what's already being reported elsewhere. And I'll just note, we do receive 10% of our institutions already send us unitary level data. So we know it can be done. Just some technical issues for us to all work through together.

That's wonderful. I agree with my chair here that we don't want to just randomly increase bureaucracy, but we do want to have targeted data and supports to make sure that we're putting money in the right places and helping support success. So my last follow up question is, do we. I'm trying to learn this whole system.

Do we pair counseling supports with our students that are accessing financial aid since oftentimes they are the ones that are first to college in their families or their parents may not have had access to a college education so they don't know how to navigate that system.

Just to help support that persistence and make sure we do have increasing rates of persistence with the financial aid packages.

I'm assuming we do because that sounds like the thing we want to do. That is absolutely correct. Entering students are required to go through orientation where many times they do meet with a counselor to help them determine what their financial aid options are. Of course there are financial aid counseling available for all of our students.

So in addition to the comments from California Student Aid Commission, it's difficult to pinpoint which financial aid program is contributing to student success because so many students receive multiple types of financial aid. So it becomes difficult to determine, like you mentioned, where to put the money because we're not sure exactly which program is having the biggest effect.

Well, in aggregate it's probably a mix of everything, right?

No question.

Thank you.

Thank you all. No further questions. So again, thank you. We'll have follow up on this issue of data. Certainly seems to be of significance to the Committee. So thank you. We will move on to the next item which is the middle class scholarship updates and proposal from this year's budget.

So we'll kick it off with the Department of Finance.

I'm Aman Singh with the California Department of Finance. The Governor's Budget provides 527.2 for the middle class scholarship program. At this time, the Governor's Budget does not propose any policy changes to the Middle Class Scholarship. Initial estimates for the budget year indicated that there would be over 327,000 middle class scholarship recipients in the upcoming aid year. However, as noted on page 18 of the agenda, the Middle Class Scholarship is facing a $103 million program deficit.

In the current year due to significant growth in program participation. Finance is working very closely with the Student Aid Commission to determine a solution to this issue as part of the May revision process And I'm sure Mr. Bremner will detail detail this topic a lot more.

So thank you Legislative Analyst Office.

Thank you, Natalie Gonzalez with the Legislative Analyst Office Consistent with last year's budget agreement, the 2526 budget plan reduces funding for middle class scholarships by $110 million in ongoing General Fund support, bringing ongoing funding for the program down from $637 million to 527 million.

Additionally, the $289 million in one time funding provided in 2425 expires under the budget plan. CSAC estimates that Middle Class Scholarship awards will cover 18% of students remaining cost of attendance in 2526. This is compared to an estimated 35% coverage in 2024-25.

Also, as just mentioned by my colleague at Department of Finance, CSAC is anticipating a larger than expected number of Middle Class scholarship recipients for 2425. To put this into perspective, another way, CSAC is estimating an almost 30% increase in the number of recipients in 2425 compared to the previous year. Originally, CSAC estimated around a 12% increase. Thank you and happy to take any questions.

Thank you. Do you want to make some comments on this item?

Yes, Mr. Chair. I'll start my comments by sharing more about what we at the Student Aid Commission are seeing as we dig into the data to understand the greater numbers of students that are in the Middle Class scholarship program for 2425 than initially projected or reported to us by our UC and CSU colleagues.

Due to those better FAFSA issues that we discussed earlier, California extended the priority aid deadline to May 2, but we also separately extended a deadline specific to the Middle Class scholarship program to July 1st.

Typically, middle class Scholarship has a deadline that aligns with the priority a deadline, but it differs in that both new and returning students who are Middle Class Scholarship recipients must apply before that deadline where students can renew their Cal Grant at any time. Middle Class Scholarship has a unique deadline because of its unique nature.

For the Student Aid Commission to project award amounts that it can provide to students, we must know the total amount of funding available in the program that you set with the Governor in June.

How many students are eligible to participate, which is based on the records that we receive from our campus colleagues and the other aid that those students are receiving and that factors into this last dollar formula for the Middle Class Scholarship program.

Whereas your agenda notes it's considering the other forms of aid that students receive before identifying the target Middle Class Scholarship award amount for 2425. There were approximately 33,000 students that applied for the Middle Class Scholarship between May to and July 1.

This helps explain why there are those additional eligible students beyond what we might have seen in prior years. However, that doesn't explain why CSAC had limited data to make a fully informed estimate of the Middle Class Scholarship Award amount for students in 2425.

In the initial records that the Student Aid Commission received from Middle Class Scholarship participating institutions, which are our undergraduate UC and CSU campuses, but also a handful of baccalaureate degree granting community colleges, we received records indicating that approximately 250,000 students would be eligible for the Middle Class Scholarship.

We knew that there would be additional records after that first upload, but we didn't have the ability to anticipate the volume of additional records that would be transmitted to the Commission by campuses. Each year we receive those follow up records and campuses are progressively adding students over the course of the fall term.

In the prior year, we received approximately 32,000 records after September and through the remainder of the academic year. This year, CSAC has already received more than 68,000 records since that same time period, so that's more than double what we've received in the prior year.

However, it's important to note that the large majority of these late student records, over 80% of them, had actually applied for aid before the May 2 deadline. So these additional records were not necessarily those Late Middle Class scholarship filers between May 2 and July 1.

This suggests several important areas where the Student Aid Commission can work with our segment partners and policymakers to strengthen the Middle Class Scholarship Program for students.

First, we at the Commission will be pursuing updates to our Middle Class Scholarship Program regulations to establish specific deadlines by which institutions must report student data for eligibility as well as payment records. Without that data, CSAC cannot make reliable estimates on student award eligibility or track the utilization of Middle Class Scholarship funds throughout the year.

These changes would be best supported by other refinements to the program's statutory structure. We can make the Middle Class Scholarship Program a more stable program and avoid the potential for pulling back funds from students who have already been awarded.

If we and each Annual Budget act set a specified phase in factor this year, for example, that phase in factor was 35% of what the target Middle Class Scholarship award would be. We've all agreed on the importance of not pulling back funds once they've been offered or communicated to students this.

If this required additional funds beyond what was appropriated for in that year's budget, we can then make an adjustment to the ensuing budget act to reflect that, as I believe we intend to do this year for 25-26 and then in years when there are middle class scholarship funds remaining at the conclusion of a year where we haven't paid those dollars out to students, perhaps there were fewer students that enrolled than expected.

We can roll those dollars into the next academic year and into the next budget year, essentially creating an expectation that funds will stay within the middle class scholarship program and not be swept into the General Fund so that we can lock in those award amounts for the entirety of a year and not have that uncertainty and that continuous repackaging of student aid.

This is essentially what we're doing to try to solve for this current year challenge. But we can avoid that and avoid this challenge for students in the future if we can create a process for resolving these issues through the state budget annually.

However, there's another important issue that affects how students can most utilize this support through middle class scholarship. Right now, we at the Student Aid Commission can't guarantee any middle class scholarship awards for students until the final budget is enacted.

And that means that students deciding on enrollment in the spring before you conclude the budget process, can really only be given an estimated amount for their middle class scholarship aid.

Guaranteeing a specified amount of middle class scholarship funding at either a program or a student level could enable us to all collectively give students a better understanding of middle class scholarship support that's available to them before they make these enrollment decisions, even if there's perhaps additional aid that's not available until the conclusion of the budget.

And we know what that final middle class scholarship funding level might be. And of course, there are some other larger changes that the Legislature and Administration could consider for the middle class scholarship program, given its targeting and its population focus. There are many students that are excluded from the program based on their segment of enrollment.

So our community college students, for example, and then, of course, students that don't have access to other forms of aid. And you might consider how this program could help offset that, you know, for our California dream Act filers, for example.

So I'm happy to answer any other questions you might have about how we're managing for this situation in the current year or the impact of the proposal for 25-26. Thank you.

Thank you. I wanted to maybe focus my questions for purposes of discussion on. So we've talked about the $103 million shortfall essentially for this program and kind of, I think, understand how we got there. And so I'm a little concerned about going forward, identifying the appropriate number of participants and also recipients and also the. Just the.

So the amount. So in the proposed budget, we have a total of 327,000 proposed recipients. But the current year, with the, again the correction of what the shortfall that existed, we're now at 350,000 students that are going to be served. Let's make sure those are factually correct and everybody agrees on those.

Okay, so we're talking about potentially 2223,000 students dropping off. Do we believe that that is an accurate assessment going forward? And how did we come up with that number? Maybe I'll start with Department of Finance first.

Ami Singh with the Department of Finance. Our middle class scholarship program estimates are based on caseload data that was provided by the Student Aid Commission. In October, the California Student Aid Commission receives all applicant data. You know, per privacy requirements, the Department of Finance does not see any actual applicant data. So we do rely on those estimates from CSAC.

Okay, that sounds very clear. Thank you. So now let me ask CSAC. So your estimates that you submitted during the budget process in October, you pegged the number at roughly 327?

That's correct. And as I noted earlier, that's at the time where we were still receiving additional student records for students who are eligible for middle class scholarship per statute and that who we all must serve. So that's where I mentioned earlier, this doubling of the rate of those late records that come to the Student Aid Commission.

So we're continuing to monitor middle class scholarship payment records, working with our institutions to receive that data on how many students are being paid middle class scholarship this year. So that working with the Administration, we could present updated forecasts going into May revision. I'll note this year we've extended the priority aid deadline.

I don't know that we at this moment envision extending the middle class scholarship deadline in the way that we did in years past. But we would expect that once students get into a program, they want to stay in. So we do hope that students will be able to maintain their eligibility in the program. But this will mean that we will need to update our forecast going into May.

Okay, so you, when the snapshot in October when you submitted the numbers was you thought it'd grow to about 327, but it's actually grown post October to about 350.

That's correct.

Got it. Okay, so that gives me Clarity on that front. The issue on deadlines is that an internal. How do deadlines get set and have the segments provide any feedback on the deadlines and what that would mean?

The deadlines are established statutorily. So that. That did take budget action last year to extend the deadline because we had not only first time filers who were grappling with those better FAFSA issues, but we had a significant number of students who are renewing their financial aid and were coming back, particularly again those mixed status families.

And while we were able to deploy the California DREAM act for first time filers, there was additional complexity in trying to make that available for returning students. So we wanted to ensure that those returning students had time to be considered for the aid that they're eligible for, barring that deadline.

So the statutory deadline will be April. April 2nd.

That's correct. Right.

For this year. Okay. Do you have comments both UC and CSU?

Yeah. I just wanted to add that I think one of the issues that happened last year that we hope not to see this year is the better FAFSA problems that existed.

And a very large number of students who may have submitted their FAFSA's prior to our deadline, but they were not processed by the Department of Education for a number of reasons.

So we did not either receive a valid student aid report, or it's called an isir, an Institutional Student Information Record, or we received one that was rejected, or there were just dropped files.

So I think that we as well as I think with the Student Aid Commission would go back and we would find just records that were not submitted back to the campuses once the student submitted.

So I think that would be one of the explanations as to why there was this kind of late reporting because we didn't receive the information that the students had submitted the FAFSA until well into the fall semester.

Okay. But now going forward. Thank you. That helps also understand the whole picture going forward. This April 2nd deadline is. We're all operating under that assumption. And. Okay, we're in agreement. Yes.

And the hope is that there are no further processing issues at the federal level.

Sure. Okay. Any questions for my colleagues? Mr. Fong?

Thank you so much, Mr. Chair, and thank you everyone for the comments on the middle class scholarship proposals. The quick question I had is when we look at the numbers of FAFSA applications and number of financial aid applications going forward, Cal grants, it looks like the number might be slightly lower. Can some of those funds be used to offset the middle class scholarship funding issue?

Assemblymember Fong, I'm happy to help clarify how we're managing for this essentially a cash flow issue for middle class scholarship. And I want to thank the Administration and the Legislature really for directing CSAC to develop options for how we could avoid pulling funds back from our students once they've been offered.

And have to also thank our segment colleagues for for working with us to provide the data. We need to understand where we are in payment as well as our seven UC quarter institutions that are right now effectively fronting middle class scholarship payments to be then reimbursed essentially after the conclusion of the state budget in June.

We were directed by the Administration and Legislature to proceed in this course of essentially allowing our UC institutions to advance those payments using institutional funds so that middle class scholarship dollars would be available for those institutions that may not have the available aid for spring term to cover those costs.

This will ensure that the middle class scholarship funds are sufficient up until that point where we need to make a correction for current year in the 25-26 state budget. And then, you know, it does appear right now that we are trending below where we might have been otherwise on Cal Grant payments.

So as you take a step back and think from the more macro level of the state budget, how do you offset that $103 million? That would be one potential savings that the state will realize.

And really each year we're truing up on the budget in June based on where actuals have landed by the time we get to that point in the financial aid delivery process. So essentially you will probably see something like a downward caseload adjustment for Cal Grant and an upward caseload adjustment for middle class scholarship.

Thank you. Any other comments? And then just really quick on the technical amendments and technical changes to make sure that we're implementing program a little bit better. I know a number of mentioned comments around that. So with the April 2 deadline going forward, will we have better projections going forward now to really help our students?

This deadline extension was just for this year and it is to respond to that application challenge that we have right now for students. The delayed launch of the financial aid application applications moving forward.

I think the way that we can do this together is first this data sharing component that I mentioned before and of course no further delays and federal aid processing. So much of all these issues we're talking about today flow downstream from that challenging FAFSA rollout.

There are additionally these other statutory changes that we do think can guarantee more predictability for students especially and earlier awareness about their middle class scholarship awards, but that I believe can Also help facilitate smoother implementation on not only the part of the Student Aid Commission, but hopefully for our campus partners as well. Thank you.

Thank you. Member Fong. For the record, Dr. Apri Medina from University of California, I think we also see. So I first want to thank you for the recent policy changes that have taken place over the last couple of cycles.

I think that has reduced some of the back and forth in the middle class scholarship revisions that students were experiencing. So thank you for that. I think there are two additional opportunities.

Currently there is a $6 variance tolerance for an entire academic year in the middle class scholarship award, meaning that the calculated annual amount can only vary by $6. And if it's beyond that, the campuses are required to recalculate and modify the awards.

So that might be an additional opportunity is to consider how we might increase that tolerance because students are experiencing revisions, you know, in the summer, basically when the year is over.

The second opportunity is, as has been alluded to, is having a more stable funding at the start and much earlier in the year to better understand how our campuses can more accurately estimate, especially at the time for new students where we are trying to provide them as transparent of an aid offer as possible. It's very challenging.

It has been challenging to do that because at present campuses don't want to over commit and then have to revise that later for students who then, you know, submit a statement of intent to that campus. It kind of feels like a bait and switch. So campuses are kind of caught in this.

We want to be as clear as we can about all the opportunities that our students can receive at our campus. But it's challenging to do that when the phase in factor, typically we don't get it until August, which is when our semester campuses are starting. So that would be the other opportunity. If there's a way that we can more confidently know the phase in factor and that it's not subject to change much earlier in the cycle.

Thank you. Thank you.

We at the CSU also express our appreciation for the fixes for this current year MCS issues because it allowed us to really just Fund the students at the expectations that they were at the levels that they were expecting.

So we really appreciate that work that was done on the behalf of our students and we agree with the California, with the UC. We would really appreciate having an earlier information on the phase in factor and on the student contribution piece that would allow us to correctly estimate awards for our prospective students.

So essentially our new fall 2025 students this year we are planning to estimate awards for our incoming class when we're roughly, just to be safe, roughly using a 10% phase in factor. But if we could have that information at a much earlier date, as we are planning on going out with offer letters this month. So we would need that type of information we would need in the January, February time frame.

Okay. Well, thank you so much. Appreciate the comments. Thank you, Mr. Chair.

Thank you. With that, that concludes this item, we will hold this issue open. And thank you for being here. We're going to take just a quick little recess to stand up and stretch and use facilities. And we'll be right back.

All right, we're going to reconvene. Thank you for giving us and now we're going to take on item number issue number four, which is the California College for the Arts proposal. Ask the presenters to please come forward and we'll kick this off with the Department of Finance. Then we want to hear from the Legislative Analyst Office.

Then we'll have the. We'll have CSAC President and the President of the California College of the Arts as well for comments or questions. Questions. So Finance, please go ahead.

Hello again, Chair and Members. I'm Aman Singh from the Department of Finance. The Governor's Budget provides $20 million in one time General Fund support to core operational costs and student retention at the California College of the Arts, which is a private, nonprofit college located in San Francisco.

The California College of the Arts is facing a budget shortfall resulting from enrollment declines following the COVID 19 pandemic. The objective of providing this funding is to allow the California College of the Arts to remain open in a fiscally sustainable manner.

The Administration has expressed strong interest in supporting the college and this is reflected in the Governor's Budget. We've had multiple discussions with the California College of Arts Arts and have determined that the college's degree programs and key mission are distinct from what is offered by local CSUs and UCs. I will defer to the California College of the Arts in this discussion to expand on their unique program offerings.

Thank you, Legislative Analyst Office. Please.

Thank you Chair Alvarez and Members of the Committee. Natalie Gonzalez with the Legislative Analyst Office. I'm just going to provide some short background quickly before getting into our recommendation. As you may be aware, California College of the Arts is a nonprofit private college based in San Francisco. They enroll approximately 1300 students, including both graduate and undergraduate students.

The College has been facing a continual budget deficit over the past years and is projected to face a $20 million deficit in 2025. This is the largest deficit the school has experienced over the past decade.

As mentioned by my colleague at Department of Finance, one factor driving this deficit is the school's enrollment decline, which is resulting in a loss of associated tuition and fee revenue. The state provided $2.5 million in one time General Fund support to the college in 2024-25.

The governor's proposal for 25-26 provides $20 million in one time General funds support for the school. This funding would help as the college continues to address its operating deficit. Though we recognize California College of the Arts fiscal challenge, we recommend rejecting the proposal for four reasons.

First, last month the college announced it had raised nearly $45 million in new philanthropic donations. The school indicates that these funds will help them address their current budget deficit. Second, the school is not the only college in California facing fiscal challenges due to enrollment decline. Some of California's public universities are facing similar challenges.

Third, due to the state's fiscal situation, CSU and UC are facing proposed budget reductions in 25-26. As the state is projected to face budget deficits in the out years, it is not in the fiscal position to support the school.

Fourth, though the state is not legally prohibited from providing fiscal support to a private higher education institution, it is not in the state scope of responsibility and has been done very rarely. Again, given these reasons, we recommend rejecting the proposal. Happy to take any questions.

Thank you, sir.

Welcome Good morning Chair Alvarez and Members of the Subcommitee. My name is David House and I'm honored to testify before you now 14 months into my tenure as President of the California College of the Arts in San Francisco, and I'm pleased to be joined by Members of my leadership team who are here to help support in answering the questions that you may have for over a century, CCA has been a pillar of California's creative economy. Founded in 1907, we have not wavered in our commitment to our mission to prepare students for careers in art, architecture, design and writing.

Today we offer 22 programs, undergraduate programs, and 10 graduate programs and our alumni are working at leading companies like Pixar, Apple, Ido, Google and Mattel, as well as top galleries, museums and architecture firms like Gensler, driving innovation and shaping California's creative economy. We are a California institution serving California students and contributing to California's economy.

75% of our domestic students are California residents and our graduates stay and work in the state, strengthening its creative industries.

Last year, the state's $2.5 million investment in CCA was a vital show of support and we put those funds to work immediately, meeting critical operational needs and we remain deeply grateful to the state for the commitment to higher education and the creative economy.

Beyond its direct impact, the state's investment galvanized others, inspiring additional philanthropic support at a critical moment for CCA's survival and reinforcing confidence and broad community support in our mission and future.

This year we again appreciate the Newsom administration's recognition of CCA's impact on a one time $20 million investment will allow us to rebuild, expand enrollment and restore critical student resources, ensuring that CCA continues to serve as a pipeline for California's creative industries and a leader in art and design education. But Today we face a critical moment.

I know you are aware of the immense challenges facing higher ed declining enrollment, rising cost and economic uncertainty decline destabilizing once stable institutions, essentially putting higher ed institutions across the state at risk. These challenges do not spare our public partners, nor do they exempt private institutions like cca.

We have seen this firsthand with the closures of San Francisco Art Institute and the merger of Mills College with Northeastern's and Boston based University. That's why we're here today to request a one time 20 million investment to stabilize CCA and ensure that we can continue serving California students. This funding is not just about survival.

It's about growth, opportunity and long term sustainability. We've taken significant steps to right size the college, including deep budget reductions and difficult layoffs of our staff. We've also launched an aggressive philanthropic fundraising campaign and are actively securing additional support.

It will take all three of these actions, cost cutting, fundraising and state investment to ensure CCA's long term sustainability and expand its impact. The $20 million investment will strengthen CCA by supporting our people, the place and programs, again ensuring long term stability and growth for our people.

At the heart of this funding request is a commitment to our students and their success. This investment will allow us to restore essential student focused personnel who were lost due to financial constraints, ensuring that students have the support systems they need to thrive from human resources support to academic advising to career development and mental health resources.

As far as place is concerned, it will allow us to address long overdue infrastructure needs. For the past five years, critical facilities have been neglected due to budget limitations. Investing in our campus means providing students with safe, quality learning environments where they can create, collaborate and innovate from a programmatic standpoint.

Finally, this funding is about strengthening our academic programs to attract and retain students. This includes expanding pathways for future arts educators, ensuring California schools have the qualified teachers needed to integrate arts education and K12 classrooms. In closing, CCA is a private institution with a clear public impact and we are proud to fill a unique role in California's higher education landscape.

We offer specialized programs not available at UC or CSU campuses, meaning that we are not only integral, but expand the higher ed landscape, complementing our public partners and creating pathways into industries that shape our culture and economy, including animation, design and other fields vital to the California innovation economy. This funding request is not made lightly.

Without this investment, our ability to serve our students, expand enrollment and continue to lead in art and design education is at serious risk and I appreciate your time and consideration and look forward to answering any questions that you might have.

Thank you. I assume, Mr. Bremer, you're just here for questions since this is being funded in csac, but you're not. It's not a program that CSAC runs. Great, thank you. Okay, I want to start off with some basic questions here. And I'm looking at page 22 of our agenda for there's the public agenda available for everybody.

I'm looking at the budget for CCA and it looks like the revenue is projected to be $68.9 million and the expenses is $73.1 million, meaning that the operation is running on a deficit. Are those numbers accurate? Those numbers are accurate. Okay. And it's also stated in our agenda that $45 million of private donations have been recently secured. Is that correct?

That is correct. Commitments.

To Department of Finance. Were you aware of the $45 million when this was prepared? I know that the budget gets prepared months in advance. Were you aware of that amount?

Aman Singh from the California Department of Finance. When we developed the Governor's Budget, you know, beginning in the summer and fall of last year, we were not yet aware of the 45 million. But from our understanding, those that $45 million in commitments are rather recent. So they may have occurred after the Governor's Budget proposals are drafted.

That makes sense. Thank you. Appreciate you for clarifying that. So let me ask the college if you've got a $73 million projected expense which is above your revenue amount of 68, that math on that is you're roughly $4.2 million short of revenue of your total expenses for this coming fiscal year. Is that correct? Why is there a need for a $20 million budget allocation towards this?

We're moving into. We currently have a structural deficit of $20 million each year. The funding that was mentioned in the 45 million actually is over two years to secure that structural deficit and it brings us to zero.

And in fact, the $20 million that we are requesting allows us to make the integral investments needed to make the transformations for the school to begin to return and boost our enrollment.

Yep. You do not show a $20 million or a 10 million over two years deficit. You show a $4.2 million deficit.

I am. I'm going to call my chief financial officer up to assist me in this.

While you do that, I can turn it over to our colleagues. Maybe they have other related questions. Mr. Fong

Thank you so much, Mr. Chair, and thank you for the opening comments and thank you to all the presenters. As you heard in our prior presentations. We're in very, very challenging fiscal times with many competing priorities and needs for our students, especially at our many public higher education institutions, including proposed cuts of over nearly $800 million for UC and CSU systems.

And when we look at the institution here, where cost of tens is nearly $100,000 a year, what is really the state's interest really this $20 million?

I take it that's a question for finance. Aman Singh, Again, the Administration has expressed support beginning in the 2024 Budget act, when the initial $2.5 million were enacted. The Administration has determined that supporting the California College of the Arts is of compelling interest to the state, specifically in Northern California, and believes that the benefit of supporting the institution and ensuring its financial stability would be of greater benefit than allowing the institution to essentially not survive, which would be of, I guess, detriment to the state.

The Governor's Budget is following in the leadership's direction to support the institution.

Thank you so much for that context. And then follow up on the Chair's question on the $2.5 million as well. I know through the budget process last year, $2.5 million was allocated. How has that been implemented or are there any updates there on that 2.5 million?

The 2.5 million which was received allowed us to invest in scholarships for California students which actually were unfunded, which then allowed us to release make relief on the budget for critical operational needs at a very critical time for the institution.

Great. And thank you so much for the context and thank you for everything you're doing. Thank you, Mr. Chair.

Mr. Muratsuchi,

Thank you. Questions for Department of Finance. So, following on Chair Fong's line of questioning, we just had a hearing last. Was it last week where we heard from Sonoma State University where they're talking. About shutting down programs, laying off people. You know, we have a core obligation to support our California State University as well as our University of California. Why are we selecting this one private college for support?

Again, Aman Singh, with the Department of Finance. We would like to underscore the California College of the Arts, unique programs that are distinct from CSU and UC. Again, the Administration did express strong support of California College of the Arts, and we did build that into the Governor's Budget.

We can provide a more detailed response as to the administration's reasoning and the nuances behind that, but that is all the information that I can provide.

Would the Department of Finance agree that, you know, California taxpayers primary responsibility is to support our public higher education institutions?

The Department of Finance does have a priority to support our public institutions.

Is there any precedent other than for specific, you know, buildings for like a private college to receive support like what is being proposed here?

There have been a few historical incidents where we have supported private colleges. I can provide details of that. But I do agree that this is a unique proposal.

From an optics perspective when we're Talking about cutting 8% of the funding for the University of California and the California State University. You know, for us to be singling. Out one private college for $20 million. In taxpayer support is not a good Look. Thank you Mr. Chair.

Thank you. Welcome you to answer my question earlier about the budget deficit that you're currently in.

Certainly. Remy Hathaway, CFO of California College of the Arts There are a couple of things in that 25 budget that were that were unexpected. We expected enrollment of approximately 1400 and we're actually closer to 1280 on an FTE basis. So that's roughly $6 million addition to that.

There's also no essentially no funding in the 25 budget for repair and replacement, which is specifically a significant portion of what's being asked for here. So that is a roughly $55 million overhang that we're looking at funding 5 to 10 million of that in the upcoming year.

So the combination of those two pieces plus slightly higher negotiated wages for next year bring us up to that $20.

Million number you mentioned significantly. Repair and replacement. Where in the previous budgets, fiscal year 24 that we have before us fiscal year 23, did you have repair and replacement? Under which budget line item do you have that covered?

There's virtually none in the prior years, roughly $250,000 per year.

So you've done no repair and replacement in either of the prior two years? No, we've. This is all deferred maintenance? Yes. How far back does this go? Roughly 10 years. So in the last 10 years there's been roughly $0 set aside? How long have you been there, sir?

Minimal. Minimal work on. On deferred maintenance? Yes. I've been there 11 months.

I didn't think you'd be there 10 years. So thank you all for answering those questions. I. We have a recommendation today to this. The Subcommitee can vote on recommendations on budget items. We are not the Budget Committee and so we cannot make a final decision.

But it's a recommendation to the Budget Committee to not move forward with this proposal. That is a recommendation before us. I would just say that I think there's. There's clearly more work that needs to be done on this front. The budget shortfall from an operating standpoint should not be projected to be, you know, $4 million.

I would expect any entity, including our own budget, to be balanced, projected at the end of the year, and not rely on a shortfall going forward for the. For the current fiscal year. It's concerning that for 10 years there hasn't been any financing of repair and replacement. And that is a large concern.

And as was stated at a moment when our public universities and institutions are having a hard time, we are literally rejecting thousands of students at some of our institutions because of the lack of access. There are other institutions that are now shutting down programs.

We heard incredible testimony from one of our colleagues representing Sonoma on what the impacts are to them. We're hearing about the threats to other public institutions beyond Sonoma. I think at this moment it is prudent for us to move a lot more carefully and with the focus that Mr. Mertzucci mentioned of our public institutions in mind.

And so that would be my suggestion as we go forward, is that we, at the minimum, further analyze this request. But certainly moving forward with a $20 million set aside at this point is probably not the prudent thing to do. So with that, we can take a motion on this item or. Or not.

Mr. Chair, I move that we reject this proposal.

Thank you. We have a motion by Mr. Muratsuchi to reject the proposal. Second by Mr. Fong. Do we have a quorum? We need to establish a quorum. We will have to establish a quorum, Members, which hopefully will happen in the next few minutes and then we can vote. Thank you very much. Appreciate you all being here.

With that, we will move on to the next item. Issue number five is our final issue today. And this has to do with the California Student Aid Commission operations, if I'm remembering correctly. I am the proposals on this. So I'd ask Department of Finance to lead us off. Response by the Legislative Analyst Office and then Student Aid Commission. Mr. Jake Brymner to present. Please go ahead.

Aman Singh. California Department of Finance. The Governor's Budget maintains statewide efficiency reductions of 7.95% included in the 2024 Budget Act. When we were building the budget for the California Student Aid Commission, which is a smaller Department consisting of 153.5 positions.

We determined that a smaller reduction of 150%, $150,000 in ongoing General Fund would be reasonable and realistic to cut beginning in the current year 24-25.

This is equivalent to about 1% rather than the 7.95% and the reasoning for that is that we determined it would have a negative consequence on CSAC's mission critical role and the control section 4.05 efforts were not necessarily to undermine efforts by the Commission.

The Control Section 4.12 drill, which was related to vacancy savings, initially reduced $550,000 in funding to CSAC. However, upon further discussions in the fall, four of the five positions were restored and that is a revision that will be reflected in our spring process.

Is that all?

There are two budget change proposals we can discuss. I can discuss them right now. There are two budget change proposals, one which is relating to an Information Security Officer and the second which relates to operational costs.

The first is a Chief Cybersecurity position which will result in $230,000 ongoing General Fund and one position at the Student Aid Commission. CSAC maintains a significant amount of private financial aid data and the support aligns with the State cybersecurity roadmap. CSAC has also seen an increase in financial aid fraud attempts which underscores the need for this position.

Our internal IT unit as well as the State Department of Technology concurred that this funding would be necessary to ensure that CSAC's cybersecurity efforts will be successful and maintained in the future and they assessed CSAC cybersecurity level risk as medium tier. There's also a second bcp for operating expenses and equipment.

There is a $1.9 million one time General Fund amount for this proposal and a $3.4 million ongoing General Fund amount for this proposal and there are zero positions associated with this.

We'd like to note that there will be an approximately $400,000 revision made in the May process which will change Those amounts from 1.9 to 1.4 in the 3.0 to 3.0 and that's due to an internal accounting correction. So that will be made and that will be reflected in the May revision.

CSAC has identified a 15% increase in year over year operational cost and significant cost drivers are related to software services and specialized technology contracts. Without this augmentation, Department of Finance determined that CSAC's ability to continue its mission critical role to administer financial aid will be negatively impacted. There is a one time amount and an ongoing amount.

The one time amount we determined is sufficient to meet CSAC's needs in the short run. However, these operational costs lead into the out year window. Therefore, we do have the ongoing support.

Thank you Legislative Analyst Office please thank.

You Chair Alvarez and Members of the Committee. Natalie Gonzalez with the Legislative Analyst Office to briefly touch on the state operations reductions. As my colleague at Department of Finance mentioned, SESAC did not receive the full 10% or sweep of all CSAC's vacant positions.

Instead, CSAC received a total reduction of $245,000, which equates to about 1% of its operating budget. Also as mentioned, the Administration is proposing two augmentations to SESAC state operations for 2526.

The first, as mentioned, is a $1.4 million in one time General Fund in 25-26 and $3 million ongoing General Fund support in 26-27 to address CSAC's rising OEM costs. The second is $230,000 ongoing for a Chief Information Security Officer position. I will first start by addressing the first proposal related to operating costs to provide some background.

CSAC's number of authorized positions permanent positions has increased over the past decade from 114.5 positions in 2014-15 to to 153.5 positions today. However, CSAC has shared that it cannot fulfill workload requirements with its current staffing levels.

CSAC currently has 145 filled positions and 8.5 vacant positions, but it has indicated that it does not have adequate funding to fill these vacant positions. CSAC has also shared that it does not currently have adequate funding to address its rising operating costs, which is primarily driven by inflationary pressures.

CSAC has submitted a budget change proposal that details how its operating costs have been increasing. CSAC also met with us to discuss this request as well as provide additional information and documentation in our meetings. CSAC emphasizes that this request is both to address rising operating costs as well as fill more of its existing positions.

After examining the provided documents and meeting with the Department, we believe further clarification is still needed to understand where CSAC is seeing specific workload shortages and how the Department would use this additional funding to fill vacant positions. Therefore, we recommend the Legislature request additional information from CSAC before taking action on this proposal.

Specifically, we recommend CSAC provide the following three items. Firstly, identify what specific workload specific CSAC is unable to cover. Secondly, the programmatic implications of not being able to perform this work and finally, how much additional funding is needed to address each of the identified workload issues.

Moving on to the second proposal regarding the Chief Information Security Officer position. As mentioned, CSAC houses a significant amount of personally identifiable and sensitive information and the Department has shared that it is seeing an increase in financial aid fraud attempts.

Though CSAC received two full time cybersecurity positions in 2023-24, it does not currently have a leadership position to run its cybersecurity efforts. Therefore, we Recommend approving the $230,000 in ongoing General funds support for a Chief Information Security Officer. Thank you and happy to take any questions.

Thank you. Go ahead. Good morning again, Chair and Subcommitee Members Jake Brymner, Deputy Director for Policy and Public affairs with the California Student Aid Commission, on behalf of the Commission like to express our appreciation to the Governor and Department of Finance for their support of our work and understanding of our capacity needs.

That's reflected in their partnership through the budget drill processes and the inclusion of two of our requests in the Governor's proposed budget for 25-26 the Student Aid Commission's 24-25 operating budget consisted of $21.4 million for personal services, our staff costs, and $1.6 million for operating expenses and equipment, a total of approximately $23 million.

With these resources and fewer than 150 filled positions, the Commission serves over 520,000 individual students this year through financial aid programs and we manage over $3 billion in funds, not considering the hundreds of high schools and institutions that we are supporting in the process of working with students to apply for aid or the Administration of state aid programs.

Relative to its significant responsibilities, CSAC was a highly lean agency even before this year and the budget drill processes. In 2324, CSAC spent 99.2% of its state operations appropriation. The two sides of our overall budget, the personal services and the operating expenses, are really inextricably linked.

Inflationary pressure on CSAC's required fixed costs office lease, rising costs for server space with the California Department of Technology or other increasing IT costs both on hardware and software result in operating expenses and equipment crowding out funding for staff positions that have already been authorized for CSAC and maintained through this budget drill process that our colleagues at Finance spoke to a moment ago.

Another significant operating expense that ties back to our staffing capacity is in IT consulting services, which CSAC utilizes with one time or limited resources to retain contractors that help ensure the reliability of our programs and systems.

As CSAC documented in the budget change proposal that we've shared with LAO and with Committee staff we face significant fiscal pressures due to inflation and those rising costs. And this all came after years in which we have presented to this Subcommitee and elsewhere about our workload demands growing beyond our operational infrastructure.

The proposed cut to CSAC's initially proposed cut to CSAC's budget of 7.95% would have been 1.8 million more. 1.8 million. That's more than the entire CSAC operating expenses and equipment budget that 1.6, which meant that would have cut in another 200,000 plus into our staff costs into our personal services.

As I noted a moment ago, CSAC expends over 99% of its overall budget and as a result we needed to really prepare for those budget control sections and what we would find with Department of Finance. As such, CSAC implemented cost cutting strategies for the current 24-25 year.

Those include an internal hiring freeze, limited travel, which means less CSAC staff presence in community to help with financial aid outreach. We've delayed refreshes to our IT systems so our software licenses and other support contracts, and we've also reduced our overall IT consulting contracts.

The resources proposed in the Governor's Budget for both 25-26 and 26-27 help offset reduced resources at CSAC as one time funds will be expended. These proposed appropriations are really critical to avoiding significant risk to CSAC's operational and and technological infrastructure.

The most significant costs in CSAC's budget are personal services which cannot be sustained without the funds that are proposed in the Governor's Budget. Implementation of the budget control sections without that additional funding could require CSAC to identify further savings and staff costs that will leave the agency understaffed relative to its workload and responsibilities.

So what does that look like? Specifically, when we're under resourced and understaffed, students and families and institutions could see impacts that jeopardize their ability to receive timely assistance or award disbursements.

Examples of this include increased wait times when students are contacting our call center or when school staff contact our institutional support unit, delays in how CSAC is able to implement programmatic changes to our grant processing systems which can have that effect of then delaying financial aid disbursement, overall delays to how CSAC staff are able to implement cybersecurity efforts that help safeguard student and family personally identifiable information, fewer workshops, fewer outreach resources that help promote the availability of financial aid and then support students in applying for it and the most significant risks are going to be those associated with new programs or those programs that receive Additional funding in the annual budget that you'll approve in June because there is such a short time frame between when you execute on a three party budget agreement and when the academic year starts and we're trying to deliver aid to students.

CSAC's responded to all LAO and staff inquiries thus far, as well as shared a copy of our 14 page budget change proposal that documents these issues and the risks.

We had not previously received a request for a workload analysis, but we will of course continue to work with LAO and with Committee staff to provide any helpful documentation on our operational and fiscal needs.

The Chief Information Security Officer position is a critical one towards ensuring that CSAC staff can appropriately support our efforts to protect student data and monitor for that potentially fraudulent activity. That was spoken to a moment ago. CSAC receives hundreds of thousands of records each year with sensitive data. And we're the only statewide entity that can monitor that application data in real time in order to observe what could be potentially unusual trends.

In recent years, we've seen the growth of online education at community colleges, expanding access and reach, but that's also increased the number of attempts to penetrate financial aid systems by non students seeking to access those funds.

A Chief Information Security Officer position, which we currently lack as LAO spoke to, will help ensure that we can continue to implement new practices to protect student data and to prevent fraud. Thank you

I think we'll have questions on that. But before that, we are going to establish a quorum. We'll call the roll.

[Roll Call]

Thank you. We have a quorum. So we're going to take action on the previous item. We have a motion by Mr. Maratsucci, second by Mr. Fong, to recommend that the Budget Committee reject the $20 million proposal on item number four. Please call the roll.

[Roll Call]

As a matter of procedure, the Department of Finance would like to note that it does support the Governor's Budget proposal.

Thank you. Appreciate you. Thank you for saying that. We. Now I have questions on issue number five. My questions are mainly focused on the Laos concerns and also the it, you know, again, it's running theme here, additions and a time when we're making difficult choices on serve.

Serving, you know, students is something that everybody should get used to at this point. Hearing us question. And so I do want to acknowledge there's a reduction and let's help us to keep it kind of simple, please. A reduction of Four positions and an addition of one position. Are we all in agreement of that? LAO and Finance?

No. Okay, let's walk through exactly what it means in terms of positions with this budget. Ask how many, how many reductions are we seeing?

The Governor's Budget control section 4.12 effort originally identified five positions to reduce. But due to overlapping deadlines during the fall process and ongoing conversations, we identified that four of those positions should not be reduced. And we are intending to restore $438,000 of the original $550,000 sweep in the control section 4.12 drill. That leaves 1.5 positions.

1.5 reduction of 1.5 positions is what you're telling me. Okay. Does the LAO see that the same way?

I think our understanding was through the Control section, they would take 0.7% of a py. So less than one py.

Okay, so there's a disagreement here.

Just to clarify, the reduction in support is equal to 0.5% of the 1.5. So it would be 0.75. So the reduction equivalent is equal to half the positions. The positions are 1.5, but the reduction is equivalent to.

Let me try to keep it simple for us. In terms of reduction of positions, there's 1.5 positions. So we're going from 153.5 to 152 in the proposed budget.

Yes.

Okay. No, you're not seeing that what we've.

Been told is through control section 4.12, it's a 0.7 py reduction. So I'm not quite following.

Okay, let's table this because it's clearly we need the LAO. If the LAO doesn't understand this, then we've got real problems here. So I'd ask that we get some follow up on that.

Now, let me ask about the LAO, as importantly, not just in terms of numbers, but why we are, you know, some of these requests for positions. Understanding that the fraud that's occurred is a huge issue. And so from that perspective. So Chancellor's office, I think, reported 25% of applications are fraudulent. That is a very, very large number.

And I know it's in the millions, tens of millions of dollars, if not hundreds. I don't remember the figure, but this is, again, dollars that could be used to actually support students. So is Mr. Brymner, you said that there were cuts in the to make some of the budget adjustments. There was cuts to the IT contracts.

But now you're asking for an IT Chief Executive level to the Laos points of workload. Analysis and programmatic implications of adding this IT person and how this addresses those issues.

Could you give us a sense of what that's going to mean for the reduction of fraud specifically and also how we're not going to how the contract elimination doesn't result also in potentially other fraud? I don't know what those contracts were.

Sure. Really important question, Mr. Chair. So we do have staff that are monitoring data and then are establishing protocols internally to CSAC to make sure that we are an effective safeguard on student data, but also that we're monitoring for those fraudulent aid applications.

Of course, many of those applications may also be for federal financial aid that has a very different disbursement process than we have for state aid. So we have not seen those same kinds of trends related to our state financial aid programs. Thankfully, we want to keep it that way.

We also know that in an evolving cybersecurity threat landscape, we have to continuously stay up to date on how the bad actors are trying to intrude, not only through financial aid application data, but potentially to penetrate our own data systems at the Student Aid Commission.

So this leadership position is going to make sure that the Student Aid Commission can stay in line with other state requirements around cybersecurity efforts that we can continue to be that safeguard. This is related, but very different from some of our other items, costs and needs.

So our IT team are also the same staff that work with our programs team to implement changes to our grant processing system so that when there's a change to the FAFSA like we saw with the better fafsa, that we're able to ensure that the way we process students for financial aid can utilize the data that we receive through the new, newly formatted fafsa.

That's one example of those changes. Or, you know, we'll talk at a future hearing about the Golden State Teacher Grant Program. We had a big mission this past year to take one program and essentially make three sub components of the Golden State Teacher Grant program in a really short turnaround.

That's another grant processing system that our IT team needs to work with programs to implement on a very short time frame. So I think right now we rely on external contractors to a great degree to make sure that we could do that in a way that's reliable for students and for institutional partners.

So I think what we'd like to see going forward is to the recommendations from the lao, and I'm understanding now that it's some of the other IT work that you need to do.

But I think the top of mind concern is the fraud that exists and so how this plays into that and then beyond that, how this is going to essentially create efficiencies or better systems so that ultimately leads to student outcomes of some sort. I think you, you get the sense of where we're headed with all of these.

So that's what I'd ask before we, you know, proceed to final adoption on this. So I don't think we need a motion on that, but request that information. And obviously the issue on the positions with the LAO from Department of Finance, we'll turn it over to my colleagues. Any questions, Mr. Fong? No.

Thank you so much, Mr. Chair. Just similar question. It was more about the cybersecurity and the new position. And what will this one new position do that the other two new positions that were funded won't do?

It's essentially, as I said, that leadership role and making sure that we have the right policies and procedures in place internally to stay up to date with that evolving threat landscape. There's a cybersecurity roadmap for the state. We want to make sure that we at the Student Aid Commission are able to fully implement those recommendations and uplift the chair's comments also on the community college fraud.

We know that it's been a challenge. When I meet with the local community. College districts, meeting with professors and just hearing the number of bots and other folks that are. Yeah. So it's. This is something that I think hopefully with this cybersecurity positions that we can help decrease the fraud in our community.

Colleges because this is a challenge when. Students are trying to enroll, students are trying to access to higher education journey that this is a critical issue. So thank you, Mr. Chair.

Thank you, Mr. Fong. Ms. Patel.

Yes. Coming from a public education system, I. Know public schools seem to be the target increasingly of this kind of fraud, cyber attacks and our databases still seem to be vulnerable across the board. I like the idea of having a. CEO to oversee this kind of management.

The management of our database systems specifically, especially when it comes to families financial information. My question to you is, is there an ability to track how much fraud. We're preventing going forward so that we can show our taxpayers the return on. Investment of this one additional staff and. How much we're saving them with trying to recover fraud?

That is such a good question. It's a difficult one to answer because it's, you know, disproving a negative, I guess you could say, and trying to show what has not happened. So we have been successful at managing state resources right now to not see some of the activity that we've seen with other financial aid programs.

So I'll go back to our team and see if there's a way in which we can quantify that. But I think that the challenge for us is, unfortunately, this is one of those investments that you don't realize you needed to make until it's too late. And that's what we want to make sure that we're avoiding.

Sure. Perhaps we won't be able to track. A dollar amount, but we can. These tech CEOs will be able to see the cybersecurity. They'll be able to see the amount of pings and attacks coming in. And we can at least track that.

Yeah, we'll follow up with the Committee because we do have data on the types of applications that we've reported to our institutional partners so that we can work with them to avoid disbursement of those kinds of applications.

Wonderful. Thank you.

Thank you. We look forward to the further information on this item. Hold it open. Thank you very much. With that, that's the end of our agenda. But we do have room for public comment. So if you have comments you'd like to make, now is the time to come forward.

Give you a minute to please state your name, your affiliation and and make your comment. But prior we get to that. Yeah, let him know. zero, he doesn't know. Okay, why don't we take some public comment and then I'll check in with Mr. Wallis in a second. Thank you. Please proceed.

Hi Chair and Members, Anna Mathews with the Faculty Association of California Community Colleges. We have an incredibly diverse student body at the California Community Colleges, most of whom are working and have other obligations that prevent them from being in school school full time.

We need the Cal Grant equity framework and inclusion of part time and non traditional students which comprise the majority of our student body. In financial aid offerings, on average, our students are taking six units. So having a 12 unit threshold removes access to aid for the students who need it the most.

We would support a reduction in the units needed to receive financial aid in order to support our most vulnerable students, such as our returning students, working students and student parents in their pursuit of higher education. Thank you.

Thank you. Welcome.

Good morning, esteemed chair and Members. Alec Sarkissian, Legislative Affairs Director for the. Student Center for California Community colleges. Representing the 2.1 million community college students throughout the state. The SSCCC is grateful for the Governor and the Legislature's ongoing support for the. Community colleges and would like to urge.

The Legislature in addressing the delays in the FAFSA and CADA applications and the. Necessary reforms to the Cal Grant program. The delays in the FAFSA and CADA. Applications have caused undue stress and financial uncertainty for students. It's crucial that we resolve these technical challenges and improve communication. To ensure that every eligible student can.

Access the financial aid they need, we. Must simplify the program and increase funding for non tuition expenses to better serve Low income students. It is crucial that all eligible students. Particularly those at community colleges, apply for. And receive financial aid to support their educational success. We urge the Legislature to continue its.

Efforts in creating a more equitable financial. Aid system that empowers all California's community colleges. Thank you. Thank you.

Hi, I'm Annie Karuga, the Vice President of Legislative affairs for the Student Senate for California Community Colleges. At this time when higher education and education funding is under attack federally, we urge you to prioritize higher ed funding to ensure that all of our students, especially our most marginalized students, have the resources they need to succeed.

Education is a right, but protecting it requires investment. One of the ways that we safeguard equitable education is by addressing the problems caused by delays in our FAFSA and CADA applications. We need to simplify our financial aid process and our programs to make it more understandable, especially for our marginalized students.

We also need to increase aid for our non tuition expenses, especially at the community college level. The non tuition expenses tend to make up a greater percentage of total student expenses and access to aid for those expenses, especially for our most marginalized students, is critical.

Our students need access to pay for their basic needs before they're able to succeed academically. We look forward to working in partnership to ensure that our aid distribution systems are equitable and serve students. Thank you.

Thank you.

Good morning. Maria Flores, an intern with Carol Gonzalez here on behalf of Ed Trust West. First of all, I want to thank you, Chair for and Members of the community for hosting this important briefing on financial aid.

We are deeply concerned with the with the declines in financial aid applications following a delayed release of FAFSA last year and General concern about data security, especially for undocumented students and students from mixed stats.

We applaud the Student Aid Commission for exercising this authority to delay the statewide application priority deadline to April 2 and the decision to keep the CADA open for applicants for mixed status families. This will ultimately ensure more students access financial aid to afford college.

Moving forward, California should consider whether access to the K should remain open to mixed status families permanently so that no students with an undocumented parent or garden has to choose between college affordability and their family.

We urge the Legislature to consider how the state could leverage existing financial aid programs to backfill federal aid and students from mixed status families that might miss out on it. We also support efforts to increase financial aid applications completion rates at California's community colleges.

Thank you very much. Appreciate your testimony.

Good Morning. Kimberly Sanchez with NextGen California, a Member of the Financial Aid Big Table Coalition, a community of advocates focused on protecting and expanding financial aid to make college affordable.

Now more than ever is the time to stand firmly together in messaging the value of a higher education as it remains a fact that a degree means future financial stability, upward economic mobility and a transformative step for families.

According to a 2021 research from PPIC, median earnings for individuals without college degrees have fallen below 19 levels while earnings for college graduates have continued to rise. In light of the national landscape, students and families continue to face ever rising daily costs, putting higher education aspirations seemingly further out of reach.

Prices are 23% more expensive today than they were before the COVID 19 pandemic. As such, we thank the Governor for keeping last year's budget tail to maintain funding to state financial aid programs and are pleased to see that there were no cuts made to the the Cal Grants.

We appreciate the Legislature, Administration, CSAC and higher education segments for their swift action in adopting a student centered approach to support impacted MCS recipients.

Thank you very much. Appreciate your testimony.

Good Morning Jessie Hernandez-Reyes on behalf of the Campaign for College Opportunity, thank you Budget Subcommitee Members for these insightful conversations on state financial aid investments for students across California.

As we engage in conversations across state financial aid programs, we respectfully ask the Legislature to future discussions guarantee that our state financial aid programs are designed and implemented to equitably distribute aid and that we build to a more equitable state financial aid ecosystem centering the needs of our state's lowest income students.

With this framing in mind, we believe it is critical to understand where proposed state investments addressing the projected 2024, 2025 middle class scholarship Program shortfall will come from and learn more about how these investments will support students from Low income families.