California Public Higher Education: Funding Supplemental Services for Low-Income and First-Generation Students

California Public Higher Education: Funding Supplemental Services for Low-Income and First-Generation Students MAC TAYLOR LEGISLATIVE ANALYST DECEMBER 20, 2017 Summary Legislature Seeks Evaluation of Supplemental Services for Low-Income and First-Generation Students in College. The California Community Colleges (CCC), California State University (CSU), and University of California (UC) each serve a large number of low-income and first-generation college students. The Supplemental Report of the 2017-18 Budget Act requires our office to examine funding and services for these students as well as provide options for restructuring existing funding approaches. The restructuring options are to include creating a weighted student formula along the lines of the formula the state now uses for K-12 education (known as the Local Control Funding Formula). This reports fulfills this requirement. Different Current Approaches to Funding and Serving These Students. The community colleges go about funding and serving low-income and first-generation students in a notably different way than the universities. For CCC, the state currently funds ten programs that each supports a designated set of services to students (such as counseling, subsidized employment, and child care). Compared to CCC, the universities have a much simpler approach, generally operating one systemwide supplemental program and giving campuses flexibility to design additional programs and services to address specific student subgroups. In addition to targeted support services, the state and all three segments operate several financial aid programs for low-income students. Several Restructuring Options. For CCC, the state’s current approach is complicated, overly rigid, and administratively burdensome. Community colleges, in our view, would benefit from a streamlined approach that provided more flexibility and local control. Such approaches include consolidating programs into a student support block grant or creating a weighted student formula. For CSU and UC, we believe the current approach to providing supplemental services is reasonable, but neither segment regularly provides clear information on program spending and results. For CSU and UC, the Legislature could consider enhancing oversight and reporting. If it believes a stronger, more prescriptive approach is needed, the Legislature could create a new categorical program that funds supplemental services directly, or it could more fundamentally transform the segments’ governance, funding formulas, planning requirements, and systems of accountability. Regardless of what the Legislature chooses to do about funding supplemental services at each of the segments, we think financially needy students at all three segments would benefit considerably from a more seamless, transparent, and rational financial aid system. analysis full gutter AN LAO REPORT INTRODUCTION Legislative Interest Expressed in Improving has two main parts. The first focuses on the California Outcomes for Low-Income and First-Generation Community Colleges (CCC) and the second focuses on Students. During the 2017-18 legislative session, the state’s two public university systems—the California several members of the Legislature expressed interest State University (CSU) and the University of California in ensuring that low-income and first-generation (UC). Within each part, we provide (1) an inventory of college students receive enough support to have systemwide supplemental programs for low-income positive college experiences and outcomes. To this and first-generation students; (2) an assessment of end, The Supplemental Report of the 2017-18 Budget the current approach for supporting these students; Act required our office to examine how much existing and (3) options for restructuring funding and support funding and support is provided to these students for these students, including the option of creating a and identify options for increasing that funding and weighted student formula. support. This report fulfills this requirement. The report CCC CCC provides lower-division undergraduate 73 percent was unrestricted. Unrestricted CCC funds— instruction and grants associate degrees and skills known as apportionments—are allocated to districts certificates. It is the largest public higher education primarily based on enrollment. Other allocation factors segment in California, serving 1.2 million full-time include the number and types of colleges in a district equivalent (FTE) students. Below, we provide and various measures of a district’s need for community background on community college governance and college access (such as its population growth, adult funding. We then provide the inventory of supplemental educational attainment, unemployment, and poverty programs, an associated assessment, and restructuring level). The state provides each district with roughly options. the same apportionment amount per student. Under a statutory requirement known as the “50 percent Background law,” districts must spend at least one-half of their CCC Overseen by State Board of Governors apportionments on salary and benefits for instructional and Local Governing Boards. Key functions of the faculty. 17-member, statewide Board of Governors include About One-Quarter of CCC Funding Is setting minimum standards for districts (such as Restricted. The remaining 27 percent of CCC’s core student graduation requirements), maintaining a operational funding in 2016-17 was restricted and comprehensive educational and fiscal accountability allocated to districts through categorical programs. system, and overseeing statewide programs. The board The largest categorical programs are the Adult appoints a Chancellor to make recommendations on Education Block Grant, Student Success and Support policy matters and run day-to-day operations at the Program, and Strong Workforce Program. The state systemwide headquarters in Sacramento. The system’s allocates funds for these programs based on various 114 colleges are operated by 72 districts, each factors specific to each program. For example, Strong governed by a locally elected board. Workforce funding is allocated based primarily on Roughly Three-Fourths of CCC Funding Is districts’ enrollment levels for occupational courses, Unrestricted. The bulk of CCC’s core operational student outcomes (such as job placement and wage funding comes from the state General Fund and local gains), and regional unemployment rates and job property tax revenue, with much smaller shares coming openings. The bulk of CCC categorical funding is for from student fees and state lottery revenue. In 2016-17, student support services and financial aid. With recent of CCC’s $8.9 billion in core operational funding, growth in student support and aid programs, the share 2 LEGISLATIVE ANALYST’S OFFICE analysis full gutter AN LAO REPORT of CCC funding allocated through categorical programs students. Other available data, however, consistently has increased by about 10 percentage points over the reflect poorer outcomes for these students. In a past five years. large, nationally representative sample, 36 percent of CCC Tracks Low-Income Students Served. first-generation students at two- and four-year colleges CCC defines low-income students primarily as those earned an associate degree or higher within ten years who meet one of two criteria: (1) they receive a Pell of completing their high school sophomore year, Grant (federal need-based aid) or (2) they receive a fee 17 percent earned a certificate, and 47 percent earned waiver (state need-based aid). In 2014-15, 22 percent no certificate or degree. Among students having at of CCC students systemwide received a Pell Grant. least one parent with a bachelor’s degree, 63 percent Among community colleges, this proportion ranged earned an associate degree or higher, 7 percent earned from 4 percent (Palo Verde) to 49 percent (Porterville). a certificate, and 30 percent earned no certificate or About one-half of all students received a fee waiver, degree in the same period. First-generation students with colleges ranging from 22 percent (West Valley) to also are far more likely to attend community colleges. 89 percent (Reedley). As federal and state aid recipients In the same sample, 52 percent of first-generation do not overlap entirely, somewhat more than one-half students initially attended a two-year college, compared of all CCC students systemwide are identified as low with 28 percent of students having a parent with a income. bachelor’s degree. Low-Income CCC Students Have Lower CCC Student Success Initiative Seeks to Improve Completion Rates. In 2015-16, the six-year Completion Rates. The Board of Governors has set completion rate for degree or certificate seeking specific goals for improving graduation rates and other low-income students was 45 percent, compared student outcomes and eliminating achievement gaps with 57 percent for other students. Federal data, also among student subgroups over the next ten years. from 2015-16, show three-year CCC completion Under the umbrella of the CCC Student Success rates for first time, full-time Pell Grant recipients and Initiative, the system has several statewide programs non-Pell Grant recipients of 26 percent and 34 percent, to help it meet these goals. The largest of these respectively. programs, the Student Success and Support program ($306 million in 2017-18), provides student orientation, CCC Also Tracks First-Generation College assessment, and counseling services to all students. In Students Served. To identify the share of 2017-18, the state also provided $150 million one time first-generation college students, CCC’s application for the Guided Pathways Initiative, which is intended to form asks for the highest level of schooling completed develop better systems for helping all students choose, by an applicant’s parents. If a student provides enter, and complete an academic program. this information for two parents, CCC uses the highest education level of the two. CCC defines a Systemwide Supplemental Programs first-generation college student as one for whom no parent or guardian has earned more than a high CCC Has Many Programs Designed to Support school diploma or ever attended college. Overall, CCC Low-Income and First Generation Students. In reports that 42 percent of students in the 2015-16 addition to broad-based support programs serving all academic year were first-generation college students, students, CCC has several programs that specifically with colleges ranging from 23 percent (Saddleback) benefit low-income and first-generation CCC students. to 74 percent (Los Angeles Trade-Tech). (CCC’s data As Figure 1 shows (see next page), some of these are unavailable or incomplete for many campuses. programs focus on student services and some provide Data from a federal reporting system using the direct student financial aid. Although Cal Grants same definition for first-generation students puts the and Pell Grants are not technically CCC categorical systemwide estimate for CCC somewhat higher, at programs, we include them in the figure because they 55 percent.) support many CCC low-income students. First-Generation Students Generally Have Total of $500 Million Provided Annually for Ten Lower Completion Rates. CCC does not report CCC Student Services Programs. This funding outcomes specifically for first-generation college supports a range of services that exclusively or primarily www.lao.ca.gov 3 analysis full gutter AN LAO REPORT Figure 1 Systemwide Programs That Support Low-Income and First-Generation CCC Students 2017-18 Funding Program Description (In Millions) Student Services Student equity Funds activities to identify and address disparities in access and outcomes for various $160 subgroups of CCC students. Adult Education Block Funds regional consortia of adult schools, community colleges, and other adult education 133 Grant providers to improve coordination and better serve the needs of adult learners. Extended Opportunity Provides various supplemental services (such as counseling, tutoring, and textbook purchase 125 Programs and Services assistance) for low-income and academically underprepared students as well as welfare- dependent single parents. Basic Skills Initiative Funds counseling and tutoring for academically underprepared students as well as curriculum 50 and professional development for basic skills faculty. CalWORKs student Provides child care, career counseling, subsidized employment, and other supplemental 44 services services to CCC students receiving CalWORKs assistance. (These services are in addition to those provided to all CalWORKs recipients by county welfare departments.) Umoja Provides professional development for faculty, staff, and students and augments instruction 3 and student services. Purpose is to improve student experiences by promoting awareness of African and African-American culture. Support for certain campus Funds child care centers (aimed primarily at low-income women studying at CCC) at 3 child care centers 25 community college districts. Mathematics, Engineering, Provides academic counseling, workshops, and community-building activities for educationally 2 and Science Achievement disadvantaged students seeking careers in math, science, and engineering fields. (MESA) Program Puente Provides faculty and staff professional development and student mentoring and counseling to 2 increase academic achievement for underserved students. Program is a partnership with University of California and emphasizes successful transfer to universities. Middle College High School Provides high school and community college instruction to high-potential, at-risk high school 2 students. Instruction is provided on community college campuses. Total $524 Student Financial Aid Pell Grants Federal need-based grants. Funds are for any cost of attendance. (Amount shown for 2014-15.) $1,750 Promise Grants State-supported enrollment fee coverage for financially needy students. (Formerly called 811 Board of Governors Fee Waivers.) Cal Grants State need-based financial aid grants. Includes tuition grants and cash stipends. 155 Financial aid administration Funds staff to process federal and state financial aid forms and assist low-income students 73 with applying for financial aid. Full-Time Student Success Supplemental state grants for Cal Grant recipients enrolling in at least 12 units per term. 66 Grants Completion Grants Additional supplemental state financial aid for Cal Grant recipients enrolling in at least 15 units 25 per term and maintaining progress to on-time graduation. Total $2,880 4 LEGISLATIVE ANALYST’S OFFICE analysis full gutter AN LAO REPORT benefit low-income and first-generation students. Restructuring Options These services include various types of wraparound Consolidate CCC Categorical Programs Into support, which is provided alongside core instructional a Student Support Block Grant. One option for programs. For example, the programs fund counseling, improving the current system is to create a block grant tutoring, subsidized employment, and child care. that requires funding be used to support low-income The programs also support outreach to high school and first-generation students. The state could allocate students and professional development for faculty and funds based on each district’s share of these students, staff. and colleges could determine how best to serve Nearly $2.9 Billion in Financial Aid Benefiting these students in their local context. As a condition of CCC Students. In addition to targeted student receiving block grant funding, districts would need to support programs, students access $1.8 billion in meet certain standards and report on students served, federal financial aid and the state provides more than use of funds, and associated outcomes. $1.1 billion in aid. These programs help students Replace Categorical System With a Weighted afford books, supplies, and living expenses while they Student Formula. Another option is to combine attend college, as well as fully cover enrollment fees for funding for certain existing student support programs low-income students. with apportionment funding and use a weighted Assessment student formula to allocate the resulting pot of funding. Such a formula might be designed similarly to the Current CCC Approach Has One Notable Local Control Funding Formula (LCFF) the state uses Advantage . . . By restricting a notable amount of for K-12 education, described in the box on page 7. funding, the current CCC approach ensures that Under this approach, the weighted student formula low-income and first-generation students receive would have a base rate for all students, a supplemental supplemental services. Colleges may not divert these rate for low-income and first-generation students, and funds for more general, less targeted purposes, such possibly a concentration rate for districts with especially as general salary increases. As a result, more funding high percentages of low-income and first-generation than otherwise tends to be available for enhanced or students. The purpose of this type of formula would expanded supplemental services. be to direct relatively greater funding to districts with . . . And Several Notable Drawbacks. As we have higher numbers and concentrations of low-income and discussed in many previous reports, the current system first-generation students. of more than a dozen CCC categorical programs is Many Decisions Entailed in Implementing a complicated and administratively burdensome. Each Weighted Student Formula. Were the Legislature to program has its own authorizing legislation, regulations, adopt a weighted student formula, it would need to funding formulas, and reporting requirements. make several key decisions (summarized in Figure 2, Such a system results in organizational silos and see next page). The extent of any redistribution of compartmentalized staff, making planning challenging funding across districts would depend largely on which and time consuming and often leading to duplication categorical funds were included, the current allocation and poor coordination of services. Moreover, the state of those funds, and the target funding rates. The pace has no effective way of assessing program results or of redistribution—and its impact on districts—would maintaining accountability for outcomes. Given overlap depend on the state’s transition strategy. A gradual and differences among these programs, pinpointing transition using only incremental funding would protect which particular program or component might be districts against year-over-year reductions, similar to producing a positive or negative outcome is virtually how the state is handling the K-12 LCFF transition impossible. Also, because the programs are set in currently underway. A more immediate reallocation of statute and regulations—and funding generally cannot current funding could reach funding targets faster but be transferred across programs—the system is not could result in some districts seeing year-over-year nimble in responding to new information, including funding reductions. changing student needs. www.lao.ca.gov 5 analysis full gutter AN LAO REPORT Figure 2 Developing a Weighted Student Formula for CCC— Key Decisions for Legislature to Consider Funding • Districts currently receive about $6.8 billion in apportionment funding. In addition to this unrestricted funding, the state provides $524 million for ten supplemental student services. Which of these 11 programs should the state fold into a weighted student formula? • The 2017-18 per-student apportionment funding rate is $5,310. Should the state set a higher target base rate? • Should all students generate the same base rate, or should base rates be higher for certain higher-cost students, such as those in career technical education or science and engineering courses? • Although most apportionment funding currently is based on enrollment, 8 percent is based on the size, number, and types of campuses in a district. Should this practice continue? Should districts receive different base rates to adjust for these characteristics? • How much funding per low-income and first-generation student do the consolidated categorical programs represent? Is this an appropriate supplemental rate for low-income or first-generation students? Should the state set a different rate? • Should the formula have a concentration grant? If so, what should be the concentration threshold? How much additional funding should districts receive for each student above the threshold? Transition • Should the state phase in the new formula? How quickly should the new formula be implemented? • Should the formula include a hold-harmless provision? Accountability • How should the state define low income and first generation? How should the state verify which students are low income and first generation? • What planning requirements should be placed on districts? • What spending restrictions, if any, should be placed on districts? • How should the state hold districts accountable for student performance? • Should the state or districts set student performance goals? Consider the Trade-Offs Between Block Grant would have to be spent on direct classroom instruction and Weighted Student Formula. A block grant and salary increases—rather than on supplemental typically requires a specified amount be spent on services. specified services. In doing so, it tends to prevent Consolidate and Simplify Financial Aid Programs. funding from going to general salary increases or other Regardless of what the Legislature chooses to do with purposes that do not necessarily benefit low-income funding for supplemental services, we recommend and first-generation students directly. By comparison, revisiting the state’s complex and somewhat irrational a weighted student formula typically is less prescriptive financial aid system. The existing financial aid system and can provide even more flexibility for educators to could be particularly difficult for first-generation students design their own local programs. A weighted student to navigate because their parents—having had no formula also could have the benefit of linking more postsecondary experience—typically are less prepared closely the supplemental funding rate for low-income to guide them through the application process. The and first-generation students with the costs of providing Legislature has requested a report from the California these services. Funding for a block grant, on the other Student Aid Commission by February 1, 2018 regarding hand, likely would be negotiated each year, weakening options to consolidate existing Cal Grant programs. The the relationship with costs. With a weighted student forthcoming report could provide a starting point for formula approach, however, the state might want to replacing the current assortment of aid programs with reconsider the 50 percent law. This is because one-half a system that is more transparent, rational, simpler, and of monies generated by a weighted student formula easier to navigate. 6 LEGISLATIVE ANALYST’S OFFICE analysis full gutter AN LAO REPORT UNIVERSITIES CSU provides instruction and grants degrees systemwide programs, an associated assessment, and generally through the master’s degree whereas UC restructuring options. serves as the state’s primary public research university and provides instruction and grants degrees through BACKGROUND the doctorate. Both CSU and UC require students to meet certain admissions requirements, including Each University System Governed by a State completing certain courses with a minimum grade point Board. CSU and UC each have a governing board average and/or standardized test scores. In 2016-17, to oversee their respective systems—the Board of CSU served 400,000 FTE students at 23 campuses Trustees at CSU and the Board of Regents at UC. and UC served 264,000 FTE students at 10 campuses Existing law grants substantial authority to each board (1 of which serves only graduate students). Below, we to manage student enrollment, allocate funding among provide background on the governance and funding campuses, determine overall staffing levels, enact of CSU and UC. We then provide an inventory of compensation policies, and set tuition and fee policies. To manage the respective systems, each board hires Components of K-12 Local Control Funding Formula (LCFF) Funding to School Districts Set by Three Rates. We describe the three rates below: • Base Rates. Each school district receives a base amount per student. In 2017-18, the base rate generated by a high school student is $8,938. The high school base rate is higher than the rate for the other grade spans (K-3, 4-6, and 7-8) in recognition of the higher associated costs. • Supplemental Funding. In addition to the base amount, districts receive supplemental funding equal to 20 percent of the base rate for each student who is an English learner, low income (that is, qualifying for free or reduced price lunch), or a foster youth. • Concentration Funding. For districts whose English learners and low-income students together exceed 55 percent of total enrollment, the state provides concentration funding. Specifically, these districts receive an additional 50 percent of the base rate for each English learner or low-income student above the 55 percent threshold. State Has Been Phasing in Formula Over Multiple Years. In developing LCFF, the state created per-student funding targets that were significantly higher than the going rates. Starting in 2013-14, the state began providing augmentations to LCFF to close the difference (or gap) between their prior-year funding level and their LCFF target level. In 2017-18, school districts are receiving 97 percent of their target funding levels. In Conjunction With LCFF, State Also Developed Spending Regulations and Planning Requirements. Districts can use most LCFF funds for any educational expense, but they must use some funding specifically for the benefit of students who are English learners, low income, or foster youth. Specifically, districts must demonstrate they are “increasing or improving” services for these students in proportion to the funding increases generated by these students. In addition, districts are required to adopt plans, known as Local Control Accountability Plans, that set performance goals and describe actions districts will take to achieve those goals. Districts must set goals in eight priority areas, including student achievement and student engagement. They must set goals for all students as well as all numerically significant student subgroups. www.lao.ca.gov 7 analysis full gutter AN LAO REPORT a systemwide chief executive officer as well as the students varies by campus. At CSU, the percentage heads of each campus (called presidents at CSU and of first-generation freshmen ranges from 17 percent chancellors at UC). (San Luis Obispo) to 74 percent (Dominguez Hills and Universities Have Greater Control Over Budgets Stanislaus). The percentage of resident undergraduate Than CCC. The universities’ core funding comes from students at UC identified as first generation ranges from the state General Fund and student tuition revenue. In 32 percent (Berkeley) to 70 percent (Merced). 2016-17, CSU received core funding of $6.6 billion and Graduation Rates for Low-Income and UC received $7.9 billion. Compared to CCC, more CSU First-Generation Students Are Lower Than Other and UC core funding (virtually all of it) is unrestricted. Students. Figure 3 shows that achievement gaps Additionally, state law sets forth no policy for how CSU exist at CSU and UC for both Pell Grant students and and UC are to allocate core funding to their respective first-generation students. The gaps are not notably campuses. Instead, the Legislature has delegated that different for the two student groups. At CSU and UC, responsibility to each of the systems’ governing board. the four-year graduation rate gaps are more notable Both governing boards provide campuses monies to than the six-year gaps. At UC, however, the gap cover costs associated with enrolling more students, narrows substantially at the six-year mark, with the though the systems have some notable differences six-year graduation rate gap at 3 percentage points in how they allocate funding among campuses. In for Pell Grant recipients and 6 percentage points for particular, CSU uses a flat per-FTE student funding first-generation students. rate whereas UC uses a weighted student formula CSU Has Goals to Eliminate Achievement Gaps that allocates more to campuses with larger numbers Among Students. To address its low graduation of graduate students and students in health science rates, CSU launched a Graduation Initiative in programs. 2009. The Graduation Initiative seeks to achieve Sizeable Portions of CSU and UC Students Are two goals by 2025: (1) increase graduation rates Considered Low Income. Both CSU and UC define for all undergraduates and (2) eliminate differences students as “low income” if they receive a federal Pell in graduation rates for several groups of students, Grant. At CSU and UC, 50 percent and 44 percent of including those who are low income and first resident undergraduate students, respectively, received generation. To reach these goals, CSU has granted a Pell Grant in fall 2016. The rate of Pell Grant recipients its campuses discretion to develop their own differs by campus. The range at CSU is from 19 percent implementation strategies. In contrast to CSU, UC (San Luis Obispo) to 68 percent (Los Angeles). The has not established systemwide student completion range at UC is from 34 percent (Berkeley) to 61 percent (Merced). Figure 3 Many CSU and UC Students Are Student Achievement Gaps Exist at CSU and UC First-Generation College-Goers. Whereas CCC defines students as Graduation Rates for Freshmen Entering as Full-Time Students first generation if neither parent has CSU UC ever attended college, the CSU and Four Yeara Six Yearb Four Yeara Six Yearb UC definition is that neither parent has All Students 20.7% 59.1% 64.0% 85.0% earned a bachelor’s degree. Students Financial Status report their parents’ education level Not a Pell Grant recipient 27.1% 63.5% 69.0% 86.0% on their admission applications. In Pell Grant recipient 13.7 53.5 58.0 83.0 fall 2016, 54 percent of entering CSU Achievement Gap 13.4% 10.0% 11.0% 3.0% freshmen identified themselves as Parental Education first generation. At UC, 46 percent Not first generation 28.5% 65.6% 69.0% 87.0% of all resident undergraduate First generation 15.4 54.4 57.0 81.0 students identified themselves as first Achievement Gap 13.1% 11.2% 12.0% 6.0% generation. As with Pell Grant status, a Freshmen entering fall 2012. b the percentage of first-generation Freshmen entering fall 2010. 8 LEGISLATIVE ANALYST’S OFFICE analysis full gutter AN LAO REPORT goals. In a November 2016 report to the Legislature, though, UC reported spending $86 million on all UC anticipated graduation rate gaps for low-income supplemental student support programs (both students to remain constant over the next few years. systemwide and campus-specific programs) in 2014-15. Additionally, UC indicates that some of its Systemwide Supplemental Programs outreach programs designed primarily for high schools Educational Opportunity Program (EOP) Is CSU’s students might be providing supplemental services to Sole Systemwide Program for Low-Income and students once they enroll at a UC campus. First-Generation Students. EOP provides a variety of CSU and UC Offer Significant Financial Aid to supplemental support services to students considered Low-Income Students. In addition to financial aid to be educationally disadvantaged, including students offered through EOP programs, CSU and UC students who are low income and first generation. Supplemental have access to numerous need-based financial aid support services offered by EOP include academic programs to cover the cost of tuition and attending advising, peer mentoring, tutoring, and student financial college. Major programs include federal Pell Grants, aid. CSU gives each campus discretion to determine the Cal Grants, and institutional aid offered by each system. specific mix of EOP services offered to students, though CSU’s institutional aid program, known as the State it requires campuses to spend a minimum amount University Grant, provides eligible students a tuition on financial aid. In 2016-17, 32,000 undergraduate waiver. UC’s institutional aid program provides eligible students (8 percent of all undergraduate students) students funding to cover tuition and, in some cases, participated in EOP. Though the Chancellor’s Office other costs of attendance (such as books and housing does not regularly track spending on EOP, CSU staff costs). Figure 4 summarizes spending on these estimates that campuses spent between $37 million programs at each segment. to $39 million on EOP in 2016-17. Slightly more than Both University Systems Allocate Funding to one-half of this amount was spent on student support Campuses to Boost Graduation Rates. CSU currently programs, with the remainder spent on financial aid is designating $123 million in ongoing funding to grants. In addition to EOP, campuses operate a variety implement its Graduation Initiative. The Chancellor’s of campus-specific programs designed to address Office distributes most of this funding through a formula specific student subgroups (such as Dominguez Hills’ allocation based on (1) each campus’ share of students Male Success Alliance, which serves primarily male receiving Pell Grants or institutional financial aid and African-American and Latino students). The Chancellor’s (2) the number of first-year students on each campus Office does not collect comprehensive information about identified as needing remediation in English or math. these campus programs. While CSU gives campuses flexibility on how to spend UC Also Operates EOP Programs. UC does this funding, the main purpose of the funding has not operate a systemwide student support program been to expand course offerings and support services. or require campuses to spend certain funding UC also directs some of its unrestricted funding to each year on supplemental services. Though no campuses with low completion rates. Since 2014-15, systemwide UC program exists, four UC campuses UC has provided four campuses with the lowest (Berkeley, Davis, Santa Barbara, and Santa Cruz) graduation rates (Merced, Riverside, Santa Barbara, currently operate an EOP program. The remaining five and Santa Cruz) $6.4 million each in addition to their undergraduate-serving campuses operate a program UC indicates is Figure 4 comparable to EOP. The programs Numerous Need-Based Aid Programs at CSU and UC generally provide a similar set of 2015-16 (In Millions) services as CSU’s EOP program, CSU UC Totals including academic advising, peer mentoring, and student financial Federal Pell Grant $950 $376 $1,326 aid. UC does not track enrollment State Cal Grant 636 843 1,478 and funding for these programs. In Institutional grants 566 725 1,291 a recent report to the Legislature, Totals $2,152 $1,944 $4,096 www.lao.ca.gov 9 analysis full gutter AN LAO REPORT regular per-student allocations. The four UC campuses to track the segments’ performance through annual have wide discretion in how to spend their allocations. reporting on key measures. The Legislature could build off this approach by expanding these reporting Assessment requirements. For example, current law requires CSU No Notable Concern With Overall Approach and UC to set and report performance goals annually at Universities. Compared to CCC’s complex and for Pell Grant student enrollment and graduation rates. overlapping approach to serving low-income and Were the Legislature also interested in first-generation first-generation students, CSU and UC have a much students, it could require the segments to provide simpler, streamlined approach. The segments generally enrollment and outcome data on those students. The operate one primary systemwide supplemental Legislature also could require periodic reports and program. We believe having one umbrella program but evaluations of supplemental support service programs giving campuses flexibility to design student support operated at each segment. services is a reasonable approach given each campus’s Directly Fund University Programs. To the extent different student population. the Legislature is concerned that the segments are not Programs Lack Transparency. Although CSU’s and prioritizing support services and providing sufficient UC’s overall approach to providing support services funding for them, it could exert greater control and for low-income and first-generation students seems oversight over these programs through the budget reasonable, the state budget does not contain clear process. Under this approach, the Legislature would fiscal information about these services. Moreover, enact legislation authorizing supplemental services and neither segment regularly tracks funding and spending appropriate a certain amount of state funding each year for supplemental support programs. Furthermore, only for those services. some enrollment and outcome data are available for Develop a Weighted Student Formula. A certain programs. For example, in most years, CSU weighted student formula that provides additional reports the number of students who participate in funding for low-income and first-generation students EOP and their graduation rates. These outcome data, could contain many of the same elements as the K-12 however, do not compare EOP students with students formula described in the CCC section. That is, such of similar academic standing who do not participate in a formula could include a base per-student funding the program. As a result, the Legislature lacks sufficient amount, supplemental rates for each low-income and data to evaluate the effectiveness of the EOP program first-generation student, and a reporting mechanism in boosting student outcomes. For UC, outcome to hold campuses accountable. Developing a data is even more limited, with no regular UC or state weighted student formula, however, would require monitoring and evaluating of these services. the Legislature to consider a number of added issues given the numerous significant differences between the Restructuring Options universities and community college districts. Figure 5 highlights these key considerations. Three Restructuring Options. One option is to continue providing flexible funding to CSU and UC Many Factors to Consider When Weighing the but track key outcomes of interest through periodic Three Options. Each option presents different roles for reporting requirements. A second option is for the the Legislature in supporting students at CSU and UC. Legislature to exert more control over CSU and UC The first approach of expanding reporting requirements budget practices by restricting funding for specified entails the least amount of change and would provide programs in the budget. Third, the Legislature could the segments significant flexibility to allocate funding adopt a weighted student formula that provides to campuses and design their own programs. The supplemental funding to these students. We describe second approach of creating systemwide categorical each approach in greater detail below. programs would give the Legislature direct control over how much is spent on low-income and first-generation Require Goal Setting, Performance Tracking, and students and which services are provided to students. Annual Reporting. Under the state’s recent budgetary Absent systematic evaluations on the effectiveness approach for the universities, the state has provided of existing statewide programs at CSU and UC, CSU and UC with unrestricted funding and elected 10 LEGISLATIVE ANALYST’S OFFICE analysis full gutter AN LAO REPORT however, choosing which programs and services to consolidating existing financial programs would help fund (and the total amount to provide) is problematic. CSU and UC low-income and first-generation students The third approach of creating a weighted student and their parents navigate a system that currently is formula would be the most significant departure from overly complex and difficult to understand. Much of the historical practice and very likely would have significant program consolidation that could be done for state and ramifications for CSU’s and UC’s governance, planning, institutional aid programs would benefit all financially budgeting, and systems of accountability. needy students across the higher education segments. Financial Aid Restructuring Could Benefit University Students Too. As for CCC students, Figure 5 Developing a Weighted Student Formula for CSU and UC— Key Decisions for Legislature to Consider Funding • Should a formula determine how much the state provides CSU and UC systemwide or be used as a campus allocation method? • In 2016-17, CSU’s and UC’s core funding equated to about $13,600 per student at CSU and about $28,200 per student at UC. Should a formula apply to all CSU and UC core funding or only new funding? • Should base rates be higher for certain higher-cost students, such as those in upper-division courses (which tend of have smaller class sizes) or science and engineering courses? Should separate rates be established for undergraduate, graduate, and professional school students? • After calculating base rates, should the Legislature set higher target rates? • Currently, CSU and UC allocate funding to campuses based in part on their size. Should this practice continue? • Is the amount CSU and UC currently spend on supplemental services an appropriate supplemental rate for low- income or first-generation students? Should the state set a higher rate? Should the rates for CSU and UC be different? Should they differ from the K-12 and CCC supplemental rates? What would be the rationale for such differences? • Should the formula have a concentration grant? If so, what should be the concentration threshold? How much additional funding should the universities receive for each student above the threshold? Transition • Should the state phase in the new formula? How quickly should the new formula be implemented? • Should the formula include a hold-harmless provision? Accountability • How should the state define low income and first generation? How should the state verify which students are low income and first generation? • What planning requirements should be linked to the formula funding? Should the requirements be placed on the system offices or on each campus? What state agency would be tasked with ensuring the planning requirements are being fulfilled? • Currently, the universities set their own performance goals. Under a new funding system, should the Legislature set these goals? Should it set goals systemwide or for each campus? • What spending restrictions, if any, should be placed on the formula funding? Should the restrictions be placed on the systemwide appropriation or on each campus’s allotment? What state agency would be tasked with ensuring that the spending requirements are being fulfilled? • Should the state hold the segments and individual campuses accountable for student performance? What should be the repercussions for poor performance? www.lao.ca.gov 11 analysis full gutter AN LAO REPORT CONCLUSION California’s public higher education segments each services is reasonable, but both segments lack clear serve a large number of low-income and first-generation information on program spending and results. For CSU students. Our review identifies opportunities for and UC, the Legislature could consider enhancing improving the way supplemental services designed for oversight, creating a new categorical program that these students are funded and overseen. For CCC, provides funding for supplemental services, or more we find that the state’s current approach of funding fundamentally transforming the segments’ governance numerous categorical programs is complicated, overly and funding. Each option entails trade-offs, with shifting rigid, and administratively burdensome. Community to a weighted student formula a significantly more colleges, in our view, would benefit from a streamlined daunting task than the other options. Regardless of approach that provided more flexibility and local what the Legislature chooses to do about funding control. Such approaches include consolidating supplemental services at CCC, CSU, and UC, we programs into a student support block grant or creating believe financially needy students at all three segments a weighted student formula. For CSU and UC, we would benefit notably from a more seamless, find the current approach to providing supplemental transparent, and rational financial aid system. LAO PUBLICATIONS This report was prepared by Jason Constantouros, Judy Heiman, and Paul Steenhausen, and reviewed by Jennifer Kuhn. The Legislative Analyst’s Office (LAO) is a nonpartisan office that provides fiscal and policy information and advice to the Legislature. To request publications call (916) 445-4656. This report and others, as well as an e-mail subscription service, are available on the LAO’s website at www.lao.ca.gov. The LAO is located at 925 L Street, Suite 1000, Sacramento, CA 95814. 12 LEGISLATIVE ANALYST’S OFFICE