The 2018-19 Budget: Higher Education Analysis

The 2018-19 Budget: Higher Education Analysis MAC TAYLOR LEGISLATIVE ANALYST FEBRUARY 15, 2018 analysis full gutter 2018-19 BUDGET Contents Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Higher Education In Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Enrollment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 Affordability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 University of California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 Key Cost Drivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26 California State University . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30 Key Cost Drivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Education Policy Fellowship Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 California Community Colleges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Apportionments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43 Enrollment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Online Community College . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50 Financial Aid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Apprenticeship Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 Other Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .66 California Student Aid Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .68 Cal Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 Cal Grants for Students Attending Private Colleges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 Middle Class Scholarships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 Summary of Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .76 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET Executive Summary In this report, we analyze the Governor’s higher education budget proposals . Below, we highlight key messages from the report . University of California Legislature Faces Key University of California (UC) Budget Decisions. UC’s budget is affected by certain key cost drivers—most notably employee compensation, enrollment growth, its academic quality initiatives, and facility projects . The Legislature likely will want to consider supporting certain faculty and staff compensation increases in 2018-19 . We note, however, that UC faculty salaries remain very competitive relative to other public universities that conduct intensive research . Regarding enrollment growth, we believe UC’s funding redirection plan to support 1,500 additional students in 2018-19 generally is consistent with legislative intent . We recommend enrollment decisions for 2019-20 be made within the context of any broader discussion on UC eligibility . We recommend the Legislature consider additional funding for UC’s academic quality initiatives as lower priority . Though UC’s student-to-faculty ratio has increased the past several years, its student outcomes have continued to improve . Finally, several of UC’s proposed capital outlay projects lack sufficient justification . For example, four projects entail relatively large, expensive expansions despite UC providing no systemwide analysis of existing unused capacity . Whatever cost increases it ultimately supports for UC, we encourage the Legislature to think about how to share those costs between the state and nonfinancially needy students . (The state covers tuition for financially needy students .) California State University Legislature Faces Similar Key Budget Decisions for California State University (CSU). CSU has similar cost drivers as UC—most notably, faculty and staff compensation, enrollment growth, the Graduation Initiative, and capital outlay . The Legislature likely will want to consider supporting compensation increases given CSU already has entered into contracts increasing its costs . We note, however, that recent faculty salary increases at CSU have far exceeded inflation and are generally higher than what other state workers and UC faculty have received . As regards enrollment growth, we recommend the Legislature set an overall enrollment target based on certain demographic and policy considerations, including the state’s recent finding that CSU is drawing from beyond its Master Plan freshman eligibility pool (admitting from the top 41 percent rather than the top 33 percent of high school graduates) . As regards the Graduation Initiative, we identify a number of opportunities CSU has to improve course availability and student success using existing resources, such that lower priority could be placed on providing additional funding for this initiative in 2018-19 . Finally, we identified several serious deficiencies with CSU’s capital outlay requests and recommend the Legislature direct CSU to compile standard information, including stronger justifications for each project, and resubmit its proposals by early March . www.lao.ca.gov 1 analysis full gutter 2018-19 BUDGET California Community Colleges Recommend Allocating Some California Community College (CCC) Funding Based on Performance. The Governor’s largest proposed higher education augmentation this year relates to implementing a new CCC funding formula . Specifically, the Governor proposes moving away from the almost entirely enrollment-based CCC funding model to one based on three components: (1) enrollment, (2) low-income student counts, and (3) performance . Given the strong incentives under the existing funding model to focus on enrolling students rather than accelerating their time to degree, we recommend the Legislature allocate less CCC funding based on enrollment and some portion based on performance . We suggest at least 20 percent of funding be performance based to ensure sufficiently strong incentives to focus on student completion and time to degree . Regarding specific performance measures, we recommend using the Governor’s proposed performance measures but refining them to ensure districts continue to focus on serving low-income students and still offer relatively expensive programs that serve student needs (such as certain career technical education programs) . We also recommend the Legislature combine the proposed funding for low-income students with existing categorical funding for those students and offer districts more flexibility in how they serve these students . Enhanced flexibility could be coupled with more transparent district budgets indicating how these students are supported . Finally, we recommend the Legislature task the Chancellor’s Office with monitoring the approval of new program awards, grade-related data, and changes in the types of degrees and certificates awarded to ensure the new funding system is working as intended . Recommend Taking Time to Evaluate New Online College Proposal. The Governor’s next largest higher education proposal is to create a new online college . Initially, the college is intended to focus on short-term program pathways for working adults with no postsecondary credentials . We believe some elements of the Governor’s proposal could have statewide benefits—for example, by expanding course access . The proposal, however, fails to clearly identify the key reasons why the target student group is currently not seeking or receiving more education . Moreover, research suggests the target student group is not particularly well suited for online instruction . The administration also has not explained how a statewide college would be able to foster sufficient industry partnerships given the regional nature of many industries . We encourage the Legislature to take its time in reviewing the proposal and consider alternatives . In particular, the Legislature could consider ways to improve online and competency-based education reforms within the existing CCC system . Recommend More Holistic Approach to Covering Unmet Living Costs for Financially Needy CCC Students. The Governor proposes to consolidate two financial aid programs that cover some living costs for full-time community college students . Though the proposal consolidates two programs, it makes the underlying award rules even more complex . Layered onto an already complex financial aid system, the proposal could further complicate the financial aid landscape for students and administrators . We recommend the Legislature take a more straightforward approach—consolidating all four existing state financial aid programs for financially needy CCC students into one program with one set of rules . Under the new program, financially needy students would receive a grant for living costs that covered all their unmet need after taking into account their expected family contribution, federal aid, and a reasonable work expectation . As covering all unmet need for all financially needy full-time CCC students would cost about $500 million compared to the $287 million earmarked for such aid under the Governor’s budget, the Legislature would have to consider how to ration awards or repurpose other funding to cover the full estimated program cost . 2 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET INTRODUCTION In this report, we analyze the Governor’s higher section of the report consists of a summary of our education budget proposals . We begin by providing recommendations . In addition to this report, we an overview of higher education in California . In the have three other higher education budget briefs that next four sections, we analyze the Governor’s budget analyze the Governor’s proposals for adult education, proposals for the three public higher education the California Education Learning Lab, and Hastings segments and the California Student Aid Commission . College of the Law . The “EdBudget” section of our In each of these sections, we provide relevant website contains many higher education budget tables, background, describe and assess the proposals, some of which are not included in this report . and make associated recommendations . The final HIGHER EDUCATION IN CONTEXT As Figure 1 (see next page) shows, California has policies for the past six decades and influenced 114 California Community Colleges (CCC), 23 California enrollment levels at all three public segments . State University (CSU) campuses, 10 University of Policies Originally Intended to Tighten California (UC) campuses, and 1 UC-affiliated law Freshman Access to Universities and Encourage school . Its private sector includes about 180 nonprofit Lower-Division Instruction at CCC. Prior to the 1960 colleges and universities and more than 700 for-profit Master Plan, CSU and UC collectively drew from larger institutions . In this section, we focus primarily on the pools of high school graduates for freshman admission, public sector—covering key issues relating to college with estimates of the proportion as high as 50 percent eligibility, enrollment, and affordability . and 15 percent for CSU and UC respectively . Policymakers in 1960 elected to limit these proportions . ELIGIBILITY In the original Master Plan report, policymakers cited five reasons for tightening freshman eligibility at the Below, we provide background on the state’s universities, including: eligibility policies, review the findings of a recent eligibility study funded by the state, and highlight issues • Costs. Operating and capital outlay costs for the Legislature to consider in light of these findings . were lower at the community colleges than the universities . Costs were particularly high at UC Background because of its research mission . The authors of the Master Plan reasoned that focusing most Longstanding State Policies Determine Which enrollment growth at CCC would allow the state Students Are Eligible to Attend Each Segment. In to support a more expansive higher education 1960, the state developed its Master Plan for Higher system . Education in California, which set forth eligibility policies for each of the public segments . Under the plan, all • Access and Affordability. CCC was believed California residents may enroll in CCC . After completing to be the most accessible of the three higher lower-division coursework with a minimum grade point education segments to students, as that segment average (GPA), CCC students may transfer to a public charges the lowest fees and generally serves local university . The Master Plan limits freshman admission commuting students . to CSU and UC to the top one-third and one-eighth • Capacity. Several CSU and UC campuses at that of high school graduates, respectively . Though never time were believed to have reached enrollment established in state law, these Master Plan policies levels that were “unmanageable .” Redirecting have served as the basis for the universities’ admissions enrollment growth to CCC was seen as allowing www.lao.ca.gov 3 analysis full gutter 2018-19 BUDGET the state to better control enrollment levels at be eligible for admission . In order to draw from those university campuses . a smaller pool of students, UC’s index requires • Mission. Encouraging lower-division enrollment higher grades and test scores than CSU’s index . at CCC was viewed as allowing CSU and UC UC Recently Developed Two Additional to focus their resources on upper-division and Freshman Admission Options. In addition to the graduate instruction . statewide admission policy, students now have two • Transfer Achievement. Data indicating that other options to demonstrate eligibility at UC . Under transfer students performed well at CSU and UC also was cited as a reason for focusing Figure 1 lower-division coursework at CCC . Higher Education in California Transfer Eligibility Based on Grades Earned 2017-18, Unless Otherwise Noted at CCC. In addition to setting policies for freshman eligibility, the Master Plan set expectations regarding transfer eligibility . Students at CCC who California Community Colleges complete their lower-division work and earn a 72 districts 114 colleges minimum of a 2 .0 GPA are eligible to attend CSU 1.1 million FTE students as upper division undergraduate students . To be 67,000 FTE faculty and staffa $8.7 billion Proposition 98 funding eligible to attend UC as a transfers, students must earn a minimum of a 2 .4 GPA in lower-division CCC California State University coursework . 23 campuses 379,000 FTE students Universities Are to Align Their Admission 43,000 FTE faculty and staffa Policies With Their Respective Eligibility Pools. $3.8 billion state funding To draw from the top 33 percent and 12 .5 percent University of California of high school graduates, the university systems 10 campuses have historically structured their admission policies 5 medical centers 3 national labs to require high school students to (1) complete 221,000 FTE students college-preparatory coursework and (2) attain a 155,000 FTE faculty and staffa $3.5 billion state funding certain mix of high school GPA and scores on standardized aptitude tests (such as the SAT or Hastings College of the Law ACT) . We describe both requirements below: 1 campus 800 FTE students 243 FTE faculty and staff • College Preparatory Coursework. Both $13.7 million state funding university systems require students to complete a series of high school courses Private Nonprofit Institutions known as “A through G” (A-G) . The A-G About 180 institutionsb series includes courses in English, history, 278,000 FTE studentsb $234 million Cal Grant funding math, science, and other subjects . The share of high school graduates completing the A-G series hovered around 35 percent from Private For-Profit Institutions 2000-01 through 2008-09, before beginning Over 700 institutionsc to increase steadily over the next 7 years— 229,000 FTE studentsb $28 million Cal Grant funding reaching 45 percent in 2015-16 . • Grades and Test Scores. Both university a systems maintain an index of GPA and test CCC and CSU numbers reflect fall 2016. UC number reflects 2016-17. b scores that students must attain to be eligible Reflects federal data for 2015-16. c Reflects Bureau of Private Postsecondary Education data for fall 2015. for admission . Each index is devised such FTE = full-time equivalent. that a student with a lower GPA on A-G courses must earn a higher test score to 4 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET the first of these options, known as “eligibility in the though it does have a referral policy for transfer local context,” students in the top 9 percent of their students who complete an associate degree for high school are eligible to attend UC as freshmen— transfer . Due to some campuses not guaranteeing regardless of how they rank statewide . UC determines admission to local students and some eligible students whether students are in the top 9 percent of their not being referred to campuses with available slots, school based on high school GPA in A-G courses, a proportion of eligible applicants (10 percent in though students must still take the SAT or ACT . Under 2016-17) are not being admitted anywhere in the the second option, students who complete the A-G system . In response, the 2017-18 Budget Act directed series, have at least a 3 .0 GPA, and take the SAT CSU to require all campuses to grant first priority or ACT but do not meet either the statewide or the admission to their local students and develop referral local admission criteria qualify for what is known as policies for students not admitted to the campus of “comprehensive review .” A comprehensive review their choice . (We provide more information regarding considers additional factors beyond overall grades these efforts in the “CSU” section of this report .) and test scores, such as a student’s performance in Universities’ Freshman Admission Criteria their senior year, academic accomplishment in light Periodically Assessed. To gauge whether the of their life experiences, and special talents . Whereas universities draw from their Master Plan eligibility pools, students eligible under the statewide index or local the state has funded what are known as “eligibility context are guaranteed admission to UC, students studies .” As part of these studies, CSU and UC qualifying for comprehensive review are not guaranteed admission counselors examine a sample of public admission . Instead, UC only views students who qualify high school transcripts and determine the number of for comprehensive review to be eligible once they are students the universities would have admitted had admitted . The combination of these three criteria (the these students applied . If the proportion of transcripts statewide index, local context, and students admitted eligible for admission is significantly different from under comprehensive review) still are intended to 33 percent and 12 .5 percent for CSU and UC, draw from the top 12 .5 percent of public high school respectively, the universities adjust their admission graduates . policies accordingly . For example, UC tightened its Eligible UC Students Not Ensured Access to admission criteria after an eligibility study conducted in Specific Campus or Major. While state policy is 2003 found it was drawing from the top 14 .4 percent intended to guarantee eligible students admission of public high school graduates . Since the 1960 Master to the UC system, it does not guarantee admission Plan, the state has conducted eleven studies, with the to students’ first-choice campus or major . Eligible last study conducted in 2015 . UC students who are not admitted to their campus Findings From Recent Study of choice are referred to less selective campuses . Currently, Merced is the sole referral campus for Results of Latest Study Recently Released. For freshmen . Merced and Riverside are referral campuses the first time since 2007, the 2015-16 budget provided for transfer students . funding for an eligibility study . The state provided Traditionally, CSU Attempts to Serve Eligible $1 million to the Office of Planning and Research (OPR), Students at Their Local Campus. In contrast to UC, which in turn contracted out the study to a private high-demand CSU campuses historically set “local vendor . The vendor, which analyzed 77,000 transcripts admission areas” to determine which students are from students graduating high school in 2015, “local .” These campuses, in turn, guarantee admission completed the study in July 2017 . We describe the for local students but increase admission standards results of the study below . for students from outside the local admission areas . CSU Drawing From Notably Beyond Its This practice is intended to guarantee place-bound Eligibility Pool. The study found that 41 percent of students access to their nearby campus . Increasingly, public high school graduates met CSU’s systemwide more campuses are choosing to no longer guarantee admission requirements in fall 2015 . This proportion admission to local students . CSU also does not have is notably higher than CSU’s expected eligibility pool a systemwide referral policy for freshman applicants, of 33 percent . It also is the highest proportion of www.lao.ca.gov 5 analysis full gutter 2018-19 BUDGET graduates CSU has drawn from since the 1960s (see Eligibility Increased for Students in Most Major Figure 2) . Because CSU admission requirements have Race and Ethnicity Groups. Figure 3 shows that not changed since the last eligibility study in 2007, the eligibility rates are markedly higher for Asian students increase since then is likely due to the greater share of than other student groups . Eligibility rates for white high school graduates completing the A-G series . students are somewhat higher than rates for Latino and UC Might Be Drawing From Beyond Its Pool. black students . Since the last eligibility study in 2007, For UC, the study found that 13 .9 percent of public nearly all student groups have experienced increases in high school graduates met the university system’s their eligibility rates . The eligibility rate for white students admission requirements in 2015, with 11 .2 percent at UC, however, declined . of graduates eligible through the statewide or local Issues for Consideration criteria and an additional 2 .7 percent of graduates admitted to UC under comprehensive review . While Recent State Interest in Re-examining Policies. above UC’s expected 12 .5 percent eligibility pool under Even prior to the findings of the recent eligibility study, the Master Plan, two factors complicate the study’s the Legislature had expressed interest in reviewing results . One is that UC’s results have a margin of error the Master Plan eligibility policies . As part of the of 1 .6 percentage points, creating a possible range 2016-17 budget, the state required all three segments between 12 .3 percent to 15 .5 percent . The other is to report on what would be entailed in notably that the eligibility study did not examine where students increasing their production of certificate and degree admitted under comprehensive review ranked statewide holders by 2030 . In its plan, UC estimated it would or locally, such that the state no longer knows the entire have to draw from around 17 percent to 20 percent of pool of students from which UC is drawing . Moreover, high school graduates to grow bachelor’s degrees to UC has increased the proportion of high school the desired level . CSU did not propose changes to its graduates admitted under comprehensive review . In fall existing admission policies . Instead, it noted that many 2016, UC admitted 4 percent of high school graduates students who are not admitted to CSU as freshmen under the comprehensive review policy . would eventually work their way to the university system through transfer from CCC . In addition to these reports, Figure 2 CSU Freshman Eligibility at Highest Point Since Early 1960s Percent of Public High School Graduates Identified as Eligible to Attend 50% Master Plan Policy 45 40 35 30 25 20 15 10 5 1961 1966 1975 1982 1985 1989 1995 2001 2003 2007 2015 6 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET two state reviews of the 1960 Master Figure 3 Plan are currently underway: (1) a Eligibility Increased for Most Student Groups study of Master Plan polices and state workforce needs from OPR (due Percent of High School Graduates Meeting Admission Requirements By Race and Ethnicity February 2018); and (2) a review by the Assembly Select Committee on Change 2007 2015 From 2007 the Master Plan for Higher Education in California, which held hearings California State University in 2017 and plans to hold further Asian 50.9% 64.0% 13.1% hearings throughout 2018 . White 37.1 39.8 2.7 Latino 22.5 31.9 9.4 Key Trade-Offs to Consider in Black 24.0 30.0 6.0 Expanding Freshman Eligibility. All graduates 32.7 40.8 8.1 In revisiting the state’s eligibility University of California policies, one policy option would be Asian 29.4% 30.7% 1.3% to allow CSU and UC to continue White 14.6 11.9 -2.7 drawing from larger eligibility pools Latino 6.9 8.5 1.6 than envisioned under the Master Black 6.3 6.5 0.2 Plan . Expanding eligibility would All graduates 13.4 13.9 0.5 permit more high school graduates to enroll directly at a public university . at CSU . Because this option would tighten admission Advocates for this approach argue that the increase requirements, however, many students may feel in A-G completion rates indicates more students are frustrated that they completed A-G coursework but better prepared for college-level study and desire to did not get admitted directly as freshmen to a public attend CSU and UC as freshmen . Not every student university . who meets existing admission standards, however, is deemed ready for college-level work, with remedial ENROLLMENT rates at CSU still notable—32 percent in fall 2017 . (This proportion could drop in the coming years due Below, we discuss college-related demographic to changes CSU is making both to how it assesses trends, enrollment trends, and enrollment funding . students’ college readiness and how it places students into first-year courses .) The public universities also Demographic Trends have higher instructional and capital costs than CCC . In 2016-17, 422,000 Students in California Moreover, the Legislature faces existing cost pressures Graduated From a Public High School. Enrollment in higher education, such as rising salary and benefit demand for the three public segments is driven in part costs at each segment . by changes in the number of high school graduates . Key Trade-Offs to Consider in Retaining Master Assuming no other changes, an increase in the Plan Eligibility Pools. In revisiting freshman eligibility number of California high school graduates causes a pools, another policy option is to adhere to the Master proportionate increase in college enrollment demand . Plan eligibility pools . This would mean CSU and UC More high school graduates can affect freshman would need to adopt stricter admissions requirements . enrollment immediately for all the segments . Increases This option would reduce enrollment pressures on in high school graduates also can have a future effect CSU and UC, which would have the advantage on transfer enrollment, as some entering community of freeing up General Fund support for other cost college students will work their way through the transfer pressures . As a result of tightening eligibility criteria, process over the course of subsequent years . more students likely would be diverted to CCC, Growth in High School Graduates Is Slowing. which has been experiencing declining enrollment in As Figure 4 shows (see next page), the number of recent years . It also likely would increase the level of high school graduates grew somewhat quickly from academic preparedness of entering freshman classes 2000-01 through 2009-10, with average annual growth www.lao.ca.gov 7 analysis full gutter 2018-19 BUDGET over this period of 2 .8 period . Figure 4 Since 2009-10, growth has slowed Growth in High School Graduates Slowing considerably . Between 2009-10 Public High School Graduates in California and 2016-17, average annual growth was 0 .6 percent . The state 500,000 is expected to continue seeing slow growth in high school graduates throughout the next several years . 450,000 The Department of Finance projects 0 .3 percent average annual growth between 2016-17 and 2025-26 . 400,000 Share of Californians Attending Projecteda College Is Growing. In 2015, 350,000 47 percent of Californians between the age of 18 and 24 (the traditional college-going age) reported 300,000 attending college . This share has 2000-01 2004-05 2008-09 2012-13 2016-17 2020-21 2024-25 steadily increased since 2000 . In that year, 35 percent of 18-24 years a Projections made by the Department of Finance’s Demographics Unit. Data for 2016-17 have not olds in California reported attending yet been finalized. college . In 2015, the rate for all 18-24 year olds in the nation was which occurred in 2008-09 (reaching almost 1 .3 million 43 percent, with California’s rate ranking 9th highest FTE students) . The decline in enrollment during the among all states . recession largely reflected reductions in state funding rather than declining enrollment demand . Enrollment Enrollment Trends demand is often highest at CCC during recessions as California Has Larger Public Sector Compared unemployment rates rise . California’s unemployment to Rest of Nation. About three-fourths of full-time rate has been declining throughout the most recent equivalent (FTE) enrollment in California is in the public economic expansion, likely a key reason why growth higher education sector . The share in the public sector in CCC enrollment has been relatively slow in recent is somewhat higher in California than the rest of the years . Largely due to its stronger link to the economic nation (two-thirds of FTE enrollment) . California’s share cycle, CCC enrollment is the most volatile among the of students in nonprofit colleges is lower than the rest three segments . of the nation (13 percent compared to 23 percent) . CSU and UC Resident Enrollment at All-Time The for-profit sector enrolls similar shares of students Highs. In 2016-17, CSU educated 377,300 resident in California and the rest of the nation (12 percent and FTE students and UC educated 216,200 resident FTE 11 percent, respectively) . students (see Figure 6) . The 2016-17 enrollment levels CCC Educates More Than 1 Million Resident are 11 percent higher at CSU and 10 percent higher FTE Students. CCC enrolls 62 percent of public sector at UC compared to their respective levels in 2006-07 . undergraduate FTE students in California . This is higher Though resident enrollment at the universities is less than public sector enrollment in two-year institutions in volatile than at CCC, both CSU and UC experienced the rest of the nation (43 percent) . California’s relatively some enrollment decline during the past recession . larger community college system reflects the state’s Nonresident Enrollment Remains Low at CCC eligibility policy, which encourages lower-division and CSU but Has Grown Notably at UC. The enrollment at CCC . In 2016-17, CCC educated proportion of nonresident students at CCC over the 1 .1 million FTE students (see Figure 5) . This enrollment past ten years has been stable at 4 percent of total level is (0 .7 percent) lower than the level in 2006-07 and enrollment . At CSU, the share of nonresident students (10 .7 percent) lower than the peak of CCC enrollment, has grown only slightly—from 4 percent in 2005-06 to 8 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET 6 percent 2016-17 . Prior to the most Figure 5 recent recession, nonresident Enrollment at CCC Increasing but Still Down From Peak enrollment also was a small portion Resident Full-Time Equivalent (FTE) Studentsa of enrollment at UC, comprising around 8 percent of all students . 1,300,000 Nonresident enrollment at UC has grown notably since the start of 1,250,000 the last recession, with the share in 2016-17 reaching 17 percent . The 1,200,000 share of nonresidents has grown especially quickly for undergraduate 1,150,000 enrollment—from 4 percent in 2008-09 to 15 percent in 2016-17, 1,100,000 increasing by 26,000 FTE students (148 percent) over the period . 1,050,000 Growth in Nonresidents at UC 1,000,000 Leads to New UC Enrollment 2006-07 2008-09 2010-11 2012-13 2014-15 2016-17 Policy. In response to concerns that the increase in nonresident enrollment was limiting space for a At CCC, 1 FTE student represents 525 contact hours per year, which equates to about 24 credit units. eligible resident students, the state recently directed UC to adopt a policy to limit nonresident enrollment . students are enrolled in a master’s program and UC adopted such a policy earlier this year, which we 25 percent are enrolled in a postbaccalaureate program describe in the box on page 10 . In contrast to UC, no (mostly teacher training programs) . Postbaccaularate formal policy limits nonresident enrollment at CCC and enrollment in 2016-17 is less than one-third of what it CSU . was 15 years ago . Graduate Students Account Figure 6 for About 1 in 5 Students at UC and 1 in 10 Students at CSU. Both CSU and UC Enrollment Levels at All-Time Highs In 2016-17, UC enrolled 50,600 Resident Full-Time Equivalent (FTE) Studentsa graduate students (19 percent of its total enrollment) and CSU 400,000 enrolled 40,700 graduate students CSU (10 percent of its total enrollment) . 350,000 These shares are somewhat lower than the shares 15 years ago . 300,000 In 2000-01, graduate students comprised 23 percent of total 250,000 UC enrollment at UC and 17 percent at 200,000 CSU . Among UC graduate students today, about 50 percent are doctoral 150,000 students, about 40 percent are enrolled in a master’s program, and 100,000 about 10 percent are enrolled in a 2006-07 2008-09 2010-11 2012-13 2014-15 2016-17 graduate professional program (such as medicine, law, and business) . At a For undergraduate education, 1 FTE student represents 30 credit units. For graduate education, 1 FTE student represents 24 credit units. CSU, about 75 percent of graduate www.lao.ca.gov 9 analysis full gutter 2018-19 BUDGET Science Majors and Degrees Trending Upward Private Sector Enrollment Below Peak Levels. Over Past 15 Years. This upward trend is most notable Private sector enrollment peaked in California in at UC, where the share of undergraduates enrolled in 2010-11, reaching around 314,000 students in the a science, technology, engineering, or mathematics for-profit sector and 281,000 students in the nonprofit (STEM) major increased from 30 percent in fall 2000 to sector . Since that time, enrollment has declined notably 41 percent in fall 2016 . While increasing at CSU at the for-profit sector and slightly at the nonprofit too, the trend has been more gradual . In fall 2016, sector . In 2014-15, enrollment in the for-profit sector 23 percent of undergraduate students enrolled in a was 18 percent lower than its peak, with enrollment STEM major, compared to 20 percent in fall 2000 . An in the nonprofit sector down 1 .9 percent . Of the two even greater share of graduate students are enrolled sectors, the for-profit sector has a larger share of its in a STEM field—about 60 percent of UC doctoral enrollment in two-year institutions . Among nonprofit students and about 26 percent of CSU master’s colleges, most enrollment (95 percent) is in four-year students in fall 2016 . institutions . Both sectors also have notable graduate student enrollment (10 percent of for-profit enrollment and 36 percent of nonprofit enrollment) . UC’s Nonresident Enrollment Policy The 2016-17 budget included provisional language requiring UC to adopt a policy limiting nonresident enrollment as a condition of receiving enrollment growth funding that year . In May 2017, the UC Regents finalized the new policy . The policy sets an 18 percent cap (or target) for nonresident undergraduate enrollment at five campuses and sets higher campus-specific caps for the remaining four campuses (see the figure below) . At these campuses, the caps are linked to their 2017-18 nonresident enrollment shares . Effectively, the new policy gives five campuses an opportunity to increase their shares of nonresident enrollment, while limiting further growth in nonresident enrollment at the four campuses with the highest existing shares . UC's Nonresident Enrollment Policy Percent of Undergraduate Enrollment That Is Nonresident (Reflects Estimates for 2017-18) 25% Adopted Limit Under New Policy 20 15 10 5 Berkeley Los San Irvine Davis Santa Santa Riverside Merced Angeles Diego Barbara Cruz 10 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET Enrollment Funding used formula assumed that the universities would hire a new professor (at the average salary of newly hired Traditionally, State Sets Enrollment Target faculty) for every 19 additional students enrolled . In for Each Segment. Under the traditional approach addition, the formula included the average cost per to funding enrollment, the state first considers the student for faculty benefits, academic and instructional eligibility, demographic, and enrollment factors support, student services, instructional equipment, and discussed earlier and sets a target for each segment . operations and maintenance of physical infrastructure . Over the past few decades, the state typically has set The marginal cost formula was based on the cost of one overall enrollment target for each segment rather all enrollment (undergraduate and graduate students than separate targets for certain types of students (such and all academic disciplines excluding health sciences) . undergraduate and graduate students or students in After calculating the total marginal cost per student, the humanities and sciences) . If the state increases state and student shares were calculated . In 2017-18, a segment’s overall enrollment target, then the state CSU estimated its total marginal cost per student was decides how much associated funding to provide . $10,649, with a state share of $8,041 . UC estimated State Funds CCC Enrollment Growth at its total marginal cost per student was $18,146, with a Per-Student Rate. State law requires that the state share of $10,097 . If the segments did not meet CCC Board of Governor’s annual budget request the enrollment target specified in the budget within a for enrollment growth be based, at a minimum, certain margin, then historically an equivalent portion of on changes in the adult population and excess the associated enrollment growth funding was reverted . unemployment (defined as an unemployment rate Funding Enrollment Growth at CSU and UC higher than 5 percent) . The Governor and Legislature Has Become Less Transparent Over Past Several do not have to approve enrollment growth at the Years. Though the state traditionally has set enrollment requested level . Their decisions tend to reflect the targets and used the marginal cost funding formula to state’s budget condition . Once the enrollment growth determine how much associated enrollment growth level is set, the state calculates how much funding to funding to provide CSU and UC, it has not regularly provide CCC based on a going per-student funding used this process since 2008 . The state began omitting rate . That rate ($5,151 in 2017-18) effectively is based enrollment targets in the 2008-09 budget, when it on the average cost of serving an additional CCC entered the last recession and reduced base funding for student . The CCC distributes enrollment growth funding CSU and UC . The purpose was to provide CSU and UC among districts based upon a set of statutory factors, flexibility to manage state funding reductions . Though including each district’s prior-year enrollment level as the state resumed some of its enrollment budgeting well as various socioeconomic factors (such as the practices since that time, it has not consistently set local unemployment level) . If a district does not meet enrollment targets and used the marginal cost formula its target, it retains associated enrollment funding for to determine associated state funding . one year, but then the unearned funding is reverted . New Budgetary Rules Emerging for UC. In recent A district, however, has up to three years to earn years, the state has approached UC enrollment targets back the funding if it can increase its enrollment . If the and funding in a few new ways: overall CCC system does not meet its target, the state immediately repurposes the funds for other college (or • Setting Out-Year Targets. In order to give UC school) priorities . more time to respond to legislative direction, the CSU and UC Enrollment Growth Traditionally 2015-16 budget set enrollment goals for UC for Funded Based on Marginal Cost Formula. In the 2016-17 academic year, one year after the the case of the universities, the state makes a budget year . The state has since continued this determination each year on how much enrollment to practice . For example, the 2017-18 budget set fund and gives the segments flexibility to set enrollment enrollment targets for the 2018-19 academic year . targets for each campus . When providing funding • Expecting UC to Cover Some of the for enrollment growth, the state for decades used a Associated Cost From New Sources. In “marginal cost” formula that estimated the cost of 2015-16 and 2016-17, the state budget provided admitting one additional student . The most recently www.lao.ca.gov 11 analysis full gutter 2018-19 BUDGET UC with less enrollment growth funding than what target by May of the following year . If UC was on would have been generated under the traditional track, it received its enrollment funding . In both marginal cost formula . The 2017-18 budget years, UC ultimately received funding . did not provide any new funding for enrollment Core Funding Per Student Increasing in Recent growth . The change in funding practices were Years. As Figure 7 shows, total core funding per made with the expectation that UC find funding student is highest at UC ($30,975), lower at CSU through alternative sources and redirected ($15,457), and lowest at CCC ($10,014) . CCC’s savings from certain cost reductions . inflation-adjusted per-student amount is down slightly • Making Funding Conditional. In years where from the system’s peak level, reached in 2015-16 funding was provided for enrollment growth (the ($10,125) . At the universities, inflation-adjusted 2015-16 and 2016-17 budgets), the state budget per-student funding has been increasing in recent required UC to demonstrate to the Department of years but remains below peak levels (of $39,299 at UC Finance that it was on track to meet its enrollment in 2000-01 and $17,205 at CSU in 1998-99) . Since Figure 7 After Declining in the 2000s, Per Student Funding Has Risen at All Three Segments Core Funding Per Full-Time Equivalent (FTE) Student, 2016-17 Dollarsa $45,000 40,000 35,000 30,000 UC 25,000 20,000 CSU 15,000 10,000 CCC 5,000 1990-91 1994-95 1998-99 2002-03 2006-07 2010-11 2014-15 a Core funding consists of General Fund, student tuition and fee revenue, and lottery funds. At CCC only, core funding also includes local property tax revenue. At UC only, core funding also includes a portion of patent royalty income and overhead on research grants. Includes funds used to provide certain students tuition discounts and waivers. Excludes funds for general obligation bond debt service at all three segments and retiree health at CSU, as data are not available for all years. One FTE student at CSU and UC represents 30 credit units for undergraduate education and 24 credit units for graduate education. CCC FTE enrollment—which the segment defines as 525 contact hours (equating to about 24 credit units)— is adjusted to make it comparable to undergraduate enrollment at CSU and UC. Reflects resident students only at CCC. Reflects resident and nonresident students at CSU and UC. 12 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET 1990-91, state and local funds have comprised around provides 62 percent of all core education funding, 95 percent of core funds at CCC . At the universities with tuition revenue from resident students comprising the share of state funding has declined, from around 17 percent, and other fund sources (primarily 80 percent in 2000-01 at both segments to around nonresident tuition revenue and endowment income) 60 percent at CSU and 50 percent at UC in recent covering 21 percent . At CSU, we estimate that the years . state provides 68 percent of all core education funding, with resident tuition revenue comprising 26 percent, AFFORDABILITY and nonresident tuition revenue covering 6 percent . At CCC, we estimate state and local revenue comprises Below, we provide information about student tuition, 95 percent of core funding, with student fee revenue living expenses, and financial aid . covering 5 percent . (These aggregate shares are not a meaningful indicator of the share covered by any Tuition particular student . A financially needy student, for State Currently Does Not Have a Tuition Policy. example, pays no tuition at any of the public segments .) A tuition policy establishes how tuition levels are to Tuition and Fees Tend to Be Volatile. Though be adjusted over time . Depending on the policy, the the state provides a large share of core education tuition charge either explicitly or implicitly represents the funding, the state contribution varies over time, tending share of education costs to be borne by full fee-paying to increase during economic expansions and retract students and the state . The state share of education during recessions . Tuition and fee levels in California costs consists of the subsidy it provides directly to tend to be affected by such fluctuations . As Figure 9 each of the higher education segments as well as the shows (see next page), tuition and fee levels have had financial aid it provides to students for covering tuition . long flat periods generally corresponding to years of Though California had a tuition policy for several years economic growth and increasing state contributions . during the late 1980s and early 1990s, it has not had a These periods tend to be followed by steep increases tuition policy the last few decades . generally corresponding to economic slowdowns Tuition at Public Institutions Is Lower in California Than Other Figure 8 States. For full-time undergraduate Compared to Similar Public Colleges, Tuition Is students, UC currently charges Much Lower at CCC, Lower at CSU, and Higher at UC $12,630, CSU charges $5,742, and Tuition and Fees, 2015-16 CCC charges $1,380 ($46 per unit for 30 units) . Campuses in each system also charge fees for specific $14,000 National Average services, such as student health 12,000 California services . Compared to the average fee level of similar public universities 10,000 in other states, UC’s tuition and fees tend to be notably higher, whereas 8,000 CSU’s tend to be notably lower (see 6,000 Figure 8) . CCC tuition and fees are the lowest in the country compared 4,000 to other public community colleges— about one-third of the national 2,000 average . Large Share of Education CCC CSU UC Funding Comes From the State. At UC, we estimate that the state www.lao.ca.gov 13 analysis full gutter 2018-19 BUDGET Figure 9 Tuition Tends to Increase Sharply After Flat Periods Year-Over-Year Percent Change in Systemwide Tuition and Fees 100% 80 CCC 60 CSU 40 UC 20 -20 1987-88 1992-93 1997-98 2002-03 2007-08 2012-13 2017-18 or recessions, when state contributions tend to fall . state . Living costs also vary depending on whether a Somewhat exceptional to these overall trends, in student lives on campus, off campus not with family, or 2017-18—a time of continued economic growth—UC off campus with family . Figure 10 shows how average increased its tuition and fees by about 3 percent and living expenses at UC vary by living arrangement . The CSU increased its tuition and fees by about 5 percent . UC system estimates students living with family face These increases came after six years of flat tuition by far the lowest costs—about 30 percent lower than charges at the two segments . other students living off campus and almost 50 percent lower than students living on campus . Living Expenses Total Cost of Attendance Figure 10 Includes Both Tuition and Living Estimated Living Expenses Vary by Expenses. Apart from tuition (that Student Living Arrangement is, direct education costs), students incur other costs to attend college, University of California, 2016-17a including housing, food, books and Off Campus supplies, transportation, and personal On Campus Off Campus With Family expenses . Rent and food $14,520 $9,769 $4,861 Estimated Living Expenses Health careb 2,312 2,316 1,946 Vary Based on Several Factors. Transportation 699 1,273 1,686 Each segment has its own method Otherc 1,732 1,916 2,068 for estimating students’ living costs . Totals $19,263 $15,274 $10,561 a Within each segment, costs vary Reflects average costs across the system’s ten general campuses. b Primarily reflects health insurance costs. Students insured through family are not required to across campuses, as some expenses purchase insurance. (such as housing) vary across the c Includes expenses for clothing, entertainment, and recreation. 14 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET Living Expenses Higher in California Than in comes from many sources—the federal government, Other States. Compared to similar public universities state government, colleges, and private entities, such in other states, living expenses for students attending as philanthropic groups . Financial aid includes gift aid CCC, CSU, and UC tend to be higher . Specifically, (grants, scholarships, and tuition waivers that students for students living off campus not with family, living do not have to pay back); loans (that students must expenses are on average about 20 percent higher in repay); federal tax benefits (that can reduce income California . For students living on campus, costs are on tax payments or provide a tax refund); and subsidized average about 30 percent higher in California . work-study programs (that make it more attractive for employers to hire students) . Financial aid may be need Financial Aid based (for students who otherwise might be unable to Various Types of Financial Aid Help Students. afford college) or nonneed based (typically scholarships Figure 11 shows the main financial aid programs based on academic merit, athletic talent, or military available to undergraduates attending one of service) . California’s public higher education segments . The aid Figure 11 Majority of Financial Aid Programs for California Students Are Gift Aid (In Millions) Programa Coverage Expendituresb Gift Aid Pell Grant (federal) Some tuition and living expenses. $2,832 Cal Grant (state) Full tuition and some living expenses for students attending public 1,986 and some private institutions in California. California College Promise Grantc (state) Full tuition for CCC students. 758 UC Grant (state) Full tuition and living expenses for UC students. 746 CSU State University Grant (state) Full tuition for CSU students. 586 Middle Class Scholarship (state) Partial tuition for UC and CSU students not eligible for a Cal Grant. 71 Supplement Education Opportunity Grant (federal) Some tuition and living expenses. 65 CCC Full-Time Student Success Grant (state) Some tuition and living expenses for full-time CCC students. 41 Subtotal ($7,085) Loans Direct Student Loans (federal) Any college expense. More generous terms for financially needy $1,610 students. Parent PLUS Loans (federal) Any college expense. Available for parents of dependent students. 402 Perkins Student Loans (federal) Any college expense. Typically more generous terms than other 47 loans. Subtotal ($2,059) Tax Benefitsd Higher education credits and deductions (federal) Tuition, books, and supplies. $1,210 Scholarshare savings plan (federal) Any college expense. Accounts have tax benefits. 209 Coverdell education savings account (federal) Any K-12 or college expense. Accounts have tax benefits. 4 Subtotal ($1,418) Work Study (Federal/State) Provides part-time jobs. $74 Total $10,637 a All gift aid, work study, and Perkins Student Loans are need based. Other loans and tax credits are nonneed based. b Reflects 2015-16 data for federal programs and 2016-17 data for state programs. c Formerly known as the CCC Board of Governor’s Fee Waiver. d Estimated based on nationwide expenditures. www.lao.ca.gov 15 analysis full gutter 2018-19 BUDGET Federal Formula Determines a Student’s shows average net price for families at various income Financial Need. Need-based aid programs assess levels . Students/families with higher-income levels pay financial need using the federal Free Application for more toward the cost of college than lower-income Federal Student Aid, or FAFSA . The FAFSA asks students/families . students/families to provide various information, such Student Loan Debt Relatively Low. Each year, as household income, certain available assets, and around 40 percent of UC and CSU undergraduates number of children in college . This information then take out loans, with an average annual loan amount of feeds into a formula that determines an expected family $5,400 per borrower . Slightly more than half of UC and contribution (EFC) toward college costs . A student’s CSU students have loan debt at graduation, with debt financial need is the total cost of attendance (tuition and at graduation averaging $20,500 . At CCC, 2 percent living costs combined) at a particular campus less his or of students borrow each year, with an average annual her EFC . loan amount of $4,500 . Student borrowing in California Many Financial Aid Programs Available to tends to be lower than in other states . For example, California Students. Most programs are need based about 60 percent of students at four-year public and most provide gift aid . If a student qualifies for universities nationally graduate with loan debt, with an more than one program, then campus financial aid average debt load upon graduation of $27,300 . (These offices “package” together aid for the student . When figures only include student loans, not other forms of packaging aid, campuses first prioritize awarding gift debt, such as credit card debt .) aid before moving on to awarding loans and work Student Loan Default Rates Low at UC and CSU, study . Campuses do not award tax benefits . Students Higher at CCC. Almost all borrowing at UC, CSU, and parents claim these benefits on their tax returns . and CCC is through federal loans . For each cohort Half of Public College Students Receive Full of undergraduate borrowers entering repayment, the Tuition Coverage, Some Receive Aid for Living federal government tracks the share defaulting within Expenses. Most state aid programs are geared toward providing full Figure 12 tuition coverage for financially Net Price Lowest for Lowest-Income Studentsa needy students . These programs collectively cover full tuition for (2015-16) around 60 percent of undergraduate Family Income Level Percent of Students Net Price students at UC and CSU . At CCC, University of California about half of students receive full $0 - 30,000 36% $9,266 fee waivers, paying for two-thirds of $30,001 - 48,000 20 10,287 all course units taken . In addition, $48,001 - 75,000 18 13,580 the federal Pell Grant program and $75,001 - 110,000 11 20,627 some state programs pay for some Over $110,000 14 29,290 California State University or all of financially needy students’ $0 - 30,000 41% $6,851 living expenses . Taken altogether, $30,001 - 48,000 21 8,244 gift aid for financially needy students $48,001 - 75,000 17 12,099 cuts their total college costs (tuition $75,001 - 110,000 10 16,607 and living expenses) in half at the Over $110,000 12 18,815 universities . For full-time students California Community Colleges attending CCC, gift aid covers a $0 - 30,000 67% $5,927 somewhat lower portion of the total $30,001 - 48,000 20 6,532 cost of attendance—about one-third . $48,001 - 75,000 11 8,757 $75,001 - 110,000 1 10,113 Lower-Income Families Have Over $110,000 —b 12,193 Lower Net Price of College. a Reflects average total cost of attendance less financial aid for full-time resident undergraduates. Average net price is the cost of Excludes students who did not apply for or receive federal student loans, grants, or work study. b attendance after gift aid . Figure 12 Less than 1 percent. 16 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET three years . Three-year student loan default rates campuses have rates in excess of 10 percent . The tend to be low at UC and CSU but higher at CCC . average rate for all institutions nationally is 11 .3 percent . Specifically, while no UC campus has a rate greater On average, older students and students who do not than 3 .6 percent and no CSU campus has a rate complete their degrees are significantly more likely to greater than 6 .7 percent, the vast majority of CCC default . UNIVERSITY OF CALIFORNIA In this section, we provide an overview of the to offset expiring one-time Proposition 56 monies Governor’s budget proposals for UC and analyze key in the 2017-18 budget, (2) removes $177 million in cost increases facing the university in 2018-19 . At the one-time funds (primarily for UC’s Retirement Plan) end of the section, we assess UC’s 2018-19 capital provided in the 2017-18 budget, and (3) reappropriates outlay request . certain unspent one-time funds provided in the 2016-17 budget . OVERVIEW Under Governor’s Budget, Total of $300 Million Available for Ongoing Spending. Beyond the Below, we first focus on the 2018-19 budget plan proposed $92 million General Fund base increase, UC for UC and then examine whether UC is likely to meet plans to tap an additional $208 million . This additional specific 2017-18 budget conditions . funding would come from various fund sources, redirections, and savings, as described below . 2018-19 Budget Plan • $120 Million From Tuition and Fees. The UC Estimated to Receive $35.6 Billion From increase would result from 1 .1 percent enrollment All Sources in 2018-19. As Figure 13 (see next growth ($71 million), a $978 (3 .5 percent) increase page) shows, UC’s total budget would increase by to nonresident supplemental tuition ($35 million), $733 million (2 .1 percent) over the 2017-18 level . and a $54 (4 .8 percent) increase to the Student One-quarter of total funding ($8 .9 billion) consists Services Fee ($14 million) . The Governor assumes of “core funds” (primarily state General Fund and resident tuition levels remain flat year over year . student tuition revenue) that support the university’s Of the increase in gross tuition and fee revenues, undergraduate and graduate educational programs . we estimate $18 .2 million would be redirected for Core funding would increase by $70 million financial aid . (0 .8 percent) . The remainder of UC funding comes primarily from its five medical centers, sales and • $88 Million From Anticipated Savings and services (including housing, bookstores, and academic Alternative Revenue Sources. This amount extension), and the federal government (primarily for consists of (1) $30 million in new revenue from research and financial aid) . increased investment returns, (2) a package of $15 million in identified redirections intended to Governor’s Budget Provides $92 Million General fund enrollment growth in 2018-19, (3) $14 million Fund Base Increase. As Figure 14 (see next page) from phasing out financial aid for nonresident shows, the main General Fund change to UC in students, (4) $10 million in savings from 2018-19 would be a $92 million ongoing unrestricted improved procurement practices, (5) $10 million base increase . The increase would reflect a 3 percent in philanthropic donations, and (6) $9 million in increase to UC’s ongoing General Fund support to savings from retiring obligations associated with a campuses . The Governor’s budget does not include past lawsuit . an increase for the Office of the President (UCOP), which the Legislature began line-item budgeting UC Likely to Prioritize Increases for in 2017-18 . Under the Governor’s budget, UCOP Compensation and Enrollment. Though the UC remains funded at $349 million . In addition to the base Regents have not yet adopted a budget plan for increase, the Governor (1) provides $10 million ongoing www.lao.ca.gov 17 analysis full gutter 2018-19 BUDGET Figure 13 University of California Funding by Source (Dollars in Millions) Change From 2017-18 2016-17 2017-18 2018-19 Actual Revised Proposed Amount Percent Core Funds General Fund Ongoing $3,279 $3,367 $3,469 $102 3.0% One time 262 177 0 -177 -100.0 Carryovera -45 5 39 34 639.0 Tuition and feesb 4,507 4,816 4,936 120 2.5 Lottery 38 42 42 —c -0.1 Other core fundsd 353 405 395 -10 -2.5 Totals $8,394 $8,813 $8,882 $70 0.8% Other Funds Medical centers $10,395 $11,330 $11,670 $340 3.0% Sales and services 6,670 7,134 7,345 211 3.0 Federal 3,649 3,735 3,776 41 1.1 Private 2,250 2,347 2,400 53 2.3 State 342 441 437 -4 -0.9 Other 1,031 1,049 1,071 22 2.1 Totals $24,337 $26,036 $26,699 $663 2.5% Grand Totals $32,730 $34,848 $35,581 $733 2.1% FTE Studentse 263,957 272,267 275,267 3,000 1.1% Core Funding Per Student $31,800 $32,368 $32,268 -$100 -0.3% a Of the $262 million one time provided in 2016-17, $45 million was unspent. UC plans to spend $5 million of the carryover in 2017-18 and the remainder in 2018-19. b Includes funds that UC uses to provide tuition discounts and waivers to certain students. In 2018-19, UC plans to provide $1 billion in such aid. c Amount is less than $500,000. d Includes a portion of overhead funding from federal and state grants, a portion of patent royalty income, and Proposition 56 funding designated for graduate medical education. e One full-time equivalent (FTE) represents 30 credit units for an undergraduate and 24 credit units for a graduate student. Student counts includes resident and nonresident students. 2018-19, its draft budget prioritizes Figure 14 spending for compensation increases and enrollment growth . As the University of California General Fund Changes top part of Figure 15 shows, UC (In Millions) for 2018-19 is likely to increase 2017-18 Revised Funding $3,549.4 faculty and staff compensation by $104 million . It also is budgeting Ongoing Provide unrestricted base increase $92.1 $57 million for planned enrollment Replace one-time Proposition 56 funds with General Fund 10.0 growth . Additionally, UC has identified Subtotal ($102.1) various other high priorities, including One Time student financial aid and mental Spend 2016-17 carryover $34.1 health services, that total $70 million . Remove one-time funding provided in 2017-18 -176.6 After funding all these high priorities, Subtotal (-$142.5) $69 million would remain available for Total -$40.4 other cost increases . 2018-19 Proposed Funding $3,509.0 18 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET UC Has Many Other Calls on Remaining 2017-18 Budget Conditions Funding. The UC Regent’s draft budget plan assumes Uncertain Whether UC Will Meet Every significantly more funding is available than implicitly Expectation Set in Last Year’s Budget. The recognized in the Governor’s budget . Whereas 2017-18 budget conditioned $50 million on UC meeting the Governor’s budget implicitly recognizes the certain expectations . As outlined in provisional budget $300 million in new funding, UC’s draft budget assumes language, the Director of Finance is to determine $437 million . The largest revenue difference between by May 1, 2018 whether UC has made a good faith the two plans is UC’s preliminary budget assumption effort to meet these expectations . Figure 16 (see next that it would raise tuition by 2 .5 percent . The largest page) lists these expectations . UC reports that it has spending difference between the two plans is UC’s completed one of them (adopting a policy prohibiting preliminary request for additional salary increases supplemental retirement payments) and is close to for faculty and other nonrepresented staff . Other completing another condition (piloting activity-based notable spending differences include UC’s preliminary request for $50 million for academic quality initiatives and $35 million Figure 15 one-time General Fund for deferred UC Has More Spending Priorities maintenance projects . The bottom Than Can Be Covered by $300 Million part of Figure 15 shows all the calls Assumed in Governor’s Budget on the $69 million remaining under the Governor’s assumed spending (In Millions) level . Top Prioritiesa Governor Is Not Supporting Compensation Further Tuition Increases at Benefit cost increases $44 This Time. Though UC has been Faculty Merit Program 32 considering a potential tuition Represented staff salary increases (3.6 percent) 28 Subtotal ($104) increase and built a preliminary Other Cost Increases budget assuming associated tuition Operating expenses and equipment (2.5 percent) $32 revenue, the Governor has indicated Financial aid 18 that he is not in support of a tuition Debt service 15 increase at this time . Specifically, Mental health services 5 the administration states that it is Subtotal ($70) concerned about raising tuition on Enrollment Growth resident students because (1) in its Resident undergraduate (1,500 students) $28 view, UC could do more to reduce Nonresident undergraduate (1,000 students) 19 Graduate (500 students) 9 its overall cost structure; (2) students Subtotal ($57) who do not have their tuition covered Total Top Priorities $231 by financial aid would face additional financial burden; and (3) it indirectly Remaining Priorities would increase state costs for the Funds Availableb $69 Cal Grant program, which covers the Calls on Available Funds Faculty and nonrepresented staff salary increases (3 percent) $83 cost of systemwide tuition for eligible Academic quality 50 low-income undergraduate students . Deferred maintenance (one time) 35 The administration calls on UC to Financial aid 27 implement further reforms before Enrollment growth (500 resident undergraduates)c 9 increasing tuition, though it does not a Reflects LAO assumptions of UC’s top spending priorities based on UC and state budget specify which reforms it expects the documents and conversations with UC staff. b Reflects funding implicitly remaining under Governor’s budget. university system to undertake . c Were UC to add these additional students, $4 million of this cost would be funded from the tuition revenue those students would pay. www.lao.ca.gov 19 analysis full gutter 2018-19 BUDGET costing at three campuses) . Some uncertainty colleges to the universities, UC historically has aimed surrounds whether UC will meet the remaining three to enroll at least one new transfer student for every conditions, as noted below . two new freshmen . (The ratio is intended to implement a recommendation in the Master Plan that no more • Budget Transparency. UC has provided greater than 40 percent of undergraduate enrollment at UC clarity on the funding amounts and sources be lower-division .) Over the past ten years UC has supporting its systemwide and presidential not attained this target, with the systemwide ratio initiatives . Whether UC has improved its overall hovering at about 1 transfer student for every 2 .3 budget documents showing all revenues, freshmen . Though the system does not meet the expenditures, and carryover funds to the target, some campuses do (see Figure 17) . Five of administration’s satisfaction is not yet clear . UC’s nine undergraduate-serving campuses, however, • Auditor’s Recommendations. Of the ten did not meet the target in 2016-17, with three of recommendations the Auditor calls upon UC those campuses (Merced, Riverside, and Santa Cruz) to complete by April 2018, the Auditor to date especially far from the target . deems one as fully implemented and another UC Developed Plans for Santa Cruz and as partially implemented . UC indicates that it is Riverside Campuses to Increase Transfer continuing to work on implementing all of the Enrollment. Due to concerns that the Riverside recommendations . and Santa Cruz campuses would face the greatest • Transfer Enrollment. Some uncertainty exists challenge in boosting transfer enrollment to meet the whether two campuses (Riverside and Santa 2017-18 budget condition, each campus developed Cruz) will attain the expected freshman-to-transfer a strategic plan to attain the 2-to-1 ratio . The plans ratio . Below, we describe the expected ratio and are similar . Both plans aim to increase outreach efforts UC’s efforts thus far to attain it . to community colleges . Riverside, for example, plans to increase recruitment visits to its nearby community UC Has Had Aspirational Goal of Meeting colleges as well as seven other community colleges Freshman-to-Transfer Ratio. Consistent with the with historically high transfer rates to UC . Riverside state’s Master Plan for Higher Education, which also plans to reach out to transfer students applying to envisions students transferring from community Figure 16 2017-18 Budget Linked $50 Million With UC Meeting Numerous Expectations By May 2018, the University of California must demonstrate it has made a good faith effort to achieve the following expectations: 9 Senior Management Compensation. Adopt a policy that does not provide supplemental retirement payments for any newly hired senior managers. 9 Activity-Based Costing. Complete activity-based costing pilot program currently underway at the Riverside campus and implement pilots at two more campuses in three departments each. (The purpose of activity-based costing is to identify program- and course-level costs of providing instruction and other services to students.) 9 Budget Transparency. Beginning with 2018-19, report to the legislative education policy and budget committees on (1) all revenues and expenditures, including carryover funds; and (2) UC’s systemwide and presidential initiatives, including a full description of each program, the sources of revenue, and explanation of how the programs further the mission of the university. 9 State Auditor Recommendations. Implement the State Auditor’s recommendations regarding the UC Office of the President’s budget practices, staffing levels, and compensation policies. 9 Freshman-to-Transfer Ratio. Enroll at least one entering transfer student for every two entering freshmen for the 2018-19 academic year at every campus except Merced and San Francisco. 20 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET CSU San Bernardino in an effort to reduce enrollment specifically indicated that UC could demonstrate good pressures on that campus . In addition to ramping up faith effort in this area by entering into a memorandum outreach efforts, both UC campuses plan to review of understanding with the CCC Chancellor’s Office their course articulation agreements with community by May 1, 2018 . In conversations with our office, colleges . Additionally, both campuses plan to review UC indicated that it is working on implementing the their transfer student admission requirements and recommendation . potentially admit more lower-division transfer applicants A Couple of Options to Consider if UC Does or certain students who have not completed all of their Not Meet Transfer Condition. Were UC to fall short pre-major course requirements . of achieving the 2-to-1 transfer ratio in 2018-19, the UC Also Planning Systemwide Efforts to Legislature could consider adopting a systemwide Better Streamline Transfer Process. These efforts target next year instead of campus-specific targets . A include (1) establishing an agreement with the CCC systemwide approach would give UC greater flexibility Chancellor’s Office to share contact information for to increase transfer enrollment at campuses where the students deemed transfer ready, (2) increasing outreach demand is highest . Additionally, we believe UC could efforts to community college counselors and students, continue working on simplifying the transfer process for and (3) exploring whether UC could better align its students, especially by aligning its transfer admissions existing transfer pathways with the associate degree for and lower-division requirements with the ADT . Better transfer (ADT) . alignment in this area would help transfer students Administration Has Asked for Additional Efforts. better plan for their coursework while at community In a December 2017 letter from the Department of colleges and complete their upper-division studies at Finance to UC, the department indicated that it thought UC more efficiently . UC’s plans were reasonable but additional effort was warranted . In particular, the Department of Finance noted that UC could do more to align its existing transfer pathways with the ADT . The department Figure 17 Three Campuses Far From Meeting Transfer Enrollment Target Ratio of Resident Freshman to Transfer Students, 2016-17 10 9 8 7 6 5 4 3 Target Ratio 2 1 Merced Riverside Santa Santa Systemwide Irvine Berkeley San Los Davis Cruz Barbara Diego Angeles www.lao.ca.gov 21 analysis full gutter 2018-19 BUDGET KEY COST DRIVERS for faculty, staff, and administrators accounts for over 80 percent of UC’s core budget . Legislature Has Key Decisions to Make UC Regents Set Compensation Policies and Regarding UC Cost Increases. As we have noted in Determine Compensation Levels. At UC, most past analyses, the Legislature faces two key decisions faculty, as well as managers and other administrative regarding UC’s budget each year . The first decision staff, are not represented by employee unions . The regards which proposed cost increases are acceptable . remaining employees (such as health care workers Typically, the Legislature gives first priority to covering at UC’s five medical centers; graduate student cost increases needed to maintain existing services . teaching assistants; and clerical, custodial, and other At the universities, the largest of these costs relate to support staff) are represented by 13 systemwide compensation and enrollment . After addressing these and 14 campus-specific collective bargaining units . base issues, the Legislature then typically considers Cost increases resulting from collective bargaining proposals for program expansions or new programs . agreements, salary increases for nonrepresented Legislature Also Faces Key Decisions About employees, and the university’s employment benefit How to Cover Those Cost Increases. After deciding programs are funded from within UC’s support budget . which cost increases to support, the second decision By comparison, for most state agencies, the Legislature regards how to fund them . Traditionally, UC cost exerts more direct control over compensation policies increases have been implicitly shared between the state and associated costs . Notably, state law provides (through budget augmentations), resident students guidance on health benefits, pension benefits, and and their families (through tuition increases), and other other employment and post-employment benefits fund sources (such as nonresident students) . Under available for state employees . State law also requires the Governor’s proposal, most of UC’s increase, after collective bargaining agreements between the state and factoring funds from nonresident students and other employees to be ratified by the Legislature before going redirections, would be covered by the state . Though into effect . the Legislature could choose to have the state bear the UC Planning 3 Percent to 4 Percent full effect of approved cost increases, it alternatively Compensation Increases. UC’s preliminary budget could consider sharing any cost increases about plan assumes 3 percent general faculty salary increases evenly between the state and nonfinancially needy ($83 million) . It assumes an average salary increase of students . (The state provides full tuition coverage for 3 .6 percent across all its represented employee groups financially needy students .) Such an approach would ($20 million) . Additionally, UC budgets for benefit cost recognize the notable public and private benefits of a increases, including employee health, retiree health, and UC education . pension contributions . Legislature Faces Three Key Cost Areas. To UC Faculty Salaries Below Average of Traditional assist the Legislature in setting its UC funding priorities Comparison Institutions. Historically, UC has used for the budget year, we analyze three proposed cost compensation data from a group of eight research increases: (1) salary increases for faculty and staff, universities to gauge the competitiveness of its (2) enrollment growth, and (3) UC’s plan for academic faculty compensation . The group includes four private quality initiatives . Throughout our analysis, we do not institutions (such as Stanford and Harvard) and four assume fundamental changes to the way UC delivers public flagship institutions (such as the University of instruction or runs its operations . If UC found new ways Michigan and the University of Virginia) . As Figure 18 of instructing and operating that substantially reduced shows, average salaries for full professors at UC are costs, these savings could be redirected to funding below the average of these eight institutions but above desired cost increases . the average of the four public comparison institutions . Salaries for associate and assistant professors compare Compensation similarly . In its preliminary budget plan, UC expresses Employee Compensation Is UC’s Largest concern that campuses face increasing difficulty Expense. Similar to most state agencies, employee competing with these comparison institutions to attract compensation is UC’s largest cost . Compensation and retain high-quality faculty . 22 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET Salaries Remain Competitive Relative to Public Fund Enrollment Growth. Figure 19 (see next page) Research Institutions. Comparing UC salaries to shows how UC proposes to achieve the $15 million in a small number of relatively expensive private and redirected resources intended to support enrollment public research institutions may not accurately reflect growth . Of this amount, $8 million would come the broader academic market in which UC campuses from reductions to UCOP’s budget . The remaining compete for faculty . To provide a broader picture of funds would come from other sources, including: UC’s labor market, we use federal data to estimate the (1) redirected lottery funds ($3 million); (2) savings, average salary of faculty at 73 public institutions around according to UC, by providing certain systemwide the country that conduct a similar level of research as programs a smaller budget increase than otherwise UC . Figure 18 shows that UC professors make notably planned for 2018-19 ($2 .5 million); and (3) eliminating higher average salaries than the average across all of certain programs budgeted at certain campuses the 73 public institutions with intensive research . ($1 .5 million) . Overall Redirection Plan Is a Reasonable Enrollment Growth Starting Point. Overall, we think UC’s proposed list is Last Year’s Budget Set 2018-19 Enrollment a reasonable starting point, as UC met with legislative Target. The 2017-18 budget set an expectation for UC staff throughout the fall and identified savings sufficient to enroll 1,500 more undergraduate resident students in to support the state share of the new enrollment . 2018-19 over the 2017-18 level . In meeting this target, While we believe the redirections are reasonable for UC was to enroll at least one new transfer student for 2018-19, we note that the identified savings are very every two new freshmen . That is, at least 500 of the modest . During spring budget hearings, the Legislature additional 1,500 students were to be new transfer may want to consider whether such a plan meets students . the Legislature’s intent to have the university more UC to Support Enrollment Growth From fundamentally revisit its cost structure . Redirected Funding. The 2017-18 budget did not designate additional funding to support the Figure 18 additional enrollment in 2018-19 . UC Faculty Salaries Below Traditional Comparison Instead, the budget directed UC Institutions but Higher Than Comparable Public Institutions to report by December 1, 2017 on Average Salary of General Campus Full Professors, 2016-17 (In Thousands) existing programs budgeted at $200 UCOP from which monies could be redirected to support the enrollment 190 growth . UC was expected to 180 consult with legislative staff and 170 the Department of Finance in the 160 summer and fall regarding the 150 possible changes . The budget 140 also stated an expectation that 130 enrollment costs be shared and 120 UC’s cost structure reviewed . This process was designed to give 110 legislative staff an opportunity 100 Traditional UC Public Comparison All Public to provide input on the possible Comparison Group Group Only High-Research programmatic reductions and allow Institutions the Legislature to finalize funding Number of 8 9 4 73 decisions in the 2018-19 budget . Campuses UC Identifies $15 Million That Could Be Redirected to www.lao.ca.gov 23 analysis full gutter 2018-19 BUDGET Recommend Conforming Adjustment to UCOP enrollment levels for 2019-20, the Legislature likely Line Item. Regardless of the Legislature’s specific will want to consider the results of the state’s recent funding decision for enrollment growth in 2018-19, we eligibility study, which found UC likely is drawing from recommend any programmatic reductions to UCOP somewhat beyond its Master Plan pool . be reflected in the office’s line item in the budget . That Academic Quality is, were the Legislature to authorize UC’s proposed enrollment funding plan, we recommend it subtract UC Cites Four Possible Uses of Academic $8 million from UCOP’s appropriation (bringing the line Quality Funds. Under UC’s proposal, campuses would item down to $341 million) and transfer the funding to have flexibility to allocate a $50 million augmentation the campuses . based on campus-specific priorities . Though the UC Planning for More Enrollment Growth in funding would be unrestricted, UC cites four examples 2018-19. UC’s draft budget plan assumes growth of how campuses might use these funds: in resident undergraduate students of 2,000 FTE students—500 more than expected in the 2017-18 budget . UC indicates that this additional growth is intended to Figure 19 respond to requests the Legislature UC’s Proposed Redirection Plan for Funding made after the enactment of the 2018-19 Enrollment Growth budget . In addition to the higher growth in resident undergraduate (In Millions) enrollment, UC plans to grow Funding graduate enrollment in 2018-19 by Reductions to Office of the President 500 FTE students (both resident and UC Presidential Initiatives Fund $2.0 nonresident) over the 2017-18 level . Contingency budget (50 percent reduction) 2.1 To cover the costs of the resident Professional services budget (5 percent reduction) 1.5 undergraduate and graduate Chancellor’s House maintenance 0.5 enrollment growth, UC assumes in its Unpaid merit awards 0.5 budget plan that the state provides Administrative fund for campus chancellors 0.4 an additional $10 million ongoing Travel and meetings budget (10 percent reduction) 0.4 General Fund beyond the Governor’s Star Award Policy 0.3 budget . Outreach and membership activities 0.2 Recommend Legislature Administrative fund for Office of the President (60 percent reduction) 0.1 Consider Enrollment Expectations Subtotal ($8.0) for 2019-20 Academic Year. The Growth in lottery funds $3.0 Legislature in recent years has Reduced growth to campus programs established enrollment expectations Agricultural Experimental Stations $1.4 one year after the budget year to Neuropsychiatric Institutes 0.5 better align the timing of budget Scripps 0.4 decisions with UC’s admissions Mental Health Teaching Support 0.2 calendar . We recommend the Medical Investigation of Neurodevelopmental Disorders (MIND) Institute 0.1 Legislature continue this practice Subtotal ($2.5) and focus its attention toward Eliminated campus programs enrollment growth for 2019-20 . California Program on Access to Care $0.9 Whereas UC’s admission decisions Health Initiatives of the Americas 0.3 for 2018-19 largely have already US-Mexico Social Security and Tax Policy 0.2 Graduate Fellows Program 0.1 been made, the Legislature still could Subtotal ($1.5) influence UC’s enrollment levels for 2019-20 . In considering possible Total $14.9 24 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET • Faculty Hiring. UC would like to hire additional • Increasing Undergraduate Instructional faculty to reduce its student-to-faculty ratio . In Support. In its budget plan, UC cites several 2015-16, the ratio was 21 students for every areas campuses might choose to provide faculty member . By comparison, the ratio was additional funding, including replacing instructional 19 .5 in 2002-03 . According to UC, reducing the equipment, augmenting funding for instructional student-to-faculty ratio would allow campuses technology and libraries, and providing funding for to offer smaller class sizes and expand course facility maintenance . offerings . UC Proposal Raises Concerns. Below, we • Faculty Start-Up Costs. To attract its first-choice summarize our key concerns . candidates, UC campuses typically offer new faculty hires certain funds to help foster • Student Outcomes Improving. As Figure 20 their research . These start-up costs include shows, freshman graduation rates—one key equipment, staff support, and renovation of measure the Legislature uses to examine UC laboratory space . UC argues that campuses performance each year—has increased over could use the increased funding for start-up costs the last two decades . Notably, graduation rates to attract these first-choice candidates . have not declined even as UC has increased its • Increase Graduate Student Stipends. Doctoral student-to-faculty ratio . students typically receive financial aid to cover • Some Concerns Could Be Addressed From their tuition, fees, and all or a portion of their living Other Spending Increases. In addition to expenses . The difference between a doctoral the proposed $50 million for academic quality, student’s total grant aid and tuition and fees is UC’s budget plan includes $32 million for a known as a “net stipend .” UC estimates that while 2 .5 percent increase for general operations and the net stipend it offers to resident Californians equipment . These funds would be available for is competitive to other institutions, net stipends equipment replacement, facility maintenance, remain uncompetitive for nonresident students . and other priorities identified by the university . UC argues that increasing net stipends for The Legislature also may wish to address any nonresident students would allow it to better concerns related to attracting and retaining faculty attract top graduate students . as part of its compensation increase decisions . Figure 20 Graduation Rates Steadily Increasing at UC 90% 80 70 60 50 40 30 20 10 1997 2000 2003 2006 2009 2012a 1997 2000 2003 2006 2009 2012 2014a Entering Freshman Cohort Entering Transfer Cohort Four year Six year Two year Four year a Six-year rate not yet available for freshman cohort and four-year rate not yet available for transfer cohort. www.lao.ca.gov 25 analysis full gutter 2018-19 BUDGET • Little Accountability Over Use of Funds. classroom and office space would vary at each project . Because campuses may allocate the funds in any At Riverside, most of the state-supportable space way they see fit, the Legislature would have little would be for classrooms (89 percent) . By comparison, information over how these funds are actually a majority of the space at San Diego (69 percent) used . and Santa Cruz (60 percent) would be for faculty and staff office space . UC does not provide a specific Recommend Legislature Signal Program Is a breakdown of space for the Davis project but indicates Lower Priority. Given the issues we raise above and the new building would have 2,000 classroom seats the many other existing cost pressures facing UC and as well as study space . In addition to constructing the state, we recommend the Legislature consider state-supportable space, some of the projects would funds for academic quality initiatives to be a lower construct nonacademic space, such as student priority for 2018-19 . Were the Legislature interested recreation rooms, that would be supported by nonstate in providing funds for more targeted purposes, we funds . In its proposals, UC notes that the San Diego, recommend the Legislature specify the use of the Riverside, and Santa Cruz campuses would relocate funding in the budget act . existing administrative and advising services of certain academic departments into the new buildings . FACILITIES Three Projects Are for Renovations at Two Campuses ($83 Million). Berkeley proposes to make In September, UC submitted a list of nine capital seismic corrections to one facility, and San Francisco outlay projects proposed for 2018-19 . Consistent with proposes two projects to do seismic and life-safety state law, UC would fund these projects by issuing renovations for one building . Previous phases of two of bonds and paying the associated debt service from its the projects (Berkeley and the life-safety renovations at state General Fund support . In order to use its General San Francisco) were approved by the state in 2017-18 . Fund support for debt service payments, state law requires UC to receive approval from the Department $35 Million for Deferred Maintenance of Finance on each of the projects, following legislative Systemwide. UC is proposing to use bond funds to review . Under the review process, the department undertake $35 million in deferred maintenance projects . is to submit a preliminary list of approved projects The budget year would mark the fourth consecutive to the Legislature by February 1, with the final list year the state has provided or authorized funding submitted no sooner than April 1, 2018 . The budget specifically for deferred maintenance at UC . In 2017-18, committees are to review the proposals during the the state also approved $15 million for UC to fund a interim . In the following section, we provide an overview team of experts to visit each campus and assess the of the projects and their associated costs, assess the current condition of academic facilities . One goal of the proposals, and provide recommendations . assessment is to attain a more accurate estimate of UC’s deferred maintenance backlog . Overview $30 Million to Expand the Northern Regional Library Facility. The facility, which is located in UC Proposes Nine Projects Totaling $301 Million Richmond, is one of two libraries (the other is in in State Costs. Figure 21 lists the nine projects . In Los Angeles) that provides overflow storage to UC addition to bonds supported by state funds, UC would campuses . The two libraries together store around use nonstate funds to supplement funding for six of 14 million of UC’s 40 million volumes . The two facilities the nine projects . Accounting for all proposed state currently have combined capacity of around 15 million and nonstate funds, the nine projects would cost items . Based on historical growth of UC’s collections, $324 million in 2018-19 (for specified phases) and UC estimates the two facilities will reach capacity $464 million total (including all phases) . sometime between 2018 and 2022 . The proposed Four Projects Involving New Space project would add 26,610 gross square feet to the ($153 Million). The San Diego, Davis, Riverside, and northern facility, which would increase total capacity of Santa Cruz campuses each propose constructing the two regional libraries to around 18 million volumes new classrooms, faculty offices, and other academic (an increase of around 20 percent) . space to accommodate enrollment growth . The mix of 26 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET Projects Would Cost $22 Million in Annual Debt its justification for its four 2018-19 expansion projects, Service. UC estimates it would begin paying debt however, UC does no systemwide analysis, instead service on the projects in 2020-21, with debt service citing locally developed campus goals as the impetus costs rising to $22 million annually by 2023-24 . UC for the expansions . anticipates requesting authority for the construction Overall Facility Utilization at UC Is Below phase of the Santa Cruz project in 2019-20, which it Legislative Guidelines. Before constructing new estimates would have an additional debt service cost facilities, the Legislature traditionally has considered of $3 .4 million annually . Including costs from previously whether UC is maximizing the use of its existing approved projects, UC estimates its debt service costs facilities . The Legislature historically has gauged would rise to $252 million in 2024-25 and remain facility utilization according to statutory guidelines around that level in subsequent years . As a share of its established for classrooms and teaching laboratories . General Fund support, UC estimates its debt service (The box on page 28 describes these guidelines .) In costs would rise to 6 .3 percent . Under state law, this fall 2016, UC systemwide used its classroom space at debt service ratio cannot exceed 15 percent . This 86 percent of the legislative guidelines . While UC used statutory limit excludes payments UC makes annually its teaching laboratories above the legislative guidelines on general obligation bond debt . Including those (105 percent), these spaces represent a small portion payments, total debt service costs at UC would be of instruction at UC (around 10 percent in fall 2016) . $416 million in 2024-25, around 10 percent of what UC As Figure 22 shows (see next page), much of the forecasts its General Fund support to be that year . underused classroom space is located at Berkeley and Los Angeles, the campuses with the two largest Assessment student enrollments . Summer enrollment also is below UC Has Not Planned for Enrollment Systemwide. legislative expectations . In the summer 2017 term, As a statewide university system that manages summer enrollment was 20 percent of 2016-17 enrollment across all of its campuses, we believe fall-through-spring enrollment . Under existing law, the UC should plan for enrollment systemwide when state has established an expectation that UC attain a assessing need for additional space at campuses . In summer enrollment ratio of 40 percent . Figure 21 University of California 2018-19 Capital Outlay Request (Dollars in Thousands) 2018-19 All Years Campus Project Phases State Cost State Cost Total Cost Systemwide Deferred maintenance C $35,000 $35,000 $35,000 Systemwide Northern Regional Library Facility, phase 4 C,Ea 30,000 30,000 32,500 expansion San Diego New Ridge Walk Complex Ca 50,000 50,000 117,409 Davis New Teaching and Library Complex Ca 50,000 50,000 66,000 Riverside New Student Success Center P,W,C,Ea 50,000 50,000 60,255 Santa Cruz New Kresge College academic building Wa 2,800 50,000 53,000 San Francisco Health Sciences Instruction and Research Ca 37,000 37,000 47,432 seismic renovation Berkeley Giannini Hall seismic renovation Cb 35,950 39,200 39,200 San Francisco Health Sciences Instruction and Research Cb 10,000 13,000 13,000 life-safety renovation Totals $300,750 $354,200 $463,796 a Previous phases funded by nonstate funds. b Previous phases approved and funded by state. C = construction; E = equipment; P = preliminary plans; and W = working drawings. www.lao.ca.gov 27 analysis full gutter 2018-19 BUDGET Figure 22 Facility Utilization Varies Notably by Campus Classroom and Teaching Laboratory Utilization Compared to Legislative Guidelines, Fall 2016 140% 120 100 80 60 Classrooms 40 Teaching Laboratories 20 Legislative Guidelines San Santa Riversidea Merced Davisa Irvine UC Santa Los Berkeley Diegoa Cruza Average Barbara Angeles a Campuses have submitted proposals for new facilities. Costs Vary Notably for New Facility Projects. As Diego campus . Even costs for similar spaces would Figure 23 shows, construction costs would vary from vary by project . Classroom space at Riverside, for $1,400 per assignable square foot at the Santa Cruz example, would cost around double for that same type campus to $688 per assignable square foot at the San of space at San Diego . In conversations with our office, Facility Utilization Guidelines The Legislature’s facility utilization guidelines have three components: (1) how often rooms are available for use, (2) how often rooms are actually used, and (3) how often seats in a room are filled . The figure below shows the guidelines for classrooms and teaching laboratories . Classrooms are to be available for use from Monday to Friday, 8 a .m . to 10 p .m . (70 hours per week) and actually used 75 percent of that time (53 hours per week) . About two-thirds of classroom seats are to be filled throughout the week (equating to 35 seat hours per week) . Teaching laboratories have lower expectations regarding seat hours per week . Legislative Guidelines for Facility Use at UC Room Availability Room Usage Seat Occupancy Room Category Hours/Week Percent Hours/Week Percent Hours/Week Classrooms 70 75% 53 67% 35 Teaching Laboratories Lower division 45 61 28 85 23a Upper division 45 49 22 80 18a a UC does not classify its laboratories as lower or upper division. It instead uses an average of the two guidelines (20 hours per week). 28 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET UC noted several general reasons Figure 23 why costs might differ across Construction Costs Vary Notably by Proposed Project projects . For example, certain Cost Per Assignable Square Foot for New Facility Projects market conditions in a campus’s region, such as a labor shortage, $1,400 could increase costs . Projects that require extensive site development 1,200 tend to cost more than projects that can use a site’s existing foundation 1,000 and related infrastructure . While 800 these general concepts are reasonable, UC has not provided 600 specific explanations regarding the wide variation in proposed project 400 costs this year . Segment Lacks Plan 200 to Eliminate Maintenance Backlog and Improve Ongoing Santa Cruz Riverside Davis San Diego Maintenance Practices. Though UC is currently studying the condition of its existing facilities, we believe the university would benefit from: (1) a long-term funding State Archives in our recent publication State Archives: plan to retire its backlog, and (2) a review of its current Limited Space for a Growing Collection (2018). scheduled maintenance practices (such as setting Recommendations funds aside when new systems are installed) so as to avoid the re-emergence of future maintenance Recommend Legislature and UC Develop backlogs . Without both plans in place, the Legislature Long-Term Enrollment Plans. The Legislature faces cannot have confidence that UC’s capital program is key decisions in 2018-19 regarding freshman eligibility being well managed and maintained . at UC . These decisions will help shape enrollment UC Library Holdings Continuing to Grow. About growth and associated space needs for the university . every ten years, the state has provided funds to expand We recommend the state develop eligibility policies the Northern Regional Library to accommodate UC’s and set enrollment expectations prior to authorizing growing collections . The Legislature faces this decision the construction of new academic space . After making again, as UC anticipates its collections will grow by these determinations, we recommend the Legislature 300,000 items annually over the next several years . direct UC to develop conforming systemwide While adding more space has been the Legislature’s long-range enrollment and capital outlay plans . UC’s traditional approach to addressing expanding library systemwide plans should include (1) enrollment collections, opportunities now exist to store documents projections based on anticipated demographic changes in a digital format rather than storing as physical in the state and eligibility criteria, (2) strategies to volumes . In recent years, UC has tried to expand its expand the use of existing facilities across the system— digital holdings through the California Digital Library, a such as directing enrollment to campuses with systemwide program housed at UCOP . Expanding such additional capacity and increasing summer use—before efforts could reduce some of the need for additional adding new space, and (3) clear justification for the space . Furthermore, we note that such decisions need to add space within the system . are not unique to UC . For example, we raise similar Recommend Legislature Direct UC to Report questions in our analysis of capacity issues at the on Cost Variation in Spring Hearings. For any UC construction project the Legislature would like to www.lao.ca.gov 29 analysis full gutter 2018-19 BUDGET consider in 2018-19, we recommend it direct UC plan for eliminating the backlog of projects, including to report on construction costs per square foot and proposed funding sources; and (2) a plan for how to explain any variation in these costs for the same type of avoid developing a maintenance backlog in the future . space across campuses . To the extent UC is unable to Consider Exploring Digital Options for UC provide sufficient justification, we recommend the state Libraries. We recommend the Legislature direct UC to withhold authorization of the projects . report at spring hearings on its current efforts to reduce Recommend Legislature Require UC to Develop pressure for new physical library storage space . As part Comprehensive Maintenance Plan. To address of its review, the Legislature could ask UC to identify concerns regarding maintenance practices at UC, we current digital collections and efforts to convert physical recommend the Legislature adopt budget language items into digital format . The Legislature also could ask requiring UC to develop a long-term maintenance plan . UC to do a reassessment of the need to maintain the The plan should include (1) a multiyear expenditure size of its existing physical library collections . CALIFORNIA STATE UNIVERSITY In this section, we first describe the Governor’s for CSU pension costs a few years ago . Under the budget plan for CSU and outline the basic choices the new policy, the state provides direct funding for CSU’s Legislature faces regarding CSU’s budget . We then pension costs attributed to its 2013-14 payroll level, assess several specific components of CSU’s budget but CSU is responsible for funding any pension costs and make associated recommendations . beyond that level using its unrestricted funds .) Of the earmarked augmentations, $181,000 (4 .4 percent) is OVERVIEW for CSU’s Center for California Studies . This increase includes (1) $100,000 in new General Fund support Under Governor’s Proposal, CSU Budget for the Education Policy Fellowship Program; and (2) Is $10.4 Billion From All Sources in 2018-19. $81,000 for a 2 .5 percent cost-of-living adjustment to As Figure 24 shows, CSU’s total budget would executive, legislative, and judicial fellow stipends . increase by $93 million (0 .9 percent) over the revised Governor Signals Desire for No Tuition Increases 2017-18 level . Of total CSU funding, two-thirds in Budget Year, Sets Expectations for CSU Spending ($7 .1 billion in 2018-19) comes from core funds—a Priorities. In the Governor’s Budget Summary, the combination of state General Fund, student tuition and Governor expresses a desire for CSU to reduce its fees, and other state funds (primarily lottery revenue) . cost structure and keep college affordable for students . CSU also receives $1 .4 billion in federal funds . In Accordingly, the Governor’s budget does not assume addition, CSU operates various campus enterprises, any increase in tuition at CSU . The Governor’s Budget such as student dormitories and parking facilities, which Summary also indicates the Governor’s desire for CSU to are estimated to generate $1 .9 billion in associated use a portion of his proposed unrestricted base increase revenue in 2018-19 . for the Graduation Initiative . The Governor’s budget does Governor’s Budget Includes $3.9 Billion in not establish an enrollment target for CSU or earmark General Fund Support for CSU in 2018-19. As any new funding for enrollment growth . Figure 25 shows, the Governor proposes a $92 million At Governor’s Proposed Funding Level, (2 .4 percent) ongoing unrestricted increase for CSU— CSU Would Prioritize Basic Cost Increases and the same dollar amount the Governor proposes for Employee Compensation. CSU indicates it would use UC . In addition, the Governor’s budget provides a the Governor’s proposed $92 million unrestricted base total of $47 .1 million in earmarked funding, primarily increase to address two funding priorities—(1) basic to support increased pension costs and higher retiree cost increases (such as higher health care premiums health benefit costs . (In an effort to encourage CSU to for current employees and additional pension costs consider pension costs as part of its new hiring and on payroll exceeding the 2013-14 level) and (2) faculty salary decisions, the state changed how it budgeted 30 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET Figure 24 California State University Funding by Source (Dollars in Millions) Change From 2017-18 2016-17 2017-18 2018-19 Actual Revised Proposed Amount Percent Core Funds General Fund Ongoinga $3,454 $3,719 $3,856 $137 3.7% One time 110 47 2 -45 -96.3 Subtotals ($3,564) ($3,765) ($3,858) ($93) (2.5%) Tuition and Feesb $3,077 $3,168 $3,168 — — Other State Fundsc 50 53 53 — — Totals $6,691 $6,986 $7,078 $93 1.3% Other Funds Federal Funds $1,352 $1,400 $1,400 — — Other CSU Fundsd 2,273 1,871 1,871 — — Totals $3,624 $3,271 $3,271 — — Grand Totals $10,315 $10,257 $10,350 $93 0.9% FTE Studentse 401,706 403,448 403,448 — — Core Funding Per Student $16,656 $17,315 $17,544 $229 1.3% a Includes funding for pensions and retiree health benefits. b Includes funds that CSU uses to provide tuition discounts and waivers to certain students. In 2018-19, CSU would provide $701 million in such aid. c Includes lottery funds and, beginning in 2017-18, $2 million ongoing from the State Transportation Fund for transportation research. d Includes funds such as housing fees, parking fees, and extended education charges. e One FTE represents 30 credit units for an undergraduate and 24 credit units for a graduate student. Includes resident and nonresident students. FTE = full-time equivalent. and staff compensation increases . Contrary to the of Trustees could vote on the tuition proposal at its May Governor’s message, CSU indicates it would not be 2018 meeting . If approved, this would be the second able to increase funding for the Graduation Initiative . straight year of tuition increases at CSU . (Prior to last CSU maintains that the Governor’s proposed funding year, tuition had been flat since 2011-12 .) level is insufficient to cover its key cost increases, as explained in the box on page 32 . Figure 25 CSU Considering a Tuition Increase for 2018-19. California State University Given that CSU believes the funding included in the General Fund Changes Governor’s budget is insufficient to address its budget priorities, CSU is considering a tuition increase . Under (In Millions) the proposal drafted by the Chancellor’s Office, 2017-18 Revised Funding $3,765.4 tuition for resident undergraduates would increase Unrestricted base increase (2.4 percent) $92.1 by 4 percent . Tuition for nonresidents and resident Pension adjustment 24.9 graduate students would increase by about 6 percent . Retiree health benefits adjustment 20.3 The proposed increase would generate about Open educational resourcesa 1.7 $70 million in additional net revenue, which, when Center for California Studies 0.2 Remove one-time funding provided in -46.6 combined with the Governor’s proposed $92 million prior years unrestricted General Fund base increase, would Total Changes $92.5 allow CSU to cover $31 million in identified basic 2018-19 Proposed Funding $3,858.0 cost increases and all $122 million in compensation a Funding authorized pursuant to Chapter 633 of 2015 (AB 798, cost increases—leaving about $9 million for the Bonilla). Graduation Initiative or other CSU priorities . The Board www.lao.ca.gov 31 analysis full gutter 2018-19 BUDGET CSU Proposes to Use $13 Million in Existing Comments Core Funds for Five Capital Outlay Projects. CSU’s Legislature Has Key Choices to Make on CSU 2018-19 capital outlay request includes 27 projects Costs . . . As with UC, the Legislature faces key totaling $1 .4 billion in estimated costs ($1 .2 billion decisions each year regarding cost increases at CSU . from university revenue bonds and $189 million Typically, the Legislature gives first priority to covering from campus reserves or other funds) . CSU plans to cost increases needed to maintain existing services . finance five of these projects in the budget year using At the universities, the largest of these costs relate to existing core funds . In 2016, CSU was able to “free compensation and enrollment . After addressing these up” $50 million from its base budget by restructuring base issues, the Legislature then typically considers some debt and retiring other debt from completed proposals for program expansions or new programs . projects . The $50 million enables CSU to finance a . . . And How Those Costs Should Be Covered. total of approximately $750 million in projects over a After making decisions about which CSU cost multiyear period . In 2018-19, CSU proposes using increases to support, the Legislature has to decide about $13 million of that freed-up funding to finance how to cover those cost increases . In addition to state $201 million in costs for its five identified projects . In funding, student tuition constitutes an important source addition, CSU is requesting $15 million in new state of funding for CSU . Similar to UC, state General Fund funding to finance an extra $225 million relating to and student tuition revenue each makes up roughly half five other facilities projects . CSU has no immediate of CSU’s core operating budget . Absent an increase in plans to fund 15 of the remaining 17 projects on its student tuition revenue, this means that any increase 2018-19 capital outlay list . The Chancellor’s Office in General Fund support results in an overall increase indicates that the other two projects could be funded in to CSU’s core budget of about half that amount . For the budget year with campus funds or other sources . example, a 3 percent General Fund increase equates Though not explicitly identified in the Governor’s to about a 1 .5 percent overall increase in CSU’s core budget, the administration likely will approve all or budget . Though the Legislature could choose to almost all of the 27 requested projects later this spring have the state bear the full effect of approved cost (by the statutory deadline of April 1) . increases, it alternatively could consider sharing any cost increases about evenly between the state and nonfinancially needy students . (The state provides full CSU Requesting Far More Funding Than Proposed by Governor Whereas the Governor’s budget includes a $92 million increase for the California State CSU’s Spending Plan Request for 2018-19 University (CSU), the system is requesting a $283 million increase—$191 million higher (In Millions) than the Governor’s proposed level . Of the Requested Increase $283 million, CSU would like $263 million Compensation $122 to come from the state General Fund and Graduation Initiative 75 $20 million to come from higher tuition revenue Basic costs 31 resulting from 1 percent enrollment growth . As Enrollment growth (1 percent) 40 the figure shows, the largest single component Facilities projects 15 of CSU’s spending plan is $122 million for faculty Total $283a and staff compensation increases . CSU also is a Of this amount, CSU requests that $263 million come from the state requesting funding for its Graduation Initiative, General Fund, with the remaining $20 million generated by tuition revenues from 1 percent enrollment growth. basic cost increases, enrollment growth, and capital outlay projects . 32 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET tuition coverage for financially needy students .) Such Faculty Association (CFA), which represents more an approach would recognize the notable public and than 25,000 CSU faculty, librarians, counselors, and private benefits of a CSU education . coaches . In November 2017, the Trustees ratified a contract with CFA that provides a 3 .5 percent general KEY COST DRIVERS salary increase in November 2018, followed by a 2 .5 percent increase in July 2019 . In January 2018, the Several Key Cost Drivers Affecting CSU’s Trustees ratified an agreement with CSU’s largest staff Budget. To assist the Legislature in setting its CSU union (CSU Employees Union), which represents more funding priorities for the budget year, we assess several than 15,000 employees across four bargaining units . key CSU cost drivers below . Specifically, we examine Under the agreement, represented employees receive compensation, enrollment, the Graduation Initiative, and a 3 percent salary increase retroactive to 2017-18 and facilities . We also analyze the Governor’s proposal for 3 percent increases in both 2018-19 and 2019-20 . The the Education Policy Fellowship Program . Throughout contract also provides each current full-time employee our analysis, we do not assume fundamental changes with a one-time $650 bonus (with part-time employees to the way CSU delivers instruction or runs its receiving a pro-rated bonus) . Of the remaining eight operations . If CSU were to find new ways of instructing bargaining units (which collectively represent less than and operating that substantially reduced costs, these one-quarter of CSU employees), two represented savings could be redirected to funding any desired cost groups have contracts in place through the end of increases . 2018-19 and six are in varying stages of negotiations or ratification by CSU . Taken together, CSU estimates Compensation that costs from all these contracts, coupled with a Compensation Is the Largest Component of planned 2 .5 percent salary increase for nonrepresented CSU’s Core Budget. Like other state departments and employees, would total $122 million in the budget year . agencies, salaries and benefits make up a significant Recent Faculty Salary Increases Outpacing share of CSU’s core budget (about 80 percent) . Inflation. The recently ratified CFA contract comes Unsurprisingly, compensation also accounts for the on the heels of a larger expiring agreement with the largest augmentation in CSU’s spending plan request . union . After extensive negotiations (and a near-strike by The Legislature has several compensation-related union members), in spring 2016 the Trustees ratified a issues to consider . contract through June 30, 2018 . Under that agreement, Board of Trustees, Not the Legislature, Approves faculty received a cumulative 10 .8 percent general CSU Collective Bargaining Agreements. For most salary increase effectively over a two-year period . departments and agencies in the state, the California Between that contract and the new agreement, faculty Department of Human Resources represents the will receive a cumulative general salary increase of Governor in labor negotiations between the state 17 .6 percent between mid-2016 and mid-2019 . Over and its employees . The resulting agreements must that same three-year time period, inflation (as measured be ratified by the Legislature before going into effect by the California Consumer Price Index) is expected and the state directly funds the associated costs of to increase by about 7 .5 percent . These annual salary the agreements . In the case of CSU, state law gives increases generally are higher than what state workers the Board of Trustees authority to negotiate collective and UC faculty are receiving . bargaining agreements . The Chancellor’s Office Study Suggests CSU Faculty Salaries Are represents the Trustees during these negotiations Generally Competitive With Peer Institutions and the resulting agreements must be ratified by the and Turnover Is Relatively Low. A 2015 analysis Trustees before going into effect . The Trustees are commissioned by the Chancellor’s Office found expected to manage the costs of these agreements that faculty salaries at CSU (which include tenured/ within CSU’s overall budget . tenure-track faculty and full-time lecturers) generally Trustees in Process of Finalizing Various were at or slightly above the average salaries of Agreements. The CSU system has 13 represented comparison institutions in other states . Salaries for employee groups . The largest group is the California full professors, however, were about 92 percent of www.lao.ca.gov 33 analysis full gutter 2018-19 BUDGET the average salary level at comparison institutions . should be tighten to reduce the share of students In addition, the Chancellor’s Office reported that that are eligible to enroll directly as freshmen . campuses generally have sufficient candidate pools and • Campus and Program Impaction. The are successful in making tenure-track hires . CSU also past several years CSU has reported denying found that average annual faculty turnover rates are admission to some freshman and transfer well below the national average . Given that the study applicants due to campus and program was conducted before the Trustees ratified the sizeable impaction . The nearby box provides background new faculty contacts discussed above, current CSU on this issue and recent legislative efforts to better faculty salaries likely are even more competitive with accommodate student applicants . comparison institutions . We encourage the Legislature to take into account all Enrollment of these factors when deciding on an overall enrollment level for CSU in the budget year . In addition, the state CSU on Track to Exceed Enrollment Target for could benefit from providing targeted enrollment growth 2017-18. The 2017-18 Budget Act set an expectation funding for two CSU graduate programs, as described for CSU to increase resident enrollment by 0 .7 percent below . (an additional 2,487 FTE students) over 2016-17 . Recommend Legislature Provide Targeted Based on preliminary enrollment data, campuses are on Enrollment Funding to Help Address K-12 Special track to exceed this target, with fall 2017 FTE student Education Staffing Shortages. As we discuss in our enrollment about 2 .7 percent (10,600 FTE students) companion report, Proposition 98 Education Analysis, higher than the previous fall . The Chancellor’s Office is California’s schools have experienced a longstanding attempting to identify the reasons why growth is coming shortage of special education staff . In addition to in so much higher than budgeted . The Chancellor’s several types of special education teachers, certain Office believes one reason is that existing students types of specialists (most notably, occupational are increasing their average unit load as a result of therapists and speech and language pathologists) are campuses adding course offerings using funds from the in particularly short supply . Our review finds that various Graduation Initiative . state and local factors likely contribute to staffing Several Factors for Legislature to Consider in shortages . As regards specialists, the shortage likely Deciding on Enrollment Growth. The Legislature has is due in part to the high cost of operating preparation at least three key factors to consider when deciding programs and the insufficient number of CSU upon a CSU enrollment target: enrollment slots . These factors end up constraining • Growth in High School Graduates. The number the number of specialists that enter the field each year . of high school graduates in the state is expected To address this issue, we recommend the Legislature to grow by 1 .8 percent in 2017-18 . This means provide CSU with targeted enrollment funding to admit that, all other factors staying the same, enrollment more students into its occupational therapy and speech demand for freshman slots in 2018-19 would and language pathology graduate programs . We think increase accordingly . High school graduates CSU likely could increase enrollment in these programs in 2018-19 are projected to decrease slightly by about 5 percent per year (or 45 FTE students in (0 .4 percent) . 2018-19), at a state cost in 2018-19 of approximately • Freshman Eligibility Pool. The state’s most $675,000 . recent eligibility study found that CSU currently is Graduation Initiative drawing from well beyond its Master Plan target level . Specifically, the study found CSU is drawing CSU Seeking to Improve Student Graduation from the top 41 percent of high school graduates Rates. Historically, CSU’s six-year graduation rates for rather than the top one-third . Going forward, incoming freshmen have been below 50 percent and its the Legislature will need to decide whether CSU four-year rates have been below 15 percent . To address should be permitted to continue drawing from its low graduation rates, CSU launched the Graduation such a large pool or whether admissions criteria Initiative in 2009 . CSU has set a goal to increase 34 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET Impaction—Developing Admissions Prioritization and Redirection Policies CSU’s Regional Role Established in Practice, Not in Statute. California’s Master Plan and current law do not specifically assign CSU a regional role within the state’s public higher education system . Historically, though, CSU campuses—through their admissions policies and other practices—have tended to focus on enrolling students from surrounding areas . Over the past several years, however, a certain CSU enrollment management practice known as “program impaction” has weakened that regional role . Program Impaction Limits Access to Place-Bound Local Applicants. When demand exceeds available enrollment slots, CSU can declare “impaction .” CSU has two types of impaction—campus and program . Under campus impaction, all local students who meet systemwide eligibility requirements are guaranteed admission to the campus . Nonlocal students, however, must meet stricter supplemental criteria . When a campus declares program impaction, by contrast, all applicants must meet supplemental admissions criteria . In other words, impacted programs do not have a local admissions guarantee (though local students typically are awarded extra eligibility points to help make them more competitive) . Whereas for decades CSU only had one campus with all programs impacted (San Luis Obispo), today six campuses have declared all (or virtually all) of their programs to be impacted . Program impaction may boost prestige at the campuses (by admitting higher-performing nonlocal students) but can make it difficult for eligible applicants—some of whom may be place-bound due to family or other obligations—to attend their local campus . CSU Required to Develop New Policy on Admissions Prioritization and Redirection. During the last legislative cycle, legislators expressed concern with CSU’s program-impaction practices . Legislators also expressed a desire for CSU to develop a process whereby all eligible but denied student applications are redirected to nonimpacted campuses or programs . (Currently, CSU only automatically redirects applicants who have an associate degree for transfer, as required by statute .) To address these issues, the 2017-18 Budget Act contained provisional language directing the Trustees to adopt a new systemwide policy that requires campuses to provide first priority for impacted programs to local students meeting minimum systemwide qualifications . The Trustees also must develop a policy to automatically redirect applications to nonimpacted campuses if a student is denied admission to an impacted program or campus . Both of these policies must be adopted by May 2018 . In January 2018, Chancellor’s Office staff presented draft proposals for both new policies . The Trustees are scheduled to vote on final policies at its March 2018 meeting . Draft Admissions Prioritization Policy Misses the Mark. We believe the Chancellor’s Office’s draft policy on admissions prioritization for local students falls notably short of legislative intent . The draft policy would not provide first priority to local applicants with minimum systemwide qualifications . Instead, the proposal merely requires every impacted program to provide some kind of admissions advantage to local students, which already is the current policy for most impacted programs . Under this draft policy, local students still would be subjected to supplemental admissions criteria . Redirection Policy Consistent With Legislative Intent. As regards the draft redirection policy, the current proposal appears to be much more in line with legislative intent . Under the policy, students who are not accepted at any of the campuses or programs to which they applied would be given an opportunity to select two nonimpacted campuses or programs to which to have their applications redirected . Upon receiving these alternative choices from a student, CSU would automatically transmit the application . (The draft policy is similar to CSU’s current policy for applicants with an associate degree for transfer who are redirected .) Recommend Legislature Signal to CSU That Proposed New Impaction Policy for Local Students Is Unsatisfactory. We recommend the Legislature signal to the Chancellor’s Office that the draft admission policy for local students is unacceptable . We recommend the Legislature direct CSU to draft a new policy that is consistent with the provisional language in the 2017-18 Budget Act. If the Legislature finds that the subsequent draft also fails to meet legislative intent, we recommend it specify in statute the new policy that campuses must follow . www.lao.ca.gov 35 analysis full gutter 2018-19 BUDGET six- and four-year graduation rates for first-time could have succeeded in college-level coursework . A freshmen to 70 percent and 40 percent, respectively, by growing amount of research is finding that a better way 2025 . The Graduation Initiative also seeks to increase to assess college readiness is to use multiple measures graduation rates for transfer students . In addition, (including data from students’ high school records) . CSU has a goal to eliminate differences in graduation To promote reform at CSU, the 2017-18 Budget Act rates for several groups of students, including those includes provisional language requiring the Trustees who are low income and first generation . Figure 26 to adopt by May 2018 new assessment policies shows that CSU graduation rates have been increasing that include placing “significant weight” on incoming steadily over time for both first-time freshmen and students’ high school grades in math and English . In transfer students . Double-digit achievement gaps, August 2017, the Chancellor issued an executive order however, persist at CSU . For example, the latest that requires campuses to discontinue using CSU’s cohort of low-income students has a 54 percent math and English placement tests and instead rely on six-year graduation rate compared to 64 percent for high school grades and other data (such as Smarter non-low-income students . Balanced assessment results and SAT scores) to CSU Adding Faculty and Staff to Make More place students . In addition, the executive order limits Courses and Support Services Available to the number of remedial (noncredit-bearing) units that Students. Currently, CSU is designating $123 million in academically underprepared students may be required ongoing funding to implement the Graduation Initiative . to take and requires campuses to provide students with (The current-year budget also provides CSU with academic support (such as targeted tutoring) . $12 .5 million in one-time monies for the Graduation CSU Identifies Opportunities to Reduce Excess Initiative .) While the Chancellor’s Office gives campuses Unit-Taking. Students who accrue more units than flexibility on how to spend this funding, the main use of their degree requires generally take longer to graduate, the funding has been to hire more faculty and advisors generate higher costs for the state and themselves, to expand course offerings and support services . In a and crowd out other students . Data indicate, however, January 2018 report to the Legislature, the Chancellor’s that CSU continues to have a problem with excess Office estimates that campuses have added unit-taking by both freshman entrants and transfer about 400 new tenure-track faculty and more than students . In response, the 2017-18 Budget Act 1,000 lecturers in the current year using Graduation Initiative funds . These new hires have enabled the Figure 26 system to offer more than 3,200 CSU Graduation Rates Are Gradually Increasing additional course sections in Year Graduation Initiative Began 2017-18 . CSU also expects to add 70% about 230 academic advisors in 60 2017-18, with the goal of reducing Three-Year Rate for Transfers campuses’ student-to-advisor 50 ratios . Six-Year Rate for First-Time Freshmen CSU Revising Assessment and 40 Remedial Policies for Incoming 30 Freshmen. Historically, CSU has Two-Year Rate for Transfers relied heavily on placement tests to 20 assess students’ college readiness . In recent years, the Legislature 10 Four-Year Rate for First-Time Freshmen has expressed concern with this practice, citing national research that 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 suggests placement tests routinely Year Cohort Entered CSU place students in remedial math and English classes when they 36 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET included provisional language requiring CSU to report The study finds, however, that campuses generally lack on opportunities for campuses to make available more a systematic approach to integrating these efforts into course slots by reducing the number of excess units a cohesive plan . The report also found that campuses that students earn . In a January 2018 report to the generally are in the beginning phases of scaling reform Legislature, the Chancellor’s Office calculated that if efforts to reach larger numbers of students . Campuses every CSU graduate reduced their excess units by also generally are beginning to think more about 1 unit, CSU could free up 1,333 additional course allocating existing resources in smarter, more strategic sections . Using this calculation, reducing excess ways (such as consolidating programs or activities) . unit-taking by half (an average of about 10 semester Recommend CSU Pursue Efficiency units per graduate) would be the equivalent of freeing Opportunities Before Legislature Further Augments up more than 10,000 course sections—representing Graduation Initiative. Despite some improvement in about 30,000 FTE students and $250 million in General CSU’s graduation rates, we believe CSU has significant Fund support for the system . The Chancellor’s Office opportunities to improve efficiencies and more report cites various ways to reduce excess unit-taking, strategically allocate existing resources . In particular, including more technology-enhanced advising (known we believe CSU could do more to reduce excess as “eAdvising” tools) . unit-taking and free up thousands of course sections . CSU Could Increase Cross-Campus Online We also think CSU could make enrolling in online Enrollment. Another strategy CSU has identified courses at other campuses much easier for students . to help achieve its Graduation Initiative targets is Additionally, campuses could focus greater efforts on expanding online education . Online education—which ensuring their various student-success strategies are can make course-taking more convenient for students integrated into a coherent and comprehensive plan . while minimizing demands on classroom space—is Given these opportunities for further reform and given offered by all but one campus (the Maritime Academy) . the many other competing cost pressures facing CSU Another potential benefit of online education is that in the budget year, the Legislature may wish to place students can find and get credit for courses offered a lower priority on providing additional funding for the at other campuses, which can speed their time to Graduation Initiative in 2018-19 . graduation . CSU data indicate, however, that very Facilities few students currently enroll in online courses at other campuses . This is due in large part to students being Under New Process, CSU Authorized to Issue unaware that the option exists, as well as CSU’s Own Bonds. Historically, the state has sold bonds development of an online course catalog that is very and paid the associated debt service to fund CSU’s difficult for students to use . Were CSU to streamline the capital outlay program for academic buildings . process by which students find, enroll in, and transfer Beginning in 2014-15, the state shifted funds for credits back to their home campus, campuses could existing debt service on CSU capital outlay projects improve students’ access to needed coursework and from a separate budget item to the university’s main reduce their time to degree . General Fund support appropriation . In addition, the CSU Study Finds Several Potential Areas for state granted CSU the authority to pledge its General Improvement at Campuses. In August 2017, the CSU Fund appropriation to issue its own bonds to build Student Success Network—a state-funded systemwide academic facilities . The university is permitted to initiative facilitated by the Education Insights Center repay the associated debt service from its General at California State University, Sacramento—released Fund appropriation . The new process limits the a report on campuses’ plans and efforts to improve university to spending a maximum of 12 percent of student success . The study notes that campuses are its main General Fund appropriation on debt service implementing a broad set of programs and practices as and pay-as-you-go academic facility projects . As of part of the Graduation Initiative (including encouraging January 2017 (the most recent year for which CSU has students to attend full-time, requiring new students submitted data to the Legislature), CSU was spending to attend orientation and advising sessions, and 6 .7 percent of its main General Fund appropriation for increasing internships and on-campus employment) . these purposes . www.lao.ca.gov 37 analysis full gutter 2018-19 BUDGET Administration and Legislature Review Project considered) . Legislative budget subcommittees have Proposals. Historically, the state reviewed and an opportunity to review the projects and, by April 1 of approved specific CSU capital outlay projects in the each year, signal to the administration whether to annual budget act . Under the new process, CSU approve or reject projects . The Department of Finance submits a list of capital projects to the Department must make final project approval decisions by April 1 . of Finance for approval . CSU must continue to Overall, Project Proposals Submitted to the submit written documentation to the Legislature— Legislature Have Serious Deficiencies. We reviewed commonly referred to as “capital outlay budget change the five 2018-19 capital outlay budget change proposals”—that provides detailed information on proposals that CSU would support using $13 million in each project request (including a description of the base funds as well as the five proposals that CSU has proposed project, what problem the project is intended indicated it would fund only if it received an associated to address, the proposed phases to be funded in the $15 million state General Fund augmentation . budget year and future years, estimated costs and Figure 27 lists these ten projects . We have four proposed funding sources, and alternatives that CSU significant concerns with the package of proposals: Figure 27 CSU’s Top 2018-19 Capital Outlay Prioritiesa (Dollars in Thousands) 2018-19 All Years Campus Project Phases State Costsb State Costsb Total Cost Tier 1 Priorities Systemwidec Infrastructure improvements Various $17,264 $17,264 TBD San Luis Obispo New science and agriculture P,W,C,E 10,000 10,000 $101,821 teaching and research complex Sonoma Stevenson Hall renovation and S,P,W,C 93,233 96,331 99,391 addition East Bay Library replacement building W,C,E 79,123 81,392 90,436 Pomona Administration replacement E 1,380 77,926d 79,306 building Subtotals ($201,000) ($282,913) ($370,954) Tier 2 Priorities San Bernardino Theater building renovation P,W,C TBDe $97,973 $111,102 and addition Northridge New Sierra Annex building P,W,C TBDe 91,084 99,884 San Luis Obispo Kennedy Library renovation P,W,C,E 50,000 51,296 55,000 and addition Channel Islands Gateway Hall renovation S,P,W,C,E 38,854 38,854 42,309 Maritime Academy Mayo Hall renovation and S,P,W,C 17,548 17,548 18,294 addition Subtotals ($225,000)c ($296,755) ($326,589) Totals $426,000 $579,668 $697,543 a CSU proposes to fund Tier 1 priorities using $13 million in freed-up existing funds and Tier 2 priorities only if it receives an additional $15 million General Fund augmentation. b Covered using CSU systemwide revenue bonds, unless otherwise indicated. Reflects amounts as stated in CSU’s 2018-19 proposals to the Legislature, which in some cases are inconsistent with other CSU documentation. c CSU proposes to finance a package of systemwide infrastructure improvements totaling $67.3 million in 2018-19. Of this amount, $17.3 million would be funded under Tier 1 and $50 million under Tier 2. d Consists of $26.6 from lease revenue bonds and $51.3 from systemwide revenue bonds. e The Chancellor’s Office has indicated that it may only proceed with preliminary plans for this project in 2018-19 but has not made a final decision. P = preliminary plans; W = working drawings; C = construction; E = equipment; S = study; and TBD = to be determined. 38 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET (1) some proposals provide virtually no documentation, what specific size and type of lecture space would be (2) proposals for facility additions or new buildings constructed (such as classrooms or large lecture halls), generally lack data or other information justifying the what current utilization rates are for those learning need for additional space, (3) some of the requests spaces, and why additional faculty offices are needed . are for previously approved projects that—with little or Without this data, the Legislature is unable to evaluate no explanation—reappear on CSU’s 2018-19 capital the need for this project . Similarly, San Luis Obispo’s outlay list with scope changes and significantly higher Kennedy Library renovation and addition project costs, and (4) several proposals are unclear on costs or indicates it would add 566 FTE students in lecture contain fiscal and other errors . We detail our concerns space without providing any further detail . below . Previously Approved Capital Projects Reappear Some Proposed Projects Have Virtually No on CSU’s 2018-19 Priority List With Scope Changes Documentation. For example, Maritime Academy’s and Significantly Higher Costs. Five projects on full proposal for the Mayo Hall renovation and addition CSU’s 2018-19 list were approved by the state as project consists of a mere five-sentence summary part of the 2017-18 budget process, but CSU opted description and estimated costs for each project phase . not to fund them in the current year . The Chancellor’s The proposal fails to provide standard information such Office has resubmitted these projects for approval as why the project is needed, how the project would in 2018-19 . Figure 28 (see next page) shows that further the campus’ programmatic goals, and what for three of these projects, the proposed scope alternatives (including their associated costs) were has changed and total estimated costs are now considered . Similarly, CSU requests authority to use significantly higher than what the state approved in systemwide revenue bonds to purchase equipment 2017-18 . Moreover, the proposals generally lack an for the Pomona campus’ administrative replacement explanation as to why the projects have changed so building . The proposal, however, does not provide a significantly in such a short period of time . For example, justification as to why new equipment is needed for a the Northridge campus’ 2017-18 proposal for Sierra replacement building . Moreover, our office requested Hall identifies a renovation—with an estimated cost from CSU the list of equipment proposed for this of $57 million—as “the most cost effective and least project, along with an itemized breakout of costs . As disruptive to the University operations and physical of this writing, CSU has not provided the list . Without environment .” It is unclear why CSU has returned this information, the Legislature has no way to review in 2018-19—just months after the state approved whether the equipment request is reasonable . the 2017-18 renovation project—with a significantly Proposals for New Buildings or Additions Do different project proposal (a new building) at a Not Justify Need for Additional Space. According significantly higher cost ($100 million) . to standard budget practice, departments seeking CSU Proposals Suffer From a General Lack of to construct a new building or otherwise add space Quality and Clarity. Not only do most proposals lack must provide in their proposals basic information, standard documentation and adequate justification, including current space utilization rates, the specific the little information that is contained in them tends types and amounts of space requested, and the extent to be unclear and contain errors . This too makes to which the requested new space would alleviate reviewing these proposals difficult for the Legislature . identified constraints or address other problems . Our The top page of one proposal that has cost information review of CSU’s six projects that involve requests for by phase, for example, is labeled with the name of a new space generally finds a lack of such justification different project at the campus . In the “Alternatives” and detail . For example, the proposal for San Luis section of San Bernardino’s 2018-19 theater arts Obispo’s science and agriculture teaching and research proposal, the proposal appears to prefer a less complex indicates that the new facility would provide expensive alternative (a new theater facility that, undergraduate and graduate student research labs, the proposal states, would “keep the budget to faculty offices, student “interaction space,” and lecture the $60 million range”) . Yet, the proposal ends up space to accommodate 336 FTE students . The recommending a $111 million renovation-and-addition proposal does not include, however, information on project . The justification for this preferred solution www.lao.ca.gov 39 analysis full gutter 2018-19 BUDGET compelling set of new proposals in Figure 28 time, we recommend the Legislature Scope and Costs for Several CSU Projects remove $13 million from CSU’s base Have Changed Significantly Since Original Approval in 2017-18 budget and redirect the funds for Total Estimated Project Costs (In Millions) other legislative priorities . Recommend Legislature Original 2017-18 Approved Request $120 Direct CSU to Include Standard New 2018-19 Request Information in All Future 100 Proposals. Going forward, we 80 recommend the Legislature signal to CSU the importance of 60 submitting complete and accurate project proposals . Each future 40 proposal should provide standard information, including (1) a clear 20 statement of the problem, (2) pros and cons of alternative approaches Renovation Renovation Renovation New Building New Building Renovation that were considered (including at and Addition and Addition least one project involving lower Stevenson Hall Sierra Hall/Annex Theatre Arts costs), (3) an explanation of why the Sonoma Campus Northridge Campus San Bernardino Campus recommended project is superior to the other available alternatives, (4) any known risks involved with the project, and (5) how the proposed remains unknown to the Legislature, however, because project is linked to CSU’s programmatic needs and that section of the proposal is incomplete . In addition, the state’s priorities . Renovation project proposals also cost-related information conflicts on certain proposals, should specify the deficiencies in the existing building, which creates further unnecessary confusion for the identify what led to these deficiencies, and state Legislature in reviewing these proposals . For example, why such deficiencies need to be addressed now . In the same San Bernardino proposal states that addition, if a proposal requests authority to add space, $6 million in future costs for equipment will be covered it should include what specific type of space is required by campus funds . CSU’s 2018-19 capital outlay (and how much space by type) as well as current and program, which the Trustees approved in November projected utilization rates and how those rates compare 2018, however, states that statewide revenue bonds to legislative standards . In addition, such proposals will pay for the equipment . Similarly, in 2017-18, the should include a description of possible strategies the state approved CSU’s request for East Bay to use campus could instead use to reduce demand or need campus funds for preliminary plans on its library for a new facility, including expanding hybrid or fully project . CSU’s 2018-19 proposal, however, states online courses or increasing facility usage during the that systemwide revenue bonds paid for East Bay’s summer . preliminary plans . As of this writing, the Chancellor’s Office has been unable to clear up these discrepancies . EDUCATION POLICY Recommend Legislature Direct CSU to Resubmit FELLOWSHIP PROGRAM Proposals. Our review has identified varying degrees of problems with virtually all of CSU’s project proposals . New Policy Fellowship Program Is Aimed at We recommend the Legislature direct CSU to rewrite Professionals Working in the Education Field. Since and resubmit its 2018-19 project requests by early 2016, CSU’s Center for California Studies (CCS) and March . Doing so would give the Legislature some the Education Insights Center, which are both housed time to review these proposals by the April 1 statutory at the Sacramento campus, have administered the deadline . Should CSU fail to provide an acceptable and 40 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET Education Policy Fellowship Program . The purpose the program as well as travel, lodging, meals, and other of the program is to strengthen the state’s education expenses for fellows and meeting facilitators . Since its policymaking process by providing professional inception, the program has received the vast majority of development and networking opportunities to working its funding from philanthropic organizations (including professionals . Program participants include government the William and Flora Hewlett Foundation and College education analysts, K-12 and higher education Futures Foundation) . Fellows are asked to pay $875 in practitioners, researchers, advocates, and other program fees, which the fellows’ employers typically education professionals working throughout the state . cover . These fees cover about 5 percent of program Cohorts of 20 Fellows Convene and Collaborate costs . Throughout the Year. Fellows who are accepted Governor’s Budget Proposal. The Governor into the program agree to attend three weekend-long proposes to provide $100,000 in ongoing General Fund meetings over the course of one year . These meetings support for the program . The Governor’s intent is that typically are held at conference centers or other CCS and the Education Insights Center would continue meeting sites in northern and southern California . At to seek philanthropic funding to cover most of the these meetings, fellows learn about and discuss policy remaining annual program costs . Though not explicit in issues related to education . Throughout the year, the proposal, our understanding is that program fees fellows work together on research projects and attend would continue to be charged . optional local and national meetings . The program’s first Assessment and Recommendation. While we cohort of 20 fellows began in 2016-17 . The program think educational programs such as these can be is currently in its second year with a new cohort of useful, we do not believe that providing support 20 fellows . CCS and the Education Insights Center for a program that serves highly educated working intend to begin recruiting a 2018-19 cohort within a professionals is a sufficiently high state priority in few months . CCS and the Education Insights Center 2018-19 . We also note that the program is very report that a recent survey found that over 75 percent expensive to operate, with an average cost of about of first-year fellows rated the program as either above $10,000 per fellow—much of which supports travel, average or excellent . lodging, and food costs for the fellows and meeting Most Program Costs Have Been Covered by facilitators . For these reasons, we recommend the Foundations. The program’s total annual budget is Legislature reject the Governor’s proposal . about $250,000, which covers staff time to administer CALIFORNIA COMMUNITY COLLEGES In this section, we first provide an overview of the OVERVIEW Governor’s budget for the CCC system . We then describe, assess, and offer recommendations relating Total CCC Budget Reaches $15.4 Billion Under to his major CCC proposals . Specifically, we cover Governor’s Budget. The largest funding sources for his largest proposals—those relating to community community colleges are Proposition 98 General Fund college apportionments, enrollment growth, a new and property tax revenue (see Figure 29, next page) . online college, and financial aid programs . We also In addition, the state provides non-Proposition 98 discuss a few other notable proposals—those relating General Fund for certain purposes, including CCC to apprenticeship programs, deferred maintenance, general obligation bond debt service, teacher retirement and innovation awards . Lastly, we discuss CCC costs, and Chancellor’s Office operations . Altogether, facility proposals . (We discuss changes in the these Proposition 98 and non-Proposition 98 funds Proposition 98 minimum guarantee and the Governor’s comprise about two-thirds of CCC funding . The overall K-14 spending package in our Proposition 98 remaining one-third of funding comes primarily from Education Analysis .) student enrollment fees, other student fees (such as nonresident tuition, parking fees, and health services www.lao.ca.gov 41 analysis full gutter 2018-19 BUDGET fees), and various local sources, including community No Proposed Change to Enrollment Fee, Many service programs and facility rentals . Students Have Fee Waived. State law currently sets Governor Proposes to Increase Proposition 98 the CCC enrollment fee at $46 per unit (or $1,380 for a Funding by $553 Million (6.4 Percent) Over Revised full-time student taking 30 semester units per year) . The 2017-18 Level. As Figure 30 shows, the Governor’s Governor proposes no change to this fee, which has budget increases Proposition 98 funding for the remained flat since 2011-12 . The Board of Governors community colleges to $9 .2 billion in 2018-19 . Most Fee Waiver (recently named the California College notably, the budget includes $212 million for a new Promise Grant) waives enrollment fees for about half high school career technical education (CTE) initiative, of students, accounting for two-thirds of credit units $175 million for transition to a new funding formula, taken at the community colleges . In 2018-19, grants for $161 million for an apportionment COLA, $120 million financially needy students are estimated to cost a total for a new online community college, and $81 million of $758 million . Beginning in 2018-19, the state is set for deferred maintenance and instructional equipment . to expand the fee waiver program to students who do In addition to the deferred maintenance funding listed not demonstrate financial need . The program, known in the figure, the Governor’s budget package includes as AB 19 after its authorizing legislation, provides $195 million in other one-time funding for deferred funding and allows, but does not require, colleges maintenance, bringing total funding to $275 million . to offer fee waivers for all resident first-time, full-time We discuss the proposed high school CTE initiative in students during their first year of college . We discuss our Proposition 98 Education Analysis. We discuss all this proposal later in this section . others proposals later in this next section . Figure 29 California Community Colleges Funding by Source (Dollars in Millions Except for Funding Per Student) Change From 2017-18 2016-17 2017-18 2018-19 Actual Revised Proposed Amount Percent Proposition 98 General Funda $5,473 $5,682 $6,066 $384 6.8% Local property tax 2,809 2,972 3,141 169 5.7 Subtotals ($8,283) ($8,654) ($9,207) ($553) (6.4%) Other State Other General Fund $404 $469 $509 $40 8.6% Lottery 233 231 231 — -0.1 Special funds 141 146 152 6 4.3% Subtotals ($777) ($846) ($892) ($46) (5.5%) Other Local Enrollment fees $458 $459 $413 -$45 -9.9% Other local revenueb 4,538 4,537 4,553 16 0.3 Subtotals ($4,997) ($4,995) ($4,966) (-$29) (-0.6%) Federal $285 $285 $285 — — Totals $14,342 $14,780 $15,350 $570 3.9% Full-Time Equivalent (FTE) Students 1,134,809 1,135,081 1,136,813 1,732 0.2% Proposition 98 Funding Per FTE Student $7,299 $7,624 $8,099 $475 6.2% Total Funding Per FTE Student $12,638 $13,021 $13,503 $481 3.7% a Includes between $500 million and $526 million each year for the Adult Education Block Grant, of which more than $400 million goes to school districts for their adult education services. b Primarily consists of revenue from student fees (other than enrollment fees), sales and services, and grants and contracts, as well as local debt-service payments. Amounts are estimates and do not include federal and state student financial aid for nontuition costs or bond proceeds for capital outlay. 42 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET APPORTIONMENTS Apportionment funding is allocated primarily based on per-student rates . In 2017-18, community colleges Below, we provide background on community received $5,151 per credit and enhanced noncredit college apportionment funding, describe the Governor’s FTE student and $3,050 per regular noncredit FTE major apportionments proposals, analyze those student . (Enhanced noncredit instruction consists of proposals, and offer associated recommendations . courses relating to career development and college preparation . Instruction includes some basic skills Background: courses, English as a Second Language courses, and Community College Funding CTE courses .) The state allows districts to claim the Apportionment Funding Comprises Almost higher of their current-year or prior-year enrollment Three-Fourths of CCC Proposition 98 Funding. levels—effectively a one-year hold harmless provision . Community college districts primarily receive their District apportionments also include a base allocation revenues through general purpose apportionment determined by the number of colleges, state-approved funding . The 2017-18 budget includes $6 .2 billion centers, and total enrollment in the district . for apportionments, representing 72 percent of all Colleges Must Spend Half of Apportionment Proposition 98 CCC funding . Funding on Instruction. Current law requires Current Apportionment Formula Allocates districts to spend at least 50 percent of their general Funding to Districts Based on Student Enrollment. operating budget on salaries and benefits of faculty Figure 30 California Community Colleges Proposition 98 Spending Changes (In Millions) 2017-18 Revised Spending $8,654 Technical Adjustments Remove one-time spending -$380 Other technical adjustments -59 Subtotal (-$439) Policy Adjustments Fund high school CTE initiative through Strong Workforce program $212 Hold districts harmless for transition to new apportionment funding formula 175 Provide 2.51 percent COLA for apportionments 161 Fund new online college ($100 million one time, $20 million ongoing) 120 Fund deferred maintenance and instructional materials (one time)a 81 Fund 1 percent enrollment growth 60 Fund AB 19 fee waivers for first-time full-time students 46 Fund consolidated financial aid program 33 Provide 2.51 percent COLA for selected student support programsb 33 Provide additional funding for prior-year Apprenticeship costs (one time) 31 Fund Innovation Awards (one time) 20 Increase funding for Apprenticeship Programs 14 Fund adult education data system alignment 5 Fund certified nursing assistant program (one time) 2 Subtotal ($992) Total Changes $553 2018-19 Proposed Proposition 98 Spending $9,207 a Budget appropriates a total of $275 million for this purpose, including $184 million in 2017-18 funds and $11 million in settle-up funds. b Applies to Apprenticeship Programs, Extended Opportunity Programs and Services, Disabled Students Programs and Services, CalWORKs student services, Mandates Block Grant, and campus child care support. Includes a 4.1 percent COLA for the Adult Education Block Grant. CTE = career technical education and COLA = cost-of-living adjustment. www.lao.ca.gov 43 analysis full gutter 2018-19 BUDGET and instructional aides engaged in direct instruction . to adopt an educational master plan and submit the Spending on other instruction-related staff, such as plan for approval to the Chancellor’s Office . The exact academic counselors and librarians, is not counted as content of the plan is determined by the local governing instructional costs . Costs for staff that provide services board but commonly consists of a profile of the district, such as campus safety, facilities maintenance, and the core values of the district, overarching district goals, information technology services also are excluded, as and measures to track progress towards meeting those are operating costs for such things as insurance and goals . Although statute does not specify how frequently utilities . Districts that fall below the 50 percent mark plans must be updated, districts typically update plans can be subject to financial penalties by the Board of every 3 to 5 years . Governors . Background: Student Success Efforts Remaining CCC Funding Is Provided Through Restricted Categorical Programs. Each of these Several Recent Initiatives Undertaken to Improve categorical programs has its own allocation formula Student Outcomes. Although the CCC system and associated restrictions and spending requirements . provides open access to anyone interested in improving The largest categorical program, the Adult Education their education, it historically has had low levels of Block Grant, distributes $500 million to consortia of student persistence and completion as well as sizeable community colleges and school districts that decide achievement gaps . Over the last several years, the how funds are to be used to serve adult learners in their state has adopted many initiatives to address concerns areas . The next two largest categorical programs are regarding these poor CCC outcomes . Some of these the Student Success and Support Program (SSSP), initiatives have been larger comprehensive reforms, which received $306 million in 2017-18, and the Strong while others address specific issues . The next six Workforce Program, which received $248 million . The paragraphs highlight major student success initiatives . SSSP provides various orientation and counseling Student Success Task Force. Chapter 409 of services . The Strong Workforce Program requires 2010 (SB 1143, Liu) directed the Board of Governors consortia of community college districts to develop and to adopt and implement a comprehensive plan operate workforce programs based on their regional for improving student outcomes . To help develop labor markets . the improvement plan, the legislation required the Many Categorical Programs Designed to board to create a task force . In 2011, the Student Help Low-Income and Less-Prepared Students. Success Task Force released a report containing Several notable categorical programs are targeted for 22 recommendations designed to improve student students that historically have had less success at the outcomes . Some of the task force recommendations community colleges . For example, the state provides required state policy and budget actions, some required $160 million for colleges to develop student equity new regulations, and others involved individual colleges plans that analyze and identify strategies for closing taking certain actions, such as disseminating best enrollment and achievement gaps among historically practices . underrepresented groups . The state also provides Student Success Act. Chapter 624 of 2012 $117 million for Extended Opportunity Programs and (SB 1456, Lowenthal) codified four key Services, which provides supplemental services for recommendations from the task force report . low-income and academically underprepared students . Specifically, Chapter 624: (1) required the Board of In addition, the state provides $45 million for the Governors to establish policies around mandatory CalWORKs Student Services program, which provides assessment, orientation, and education planning for child care, career counseling, subsidized employment, incoming students; (2) authorized the board to set a and other supplemental services to community time or unit limit for students to declare a major or other college students receiving CalWORKs assistance . specific educational goal; (3) authorized the board to These services are in addition to those provided to all establish minimum academic standards for financially CalWORKs recipients by county welfare departments . needy students who receive enrollment fee waivers; Districts Required to Develop Educational Master and (4) established requirements for colleges to have Plans. Every community college district is required SSSP and student equity plans . 44 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET Transfer Reform. In an attempt to reform the Guided Pathways. The 2017-18 budget provided transfer pipeline from CCC to the CSU system, the $150 million one-time Proposition 98 funding to help state enacted Chapter 428 of 2010 (SB 1440, Padilla) . colleges implement guided pathways, an initiative The legislation required community colleges to create that provides comprehensive support for students two-year (60 unit) degrees known as associate degrees to improve student outcomes . Four key elements of for transfer (ADT) that are fully transferable to CSU . guided pathways are (1) academic program maps These degrees require students to complete (1) an (which set forth course sequences required to achieve approved set of general education requirements specified educational objectives), (2) an intake process and (2) a minimum of 18 units in a major or area of that helps students clarify their college and career goals emphasis . Though students with an ADT are not as well as develop an academic plan, (3) proactive guaranteed admission to a particular CSU campus or support services aligned with student progress, and into a particular degree program, they receive priority (4) institutional and program-specific student learning admission to a CSU program that is “similar” to their expectations . major or area of emphasis . Once admitted, students Recent Initiatives Have Tied Funding to Specific need only to complete two additional years (an Activities. To implement the variety of initiatives listed additional 60 units) of coursework to earn a bachelor’s above, the state has increased categorical funding degree . for specified activities intended to improve student Basic Skills Reform. For the past decade, the state outcomes . For example, the state has increased has provided a mix of one-time and ongoing funding for funding for the SSSP and student equity plans by colleges to transform how they serve students who are $417 million over the last five years to encourage not prepared for college-level math or English courses . districts to increase support services for students . Beginning in 2015-16, colleges were encouraged to The state also has provided one-time funding for adopt various evidence-based strategies to improve implementing guided pathways and basic skills reforms . student outcomes . These strategies include (1) using In many cases, funding was not distributed to all multiple measures (including high school course taking districts statewide but instead was available only to and grades) to determine student placement and districts that agreed to implement specific changes . (2) compressing remedial course sequences to get Board of Governors Recently Adopted Vision students into college-level courses more quickly . In the for Success. In July 2017, the Board of Governors fall of 2017, the state enacted Chapter 745 of 2017 adopted the Vision for Success, a document that sets (AB 705, Irwin), which prohibits a college from placing specific goals in a number of key student performance students into remedial coursework unless placement areas and identifies key commitments of the research indicates they otherwise would be unlikely to Chancellor’s Office to assist colleges in meeting those succeed in college-level coursework . goals . The document was developed in collaboration Institutional Effectiveness. Established in 2014-15, with community college leaders and stakeholders this ongoing initiative provides technical assistance across the state . Specifically, the Vision for Success and professional development to colleges seeking to sets goals in six areas: (1) number of degrees, improve student outcomes and overall operations . The certificates, and credentials issued; (2) transfers to UC Chancellor’s Office oversees the initiative and contracts and CSU; (3) number of units accrued upon associate with two districts (Santa Clarita Community College degree completion; (4) employment in a related District and Chabot-Las Positas Community College field; (5) equity gaps among student groups; and District) to coordinate teams of CCC experts to consult (6) achievement gaps among regions in the state . The with campuses, organize regional workshops, and goals set in the Vision for Success generally are aligned perform other activities . To help identify institutions to the goals of the Legislature in improving the CCC that may need assistance, the Chancellor’s Office has system . developed a set of effectiveness indicators . Statute Modest Improvements in Student Outcomes in requires colleges to develop, adopt, and publicly Recent Years. Using the most recent data available, post goals and actual results each year using these community colleges have made little progress indicators . with respect to program completion . The six-year www.lao.ca.gov 45 analysis full gutter 2018-19 BUDGET completion rate for the most recent cohort (students to overall per-student apportionment funding . For who began college in 2010-11) is 48 percent, 2018-19 only, districts would receive the greater of 1 percentage point lower than the completion rate (1) the amount calculated based on the new funding for the 2006-07 cohort (49 percent) . Statewide formula or (2) the amount of apportionment funding performance, however, has improved in several other they received in 2017-18 . For 2019-20 and future areas . For example, the most recent data show years, districts would receive the greater of (1) the modest improvements in the proportion of students amount calculated based on the new funding formula who complete a college-level course after being initially or (2) the district’s FTE enrollment in that year multiplied placed in remedial classes, complete a transfer-level by its 2017-18 per-student funding rate . That is, the math or English course within their first two years, and hold harmless would ensure districts received no less complete 30 units of coursework within six years . on a per-student basis than they did in 2017-18 . Includes Hold Harmless for Supplemental and Governor’s Proposals Performance Funding. The proposal also includes Increases Apportionment Funding by separate hold harmless provisions for each of the two $396 Million. Of the total increase, $175 million is elements of the supplemental grant and three elements for holding districts harmless for the shift to a new of the performance grant . Specifically, if the amount funding formula, $161 million is for a 2 .51 percent calculated for any element of these grants is lower than apportionment COLA, and $60 million is for 1 percent the amount the district received in the previous year, enrollment growth . We analyze the new funding formula the district would receive the amount calculated the below, then turn to the enrollment growth proposal . previous year . These adjustments essentially provide Creates New Apportionment Formula Based districts with a one-year delay in reductions related to on Three Components. The Governor proposes these elements of the formula . moving away from the almost entirely enrollment-based Includes Planning Requirements. As a condition apportionment funding model to one that not only of receiving supplemental and performance grants, accounts for overall enrollment but also accounts districts would be required to align the goals in their for low-income student enrollment and student educational master plans with the systemwide goals set performance . The Governor has two main objectives forth in the Vision for Success. Districts also would be in proposing the new formula . He wants to (1) place required to measure progress towards meeting those less emphasis on seat time and more on program goals . In addition, districts would be required to align completion and (2) place more emphasis on the additional cost Figure 31 entailed in serving low-income Components of Proposed Funding Formula students . As Figure 31 shows, the Base Grant ($3.2 Billion) new formula would include three components: (1) enrollment-based • $2,405 per credit and enhanced noncredit full-time equivalent (FTE) student. funding, (2) funding based on a • $1,502 per regular noncredit FTE student. district’s number of low-income • Allocation determined by the number of colleges and state-approved students, and (3) performance-based centers in the district. funding . The administration proposes Supplemental Grant ($1.6 Billion) using current-year data for calculating • $1,334 for each financially needy student receiving an enrollment fee the enrollment-based component waiver. of the formula and prior-year • $2,128 for each first-time freshmen who receives a Pell Grant. data for calculating the other two Student Success Incentive Grant ($1.6 Billion) components . • $5,533 for each Chancellor’s Office-approved degree, certificate, and Includes Hold Harmless award granted. Provision for Per-Student Funding. • $6,395 for each student who completed a degree or certificate and/or The Governor’s proposal includes transferred to a four-year institution within three years. a hold harmless provision relating • $976 for each associate degree for transfer awarded. 46 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET their budgets to their revised master plans by a date implement competency-based programs, which require that would be determined by the Chancellor’s Office . upfront spending and typically result in fewer units Requires Low-Performing Districts to Receive taken, as they would receive less funding . Technical Assistance. If a district is identified as Performance-Based Funding Would Tie More needing assistance to make progress towards meeting Funding to Legislature’s Goals for System. The its goals, the Chancellor’s Office could require a district Legislature has implemented a variety of initiatives to use up to 3 percent of its apportionment funding for over the last several years with the ultimate goal of technical assistance and training . increasing the number of CCC students attaining a Requires Chancellor’s Office to Monitor degree or certificate, decreasing time to completion, Implementation. The Governor’s proposal requires the and better serving low-income students . These Chancellor’s Office to develop processes to monitor goals are very similar to the measures the Governor the implementation of the funding formula . Perhaps proposes to use for the performance component of most importantly, the Chancellor’s Office is required to the new formula . Allocating some funding based on develop minimum standards for the types of certificates performance could help expedite progress in core areas and awards that count towards the performance grant . and further strengthen districts’ fiscal incentives to improve student outcomes . Requires Chancellor’s Office to Report on Progress in Meeting Vision for Success Goals. Many States Have Some Type of The proposal also requires the Chancellor’s Office to Performance-Based Funding Formula. More submit a report to the Legislature and Department of than 30 states have at least a portion of their higher Finance by July 1, 2022 on the progress colleges have education funding allocated based on performance . made in advancing the Vision for Success goals . The State funding formulas, however, have notable report also is to include an overview of any technical differences . The portion of funding tied to performance assistance or other actions the Chancellor’s Office has varies significantly, from less than 1 percent to almost taken to help districts improve outcomes for historically 100 percent . The types of measures used and weight underrepresented populations . given to each measure also vary . Some states, for example, include interim performance measures, Tasks Chancellor’s Office With Developing such as persistence rates and remedial-course Proposal to Consolidate Categorical Programs. In completion rates, whereas other states focus only on the Governor’s Budget Summary, the administration final performance results, such as degree completion . states its expectation that the Chancellor’s Office Some states also provide greater weight to outcome consult with stakeholders over the next few months to measures for low-income students and other historically develop a proposal to consolidate existing categorical underrepresented groups or for high-priority areas such programs and provide greater flexibility for districts . The as CTE . proposal would be submitted for possible consideration in the May Revision . Nationwide Research Finds Performance-Based Formulas Can Change Institutional Behavior. Assessment Whereas enrollment-based formulas encourage colleges to increase enrollment, research finds that Current Enrollment-Based Funding Approach performance-based formulas affect institutional Has Certain Drawbacks. The state has used an behavior in other ways . In states switching from enrollment-based funding formula in part because enrollment- to performance-based funding formulas, it is simple to administer and generally tracks with the switch was found to correlate with colleges district costs . Such a funding model, however, has adopting basic skills reforms, improving course several key drawbacks . The model does not have articulation and transfer, increasing the number of incentives for colleges to ensure students meet their academic advisors, providing additional support educational goals and finish with a certificate or degree for students at risk of dropping out, and increasing in a timely manner . An enrollment-based approach availability of tutoring and supplemental instruction . In also discourages districts from adopting innovative many cases, these institutional changes were being approaches that help students if such changes result in made as other statewide reforms in these areas were fewer units taken . For example, districts are unlikely to www.lao.ca.gov 47 analysis full gutter 2018-19 BUDGET being implemented, such that isolating the effect the supplemental grant under the Governor’s proposal of the performance-based formula is challenging . would complement existing programs is unclear, as is In addition, despite encouraging these types of the rationale for having both types of grants . Moreover, institutional changes, studies to date have not found the structure of the supplemental grant is very improvements in student performance after shifting to different than the structure of existing student support performance-based funding . grants, with the Governor’s proposed grant having no Proposed Formula Has Several Key Incentive restrictions or reporting requirements and the existing Problems. Several components of the Governor’s grants typically having many restrictions and reporting performance-based funding formula raise concerns . rules . In particular, the proposal does not provide additional Recommendations incentives for colleges to help low-income students complete a certificate or degree . Although the formula Allocate Less Funding Based on Enrollment. creates an incentive to enroll low-income students, it Given the concerns with poor incentives created by does not create incentives for colleges to help these the enrollment-based funding model, we recommend students reach their educational goals . Additionally, by the Legislature consider reducing the share of CCC providing the same amount of outcome-based funding apportionment funding that is based on enrollment . for any degree or certificate, the proposal creates We think the Governor’s proposal to allocate about half incentives for colleges to offer shorter, less expensive of apportionment funding based on enrollment seems programs that lead to a degree or certificate . This could reasonable . discourage colleges from offering more expensive Allocate Some Funding Based on Performance. CTE programs . Research on performance-based In tandem with allocating less funding based on funding models also identifies concerns related to enrollment, we recommend the Legislature consider the possibility of weakening academic standards . allocating some portion based on performance . Specifically, a formula based on performance could To ensure sufficiently strong incentives to focus create incentives for faculty to inflate grades to ensure on performance, we recommend basing at least student completion . 20 percent of CCC funding on student outcomes . Hold Harmless Provisions May Dampen Effect A larger share of funding based on performance of Shifting to Performance-Based Formula. By likely would produce greater changes in institutional incorporating several hold harmless provisions, the behavior . We think the Governor’s proposed Governor’s proposal provides stability during the performance measures (program awards, three-year transition to a new formula . Such stability, however, completion rates, and associate degrees for transfer) could diminish the changes in behavior that the are reasonable . We recommend, however, providing administration is hoping will occur . In particular, districts higher levels of funding for the outcomes of low-income whose allocations under the new funding formula students and expensive programs the Legislature are far below their hold harmless levels would have considers a high priority (such as some CTE programs) . no financial incentives to focus on improving student These adjustments would help ensure colleges focus outcomes . on improving outcomes for low-income students and Supplemental Funding and Many Categorical maintain expensive programs that serve student needs . Programs Serve Same Purposes. The Governor’s Consider Supplemental Funding and Categorical proposal distributes a quarter of apportionment funding Programs Together. Given the supplemental grant based on the number of low-income students . This component of the Governor’s proposal and many component of the formula acknowledges the higher existing CCC categorical programs are intended to costs involved in serving low-income students (who are benefit low-income students, we recommend the less likely to be prepared for college-level coursework, Legislature consider these pots of funding in tandem . less likely to persist, and less likely to complete their We recommend the Legislature collapse these fund programs) . Acknowledging these higher costs and streams into one larger pot of funding intended to responding to these issues is the same rationale benefit these students . In doing so, one critical decision underlying many existing categorical programs . How for the Legislature would be determining how much 48 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET funding to provide for this purpose . Another key districts have experienced recent enrollment declines decision would be what spending requirements, if any, or “restorations .” After one year of enrollment decline, to place on this pot of funding (discussed below) . the state lowers base funding for the affected districts Recommend Coupling Planning With Flexibility but gives those districts three years to earn back in Serving Low-Income Students. Given our (restore) funding . Each year, some of these districts recommendation that the new funding model provide earn restoration funding . Technically, districts receive greater weight to outcomes for low-income students, restoration funding first, then any new enrollment we further recommend attaching few strings to the growth funding . supplemental pot of funding . We think colleges could Chancellor’s Office Sets Enrollment Growth benefit from having flexibility in deciding exactly how Target for Each District. After the state sets the overall best to serve these students . The Legislature could CCC enrollment target, the Chancellor’s Office sets an require districts, however, to document clearly in their enrollment target for each district . A few years ago (as annual budgets how they intend to serve low-income part of the 2014-15 budget package), the Chancellor’s students . Additionally, the Chancellor’s Office could Office was tasked with developing a new district monitor and report the performance of low-income allocation formula . The purpose of the new formula is to students by college and offer institutional effectiveness direct a larger share of enrollment funding to high-need support when colleges do not meet their goals . districts . Whereas previous district allocations largely Monitor Implementation to Determine if Negative were based on year-to-year changes in the local high Outcomes Emerge. Consistent with the Governor’s school graduation and adult population rates, the new proposal, we recommend the Legislature task the formula instead considers local educational attainment, Chancellor’s Office with monitoring key aspects of unemployment, and poverty rates, as well as recent implementation to identify if any problematic trends enrollment trends . result from using the new funding model . In addition Governor’s Proposals to monitoring the approval of new program awards (to ensure minimum standards are met), we recommend Reduces Enrollment Funding in Prior and Current requiring the Chancellor’s Office to also monitor Years to Reflect Updated Data. The Governor’s data related to grades (to monitor for grade inflation) budget package reduces enrollment funding by and changes in the types of degree and certificates $73 .7 million in 2016-17 and $17 million in 2017-18 to awarded (to ensure districts do not shift to cheaper and account for the latest enrollment estimates provided by lower-value certificates as a way to maximize funding) . the colleges . Tracking this information would help inform future Funds Enrollment Growth for 2018-19. After legislative decisions regarding if the funding model adjusting base funding, the Governor proposes should be modified or new laws should be passed to $60 million for 1 percent CCC enrollment growth prevent these problems from reoccurring . (an additional 11,300 FTE students) . The Governor’s budget also makes adjustments for districts ENROLLMENT experiencing enrollment declines and restorations . Altogether, the Governor’s budget funds a net increase Below, we provide background on CCC enrollment of 0 .2 percent (about 1,700 FTE students) compared to funding, describe the Governor’s enrollment proposals, the revised 2017-18 level . and provide our assessment of those proposals . Assessment Background Systemwide, CCC Continues to Fall Short of State Considers Several Factors When Making Meeting Enrollment Targets. Over the last three years, CCC Systemwide Enrollment Decision. Each year, actual enrollment growth has been consistently lower the state projects enrollment growth systemwide based than the amount assumed in the state budget . For on population changes, the economy (specifically, an example, while the 2015-16 Budget Act assumed net add-on if the unemployment rate is high), and prior-year enrollment growth of 2 .2 percent, actual net enrollment enrollment demand . It then examines whether any growth was 0 .8 percent . Similarly, the 2016-17 Budget www.lao.ca.gov 49 analysis full gutter 2018-19 BUDGET Act assumed 1 .6 percent net enrollment growth, while online college, provide an assessment of that proposal, actual enrollment declined 0 .2 percent . The Governor’s and lay out some issues for the Legislature to consider budget also reduces his net enrollment growth estimate in evaluating it . for 2017-18—from 0 .2 percent to being virtually flat . Background Given these enrollment trends, the CCC system is unlikely to need enrollment growth funding in 2018-19 . Community Colleges Systemwide Provide Use Updated Information in May to Make 13 Percent of Instruction Online. As Figure 32 Final Enrollment Decisions. By the time of the May shows, 13 percent of 2016-17 instruction occurred Revision, the Chancellor’s Office will have received in online courses . (CCC defines an online course as updated 2017-18 attendance reports from districts . one in which more than half of instruction is online .) These data will show the extent to which districts are The vast majority of these courses are conducted meeting, exceeding, or falling short of their enrollment asynchronously—that is, an instructor provides online targets in the current year . At that time, the Legislature course sessions that students can access any hour will have better information to assess the extent of the day . A small share of online courses (about to which colleges will use the 2017-18 enrollment 1 percent of all instruction) is provided synchronously, growth funds and be able to grow in the budget meaning that faculty and students communicate year . If the Legislature decides the full amounts are with each other in real time . The share of instruction not justified for the current and budget years, it provided online has increased notably in the last ten could use any associated freed-up funds for other years, increasing from 5 percent in 2006-07 . Although Proposition 98 priorities . some colleges run fully online degree or certificate programs (48 colleges report offering at least one fully ONLINE COMMUNITY COLLEGE online program), community college students typically take the bulk of their courses in person and a minority Below, we provide background on the state’s efforts of courses online . to provide online instruction at the community colleges, Decisions Regarding Online Course Offerings Are describe the Governor’s proposal to create a new Made by Districts. As with other decisions regarding Figure 32 Percentage of CCC Instruction Taken Online Has Increased Notably 14% 12 10 8 6 4 2 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 50 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET course and program offerings, colleges determine the The OEI currently automates various components of number of online courses and programs they will offer . the application process to allow students to enroll Online offerings vary by district, with some districts more quickly in online courses offered outside of their offering only a few online courses and 12 districts home district . (Recent changes in state law will allow reporting more than 20 percent of their instruction is greater streamlining of this process .) Course offerings online . in the exchange, however, are limited . Currently, only Online Education Initiative (OEI) Launched in 45 courses are available . Though campuses might have 2013 to Enhance Online Instruction. Most notably, various reasons for being reluctant to participate, one OEI makes a common course management system of the main reasons appears to be concern with losing available to all community colleges . The course enrollment funding to other campuses in the exchange . management system allows faculty to post information Enrollment funding for each course a student takes about a course (including its syllabus), instructional is scored to the college in the exchange running that content (such as video presentations and text-based course . This means colleges only have a fiscal incentive lectures), assignments, and other material . Students to participate in the exchange if they believe they can use the system to perform functions such as submitting “win” more students than they “lose .” their assignments, taking tests, and participating in No Systemwide Coordination of Course online discussions with classmates . The OEI also Offerings. Because decisions regarding online course provides training and resources for faculty interested offerings are made by districts, little coordination exists in developing online courses and online tutoring for systemwide to monitor online offerings and determine students . In addition, OEI runs a course exchange, whether these options are meeting the needs of which creates a more streamlined process for students students statewide . In some types of courses, such as at participating colleges to take online classes from transfer-level general education courses, many online other participating colleges . Currently six colleges courses are available . In other areas, however, little participate in the course exchange . online content exists . To Date, Notable Shortcomings With Systemwide Lower Success Rates in Online Courses, Efforts to Increase Online Offerings. Although many Though Gap Is Closing. As Figure 33 shows (see districts have increased their online offerings since next page), CCC students perform somewhat worse 2013, efforts to give students access to online courses in online courses compared to in-person courses . In outside of their home districts have not had much 2016-17, students successfully completed 65 percent success . Three main problems (discussed in the next of online courses, compared with 72 percent for three paragraphs) have limited systemwide expansion in-person courses . This gap, however, is smaller of online offerings . than in prior years . In 2011-12, 59 percent of online Enrolling in Online Courses Outside of Home courses were completed successfully, compared with District Is Difficult. Although CCC students interested 70 percent of in-person courses . These outcomes are in taking an online course at another district in the similar to trends in other higher education systems system can search for options online, registering across the country . Improved performance in online for these courses can be cumbersome . To enroll in courses is likely due to a number of factors, including courses outside of their home district, students have to improvements in the quality of online content, the apply separately for admission to each college offering growing expertise of faculty in teaching them, and a course of interest, receive new student identification better support services (such as online tutoring) . numbers and passwords, and register for each class Colleges also have developed online learner readiness separately . modules to help students understand how an online course differs from an in-person course and determine Campuses Are Reluctant to Participate in Course whether they are well suited to taking online courses . Exchange. To address some of the concerns with the existing cumbersome enrollment process, the Success in Online Courses Varies by Student OEI course exchange is intended to provide a more Type. Although students overall perform somewhat streamlined process for students to enroll in online worse in online courses, the gap between in-person courses offered by other colleges in the exchange . and online performance varies by type of student . www.lao.ca.gov 51 analysis full gutter 2018-19 BUDGET The apportionment funding Figure 33 would be in addition to the base CCC Course Success Rates Narrowing $20 million ongoing allocation . Initial Program Offerings Would 80% Target Working Adults, Focus on Short-Term Pathways. The 70 Governor’s proposal provides broad 60 discretion for the online community college to identify the programs and 50 credentials it would offer . Initially, the college is intended to focus on 40 Online short-term programs . Over the next 30 In-class three years, the college would be required to develop at least three 20 short-term program pathways linked with industry needs . The 10 administration’s goal is to focus on attracting working adults ages 2011-12 2016-17 25-34 with no postsecondary education credentials . This target group could include those with a high school diploma but no Various studies find older adults, students with higher postsecondary experience, some college credits but GPAs, and women have higher completion rates for no degree, and other adults, such as incarcerated and online courses than other types of students . formerly incarcerated individuals and recent immigrants, Governor’s Proposal presumably without a high school diploma . The administration indicates that not all programs would be Creates New Online College Within CCC System. fully online . In pathways where hands-on experience The Governor’s budget proposes to create a new online is needed, the college intends to partner with other college with an explicit statewide focus . Initially, the entities (such as libraries, other community colleges, and college would be run by the CCC Board of Governors . industry) to provide such experiences . The college also The board either could hire a Chief Executive Officer could establish partnerships with these or other types of or give authority to the Chancellor to administer the entities to provide support services, such as tutoring . college . By July 2025, the college would be required to Programs Intended to Accelerate Student have its own board consisting of five voting members Time to Completion and Improve Affordability. (three appointed by the Governor, one appointed by the The administration indicates the online community Speaker of the Assembly, and one appointed by the college is to focus on developing programs that reduce Senate Rules Committee) and two non-voting members time to completion and are affordable for students . appointed by the Governor . To that end, the college is intended to use existing Provides $100 Million for Startup and $20 Million industry certifications, competency-based learning, for Ongoing Operations. The startup funding and prior learning assessments to reduce the amount could be spread over a seven-year period and used of additional courses students need to complete their for technology, building space, and business plan pathway . (Both competency-based programs and prior development, among other things . The funding for learning assessments allow students to more quickly ongoing operations could be used for the salaries and complete a program if they can demonstrate they benefits of staff, staff training, and technology licensing already have mastered some of the content .) To the and maintenance . When the college begins enrolling extent possible, the college is to use open educational students, it would begin receiving apportionment resources, which are available to students at no cost . funding similar to all other community college districts . 52 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET Proposal Sets Several Milestones and Reporting recognized by the U .S . Department of Education . Requirements for College. As Figure 34 shows, Without accreditation, students may be wary of the Governor proposes the new college meet certain enrolling in the college, students would be unable to program, administrative, and accreditation milestones transfer credits earned at the online community college within the first seven years . Most notably, the to other community colleges, and students would be Governor’s proposal requires the online community unable to access federal financial aid . Although the college to begin enrolling students by the last quarter of proposal includes no specific deadline for attaining 2019, with at least 13 program pathways designed and accreditation, the new college must develop an validated by July 1, 2023 . accreditation plan by July 1, 2020 . In Long Run, College Would Seek Accreditation. College Exempt From Some Requirements. The Governor’s proposal requires the online community Initially, the online community college would be exempt college eventually to be accredited by an accreditor from collective bargaining requirements . Instead, the Figure 34 Specific Milestones for New Online Community College The online community college is to meet the following milestones by the specified dates: By July 1, 2020 9 Develop a seven-year implementation plan, including a business plan and three program pathways. 9 Develop internal business processes and establish outcome goals. 9 Map the student experience, including recruiting, onboarding, instructional experience, billing, and entry into a job. 9 Develop an accreditation plan. 9 Create a statewide outreach plan. 9 Define duties for instructional support and program development. 9 Establish a process for recognizing prior learning. 9 Enroll students by the last quarter of 2019. By July 1, 2021 9 Incorporate student feedback to improve the college’s instruction, technology, and support services. 9 Design and validate at least three additional program pathways. By July 1, 2023 9 Continue to enroll students into the college’s program pathways and incorporate student feedback to improve the college’s activities. 9 Design and validate at least 10 additional program pathways. By July 1, 2025 9 Continue enrolling students into the college’s program pathways. 9 Incorporate student feedback to improve the college’s activities. www.lao.ca.gov 53 analysis full gutter 2018-19 BUDGET college would be required to “meet and confer” with in more education cannot access it through existing faculty to discuss salaries, benefits, and employment online or in-person community college programs . practices . The proposal includes no specific deadline Unclear if Target Student Group Is Well Suited for when collective bargaining would need to occur . In for Online Approach. Studies find that individuals addition, the college would have flexibility with regard with a lower track record of academic success (as to setting its academic calendar and establishing an measured by GPA) have a larger drop-off in online alternative student fee structure . The online community courses compared to in-person courses . Given the college would be subject to most other rules and target students under the Governor’s proposal consist regulations that apply to existing community colleges . of those who have no postsecondary experience and Most notably, the college would be required to spend may not have graduated high school, an online setting at least 50 percent of its general operating budget on likely is not the most effective instructional approach for salaries and benefits of faculty and instructional aides them . The online community college could address this engaged in direct instruction . The college also would be concern by paying particular attention to counseling required to have its program and courses reviewed and and support services, online readiness assessments for approved by the Chancellor’s Office . students, and access to online tutors . The proposal, however, lacks detail on how the college would provide Assessment such support . Governor’s Problem Statement and Proposed Unclear How Statewide Industry Partnerships Solution Are Not Well Defined. In its description Would Be Developed. Identifying industry partners of the proposal, the administration identifies many would be critical for the success of the Governor’s key problems a new online community college could proposed college . These partnerships would be address: greater educational options for working adults necessary for identifying program pathways with lacking postsecondary credentials, greater access to high-industry demand and providing the hands-on online courses, innovation at the community colleges experience students will need to complete the (such as incorporating competency-based components pathways . The administration’s proposal, however, and measuring prior knowledge), and providing cheaper lacks detail regarding how it will develop these alternatives to for-profit colleges . The proposal for a partnerships, especially how it will develop them new online community college, however, does not statewide given the regional nature of many industries . identify which of these problems is the administration’s Without partnerships in all areas of the state, students primary concern . The administration also does not may not have access to hands-on experiences critical provide a clear rationale for why a new community to program completion . college is needed to address these problems, rather Creating a New College Has Significant than making systemwide improvements through Drawbacks Compared to Working Within Existing existing community colleges . We describe more specific System. Compared to funding new initiatives within concerns with the proposal below . the existing CCC system or improving upon existing Unclear If Providing Online Offerings Will Solve CCC initiatives, creating a new college requires much Key Barriers for Target Student Group. One of the greater upfront spending . It also has the disadvantage proposal’s goals is to increase educational attainment of taking longer until students can access the new for adults who currently have no postsecondary course offerings . The college would have to hire staff credentials . Although this is a laudable goal, the and develop key business practices before developing administration has not provided any evidence that an programs . By starting a new college, initial programs online community college will address the key barriers also would not be accredited . Students enrolled in for this potential student group . Although an online the college’s programs prior to accreditation would be program can increase convenience, working adults unable to receive federal financial aid and would not be may not be pursuing additional education for a number able to transfer credits to other colleges . of reasons . The administration also has not provided Eventually, a New College Would Have Its Own evidence that those working adults who are interested Constraints. The administration has indicated that, by starting with a completely new organization, the 54 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET online community college would be better positioned such programs . Additionally, the Legislature could to implement innovative new programs . Without having fund more training for faculty willing to teach those programs that are already based on the traditional particular online programs and staff willing to support academic calendar, for example, the college could more the students taking them . The Legislature also could easily use a competency-based education model that consider using the CCC Strong Workforce Program allows students to advance at their own pace . Although to build additional industry partnerships to help link the college initially may be more nimble, the college online coursework with hands-on job experience . These eventually would face many of the same constraints options could address many of the administration’s that existing community colleges face . Most notably, current concerns and could be implemented the college eventually would be expected to collectively immediately and at lower initial cost . bargain and would have to spend 50 percent of its No Urgency If Interested in Creating an Online budget on instructional salaries from the start . In Community College. Ultimately, the Legislature may the long run, these restrictions could result in the still want to pursue an online community college . online college having the same types of constraints Creating a new online college, in tandem with various existing community colleges have in making major other community college reforms, could significantly programmatic reforms . improve access and program options systemwide . Given the many important decisions involved in creating Issues for Consideration a new online college, we encourage the Legislature Elements of Proposal Could Have Benefits for to take its time to review the Governor’s specific Some Students. Some elements of the Governor’s proposal and consider alternatives . As part of this proposal could have statewide benefits . Greater access examination, we encourage the Legislature to gather to online education can provide increased opportunities more information about what underlying problems exist, for students to access required courses, thereby what are the root causes of those problems, how a new potentially speeding their time to graduation and online college could be designed to respond to those reducing total cost of attendance . Also, by aggregating issues, and how a new college could be funded and geographically separated students into online courses, held accountable for meeting its objectives . programs can be run more efficiently . Additionally, creating competency-based programs and recognizing FINANCIAL AID prior learning can help students complete programs more quickly with a lower cost of attendance . In this section, we first describe and analyze the Governor’s proposal relating to enrollment fee waivers . Explore Changes to Make Systemwide We then describe and analyze the Governor’s proposal Improvements. Rather than creating a new to consolidate two grants for living expenses . In regards college to implement key reforms, the Legislature to this latter proposal, we offer the Legislature an could consider statutory changes that would help alternative to consider . implement reforms within the existing CCC system . If interested in expanding access to online courses, the Enrollment Fee Waivers Legislature could incentivize districts to participate in the existing course exchange and improve students’ Below, we provide background on the state’s intercampus access to online courses . If the Legislature longstanding enrollment fee waiver program as well as is interested in increasing the number of programs the new fee waiver program the Legislature authorized that incorporate competency-based elements or last year . Next, we describe and assess the Governor’s recognize prior learning, it could modify the existing proposal to fund implementation of the new fee waiver apportionment-based funding model that currently program . creates a fiscal disincentive for colleges to pursue Background these options . If the Legislature is interested in having a particular set of programs available in an online format, State Has Long Waived Enrollment Fees for the Legislature could have the Chancellor’s Office run All Financially Needy Students. At CCC, financially a competitive grant application for colleges to develop needy students have their fees waived under the www.lao.ca.gov 55 analysis full gutter 2018-19 BUDGET California College Promise Grant (formerly known this were to happen, the cost of the fee waivers as the Board of Governor’s Fee Waiver program) . In would be higher . The program also could entice more 2017-18, the per-unit enrollment fee was $46, equating students who otherwise might not have gone to college to an annual fee for a full-time student (taking 15 to enroll at CCC, which would increase state costs for units per term) of $1,380 . In 2016-17, the state spent CCC apportionments . The program also might entice $758 million on fee waivers . Half of students received nonneedy students who otherwise would have gone fee waivers, accounting for two-thirds of all course units to CSU to complete their lower-division coursework taken . Financially needy students get all fees waived at CCC, thereby saving themselves the tuition cost regardless of the number of course units they take . That at CSU . If students responded in this way, the state is, both part-time and full-time students receive awards potentially could see a reduction in CSU enrollment covering all their enrollment fee costs . costs . Though these types of behavioral effects are AB 19 Expanded Eligibility for Fee Waivers. possible, they also are difficult to estimate . Chapter 735 of 2017 (AB 19, Santiago) expanded Perennial Tension Between Access and the fee waiver program to students who do not Achievement. An ongoing tension exists between demonstrate financial need . Specifically, it authorizes prioritizing funding for improving student access fee waivers for all resident first-time, full-time students to higher education, particularly for students who during their first year of college . (Though the cost otherwise could not afford college, and improving of the expanded program is calculated assuming student achievement once students get to college . On all these students obtain fee waivers, the legislation a longstanding basis, state (and federal) financial aid allows colleges to use their program allotments for programs have focused primarily on providing college other purposes, such as providing more student access for financially needy students . In recent years, support services .) To receive funding, colleges must financial aid efforts have shifted to focus more on meet various requirements, such as participating in the student achievement, with the intent of using financial Guided Pathways program . aid to improve student outcomes . When making its financial aid spending decisions, the Legislature each Governor’s Proposal year has to weigh these priorities . Provides Funding for AB 19 Fee Waivers. The Financial Aid for Living Costs Governor’s budget includes $46 million to fund the expansion of the California College Promise Grant Below, we provide background on financial aid program . The estimate is based on 2016-17 data of programs that cover living costs for community college the number of first-time, full-time students enrolled at students . We then describe the Governor’s proposal to CCC who did not receive a fee waiver . The Governor’s consolidate two of these programs . Next, we assess budget also includes $758 million to fund need-based those proposals and end by offering an alternative for fee waivers . the Legislature to consider . Assessment Background No Concerns With Basis of Governor’s AB 19 State Has Long Provided Aid to Cover Some Cost Estimate. The Governor’s estimate of the cost of Nontuition Expenses for Low-Income Students. In the AB 19 fee waivers is based on the best available addition to waiving enrollment fees for many community data . Though the data underlying the estimate comes college students, the state traditionally has provided from 2016-17, enrollment growth in 2017-18 and aid to cover a portion of some students’ living costs . 2018-19 is likely to be negligible . Specifically, the California Student Aid Commission Estimate Does Not Account for Behavioral (CSAC) administers two Cal Grant awards that provide Changes. The Governor’s cost estimate, however, nontuition coverage for certain financially needy does not consider the potential behavioral effects that community college students . The state funds both the proposal could have on students . For example, the types of Cal Grant awards with non-Proposition 98 proposal could result in more CCC first-time students General Fund . The two types of awards are: taking more units during their first year . To the extent 56 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET • The Cal Grant B Nontuition Award. This annually if they enroll in 12 or more units per term . award provides low-income students with Enrolling in 12 units per term typically would lead to $1,672 annually to cover living expenses . The graduation in 2 .5 years . In 2017-18, the Legislature majority of Cal Grant B nontuition awards are created the CCC Completion Grant . The Completion given to students who enroll in college within a Grant provides an additional $2,000 annually to year of graduating high school . Whereas these students receiving the Full-Time Grant if they enroll in students are entitled to awards, older students 15 or more units per term . Enrolling in 15 units per term compete for a fixed number of awards each year . typically would lead to graduation in 2 years . The state In 2016-17, about 74,000 community college funds both programs with Proposition 98 General Fund . students received entitlement awards and about In 2016-17, about 78,000 students received a Full-Time 33,200 older students received competitive Grant . Data are not yet available on the number awards . receiving a Completion Grant . • The Cal Grant C Nontuition Award. This award In Total, Full-Time Students Can Qualify for More provides low-income students enrolled in CTE than $10,000 Annually for Living Costs. As Figure 35 programs with $1,094 for materials and other shows, CCC students enrolled in 15 units per term nontuition expenses . Students of any age can currently may qualify for one federal grant and three receive the grant, but the state caps the number state grants to help them cover living expenses . In total, of awards offered annually . In 2016-17, about they may qualify for about $10,600 annually if meeting 5,200 community college students received these the Cal Grant B eligibility criteria and almost $10,000 awards . annually if meeting the Cal Grant C eligibility criteria . By comparison, CCC students enrolled in 12-14 units per Federal Government Also Has Long Provided Aid term may qualify for about $8,600 annually if meeting to Cover Some Nontuition Expenses. Community the Cal Grant B eligibility criteria and almost $8,000 colleges administer the federal Pell Grant program, annually if meeting the Cal Grant C eligibility criteria . which provides financially needy students up to $5,920 Living Costs Vary Based on Students’ Living annually, if enrolled in 12 or more units . The award Situations. About half of financially needy students amount is pro-rated downward for part-time students . enrolled in 12-15 units live at home . We estimate As financially needy community college students get their enrollment Figure 35 fees waived, they may use their Pell Grants for living expenses . In Several Programs Help Financially Needy 2016-17, 450,000 community college Students Cover Living Expenses students received Pell Grants . Reflects Annual Awards, 2017-18 Legislature Recently Created 15 Units Per Term 12-14 Units Per Term Two Programs to Cover Additional Nontuition Costs for Full-Time Cal Grant B Students Students. Due to concerns with Pell Granta $5,902 $5,902 Completion Grant 2,000 — low completion rates at CCC, the Cal Grant B 1,672 1,672 Legislature recently created two Full-Time Grant 1,000 1,000 programs administered by the Total Maximum Aid $10,574 $8,574 community colleges to provide more aid for students’ living costs if they Cal Grant C Students enroll in more units . In 2015-16, the Pell Granta $5,902 $5,902 Legislature created the Full-Time Completion Grant 2,000 — Cal Grant C 1,094 1,094 Student Success Grant (Full-Time Full-Time Grant 1,000 1,000 Grant) . The Full-Time Grant provides Total Maximum Aid $9,996 $7,996 students who receive a Cal Grant a Assumes student has sufficient financial need to qualify for maximum award amount. Students B award with an additional $1,000 with incomes under $50,000 typically qualify for an award. www.lao.ca.gov 57 analysis full gutter 2018-19 BUDGET that these students have on average $11,000 in indicates that the program is meant to simplify financial annual nontuition costs . Of the students enrolled in aid programs by consolidating two programs . The 12-15 units who do not live at home, we estimate Governor estimates that the cost of the grant program that about 60 percent are dependent students and would total $124 million in 2018-19, a $33 million about 40 percent are independent students . (Students increase over the combined cost of the Full-Time Grant generally are considered independent if they are and Completion Grant programs in the current year . 24 years or older .) We estimate average annual living Program Would Have Annual Reporting costs of about $15,700 for students who do not live Requirements. The proposal requires CCC to report at home . These estimates are based on averages, by April 1, 2020 on outcomes for the first year of the with any particular student potentially incurring notably program, including information about the number of higher or lower living costs . grant recipients and their college goals, their GPAs, and how many are on track to complete college in Governor’s Proposal 2 or 3 years . “Consolidates” Two CCC Aid Programs and Assessment Increases Funding by $33 Million. The Governor proposes to create a new program called the Various Factors Are Correlated With Higher Community College Student Success Completion Completion Rates and More Timely Completion. Grant that replaces the rules underlying the existing Research suggests that several key factors contribute Full-Time Grant and Completion Grant . Instead of two to more timely completion rates . Younger students tiers of funding based on the number of units a student and students that enroll in college immediately or soon takes per term, the new grant program would have after high school are likely to complete college at higher four tiers . The maximum annual grant would be $1,000 rates than students who are older or enroll later in for Cal Grant B recipients enrolled in 12 units per life . In addition, research suggests that providing aid term, with incremental increases for recipients enrolled for students’ living expenses can induce low-income in 13 and 14 units, and a maximum of $4,000 for students to work fewer hours and enroll in more units, recipients enrolled in 15 units per term (see Figure 36) . which can lead to more timely completion . Research The proposal includes language that funding must also suggests, however, that students working between not exceed a student’s demonstrated financial need 10 and 20 hours per week during the academic year do (as calculated under the federal methodology) . The not have worse educational outcomes than nonworking Governor’s intent is to provide more funding to certain students . CCC students such that they could complete their Governor’s Proposal Provides Additional Funding degree more quickly by not working as much . He for a Subset of Full-Time Community College Students. The Governor proposes to cover a larger Figure 36 share of living expenses for the 60,000 Cal Grant recipients at the community colleges enrolled in 13-15 Comparing Grant Amounts Under units per term . (Funding for living expenses for students Existing and Proposed Rules enrolled in 12 units would remain the same .) Beyond Reflects Annual Awardsa these students, more than 200,000 additional financially Governor’s needy community college students enroll in 12 or Units Per Current Grant Proposed more units per term but do not receive a Cal Grant . Semester Amount Grant Amount This usually is because they graduated high school 12 $1,000 $1,000 more than a year prior to entering community college . 13 1,000 1,250 The Governor’s proposal would continue to exclude 14 1,000 1,900 these students from receiving additional aid for living 15+ 3,000 4,000 expenses . a A student would need to be enrolled full time in both fall and spring semesters to qualify for the amounts shown in the figure. Governor’s Governor’s Goal to Simplify Aid Programs proposed amounts reflect maximum amounts, as awards could not Has Merit, but Proposal Does Not Simplify. The exceed students’ financial need. Governor’s goals to simplify and consolidate financial 58 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET aid programs are laudable . His approach, however, funding the consolidated program using Proposition 98 has notable shortcomings . Although it combines two funds (consistent with virtually all other CCC operational programs in name, it makes the underlying award funding) and having the CCC Chancellor’s Office rules more complicated by introducing four award administer the consolidated program . Specifically, we tiers rather than the existing two . When financial aid recommend collapsing funding from the community programs are overly complicated, students might not college Cal Grant B nontuition award ($158 million understand them, so the programs might not have non-Proposition 98), the Cal Grant C nontuition award their intended effects on student behavior . In addition, ($5 million non-Proposition 98), the Full-Time Grant, complicated financial aid programs can be difficult for and the Completion Grant (at the Governor’s higher administrators to understand and convey to students . combined proposed funding level of $124 million Lastly, overly complicated approaches to financial aid Proposition 98) . Thus, a total of $287 million would can result in policymakers being unable to identify the be available . As explained below, the Legislature has specific factors contributing to program outcomes, various issues to consider in implementing the new such that knowing how best to refine those programs is program . especially challenging . Consider Living Costs Then Apply Reasonable Governor’s Award Structure Could Be More Expectations. When considering how to award Closely Linked to Financial Need and Living funding under a new program, we recommend the Costs. The Governor’s proposal does not link grants Legislature consider community college students’ specifically with financially needy students’ unmet living arrangements as well as their expected family living costs . It also does not take into account how contributions and federal aid . We also recommend unmet need is likely to vary at different unit loads . For applying a reasonable work expectation . Though any example, the proposal provides $250 more annually to expectation between 10 and 20 hours per week would students enrolled in 13 rather than 12 units per term . be reasonable given research findings, we ran program The Governor provides no rationale for why $250 is an estimates assuming 15 hours per week . After applying appropriate amount to provide for a student enrolled a work expectation of 15 hours per week, an average in 1 more unit . If taking 12 rather than 13 units per family contribution, and an average Pell Grant award, term, a student could work for the 3 hours a week we estimate that financially needy dependent students he/she otherwise would have spent in class and on who live at home and enroll full time on average already homework . At minimum wage, that student could earn have their living costs covered . For full-time dependent over $1,000 more in the course of an academic year by students not living at home, we estimate average unmet working rather than receiving the grant to take 1 extra living costs of $2,700 annually, after applying the same unit . The Governor’s proposal, therefore, could be more work, family contribution, and Pell Grant expectations . closely linked to the incentives that students consider For full-time independent students not living at home, when deciding whether to work or take a higher course we estimate unmet living costs of $4,300 annually, after load . applying the same expectations . For all financially needy full-time students across all living arrangements, we Recommendations estimate covering unmet living costs would total about Recommend Rejecting Proposal and Thinking $500 million annually . This cost is significantly higher More Holistically. Though we believe the Governor has than current program costs because all financially a worthwhile objective to improve time to degree at the needy full-time students’ unmet living expenses would community colleges, particularly among low-income be covered . students, we also believe the Legislature has better Link Living Grant With Unmet Living Costs. Under ways to achieve this objective . Thus, we recommend the new program, we recommend the Legislature the Legislature reject the Governor’s approach, taking make grants equal to whatever amount of unmet living a more straightforward alternative approach . The costs a student has after factoring in all the above alternative approach would be to consolidate all existing expectations . For example, two financially needy aid programs covering nontuition costs for financially dependent students living not at home and enrolled full needy community college students . We recommend time would each have expected annual living costs of www.lao.ca.gov 59 analysis full gutter 2018-19 BUDGET $11,000 . Both students would be expected to work potential to change student behavior because the 15 hours per week and earn $7,848 annually . One message of the program would be clearer for students student, however, might have a lower expected family (and administrators and policymakers) . By potentially contribution and therefore more unmet need . The living improving both completion and time to degree, the grant for this student would be larger . The program program also could improve the efficiency of the would work similarly for full-time students with other system and lower costs per completion . In addition, our living arrangements . approach would allow policymakers to determine more Consider Ways to Prioritize Awards Given easily whether students were reacting to the program’s Available Funding. As the $287 million for the new incentives to complete and complete more quickly . program would be insufficient to cover all unmet living costs for financially needy community college students APPRENTICESHIP PROGRAMS enrolled full time, the Legislature could consider various In this section, we first provide background on options to prioritize available funding . A common way apprenticeships . We then describe and assess the the Legislature prioritizes funding is based on financial Governor’s two proposals relating to the state’s need . Under this approach, the financially neediest apprenticeship programs . We end by making students would get all their unmet living costs covered, associated recommendations . then students with slightly less financial need would receive coverage, until all available funds were spent . Background Alternatively, the Legislature could pro-rate awards downward, covering a portion of unmet living costs Nearly 80,000 Registered Apprentices in for all financially needy students . Another option Various Trades. In 2016-17, California had nearly would be to prioritize dependent students, then 80,000 registered apprentices in more than 50 trades, independent students, as research generally finds ranging from glazing to motion picture work . The most that younger students are more likely to complete common apprenticeships are in the construction trades, college than older students . Rather than rationing, the making up about 70 percent of apprentices in the state . Legislature could consider shifting funding from other These apprenticeships include training for carpenters, Proposition 98 programs to cover the full estimated plumbers, and electricians, among others . The second cost of the program . Yet another option would be to most common apprenticeships are in public safety, develop a statutory plan for gradually increasing funding primarily for correctional workers and firefighters . until full program costs were covered, using any of the Apprenticeship programs typically are sponsored by above rationing options during the interim . businesses and labor unions that design and support Our Recommendations Would Simplify the programs and recruit apprentices . The sponsors Messaging and Administration. Taking our approach must find a school district or community college that would simplify messaging to low-income community will affiliate with them . To become a state-approved college students . Rather than needing to understand program, the sponsors and affiliated education agency the rules of multiple state programs, students would submit their apprenticeship program plans to the need to understand only one . The rules for the one Division of Apprenticeship Standards (DAS) in the program would be more straightforward—financially California Department of Industrial Relations . The DAS needy dependent students that work 15 hours a week reviews the curriculum and certifies that the programs and enroll in 12-15 units would receive aid sufficient to meet industry standards . cover their unmet living costs . Under our approach, the State Workforce Plan Has Goal of Significantly process of receiving and delivering aid also would be Increasing Apprenticeships Over Next Few Years. less confusing and more efficient for community college The federal Workforce Innovation and Opportunity Act students and administrators . Students would receive requires each state to submit a plan for addressing its all of their state and federal aid from their campus, with workforce needs . California’s state plan sets a goal of campus aid administrators packaging the aid directly . doubling apprenticeships in the state by 2027—from Our Recommendations Likely Would Result in roughly 80,000 apprentices to 160,000 . Research Better Student Outcomes. Our approach has the indicates that the apprenticeship model is an effective 60 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET way to train people for jobs with relatively high earnings Figure 37 potential . Apprenticeship Funding Has Grown Apprenticeships Combine On-the-Job Training Significantly Over Time With Coursework. Apprenticeships differ from other CTE because they are paid work programs that pair (In Millions) adult students with skilled workers for supervised, California hands-on learning . Apprenticeships last from two Apprenticeship to six years and typically result in job placement . In Apprenticeship Initiative Total tandem with on-the-job training, apprentices take 2013-14 $23 — $23 classes relevant to their trade . Classroom time is known 2014-15 23 — 23 as related supplemental instruction (RSI) . Usually 2015-16 37 $15 52 these classes are held on weekends or evenings to 2016-17 39 15 54 accommodate apprentices’ work schedules . Most 2017-18 40 15 55 apprenticeship programs have stand-alone training centers that provide these classes, but school districts of the number of hours of instruction their apprentices and community colleges provide some apprenticeship have completed to DAS, which certifies the hours . classes on their campuses . The required mix of Those hours are then reimbursed at the end of the year on-the-job training and coursework varies by industry, by the sponsor’s affiliated school district or community but the on-the-job training component typically entails college . These education agencies take a portion of more hours than the coursework component . Carpentry the funding off the top before passing through the rest apprentices spend a minimum of 3,600 hours on the as RSI reimbursement . The portion held back is larger job and 432 hours in RSI over three years, for example, when programs use school districts or community while air conditioning and refrigeration apprentices must college classroom space . The state has increased complete 7,500 hours on the job and 1,080 hours in the RSI rate every year since 2014-15, rising from RSI over five years . $5 .04 that year to $5 .90 in 2017-18 . State Now Has Two Apprenticeship Programs. Number of Approved Apprenticeship Hours Has The state’s longstanding Apprenticeship program Increased in Recent Years. The number of certified focuses on traditional apprenticeship fields . In RSI hours has increased significantly in recent years 2017-18, the state provided $39 .9 million for the (see Figure 38, next page) . This is likely due to the program . In 2015-16, the state created the California state’s economic recovery . Growth in apprenticeship Apprenticeship Initiative, which provides $15 million hours has been widespread across industries but annually for nontraditional apprenticeship programs especially pronounced in the construction trades . (such as healthcare, advanced manufacturing, and If Funding for RSI Falls Short, the RSI Is information technology) and pre-apprenticeships Pro-Rated Down. In recent years, the amount of (programs that prepare students for an apprenticeship) . funding the state has budgeted for RSI has fallen short Figure 37 shows state funding for each of these of covering all certified instructional hours for traditional programs over the past five years . Total state funding apprenticeship programs . When funding is not sufficient for apprenticeships is almost two-and-a-half times to reimburse all hours at the specified RSI rate, the rate greater today than five years ago . is adjusted downward . In each of the past five years, State Subsidizes Portion of Coursework Costs the state has made pro-rata reductions (see Figure 39, at “Regular” Noncredit Rate. The bulk of state next page) . Because school district and community Apprenticeship funding is for RSI . State funding helps college apprenticeship programs have different line support some costs of RSI by providing $5 .90 for every items in the state budget, their pro-rata reductions have hour of instruction . This rate equates to the hourly rate been different . In recent years, the pro-rata reductions for community college regular noncredit instruction . for apprenticeship programs affiliated with school Apprenticeship programs indicate that sponsors districts have been greater, largely because they have typically fund more than half of RSI costs . To access grown more rapidly than community college-affiliated state funding, apprenticeship programs submit a record apprenticeships . www.lao.ca.gov 61 analysis full gutter 2018-19 BUDGET for college credit . Regardless of Figure 38 whether offered for college credit, all Certified Apprenticeship Hours Have Increased apprenticeship programs culminate Significantly in Recent Yearsa in industry certifications . Total Certified Hours (In Millions) Governor’s Proposals 9 8 Provides $31 Million One Time to Make Up for Pro-Rata 7 Reductions in Prior Years. 6 The Governor’s budget includes 5 $31 million one time to reimburse 4 the traditional Apprenticeship program for pro-rata reductions that 3 occurred from 2013-14 through 2 2017-18 . Though apprenticeship 1 hours for 2017-18 have not yet been certified, the Governor’s budget 2013-14 2014-15 2015-16 2016-17 2017-18 assumes an average 32 percent a Actual hours through 2016-17. Estimated hours for 2017-18. pro-rata reduction would occur absent the proposed augmentation . The amount provided is based upon the total number of certified Some Apprenticeship Coursework Offered for hours over this period and the pro-rata reductions . Of Credit. About 90 percent of apprenticeship courses the $31 million, the bulk is associated with 2017-18 that are affiliated with community colleges are offered ($10 million), with the remaining $21 million spread for credit . Apprenticeship instructors, rather than over the rest of the period . The proposal allocates the community college faculty, typically teach these funds proportionally—effectively undoing the prior-year classes at apprenticeship training centers . These pro-rata reductions . The majority goes to programs apprenticeship courses generally are degree applicable, affiliated with school districts ($25 million) . The proposal though the programs alone do not culminate in an does not place restrictions on the use of funds . associate degree . Despite being offered for credit, the courses are funded based on the regular hourly Provides $17.8 Million Ongoing for Traditional noncredit rate . Comparable apprenticeship programs Apprenticeship Program. Of this amount, run through school districts generally are not offered $13 .8 million is associated with more RSI hours and $3 .9 million is associated with increasing the RSI rate up to the Figure 39 new noncredit hourly rate of $6 .49 . Apprenticeship Reimbursement Rate Has Been As the state has not adjusted Prorated Down in Recent Yearsa the base number of RSI hours it Hourly Rate reimburses since 2015-16, the Governor’s proposal effectively trues Statutory Pro-Rata Effective Rate Reductiona Rate up to the 2017-18 level and holds that level flat in 2018-19 . Although 2013-14 $5.04 -10% $4.53 the Governor expects growth in 2014-15 5.04 -22 3.95 apprenticeship hours in the budget 2015-16 5.46 -1 5.38 year, he holds hours flat because 2016-17 5.71 -18 4.68 2017-18b 5.90 -24 4.48 he believes that growth would be a offset by his companion proposal to Reflects average of school district and community college pro-rata reductions. b Pro-rata reduction and effective rate are estimates. allow apprenticeships at community 62 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET colleges to start earning the credit funding rate and state funding with projected apprenticeship hours generating apportionment funding . We describe this moving forward is reasonable . Trying to avoid a proposal in the next paragraph . notable pro-rata reduction in the budget year would Proposes Allowing Colleges to Earn Credit make planning easier for participating businesses Funding Rate for Apprenticeship Programs. The and unions . Moreover, we do not have concerns Governor proposes to allow colleges to generate that increasing the effective RSI rate will result in too the credit funding rate rather than the RSI rate for many apprenticeships . This is because apprenticeship apprenticeship courses it offers for college credit . The sponsors cover the majority of program costs and thus Governor’s proposed 2018-19 credit rate is $5,453 per have incentives not to overproduce apprentices . student . This equates to $10 .38 per hour—60 percent No Evidence Raising Apprenticeship Funding higher than the proposed 2018-19 RSI rate, which Rate Even Further Is Warranted. Given how quickly would apply to all other apprenticeship programs . the number of apprenticeships has been growing in The Governor indicates that this proposal could recent years, the state likely is on track to meet its goal of (1) incentivize more colleges to offer apprenticeships having 180,000 registered apprentices by 2027 . Based and (2) lead to more students receiving college credit on recent trends in certified hours, employers clearly are for apprenticeships, which eventually could lead to willing to cover a large share of RSI costs . Increasing more associate degrees or stackable credentials . the reimbursement rate even further—to the community He indicates the credit rate is justified because college credit rate—appears unnecessary . Eventually, credit-bearing programs could be more expensive if raising the rate to especially high new levels could result taught at community college campuses rather than in less employer buy-in, effectively having state funding at training centers . The administration has neither supplant funding from businesses and unions . provided data on the projected number of courses Community Colleges Already Offer that likely would start to earn the credit funding rate Apprenticeship Instruction for Credit. The vast in 2018-19 nor estimated the additional associated majority of students attending apprenticeships through apportionment cost . the community colleges already earn credits that they can apply toward an associate degree or other Assessment credential . We see no reason to increase the funding No Compelling Justification for Retroactive rate for these courses by 60 percent on the chance Reimbursements. During the years that state that the higher rate might spur slightly more credit apprenticeship funding fell short of demand, instruction . apprenticeship sponsors covered more of the costs Proposal Would Result in Different Rules for of instruction . State law makes clear that if funding is Apprenticeship Program Providers. The Governor’s insufficient to cover all certified hours, the administering proposal further complicates the Apprenticeship agencies are to make adjustments to stay within the program by proposing a higher funding rate for annual budget allocation . Though anticipating what the certain community college apprenticeship programs effective reimbursement rate will be in any given year and not for other community college and school likely is challenging for participating businesses and district apprenticeship programs . Moreover, the unions, the state’s Apprenticeship program has worked Governor’s proposal could result in inconsistencies in this way for many years . Moreover, apprenticeship apprenticeship instructor qualifications . The minimum hours have continued to grow at a remarkable pace qualifications for apprenticeship instructors currently even though participating businesses and unions have are different from community college faculty, even if the known that the reimbursement rate is very likely to be apprenticeships are taught in affiliation with community pro-rated downward, as such adjustments have been colleges . Under the Governor’s proposal, the impact made for five consecutive years . on apprenticeship instructors is unclear . Potentially Ongoing Augmentation Would Better Align these instructors could have to meet new requirements Funding With Apprenticeship Hours. Though we merely because of the new funding mechanism . (The believe providing retroactive reimbursements serves administration has provided no evidence that the quality no compelling state purpose, we believe aligning of apprenticeship instructors is poor .) www.lao.ca.gov 63 analysis full gutter 2018-19 BUDGET Recommendations planning efforts . All 72 districts pay annual fees to the Foundation to support the facility condition assessments Reject Retroactive Reimbursements. We and the online management system . recommend the Legislature reject the Governor’s CCC Reports Sizeable Maintenance Backlog. proposal to provide reimbursements to apprenticeship From the districts’ facility condition assessments, the programs for prior year costs that exceeded the CCC system has identified $6 .6 billion in scheduled budgeted allocation . Program sponsors continued to and deferred maintenance projects over the next five cover these costs during this time and the program years . The system has narrowed down the list to identify continued to grow rapidly . a more feasible maintenance plan of $1 .2 billion in top Approve $23.6 Million Ongoing Augmentation priority projects to be completed over this period . Of this ($5.8 Million More Than Governor’s Budget). We amount, the Chancellor’s Office identified $611 million in recommend the Legislature provide an augmentation projects to undertake the next two years . of $23 .6 million to cover all projected RSI hours State Has a Categorical Program for CCC in 2018-19 . We estimate 10 percent growth in Maintenance. This categorical program also funds 2018-19 based on average annual growth over the replacement of instructional equipment and the past five years . In addition, we recommend the library materials, hazardous substances abatement, Legislature readjust the amount of RSI hours it funds architectural barrier removal, and water conservation annually so that the hours the state reimburses moves projects . Historically, budget language for this program up and down with the economy and the demand for has required a one-to-one match (with districts apprentices . meeting the local match using apportionments, local Reject Governor’s Proposal to Allow Colleges bond monies, or other general purpose funds), but no to Earn Credit Funding Rate for Apprenticeship match has been required since 2013-14 . To use this Programs. We recommend rejecting the Governor’s categorical funding for maintenance, districts must proposal to allow colleges to claim credit funding adopt and submit to the CCC Chancellor’s Office for apprenticeship programs . Apprenticeship a five-year plan of maintenance projects . Districts instruction already can be offered for credit . Moreover, also must spend at least 0 .5 percent of their current apprenticeships continue to increase even at the operating budgets on ongoing maintenance and current hourly noncredit funding rate . at least as much on maintenance as they spent in 1995-96 (about $300 million statewide) plus what they OTHER PROPOSALS receive from the categorical program . In addition to categorical funds, districts fund scheduled maintenance Below, we discuss the Governor’s proposals relating from their apportionments and other general purpose to deferred maintenance and awards for colleges to funds (for less expensive projects) augmented by local implement innovative improvement strategies . bond funds (for more expensive projects) . Deferred Maintenance State Has Provided Substantial Funding for CCC Maintenance Over Past Few Years. Over the last CCC Maintains Inventory of Facility Conditions. four years, the state has provided $551 million for the Community college districts jointly developed a set of CCC maintenance categorical program . Historically, this online project planning and management tools in 2002 . program has received large appropriations when a large The Foundation for California Community Colleges, with amount of one-time Proposition 98 funding is available assistance from San Joaquin Delta Community College and no appropriations in tight budget years . The budget District, operates and maintains this system on behalf of has typically allocated half of the program’s funding districts . The Foundation employs assessors to complete for deferred maintenance and half for replacement a facility condition assessment of every building at of instructional equipment and library materials . In districts’ campuses and centers on a three- to four-year 2014-15, the budget removed this split, leaving cycle . These assessments, together with other facility associated allocation decisions up to districts . Data are information entered into the system, provide extensive not available on how much of the funding community data on CCC facilities and help districts with their local colleges have spent on each of the allowable uses . 64 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET Data also are not available on how much the colleges applications, including 6 from community colleges . The expect to spend from their apportionments and bond winning applications were for strategies that included funds on maintenance . improving K-12 alignment with higher education Governor Proposes $275 Million One Time for expectations, redesigning curriculum and teaching CCC Maintenance Categorical Program. Under the practices to improve outcomes, and using technology Governor’s budget, one-time funding for this categorical to expand access to courses . Each winning applicant program would come from several sources . Specifically, received from $2 .5 million to $5 million in award funds . $184 million is 2017-18 funds, $81 million is 2018-19 Award recipients are to report on their strategies by funds, and $11 million is Proposition 98 settle-up funds . January 1, 2018 and January 1, 2020 . As of this Consistent with recent practice, the Governor proposes writing, the January 2018 compiled reports had not yet no matching requirement and no required split between been released . using the funds for maintenance or equipment and Second Round of Awards Funded in 2016-17. materials . After rejecting the administration’s proposal Recommend Adopting Governor’s Proposal. The for more awards in 2015-16, the Legislature proposed funding would help address CCC’s large accepted a revised proposal the following year . The maintenance backlog and help update instructional 2016-17 awards program, funded with $25 million equipment and materials . In addition, by dedicating one-time Proposition 98 funds, differed from the $80 million in 2018-19 Proposition 98 funding to 2014-15 program in three ways: (1) only community one-time purposes, the proposal would provide a college districts could apply for awards; (2) awards corresponding cushion against potential revenue were based on proposed activities instead of declines and drops in the Proposition 98 minimum initiatives applicants already had implemented; and guarantee in the future . For these reasons, we (3) the Governor had more discretion in selecting his recommend adopting the Governor’s proposal . To appointees to the awards committee . The program the extent the Legislature rejects the Governor’s that year authorized awards for curriculum redesign other one-time CCC proposals or prefers to provide (such as the implementation of three-year bachelor’s community colleges with a larger amount of one-time degrees), competency-based programs (such as funding, we recommend the Legislature further increase efforts to award credit for military education and funding for this categorical program . training), and financial aid access (such as increasing the number of students applying for aid) . The program Innovation Awards gave preference to projects that focused on improving outcomes for students from underrepresented groups First Awards Funded in 2014-15. The or using technology in ways that are not common in 2014-15 budget provided $50 million in one-time higher education . In the spring of 2017, the committee funding to promote innovative models of higher awarded funds to 14 colleges, with 11 awards of education at UC, CSU, and CCC campuses . $2 million each and 3 awards of $1 million each . Campuses (or teams of campuses) that had undertaken initiatives to increase the number of bachelor’s degrees Third Round of Awards Funded in 2017-18. awarded, improve four-year completion rates, or The 2017-18 budget provided $20 million one-time ease transfer across the segments could apply for Proposition 98 funding for a third round of awards . Because awards were based on initiatives innovation awards . Like the 2016-17 awards, the already implemented at the campuses, they functioned 2017-18 program focuses on innovations at the more like prizes or rewards than grants for specified community colleges, with awards for addressing future activities . A committee of seven members— specified groups of underrepresented students five Governor’s appointees (one each representing and using technology to improve instruction and the Department of Finance, the three segments, support services . The 2017-18 program is different, and the State Board of Education) as well as two however, in that it eliminates the award committee legislative appointees selected by the Speaker of the appointed by the Governor and Legislature and tasks Assembly and the Senate Rules Committee—made the Chancellor’s Office with making award decisions award decisions . The committee approved 14 of 57 directly . The Chancellor’s Office is to submit interim and www.lao.ca.gov 65 analysis full gutter 2018-19 BUDGET final reports on these awards by January 1, 2020 and FACILITIES 2022, respectively . Applications for these awards are In this section, we provide background on state due March 19, 2018, with winners to be announced by funding for CCC facilities and discuss the Governor’s May 14, 2018 . proposal to authorize five new community college Governor Proposes Fourth Round of Innovation projects . Awards. The Governor’s budget includes $20 million one-time Proposition 98 funding for an additional Background round of innovation awards to community colleges . As with the awards funded in 2017-18, the Chancellor’s State Primarily Funds Community College Office would set award criteria and select winners . Facilities Through General Obligation Bonds. The The 2018-19 awards are to focus on innovations that state typically issues general obligation bonds to help reduce regional achievement gaps across the state and pay for community college facility projects . A majority of gaps for students from traditionally underrepresented voters must approve these bonds . From 1998 through groups . In particular, the proposal emphasizes interest 2006, voters approved four facility bonds that provided in closing gaps related to degrees and certificates a total of $4 billion for community college facilities . awarded, the number of excess units taken by students Virtually no funding remains from these facility bonds . attaining associate degrees, and the number of CTE New State Bond Approved in 2016. After a students who become employed in their field of study . ten-year gap, voters approved Proposition 51 in Potential Statewide Benefits Unclear. One of November 2016 . It authorizes the state to sell $2 billion our most significant concerns with the proposal is in general obligation bonds for community college that the awards might provide relatively large sums to projects (in addition to $7 billion for K-12 school a small number of community colleges to implement facilities projects) . The funds may be used for any CCC local initiatives that would not necessarily have facility project, including buying land, constructing statewide impact . This is because the proposal does new buildings, modernizing existing buildings, and not provide for dissemination of innovations to other purchasing equipment . colleges across the state nor does it do anything to Community College Facility Projects promote buy-in among other colleges to implement the Recommended by Chancellor and Approved innovations . in Annual Budget. To receive state bond funding, Award Program Further Fragments Efforts to community college districts must submit project Improve Student Outcomes. We also are concerned proposals to the Chancellor’s Office . The Chancellor’s that the awards add yet another program to the state’s Office ranks all submitted facility projects using numerous existing efforts to improve CCC student the following five criteria adopted by the Board of outcomes . The current plethora of student support and Governors (in order of priority): success initiatives is already challenging for colleges to • Life-safety projects, projects to address seismic coordinate . Moreover, these existing initiatives, as well deficiencies or risks, and infrastructure projects as the proposed changes to the CCC apportionment (such as utility systems) at risk of failure . funding formula, are designed to have much broader • Projects to increase instructional capacity . statewide impact . Rather than funding another round • Projects to modernize instructional space . of generous awards to a small number of colleges, we believe the state should focus on effectively • Projects to complete campus build-outs . implementing systemwide CCC initiatives . • Projects that house institutional support services . Reject Governor’s Proposal to Provide In addition, projects with a local contribution receive $20 Million for CCC Awards. For these reasons, we greater consideration . (Districts raise their local recommend the Legislature reject this proposal . The contributions mainly through local general obligation Legislature could instead target the funding to other bonds .) Based on these criteria, the Chancellor’s priorities, like deferred maintenance, that are one time Office submits capital outlay project proposals to the in nature . Legislature and Governor as part of the annual state budget process . 66 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET 2017-18 Budget Provides Planning Funds for addressed priority issues and, in some cases, included a 15 Projects. In the fall of 2016, the Chancellor’s sizeable local match . Office recommended 29 projects to be included in Budget Includes $55 Million for Previously the 2017-18 budget . The 2017-18 budget included Approved Projects. Of that amount, $40 million is $17 million for the preliminary planning phase of 15 of Proposition 51 funding related to the cost of projects the 29 projects . Total state costs for these projects (all approved in 2017-18 . For 14 of the 15 projects phases) are estimated to be $441 million . Total project approved last year, the appropriation reflects the cost costs including local contributions are estimated to be of developing working drawings . For one project, which $676 million . will be constructed using a design-build approach, Chancellor’s Office Recommended 15 Projects the budget includes the cost of both design and for 2018-19. Of the 15 projects, 13 projects were construction . The budget also includes $14 million in proposed but not funded last year and 2 projects were 2006 bond funds for the construction of an instructional newly approved in the fall of 2017 . Of the projects, the building at Compton College . The project was initially Chancellor’s Office ranked two in the highest-priority approved by the state in 2014-15 but has had delays in category, four in the second highest-priority category, the design and review process . five in the third category, and four in the fourth category . Assessment The 15 projects are estimated to have total state costs of $282 million . Proposed Projects Address Notable Problems. The project in the College of the Redwoods replaces a Governor’s Proposals building currently located on an active fault . Two of the Governor Proposes Funding Five New CCC projects—at Coast Community College and Mount San Projects for 2018-19. The administration proposes to Antonio College—replace buildings with foundation or fund five of the 15 projects submitted by the Chancellor’s seismic issues . The two remaining projects—at Laney Office . As Figure 40 shows, the Governor’s budget and Merritt colleges—replace facilities at the end of includes $4 .7 million in Proposition 51 funds for initial their lifespans . These latter two projects would be planning costs . Total state costs for the five projects primarily funded with district funds—another reason for (including construction) are estimated to be $131 million . their high prioritization . Of the five projects, one is in the highest-priority Governor’s Proposal Too Small Relative to category, two are in the second highest-priority category, Voter-Approved Bond Funding. The total state cost and two are in the fourth category . The project in the of the five proposed projects amounts to 7 percent of highest-priority category, at College of the Redwoods, the CCC bond funding authorized in Proposition 51 . includes no local match . According to the administration, Given a substantial backlog of facility projects at the the remaining four projects were selected because they Figure 40 Governor’s Proposed CCC Capital Outlay Projectsa (In Thousands) 2018-19 All Years College Project Phase State Cost State Cost Total Cost Mount San Antonio College New Physical Education Complex P $1,634 $51,978 $65,284 College of the Redwoods Arts Building replacement P 1,319 24,268 24,268 Golden West College Language Arts Complex replacement P 763 23,740 46,870 Laney College Learning Resource Center replacement P 761 24,699 76,480 Merritt College Child Development Center replacement P 209 6,151 20,092 Totals $4,686 $130,836 $232,994 a Reflects only new projects entering the planning phase. Apart from the College of the Redwoods project, the other replacement projects appear to increase available space. P = preliminary plans. www.lao.ca.gov 67 analysis full gutter 2018-19 BUDGET community colleges, we see no justification for funding 2018-19 would cost $400 million, or 20 percent of the so few projects . total bond authority granted by the ballot measure . At this rate, total bond authority would be committed over Recommendations five years . In addition to authorizing more projects in 2018-19, we recommend the Legislature develop a Consider Authorizing Additional Projects and Developing a Multiyear Plan. We recommend the multiyear expenditure plan for remaining Proposition 51 Legislature consider authorizing more CCC projects funds . Such a plan would (1) help community than included in the Governor’s budget . A CCC facility colleges plan their capital outlay programs, (2) ensure project on average costs roughly $50 million . At this that voter-authorized funds are put to use within a average cost, approving eight additional projects in reasonable time, and (3) spread bond sales over several years . CALIFORNIA STUDENT AID COMMISSION In this section, we provide an overview of the Scholarship program and other aid programs that it Governor’s budget for the California Student Aid had created over the years into the Cal Grant program . Commission (CSAC) . We then assess the Governor’s In 2000, the Legislature restructured the Cal Grant Cal Grant estimates and analyze his proposal to place program into a relatively large entitlement program for conditions on the Cal Grant award for private nonprofit students meeting certain criteria, as well as a relatively institutions . We end by assessing the Governor’s cost small competitive program for students not meeting the estimates for the Middle Class Scholarship program . entitlement criteria . Entitlement and Competitive Programs Have OVERVIEW Different Eligibility Criteria. To qualify for the entitlement and competitive programs, students must Governor Proposes $2.3 Billion for CSAC in meet certain income and asset criteria (see Figure 42, 2018-19. As Figure 41 shows, the Governor proposes page 70) . In addition to financial criteria, the programs an $80 million (3 .6 percent) increase for CSAC over have certain age requirements . To qualify for the the revised 2017-18 level . The largest increase is for entitlement program, students must be recent high Cal Grants ($71 million) . The two main fund sources for school graduates or transfer students under age 28 . CSAC are state General Fund and federal Temporary The competitive program generally is designed for older Assistance for Needy Families (TANF) funds . Under the students . Both programs require a minimum grade Governor’s proposal, General Fund spending increases point average (ranging from 2 .0 to 3 .0), except for one by $28 million (2 .4 percent) and TANF funds increase by specific type of competitive award (the Cal Grant C, $52 million (5 percent) . discussed further below) . Program Has Multiple Types of Awards. The CAL GRANTS Cal Grant program offers three types of awards (see Figure 43, page 71) . One type, Cal Grant A, Below, we provide background on the Cal Grant covers full systemwide tuition and fees at the public program and review the Governor’s cost estimates . universities and up to a fixed dollar amount toward Background tuition costs at private colleges . The second type, Cal Grant B, covers tuition in all but the first year of State Has a Long History of Providing Cal college and provides additional aid to help pay for Grants. The Cal Grant program traces its roots back to nontuition expenses, including books, supplies, and 1955, when the Legislature established a merit-based, transportation . The third type of award, Cal Grant C, competitive State Scholarship program for financially covers up to a fixed amount for tuition and provides aid needy students attending public or private institutions . for nontuition expenses for eligible students enrolled In the late 1970s, the Legislature consolidated the State in CTE programs . A student generally may receive a 68 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET Cal Grant A or B award for up to the equivalent of four universities as well as any administrative efforts to years of full-time study, whereas a Cal Grant C award is increase the number of awards that are paid . available for up to two years . Governor’s Budget Assumes Lower Spending in 2016-17 and 2017-18, Higher Spending in 2018-19. Cost Estimates The budget revises 2016-17 Cal Grant spending down CSAC Estimates Cal Grant Caseload Based by $33 million (1 .7 percent) and 2017-18 spending Largely on Previous Trends. Each fall and spring, down by $15 million (0 .7 percent) to reflect updated CSAC estimates Cal Grant participation for the current cost estimates . Compared to the revised 2017-18 level, year and budget year . For the current year, CSAC looks the budget provides a $71 million (3 .4 percent) at how many awards have been offered to date and increase for 2018-19 . The increase primarily is due then assumes a certain percentage of these awards are to a projected 4 .2 percent increase in participation . paid based on recent paid rates . For the budget year, (Growth in participation tends to be higher than growth CSAC takes the current-year estimate and projects in overall costs because community college students it forward using various assumptions, such as the receive a large share of the grants and their grant expected share of new awards converting into renewal costs are relatively low .) The administration’s estimate awards and the attrition of existing renewal awards . for 2018-19 does not assume any changes in tuition For current- and budget-year estimates, CSAC also and fees, except for a $54 increase (4 .8 percent) in includes the effects of any policy or administrative UC’s Student Services Fee . Since the release of the changes . For instance, CSAC includes the effects of Governor’s budget, CSAC has provided an updated any adopted or proposed tuition increases at the public Cal Grant estimate indicating costs in 2018-19 could be $38 million higher than the Governor’s estimate . The Figure 41 California Student Aid Commission Budget (Dollars in Millions) Change From 2017-18 2016-17 2017-18 2018-19 Revised Revised Proposed Amount Percent Expenditures Local Assistance Cal Grants $1,948 $2,090 $2,162 $71 3.4% Middle Class Scholarships 74 100 102 2.2 2.2 Assumption Program of Loans for Education 10 7 7 -0.5 -6.8 Chafee Foster Youth Program 13 14 15 —a 2.0 Student Opportunity and Access Program 8 8 8 —a 2.3 National Guard Education Assistance Awards 2 2 2 — — Other Programsb 1 1 1 —a -26.0 Subtotals ($2,056) ($2,223) ($2,297) ($73) (3.3%) State Operations $16 $16 $22 $7 44% Totals $2,072 $2,239 $2,319 $80 3.6% Funding State General Fund $1,126c $1,172c $1,201 $28 2.4% Federal TANF 926 1,043 1,095 52 5.0 Other federal funds and reimbursements 17 18 18 —a 0.2 College Access Tax Credit Fund 4 6 6 —a 1.5 a Less than $500,000. b Includes Cash for College, Child Development Teacher/Supervisor Grants, Graduate Assumption Program of Loans for Education, John R. Justice Program, Law Enforcement Personnel Dependents Scholarships, and State Nursing Assumption Program of Loans for Education for Nursing Faculty. c Reflects correction to remove double-counting of College Access Tax Credit funding. TANF = Temporary Assistance for Needy Families. www.lao.ca.gov 69 analysis full gutter 2018-19 BUDGET administration likely will update its estimates to match colleges with Cal Grant awards to help them cover the latest CSAC estimates in the May Revision . the costs of their education . The state originally had various goals in offering these Cal Grant awards . First, CAL GRANTS FOR STUDENTS the state wanted to provide low-income students with the choice to attend private college . Second, ATTENDING PRIVATE COLLEGES having some students select private colleges eased up Below, we discuss the Governor’s proposal to capacity issues at UC and CSU . (This was of particular tie certain Cal Grant funding for students attending concern during certain decades, such as the 1960s, private nonprofit colleges to certain conditions . We also when the state was seeing large growth in the number discuss his proposal to reduce the Cal Grant award for of college-age students .) Lastly, the awards potentially students attending for-profit colleges accredited by the provided state savings because the Cal Grant cost less Western Association of Schools and Colleges (WASC) . than what the state would have paid had the student attended a public college . Background Historically, WASC-Accredited Private Award Cal Grant Award for Students Attending Private Linked to Costs at UC and CSU. Prior to the Colleges Is Intended to Achieve Certain State restructuring of the Cal Grant program in 2000, state Goals. The state provides financially needy students law called for the maximum WASC-accredited private attending WASC-accredited nonprofit and for-profit award to be set by adding together (1) 75 percent of the state General Fund cost per CSU student and (2) the average of the Figure 42 tuition and fees charged by UC and Cal Grant Eligibility Criteria CSU . (The state pays tuition and fees 2017-18 for low-income students attending UC and CSU .) The policy served as Financial Eligibility Criteriaa an aspirational goal against which to Cal Grant A and C measure state funding . In 1997-98, Family income ceiling: $88,900 to $114,300, depending on family size. for example, the state met 97 percent Asset ceiling: $76,500. of the statutory goal . As part of the Cal Grant B Cal Grant program restructuring in Family income ceiling: $41,500 to $62,800, depending on family size. 2000, the Legislature removed these Asset ceiling: same as A and C. provisions from state law . Other Major Eligibility Criteria Current Law Lowers High School Entitlement (Cal Grant A and B) WASC-Accredited Private Award • Graduated from high school within the last year. Beginning in 2018-19. As a savings • Minimum high school GPA of 3.0 for A award and 2.0 for B award. measure, the 2012-13 budget Transfer Entitlement (Cal Grant A and B) amended state law to lower the • CCC student under age 28 transferring to a four-year college. WASC-accredited private award • Minimum college GPA of 2.4. from $9,084 to $8,056 starting in Competitive (Cal Grant A and B) 2014-15 . Subsequent budget actions • Not eligible for entitlement award because of time lapsed since high have postponed the reduction . school graduation. Most recently, the 2017-18 budget • Minimum GPA same as high school entitlement A and B. delayed the reduction until 2018-19 Competitive (Cal Grant C) and added statutory language that • Must be enrolled in a career technical education program at least four WASC-accredited private colleges months long. participating in the Cal Grant • No minimum GPA requirement. program make a good faith effort to a Reflects criteria for dependent students. Different criteria apply to independent students enroll more low-income students, (generally those over age 24). GPA = grade point average. enroll more transfer students, and 70 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET offer more online courses . The budget requires these thereby providing more choice over college campus institutions to report on progress towards meeting and program . At times, the state also has used the Cal these goals by March 15 of each year . Grant program to incentivize students to attend private colleges in order to alleviate enrollment pressures Governor’s Proposals at the public segments . The state also attains both Governor Proposes to Maintain Private Nonprofit operational and capital savings if a student attends a Award if Sector Meets Specific Transfer Enrollment private rather than public college . Target. The budget includes $7 .9 million to maintain the Unclear Whether Proposal Is Addressing an private nonprofit award at $9,084 ($1,028 higher than Actual Problem. The Governor provides no data the otherwise reduced level of $8,056) . To be able to indicating that problems exist with the number of overall receive the $1,028 differential in 2019-20, the Governor transfer students or ADT students that private nonprofit proposes to add a requirement that the sector in institutions currently accept . He also does not provide 2018-19 accept at least 2,500 transfer students who data indicating that private nonprofit institutions have have earned an ADT . (The box on page 72 provides inadequate transfer pathways or that their transfer information about the ADT .) This would equate to students do not graduate in a timely manner . We have almost one-third of the total transfers that private concerns with proposing a very specific solution without nonprofit institutions currently accept . The Governor first substantiating that a problem exists . proposes to increase the expectation to 3,000 in Proposal Deemphasizes Longstanding 2020-21 . Beginning in 2021-22, the target changes to Overriding Cal Grant Goals in Exchange for One become based on the percent change in the number Very Specific Goal. The Governor’s proposal departs of total transfers the sector admitted in the prior year . notably from the original, overarching goals of the Cal For example, if the sector increases overall transfer Grant program to provide more choice for low-income enrollment by 3 percent in 2021-22, then it would students, greater overall capacity in the state’s higher be expected to grow ADT enrollment by 3 percent in education system, and lower overall state costs . The 2022-23 . The Governor indicates that this proposal is proposal to tie a portion of the Cal Grant to a very part of a broader effort to make transfer easier across specific transfer-focused goal represents a significant all segments and improve timely completion rates for policy change . Additionally, this one very specific goal transfer students . Proposal Reduces Award for Figure 43 Students at WASC-Accredited Cal Grant Award Amounts For-Profit Colleges. The Governor proposes to reduce the Cal Grant 2017-18 award for students attending WASC-accredited for-profit Cal Grant A institutions—providing $8,056 for Tuition awards for up to four years. those students instead of the higher Full systemwide tuition and fees ($12,630) at UC. $9,084 . This proposal would likely Full systemwide tuition and fees ($5,742) at CSU. affect five institutions . The Governor’s Fixed amount ($9,084) at nonprofit and WASC-accredited for-profit budget recognizes $600,000 in total colleges. associated savings . Fixed amount ($4,000) for other for-profit colleges. Cal Grant B Assessment Tuition coverage comparable to A award for all but first year. Private Nonprofit Award Has Up to $1,672 toward nontuition expenses for up to four years. Student and State Benefits. Cal Grant C Throughout its history, the Cal Up to $2,462 for tuition and fees for up to two years. Grant program has provided aid to Up to $1,094 at CCC and $547 at private colleges for nontuition expenses for up to two years. financially needy students attending WASC = Western Association of Schools and Colleges. either public or private institutions, www.lao.ca.gov 71 analysis full gutter 2018-19 BUDGET may not be compatible with the mission of some colleges, the institutions are very diverse and do not nonprofit colleges . For example, some nonprofit have a central governing body that can hold them colleges focus on specific disciplines, such as art or accountable for not meeting certain state requirements . music, and rely on small four-year cohort approaches . Of equal concern is that if the overall sector does not These programs do not intend to focus on transfer, meet its ADT target, all financially needy students yet they can provide low-income students access to attending private nonprofits will lose a portion of their types of college programs not offered within the public Cal Grant award . Although the Governor proposes to system . Additionally, the private sector was not part of grandfather in higher grant awards for students that the ADT authorizing legislation or included in the ADT enter the institutions in a year that the sector meets its development efforts . Years later, tying the Cal Grant for targets, students that enter in a year that the sector low-income students attending the private sector to does not meet its target would receive a lower grant ADT requirements could be viewed as arbitrary . amount . We believe these types of repercussions could Proposal Has Poor Approach to Accountability. be viewed as unreasonable . Even if data showed a problem did exist and tying No Clear Rationale for Reducing Cal Grant strings to the award were deemed reasonable, Award for Students Attending WASC-Accredited we believe the Governor’s particular approach to For-Profit Colleges. The administration was unable to accountability has notable shortcomings . Some provide justification for reducing the Cal Grant award nonprofit colleges might increase their ADT enrollment for WASC-accredited for-profit colleges . We compared significantly yet still lose Cal Grant funding because the graduation rates and student loan default rates for sector overall does not meet its ADT target . Conversely, the five WASC-accredited for-profit colleges with the some colleges might not increase their ADT enrollment averages for nonprofit colleges and CSU campuses . yet continue receiving Cal Grant funding . Though a The WASC-accredited for-profit colleges’ graduation statewide organization advocates on behalf of nonprofit rates are on average lower than nonprofit colleges but Associate Degree for Transfer Degree Designed to Create Clearer Pathways From California Community Colleges to California State University (CSU). Although students being able to transfer from community colleges to universities is a core feature of the state’s higher education system, transferring has been a longstanding problem . Historically, transfer students often had to navigate through a maze of requirements that varied by campus . To improve the transfer process, the state enacted the Student Transfer Achievement Reform Act in 2010 . A key feature of the reform required community colleges to develop two-year (60 unit) degrees known as associate degrees for transfer (ADT) . Students who earn such a degree are guaranteed admission into a CSU bachelor’s degree program that can be completed within an additional two years (60 units) of upper-division coursework . Students receiving an ADT get priority admission to their local CSU campus in a degree program that is similar to their ADT major . The University of California (UC) is not required to recognize the ADT or give priority admission to ADT students . Instead, UC adopted its own transfer pathways . Number of Students With ADT on the Rise. The number of students attaining ADT has grown markedly, from fewer than 1,000 students earning the degree in 2011-12 to over 30,000 earning the degree in 2016-17 . Despite the large growth, the vast majority of transfer students do not have an ADT . In 2016-17, just under half of community college students transferring to CSU had the degree, with the remainder having a more traditional associate degree . CSU Enrolls Vast Majority of Students With ADT. In 2017, CSU admitted 98 percent of ADT recipients . Based on outcome data from the first cohort of students that completed an ADT and transferred to CSU, about 50 percent graduated from CSU in two years . 72 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET higher than CSU campuses . Regarding default rates $16,500 . The Governor’s proposed 2018-19 award on student loans, their rates on average are about amount of $9,084 equates to 55 percent of that 1 percentage point higher than nonprofit colleges and aspirational level . The Legislature could determine the CSU campuses . Unless the administration can make a exact adjustment to make to the award in 2018-19, compelling case that the WASC-accredited schools are potentially adopting a multiyear plan to ramp up the of notably lower quality using some other meaningful award over time . For example, if the state wanted to indicators, we question why financially needy students reach the target of $16,500 in five years (making equal attending them should have their state financial aid progress each year), the 2018-19 award amount would reduced . be $10,300—at an additional state cost of $43 million relative to the Governor’s budget . Recommendations Recommend Legislature Reject Governor’s MIDDLE CLASS SCHOLARSHIPS Proposals. We recommend the Legislature reject Middle Class Scholarships for Students the Governor’s proposal to place conditions on a Attending Public Universities Started in 2014-15. portion of the Cal Grant award for financially needy Under the program, students with household incomes students attending private nonprofit institutions . We and assets each under $171,000 may qualify for also recommend the Legislature maintain the existing an award that covers a portion of their tuition and Cal Grant award amount for financially needy students systemwide fees (when combined with all other public attending WASC-accredited for-profit institutions . financial aid) . CSAC provides these scholarships to We encourage the Legislature to continue upholding eligible students who fill out a federal financial aid the overarching policy goals of the Cal Grant award application, though the program is not need-based for financially needy students attending private according to the federal government’s financial institutions—choice of campus and program, capacity aid formula . Unlike Cal Grants, the program is not of the overall higher education system in the state, and considered an entitlement and the program funding state savings . level is capped in state law . If funding is insufficient Recommend Using Former State Policy to to cover the maximum award amounts specified in Set Award Amount. The Cal Grant award amount law, awards are pro-rated downward . Current state for students attending WASC-accredited private law appropriates $96 million for 2017-18, increasing colleges has been flat at $9,084 for six years . As the to $117 million in 2018-19, with funding capped at real value of the award amount has eroded, student $117 million thereafter . choice also appears to be eroding . Cal Grant data Governor Assumes Higher Spending in 2017-18 show that nonprofit awards as a share of total Cal and 2018-19. The Governor revises estimated Middle Grants has been declining in recent years . Whereas Class Scholarship costs upward in 2017-18 by over 20 percent of all Cal Grant recipients attended $3 .9 million (4 percent) . Compared to the revised a nonprofit college in 2001-02, 11 percent attend 2017-18 level, the Governor projects a $2 .2 million today . To improve students’ buying power and choice, increase in 2018-19 to reflect an estimated 2 percent we recommend the Legislature increase the Cal increase in program participation . In total, he estimates Grant award for students attending these institutions . 53,250 students will receive grants in 2018-19 (9,600 In setting the award amount, we recommend the at UC and 43,650 at CSU) . The Governor’s proposed Legislature use the state’s historic Cal Grant formula for trailer bill modifies state law to match the Governor’s private colleges . budget estimates in 2017-18 and 2018-19, but the cap Under Policy, Updated Aspirational Award of $117 million is left in place for future years . We think Amount Would Be $16,500. If the Legislature were all these proposed adjustments are reasonable . to use the statutory policy for private awards in effect prior to 2000, the aspirational award amount would be www.lao.ca.gov 73 analysis full gutter 2018-19 BUDGET 74 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET SUMMARY OF RECOMMENDATIONS University of California • Determine which University of California (UC) cost increases to support in 2018-19 and consider sharing these cost increases between the state, nonfinancially needy California students, nonresident students, and other savings and fund sources . • Use UC’s planned programmatic reductions and redirections as a starting point to fund enrollment growth in 2018-19 . • Make enrollment growth decisions for 2019-20 consistent with any broader decision regarding UC eligibility pools . • If UC is unable to attain a 2-to-1 transfer ratio at each campus, consider establishing a systemwide ratio to give UC more flexibility to meet the target while still ensuring transfer access . Also encourage UC to pursue efforts to simplify the transfer process and accelerate time to degree for entering transfer students . • Signal to UC that funding for its academic quality initiatives is a lower priority for 2018-19 . Were the Legislature interested in providing additional funds for more targeted purposes, specify the use of the funding in the budget act . • After making decisions regarding eligibility, direct UC to develop a systemwide enrollment plan that includes (1) enrollment projections based on anticipated demographic changes and eligibility criteria, (2) strategies to maximize the use of existing facilities across the system before adding new space, and (3) clear justification for the need to add space within the system . • Direct UC to report on construction costs per square foot and explain any variation in these costs for the same type of space across campuses . To the extent UC is unable to provide sufficient justification for the differences contained in its four 2018-19 proposals for new academic buildings, we recommend the state withhold authorization of those projects . • Require UC to develop a long-term plan to (1) retire its maintenance backlog and (2) improve its ongoing maintenance practices moving forward to prevent a backlog from reemerging . • Direct UC to report in spring hearings on its current efforts to reduce pressure for new physical library storage space and expand its digital collections . California State University • After deciding which California State University (CSU) cost increases to support, consider sharing those cost increases between the state and students . • Take into account several demographic- and policy-related factors when deciding on an overall enrollment target for CSU in 2018-19 . • To help address K-12 staffing shortages in special education, recommend the Legislature provide $675,000 in targeted enrollment funding for CSU’s occupational therapy and speech and language pathology graduate programs . Funding equates to 5 percent growth or 45 additional full-time equivalent students . The Legislature could continue funding growth in these two graduate programs over the next several years . www.lao.ca.gov 75 analysis full gutter 2018-19 BUDGET • Recommend the Legislature signal to the Chancellor’s Office that its draft admissions policy concerning local students and impacted programs is inconsistent with legislative intent . If the Legislature finds that the subsequent draft policy also fails to meet legislative intent, recommend the Legislature specify its preferred new policy in statute . • Given numerous opportunities for CSU to improve efficiencies and more strategically allocate existing resources, suggest the Legislature place a lower priority on providing additional funding for the Graduation Initiative in 2018-19 . • Recommend the Legislature direct CSU to rewrite its 2018-19 capital outlay project proposals and resubmit them by early March 2018 . Should CSU fail to provide an acceptable and compelling set of new proposals in time, recommend the Legislature remove $13 million from CSU’s base budget and redirect the funds for other legislative priorities . • Recommend the Legislature direct CSU to include a standard set of information in all future capital outlay proposals submitted to the Legislature . • Given other state funding priorities in 2018-19, recommend the Legislature reject the Governor’s proposal to provide $100,000 in ongoing General Fund support for the Education Policy Fellowship Program . California Community Colleges • Allocate less apportionment funding based on enrollment . The Governor’s proposal to allocate about half of apportionment funding based on enrollment seems reasonable . • Allocate at least 20 percent of apportionment funding based on performance to ensure sufficiently strong incentives to focus on performance . • Adopt Governor’s proposed performance measures but provide higher levels of funding for the outcomes of low-income students and relatively expensive programs meeting student needs (such as some career technical education programs) . • Collapse proposed supplemental grant funding and existing categorical funding for low-income students into one larger pot of funding . • Attach few spending requirements to new supplemental pot of funding but require districts to document clearly in their annual budgets how they intend to serve low-income students . • Task the Chancellor’s Office with monitoring the approval of new program awards, grade-related data, and changes in the types of degrees and certificates awarded to ensure the new funding system is working as intended . • Wait until early May for updated enrollment estimates and then adjust apportionments for 2017-18 and 2018-19 accordingly . Given recent California Community Colleges (CCC) enrollment trends, enrollment growth funding is unlikely to be needed in the budget year . The Legislature could begin considering how to repurpose any associated freed-up funding . • Consider various ways to improve online education within the existing CCC system . Options include adopting alternative funding models to encourage competency-based instructional approaches, running a competitive grant program for colleges to develop specific online courses that currently are unavailable, and funding more training for faculty and staff willing to teach and support students in online programs . • Take time to consider whether to authorize a new online community college . Gather information about what underlying problems exist, what are the root causes of those problems, how a new 76 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET online college could be designed to respond to those issues, and how a new college could be funded and held accountable for meeting its objectives . • Reject proposal to provide Apprenticeship programs with $31 million for prior-year costs . • Approve $23 .6 million ongoing augmentation ($5 .8 million more than the Governor’s budget) to cover all projected apprenticeship hours in 2018-19 . • Reject proposal to allow community colleges to earn credit funding rate for apprenticeship instruction they now provide at the regular noncredit hourly rate . • Reject proposal to consolidate two community college financial aid programs that help cover living costs for some full-time students . • Recommend Legislature take a more straightforward approach to providing financially needy full-time students with aid for living costs . Specifically, consolidate all four existing state aid programs covering a portion of some CCC students’ living expenses into one program with one set of rules . • As covering all unmet need for all financially needy full-time CCC students would cost about $500 million compared to the $287 million earmarked for such aid under the Governor’s budget, consider how to ration awards or repurpose other funding to cover the full estimated program cost . • Adopt Governor’s deferred maintenance proposal, as the funding would help address CCC’s large maintenance backlog . • Reject $20 million innovation awards proposal . Rather than providing large sums to a small number of colleges to implement local initiatives, focus on ensuring existing CCC student success programs are implemented effectively . • Consider authorizing more capital outlay projects than included in the Governor’s budget . At an average facility cost of $50 million, approving eight additional projects in 2018-19 would cost $400 million, or 20 percent of the total CCC bond authority granted by Proposition 51 . • Develop a multiyear expenditure plan for remaining Proposition 51 funds . California Student Aid Commission • Reject Governor’s proposal to place conditions on a portion of the Cal Grant award for financially needy students attending private nonprofit institutions . Focus instead on upholding the overarching goals of the program, including expanding low-income students’ college choices . • Maintain existing Cal Grant award amount for financially needy students attending for-profit institutions accredited by the Western Association of Schools and Colleges . • Use former state policy for setting Cal Grant award amount for students attending private institutions . www.lao.ca.gov 77 analysis full gutter 2018-19 BUDGET Contact Information Edgar Cabral California Community Colleges 319-8343 Edgar.Cabral@lao.ca.gov Natasha Collins California Student Aid Commission 319-8335 Natasha.Collins@lao.ca.gov Affordability and Financial Aid Apprenticeship Programs Jason Constantouros University of California 319-8322 Jason.Constantouros@lao.ca.gov Paul Steenhausen California State University 319-8303 Paul.Steenhausen@lao.ca.gov LAO PUBLICATIONS This report was 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. 78 LEGISLATIVE ANALYST’S OFFICE