The 2021-22 Budget: California Student Aid Commission

The 2021-22 Budget: California Student Aid Commission SUMMARY In this report, we analyze the Governor’s major budget proposals for the California Student Aid Commission (CSAC). Below, we share some of the key takeaways from the report. Governor Proposes $2.8 Billion for CSAC in 2021-22. This reflects a $146 million (5.4 percent) increase over the revised 2020-21 level. The Governor proposes two early action items related to Cal Grants, two ongoing Cal Grant program expansions, and a new requirement for school districts to have high school seniors complete college financial aid applications. Cal Grant Early Action Proposals Are Warranted. The Governor is requesting early action to (1) restore Cal Grant A awards for certain students who lost eligibility in 2020-21 due to a change in their living arrangements, and (2) postpone a rule that would reduce Cal Grant award amounts at private nonprofit institutions if the sector does not admit a specified number of transfer students in 2020-21. We recommend the Legislature adopt both proposals, as they are time-sensitive and respond to problems resulting from the pandemic. However, we also recommend the Legislature revisit the funding level for the Cal Grant A restoration proposal at the May Revision, as recent data suggests the cost may be overestimated. Cal Grant Expansion Proposals Could Be Considered, Funds Permitting. The Governor proposes to provide (1) $35 million ongoing to fund an additional 9,000 new competitive awards annually, and (2) $20 million ongoing to fund supplemental access awards for current and former foster youth. We encourage the Legislature to keep the state’s projected operating deficit in mind as it considers whether to pursue any Cal Grant expansion. If the Legislature were to give high budget priority to Cal Grant expansion, we think the Governor’s competitive award proposal merits consideration because it would allocate additional aid largely according to student need. The Governor’s foster youth proposal is also a reasonable way to target additional aid in the near term, though we think recent federal changes could provide the state with a more systematic alternative in the long run. Last Proposal Could Increase Financial Aid Utilization. The Governor also proposes to require school districts to confirm that all high school seniors complete a Free Application for Federal Student Aid (more commonly known as the FAFSA) or a California Dream Act Application, unless the student opts out or receives an exemption. This proposal would likely leverage more federal financial aid to support students with their college costs. It would likely also increase Cal Grant entitlement spending. We recommend adopting this proposal in concept but working with the administration to ensure that it does not create unnecessary costs for school districts and planning for increased Cal Grant spending in the out-years. GABRIEL PETEK LEGISLATIVE ANALYST FEBRUARY 2021 analysis full gutter 2021-22 BUDGET INTRODUCTION This report analyzes the Governor’s major budget award amounts at private nonprofit institutions, proposals for CSAC. We begin the report with an competitive awards, supplemental awards for foster overview. Next, we analyze several of the Governor’s youth, and a requirement for school districts related specific proposals, with sections covering the to financial aid applications. restoration of certain Cal Grant A awards, Cal Grant OVERVIEW In this section, we provide an overview of $146 million (5.4 percent) increase over the revised the Governor’s budget for CSAC, followed by 2020-21 level. The two main fund sources for CSAC background on the Cal Grant program. are state General Fund and federal Temporary Assistance for Needy Families (TANF). In 2021-22, CSAC Budget state General Fund would comprise 85 percent of Governor Proposes $2.8 Billion for CSAC CSAC funding and federal TANF would comprise in 2021-22. As Figure 1 shows, this reflects a 14 percent. The remainder of CSAC funding comes Figure 1 CSAC Spending Increases Under the Governor’s Budget (Dollars in Millions) Change From 2020-21 2019-20 2020-21 2021-22 Actual Revised Proposed Amount Percent Spending Local Assistance Cal Grants $2,282 $2,483 $2,561 $79 3.2% Middle Class Scholarships 117 117 117 —a —a Golden State Teacher Grants — 15 100 85 567 Student Opportunity and Access Program 18 8 8 — — Emergency aid for undocumented studentsb — 15 — -15 -100 Child Savings Account Grantsc 10 — — — — Other programsd 21 21 21 —a —a Subtotals ($2,448) ($2,658) ($2,807) ($149) (5.6%) State Operations $27 $23 $20 -$3 -13% Totals $2,474 $2,681 $2,827 $146 5.4% Funding General Fund $1,388 $2,244 $2,406 $161 7.2% Federal TANF 1,060 400 400 — — College Access Tax Credit Fund 6 1 —a —a -52 Other funds and reimbursements 21 36 21 -15 -42 a Less than $500,000 or 0.05 percent. b Supported by unspent 2019-20 and 2020-21 funds redirected from California Dreamer Service Incentive Grants. c The 2019-20 Budget Act also provided $25 million one time to the Scholarshare Investment Board for the California Kids Investment and Development Savings Program. d Includes Assumption Program of Loans for Education, California Military Department GI Bill Awards, Cash for College, Chafee Foster Youth Program, John R. Justice Program, Law Enforcement Personnel Dependents Scholarships, and State Nursing Assumption Program of Loans for Education for Nursing Faculty. CSAC = California Student Aid Commission and TANF = Temporary Assistance for Needy Families. 2 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2021-22 BUDGET from various sources, including other federal which vary by family size and are adjusted annually programs and a state tax credit program. for inflation. For example, in the 2020-21 award year, Cal Grants Account for Majority of New a dependent student from a family of four must have Ongoing Spending. As Figure 2 shows, the an annual household income of under $106,500 to Governor’s budget includes $72 million in ongoing qualify for Cal Grant A or C, and under $56,000 to spending increases for CSAC. Most of these qualify for Cal Grant B. Students must also have increases are associated with the Cal Grant a minimum grade point average (GPA), which program, with minimal changes in other financial aid ranges from 2.0 to 3.0 depending on award type. programs and state operations. The most notable Cal Grants are provided as entitlements to recent one-time proposal is $100 million for the Golden high school graduates and transfer students under State Teacher Grant program, which we will cover age 28. The state also provides a limited number in an upcoming analysis of teacher workforce of competitive awards to other students—typically proposals. older students who have been out of school for at least a few years. In recent years, members of the Cal Grants Legislature have initiated efforts to restructure this complex system, as described in the box on the next State Offers Multiple Types of Cal Grant page. Awards. Cal Grants are the state’s primary form of financial aid. There are three main types of Cal Grant Cal Grant Program Uses Federal Application awards—Cal Grant A, B, and C. As Figure 3 on Form. Whereas the primary role of the FAFSA is to the next page shows, the award types vary in the assess student eligibility for federal grant and loan amount of tuition and nontuition coverage they programs, many state and institutional aid programs provide. Cal Grant A covers full systemwide tuition also rely on the FAFSA to measure student financial and fees at public universities and a fixed amount need and allocate awards. This is the case with of tuition at private universities. Cal Grant B in most the Cal Grant program. Students apply for a Cal cases provides the same amount of tuition coverage as Cal Grant A, Figure 2 while also providing an “access Governor Has Multiple CSAC Proposals award” for nontuition expenses (In Millions) such as food and housing. Cal Grant C, which is only available to 2020-21 Revised Spending $2,680.9a students enrolled in career technical Ongoing education programs, provides Cal Grant competitive award increase $34.8 Cal Grant supplemental award for foster youth 20.2 lower award amounts for tuition Other Cal Grant adjustments 16.1 and nontuition expenses. Across Grant Delivery System modernization 0.7 all three Cal Grant award types, Other financial aid program adjustments —b students with dependent children Subtotal ($71.8) qualify for a supplemental award One Time that provides additional nontuition Golden State Teacher Grant Program $100.0 coverage. A student may receive Grant Delivery System modernization 1.1 a Cal Grant A or B award for up to Subtotal ($101.1) four years of full-time study or the Technical adjustments -$27.1 equivalent, whereas a Cal Grant Total $145.8 C award is available for up to two 2021-22 Proposed Spending $2,826.7 calendar years. a Includes an early action proposal to restore Cal Grant A eligibility to certain students who lost their awards in the current academic year. An associated $58 million is built into the 2020-21 Cal Grants Have Financial and revised spending level. b Other Eligibility Criteria. To qualify Reflects caseload changes in several relatively small financial aid programs. Total net changes are less than $50,000. for Cal Grants, students must meet CSAC = California Student Aid Commission. certain income and asset criteria, www.lao.ca.gov 3 analysis full gutter 2021-22 BUDGET Cal Grant Modernization Some Efforts Underway to Restructure Cal Grants. In September 2019, several members of the Legislature requested that the California Student Aid Commission convene a work group to provide recommendations to restructure the Cal Grant system. The work group identified several policy objectives, including (1) simplifying the program to make it easier for students to navigate; (2) expanding eligibility for low-income students; and (3) addressing the total cost of attendance, including nontuition costs. The work group released its initial report in March 2020. In that report, it proposed restructuring Cal Grants into two components: (1) an access award worth $6,000 for very low-income students at the California Community Colleges and (2) a tuition award for low-income students at all other segments. (Those other segments would have been expected to provide institutional aid for nontuition costs.) The proposal would have cost $1.1 billion annually above current costs at full implementation. In light of changes in the state’s fiscal situation since the start of the pandemic, the work group is developing a revised proposal that is intended to generate no new ongoing costs. Grant award by submitting either the FAFSA or a similar state form for undocumented students, Figure 3 the California Dream Act Application (CADAA). For Cal Grant Amounts Vary by most Cal Grant awards, the application deadline is Award Type and Sector March 2 preceding the start of the new academic Maximum Annual Award Amount, 2020-21 year. Amount Governor’s Budget Adjusts 2020-21 Cal Tuition Coverage Grant Spending Downward Slightly. The revised Cal Grant A and Ba current-year spending level is $3 million below UC $12,570 the level enacted in the 2020-21 Budget Act. This Nonprofit schools 9,084 revision is the net effect of three factors. First, the WASC-accredited for-profit schools 8,056 administration makes a downward adjustment of CSU 5,742 $112 million (4.5 percent) to reflect more recent Other for-profit schools 4,000 baseline data showing fewer-than-expected program Cal Grant C recipients and lower associated payments. Second, Private schools $2,462 the administration provides $50 million above these Nontuition Coverageb baseline estimates to allow for a potential increase in Cal Grant B Cal Grant recipients due to the recession. (The state All segments $1,648c took the same action in the enacted budget last Cal Grant C June.) Third, the administration increases spending CCC $1,094 by $58 million to reflect an early action proposal that Private schools 547 would take effect in the current year, as discussed a Cal Grant B recipients generally do not receive tuition coverage in below. their first year. b Award amounts shown apply to students without dependent children. Governor’s Budget Reflects Slight Baseline Students with dependent children qualify for a supplemental award Increase in 2021-22. From the revised 2020-21 that brings nontuition coverage to a maximum of $6,000 for Cal Grant A and B recipients and $4,000 for Cal Grant C recipients. spending level, the Governor’s budget provides c Cal Grant B recipients also receive a supplemental award (up to $8) a $17 million (0.7 percent) augmentation for funded by the College Access Tax Credit. 2021-22 to reflect updated baseline projections WASC = Western Association of Schools and Colleges. 4 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2021-22 BUDGET of program recipients and payments. This low • $58 million ongoing beginning in growth rate is linked to the administration’s baseline 2020-21 to restore Cal Grant A eligibility for assumptions regarding current-year program certain students. recipients. It also reflects minimal change in the • Trailer bill language to postpone a requirement average projected Cal Grant award amount, which that private nonprofit institutions admit a is consistent with the administration’s assumption specified number of transfer students. of no tuition increases in 2021-22. As there • $35 million ongoing to fund an additional remains considerable uncertainty as to how the 9,000 new competitive awards annually. pandemic and economy will impact higher education • $20 million ongoing to provide supplemental enrollment and Cal Grant participation in the budget access awards to current and former foster year, we think the Legislature likely will want to wait youth. until May to finalize its assumptions about baseline spending. The Governor presents the first two proposals for Governor’s Budget Also Includes Four Cal early action in the spring. The remaining proposals Grant Policy Proposals. In addition to these are to be considered as part of the regular budget baseline Cal Grant adjustments, the administration process. proposes four other changes to Cal Grant spending and rules. These four proposals consist of: CAL GRANT A ELIGIBILITY RESTORATION In this section, we provide background on Cal the maximum award amount at their segment of Grant eligibility and student living arrangements, attendance. As mentioned earlier, the maximum describe the Governor’s early action proposal award amount at the California State University to restore Cal Grant A awards for students who (CSU) and the University of California (UC) is linked lost eligibility due to a change in their living to systemwide tuition and fees. With the $1,500 arrangement, assess that proposal, and offer an addition, the financial need threshold for a Cal associated recommendation. Grant A award in 2020-21 is $7,242 at CSU and $14,070 at UC. The Cal Grant B award has a lower Background financial need threshold of at least $700, regardless State Law Sets Financial Need Threshold for of segment. Cal Grant Eligibility. A student’s financial need Certain Students Who Changed Living reflects the difference between two factors: Arrangement Lost Cal Grant Eligibility. Due to the pandemic, on-campus housing is operating • The student’s cost of attendance, which is at significantly reduced capacity in 2020-21. calculated by their campus and varies based Many students who otherwise would have lived on their living arrangement (on campus, off on campus are instead living at home with family. campus, or with family). Changing living arrangements in this way reduces • The student’s expected family contribution a student’s cost of attendance, and, in turn, their (EFC), which is measured by a federal formula financial need. As a result, some students who that takes into account household income and otherwise would have qualified for Cal Grant A no size, among other factors. longer meet the financial need threshold. (Cal Grant B recipients were generally not affected because State law requires students to demonstrate a the financial need threshold is significantly lower for certain level of financial need to be eligible for Cal that award.) Grants. To receive a Cal Grant A award, a student’s financial need must be at least $1,500 higher than www.lao.ca.gov 5 analysis full gutter 2021-22 BUDGET Proposal planned on receiving the tuition coverage, and they might not have alternative ways to now cover the Governor Proposes to Restore Eligibility unexpected cost increase. for Students Impacted by Change in Living Early Action Is Warranted to Restore Awards Arrangement. The proposed trailer bill language in Current Year. Students whose Cal Grant would modify the financial need requirement for Cal eligibility was impacted in 2020-21 are not receiving Grant A recipients whose eligibility is impacted by tuition coverage in the current academic year. a change in living arrangement (from on campus to Under the traditional budget time line, this proposal, off campus or with family) due to the pandemic. For if enacted, would not go into effect until after the these students, Cal Grant eligibility in 2020-21 and academic year ends, leaving students responsible 2021-22 would be based on what their financial for covering tuition costs in the meantime. Taking need would have been had they remained on early action on this proposal could allow students campus. The budget provides $58 million ongoing to receive aid sooner. General Fund beginning in 2020-21 to fund these Cost of Proposal Is Likely Overestimated. students’ awards. The proposed amount is based The proposed amount in the Governor’s budget on the administration’s estimate that awards would is based on estimates the segments provided be restored to about 5,400 students. Under the last fall of the number of students whose financial estimate, about 70 percent of these students aid packages were impacted by a change in are attending UC, with the remaining students living arrangement. The segments have since attending CSU or private nonprofit institutions. revised their estimates downward, based upon (Community college students generally do not updated information about how campuses are receive Cal Grant A awards.) The Governor includes adjusting students’ financial aid packages. The this proposal in his early action package, which he most significant change is at UC, which has is asking the Legislature to act upon in the spring. revised its estimate of impacted students from Assessment about 3,800 to about 450. As a result, the cost of restoring eligibility for these students could be Proposal Addresses Unintended Effect. Had much lower than the Governor’s proposed amount. the pandemic not resulted in campuses operating their housing programs at reduced capacity, more Recommendation students would have lived on campus in 2020-21. Adopt as Early Action, but Revisit Cost In turn, some of these students would have had Estimate at May Revision. We recommend greater financial need and met the threshold the Legislature take early action to adopt the for receiving Cal Grant A tuition coverage. In Governor’s proposal to restore Cal Grant A awards developing the current rules, the state likely did to impacted students. Taking early action could not intend for changes in living arrangement due provide students with aid before the end of the to an emergency to affect students’ Cal Grant term. We recommend the Legislature revisit the eligibility and tuition coverage. We think allowing associated funding level at the May Revision, when the impacted students to receive Cal Grant A tuition all other Cal Grant cost estimates are typically coverage, even if living with family in 2020-21, updated. By May, better data should be available is reasonable. Many of these students likely had on the number of impacted students. TRANSFER TARGET AT PRIVATE NONPROFIT SECTOR In this section, we provide background on the Governor’s early action proposal to postpone the associate degree for transfer (ADT) admission target by one year, assess that proposal, and offer target for the private nonprofit sector, describe the an associated recommendation. 6 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2021-22 BUDGET Background year, starting with the current target. Under this proposal, the maximum Cal Grant award amount At Private Nonprofit Institutions, Cal Grant at private nonprofit institutions would remain at Award Amounts Are Tied to Transfer Targets. $9,084 for the budget year, regardless of the Over 90 private nonprofit institutions are currently number of ADT students the sector admits in eligible to participate in the Cal Grant program. The 2020-21. Then, in 2021-22, the sector would be 2018-19 budget package included trailer legislation required to admit 3,000 ADT students (as opposed creating a new requirement that the sector admit to the 3,500 required in current law) to maintain a specified number of students with an ADT each the maximum award amount for the following year. year, with the target gradually increasing over This proposal is part of the Governor’s early action time. If the sector does not meet the target, then package. the maximum award amount for new Cal Grant recipients attending any institution within the sector Assessment is to be reduced from $9,084 to $8,056 in the Proposal Prevents a Potential Award following year. Reduction for Students With Financial Need. State Has Postponed or Suspended Based on an AICCU survey, member institutions Requirement for the Past Two Years. The initial saw a median enrollment decline of 7 percent from target was for private nonprofit institutions to fall 2019 to fall 2020. (In contrast, California’s two admit 2,000 ADT students in 2018-19. The sector public university systems saw slight enrollment admitted 869 students that year, missing its target. increases.) If this trend persists for the spring term, Rather than reduce Cal Grant award amounts the private nonprofit sector could be at risk of at the sector, the state postponed each annual missing its ADT target for 2020-21. Under current requirement by one year in the 2019-20 budget law, students with financial need attending the package, then subsequently suspended the revised sector would bear the consequences of the missed 2019-20 requirement in the 2020-21 budget target. This could be viewed as unreasonable, package. Nonetheless, the sector ended up especially given the financial impact of the admitting 2,372 ADT students during 2019-20— pandemic on many lower-income students. exceeding that year’s target by a few hundred Early Action Would Reduce Uncertainty for students. (Due to the timing of data collection Incoming Students. The Governor’s proposal for the spring 2020 term, the sector did not have would mostly affect the incoming class of 2021-22, this final count until after the requirement was as the reduction in award amounts under current suspended.) law only applies to new Cal Grant recipients. Current Law Requires Sector to Admit 3,000 (Under current law and the Governor’s proposal, ADT Students in 2020-21. This target is scheduled students renewing their awards would continue to to increase to 3,500 ADT students in 2021-22, qualify for the current maximum award amount.) and then to be adjusted annually in future years Many of these incoming students are likely making according to a specified formula. State law requires enrollment decisions during the spring. Taking the association representing the sector to report early action would provide them with greater on its progress toward meeting the requirement by predictability regarding their financial aid coverage April of each year. As of this writing, the Association as they make their enrollment decisions for the of Independent California Colleges and Universities 2021-22 academic year. (AICCU) was in the process of compiling data from member institutions on fall 2020 admissions. Recommendation Proposal Adopt Proposal as Early Action. Given the above considerations, we recommend the Governor Proposes to Postpone Transfer Legislature adopt the Governor’s early action Target. The proposed trailer bill language would proposal to postpone the ADT target for private postpone each upcoming annual target by one nonprofit institutions by one year. www.lao.ca.gov 7 analysis full gutter 2021-22 BUDGET ADDITIONAL COMPETITIVE AWARDS In this section, we provide background on Cal Proposal Grant competitive awards, describe the Governor’s Governor Proposes Increasing Number of proposal to increase the number of competitive Competitive Awards. The Governor’s budget awards, assess that proposal, and offer an provides $35 million ongoing General Fund to add associated recommendation. 9,000 new competitive awards, bringing the total Background number of new competitive awards available each year to 50,000. The proposed funding level consists State Provides a Limited Number of of two components—$28 million for base awards Competitive Awards. The state currently authorizes and $7 million to provide supplemental access 41,000 new competitive awards annually for awards to those recipients who have dependent students who do not qualify for an entitlement children. award. As Figure 4 shows, CSAC uses a scoring matrix to prioritize among eligible applicants. The Assessment scoring matrix places greatest weight on measures Student Demand for Competitive Awards relating to an applicant’s financial need, including Far Exceeds Current Supply. In 2019-20, over their EFC. Applicants also receive points for certain 293,000 students were eligible for a new Cal Grant socioeconomic factors and their GPA. Each year, competitive award. Of these students, only 51,000 half of the competitive awards are available to (17 percent) were offered an award. (The number students at any segment who apply by March 2, of offered awards exceeds the 41,000 authorized and the other half is reserved for students attending awards because not every student offered an the California Community Colleges (CCC) who apply award eventually receives it.) Students offered by September 2. awards had an average annual income of about $8,100. The remaining 242,000 students, who were not offered Figure 4 awards, had an average income of CSAC Uses Scoring Matrix to $30,000. Increasing the number Allocate Competitive Awards of available awards would align Reflects Scoring Matrix Used Since 2018-19 with a key objective of Cal Grant modernization efforts—expanding Component Maximum Points eligibility for low-income students. Expected family contributiona 250 Proposal Would Systematically Family income and size 250 Allocate Aid According to Grade point average 100 Dependentsb 100 Need. Because of the competitive High school experiencec 100 award scoring matrix, the newly Parents’ educational level 100 proposed awards would likely go Family environmentd 100 to students who have a low EFC, Total 1,000e are low income, and have other a Determined by a federal needs calculation. socioeconomic disadvantages. The b Points awarded to single independent students with children. c use of this scoring matrix reflects Points awarded to students who attended schools with high poverty rates, schools with low university-going rates, or continuation schools, as well as students who submit a score on a high a systematic way of prioritizing school equivalency test. d additional aid. (As an alternative to Points awarded to students who are foster youth, orphans, wards of the court, unaccompanied, or at risk of homelessness. increasing the number of awards, e In 2020-21, CSAC made initial award offers to students with a minimum score of 609 in the March the state could consider increasing cycle and 616 in the September cycle. award amounts. However, the state CSAC = California Student Aid Commission. currently lacks key information 8 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2021-22 BUDGET that would help it decide among these and other Recommendation approaches, as discussed in the nearby box.) Consider Proposal, Funds Permitting. We Cost of Proposal Increases Notably Over Next encourage the Legislature to keep the state’s Few Years. The Governor’s budget reflects the projected operating deficit in mind as it considers cost of providing 9,000 additional new awards in any Cal Grant expansion proposal. If the Legislature 2021-22. Over the next few years, the larger cohort were to decide to adopt the proposal to increase of new recipients will convert to larger cohorts the number of new competitive awards, it would of renewal recipients. This results in costs that want to ensure that other budget adjustments have increase over the next four years. Based on CSAC’s been made in order to cover the increasing out-year estimates, the annual cost of providing 9,000 costs. If the funds are available, we think this additional competitive awards would roughly double proposal is worth considering because it reflects by 2024-25. This cost increase would contribute a systematic approach to allocating additional aid to the state’s projected out-year operating according to student need. deficits. (The administration has accounted for this proposal’s out-year effects in its January projections of the state’s operating deficits.) Evaluating Cal Grant Outcomes Many Unanswered Questions Make Targeting Aid Difficult. As the Legislature likely will not be able to fund every desired Cal Grant expansion in the near term given the state’s projected operating deficits, the trade-offs among its Cal Grant expansion options are particularly important to consider. Rather than adding more competitive awards, a different option the Legislature could consider is increasing access award amounts for the financially neediest Cal Grant recipients. Increasing access award amounts for these students might reduce their work hours and college debt levels, potentially reducing time to degree and increasing graduation rates. To determine whether adding more competitive awards or increasing access award amounts has the greatest benefits, the state would need information that it does not currently collect. For example, the state would need to be able to compare student demographics, work hours, student debt, college persistence, and graduation rates for Cal Grant recipients and nonrecipients. Some, if not all, of these data likely could become part of the state’s new Cradle-to-Career data system, which is in the early stages of development. The Governor has a 2021-22 proposal to fund the next phase of this system. SUPPLEMENTAL AWARDS FOR FOSTER YOUTH In this section, we provide background on Background financial aid for foster youth, describe the About 4,000 Foster Youth Receive Cal Grants Governor’s proposal to provide supplemental Cal at Public Segments. Figure 5 on the next page Grant access awards to foster youth, assess that shows the distribution of current and former proposal, and offer an associated recommendation. foster youth who received Cal Grants by segment, program type, and award type in 2019-20. Over half of these students are enrolled at CCC. Most of them received an award through the high www.lao.ca.gov 9 analysis full gutter 2021-22 BUDGET the second round of competitive awards offered Figure 5 annually, all CCC students, including foster youth, Most Foster Youth Receiving Cal Grants must apply by September 2.) Third, it increased the Attend CCC time limit for foster youth to receive any Cal Grant 2019-20 B award from four years to eight years of full-time undergraduate study (or the equivalent). Number Percent Other Programs Also Provide Financial Segment Assistance to Foster Youth. Figure 6 on the next California Community Colleges 2,413 57% page provides illustrative financial aid packages for California State University 1,216 29 two students who are foster youth. In addition to University of California 326 8 Private nonprofit institutions 184 4 Cal Grants, both students in this example receive Private for-profit institutions 77 2 federal Pell Grants, and the student attending CCC Other public institutions 2 — receives two state-funded grants for low-income Totals 4,218 100% community college students. Both students also Program Type receive targeted aid for foster youth through the High School Entitlement 2,322 55% Chafee Educational and Training Vouchers Program. Competitive 1,595 38 The Chafee program, which is also administered Cal Grant C 166 4 by CSAC, provides grants of up to $5,000 each Transfer Entitlement 135 3 to students who were in foster care between the Totals 4,218 100% ages of 16 and 18. The program is supported Award Type by $18 million ($12 million federal funds and Cal Grant B 3,715 88% $6 million state General Fund) that flows through Cal Grant A 337 8 the California Department of Social Services. About Cal Grant C 166 4 4,200 students—including roughly half of Cal Grant Totals 4,218 100% recipients who are foster youth—receive a Chafee grant each year. In addition to traditional financial school entitlement program. The majority received aid, many campuses also have broader student Cal Grant B awards, which are designed for support programs for foster youth that include lower-income students. This figure excludes about financial support. For example, the state provides 1,200 foster youth who were eligible for a Cal Grant $20 million ongoing Proposition 98 General Fund competitive award but were not offered one due to for NextUp, a program at 45 community colleges the limited number of these awards. (Although the that provides book and supply grants, academic competitive award scoring matrix provides foster counseling, tutoring, and other support to foster youth with priority points, demand for these awards youth. far exceeds supply, as discussed in the previous Proposal section.) Under current rules, foster youth receive the same Cal Grant award amounts as other Cal Governor Proposes to Increase Cal Grant Grant recipients. Access Award for Foster Youth. Under this Recent Cal Grant Changes Expanded proposal, current and former foster youth Eligibility for Foster Youth. The 2018-19 budget attending CCC, CSU, and UC would be eligible package enacted several changes to Cal Grant B for supplemental access awards. The amount of eligibility specifically for current and former foster supplemental aid would depend on the student’s youth. First, it made foster youth eligible for a high award type. Specifically, the maximum access school entitlement award until they are 26 years award would increase from $0 to $6,000 for old, regardless of when they graduated from high Cal Grant A recipients, from $1,648 to $6,000 school. Second, it extended the deadline to apply for Cal Grant B recipients, and from $1,094 to for a high school entitlement award from March 2 to $4,000 for Cal Grant C recipients. Foster youth September 2 for foster youth attending CCC. (For attending private colleges would not qualify for 10 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2021-22 BUDGET of CCC students, 43 percent of Figure 6 foster youth reported experiencing Foster Youth May Receive Financial Aid From homelessness in the past year, Multiple Programs compared to 18 percent of other Illustrative Financial Aid Packages for a Foster Youth in respondents. (Because this survey Sophomore Year Enrolled Full Timea had an overall response rate of CCC Student CSU Student 5 percent, respondents might not be representative of the student Cost of Attendance $25,000 $30,000 Financial Aid population.) Pell Grant $6,345 $6,345 Governor’s Proposal Chafee Grant 5,000 5,000 Complicates an Already Student Success Completion Grantb 4,000 — Complicated Program. Although Cal Grant B 1,648 7,390 the Governor’s proposal has California College Promise Grant 1,380 — potential benefits, it adds another Totals $18,373 $18,735 type of award to the Cal Grant Net Cost for Student $6,627 $11,265 program. The Governor took a a Package reflects maximum award amounts for major state and federal grant programs. Some similar approach in 2019-20 in students may also receive financial aid from other sources, such as institutional grants, scholarships, and loans. proposing supplemental awards b Available to CCC students receiving Cal Grant B who enroll full time. Award amount reflects aid for students with dependent for students enrolled in 15 units per semester. children. To date, the Governor’s approach to expanding the Cal these supplemental awards, nor would foster youth Grant program has relied on creating supplemental who are eligible for but not receiving a competitive awards for specific student groups. These award. In all of these aspects, the Governor’s supplemental awards have their own eligibility rules, proposal mirrors the supplemental award for some of which might be considered arbitrary. Such students with dependent children that was created an approach works counter to recent legislative in the 2019-20 budget package. The Governor’s interest in simplifying the program. Were the budget provides $20 million ongoing for the Legislature to want to expand access awards, foster youth program in 2021-22, with the intent it could explore other ways of doing so that to provide the full award amounts for all eligible might simplify rather than complicate the existing students. The associated trailer bill language limits structure of the Cal Grant program. funding for this program in the future to $40 million annually, with award amounts prorated downward Certain Constraints Prevent More Systematic for new recipients if funding is insufficient in any Expansion of Access Awards. An alternative given year. to creating supplemental access awards for specific student groups is expanding access Assessment awards based on EFC. In addition to potentially adding less complexity to the Cal Grant system, Governor’s Proposal Targets Aid Toward this approach could also be more systematic. Certain Students With High Need. The majority By expanding award amounts first to students of foster youth receiving Cal Grants (93 percent) with the lowest EFC, the state would be ensuring have zero EFC, reflecting that they have no family that it is prioritizing additional aid resources resources they can contribute. Many of these according to need. For now, however, this option students also could have a relatively high cost of is impractical due to methodological issues and attendance, as they may not have the option of the fiscal constraints. In 2019-20, 228,000 Cal Grant least expensive living arrangement—at home with recipients (59 percent of all recipients) had the family. Despite the existing financial aid and student lowest possible EFC of zero. The cost of providing support programs available for foster youth, these each of these recipients with access awards of up students continue to report elevated rates of to $6,000 could be in the high hundreds of millions basic needs insecurity. For example, in a survey www.lao.ca.gov 11 analysis full gutter 2021-22 BUDGET of dollars annually—substantially more than the of new competitive awards, we encourage the Governor’s proposed $20 million. Alternatively, Legislature to keep the state’s projected operating allocating the proposed $20 million across all of deficit in mind as it considers whether to provide these students would increase the access award supplemental access awards for foster youth. for each student by an average of $90—an amount Compared to the competitive award proposal, unlikely to notably impact affordability or outcomes. this proposal has the fiscal advantage of having Forthcoming Federal Changes Will Help relatively flat costs in the out-years. (Some out-year State Prioritize Students for Aid. The federal cost increases are still possible, particularly if Consolidated Appropriations Act, 2021, makes there is an increase in the number of foster youth changes to the financial aid system that will receiving Cal Grants.) If the Legislature were to soon improve the state’s ability to identify the give high budget priority to Cal Grant expansion, highest-need students. The new system, which we think that expanding award amounts for foster is scheduled to take effect in 2023-24, replaces youth is a reasonable way to target additional aid the EFC with a new measure called the Student in the near term. In the longer term, we believe Aid Index (SAI). The SAI will allow for greater the new federal SAI could provide the state with differentiation among students with high need, a more systematic way to target additional aid making prioritization logistically easier. Whereas to the highest-need students without having to many students have the lowest possible EFC of create supplemental awards for specific student zero, fewer students will be grouped at the lowest groups. Should the Legislature wish to take a more possible SAI. This will open up the possibility of systematic approach, it could consider working expanding access awards to students with the with CSAC and the administration over the next few lowest SAI, rather than creating supplemental years to develop a plan (including cost estimates awards for specific student groups. and phase-in options) for expanding award amounts based on SAI. Recommendation Consider Proposal, Funds Permitting. As with the Governor’s proposal to increase the number FINANCIAL AID APPLICATIONS In this section, we provide background on for students and their families. Fifty-eight percent financial aid applications, describe the Governor’s of California public high school seniors submitted proposal to require school districts to confirm a FAFSA or CADAA for the 2020-21 award year. that students apply for financial aid, assess that Applications for the 2021-22 award year opened proposal, and offer an associated recommendation. on October 1, 2020. As of late fall, CSAC was reporting that application rates among incoming Background freshmen were down compared to the same time More Than Half of High School Seniors in the previous year, with declines notably larger Complete a Financial Aid Application. Most among CADAA filers (46 percent) than FAFSA filers students may use the FAFSA to apply for federal, (9 percent). state, and institutional aid. Undocumented students Recent State and Federal Policies Have (who are ineligible for federal aid) use the CADAA Aimed to Have More Students Complete to apply for state and institutional aid. CSAC helps Applications. Chapter 533 of 2018 (AB 2015, students complete these forms through its outreach Reyes) requires school districts to ensure that all programs, including the Cash for College program, students receive information on how to complete which provides financial aid application workshops a FAFSA or CADAA before entering their senior 12 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2021-22 BUDGET year. (The fiscal and programmatic impacts of it may have various out-year fiscal impacts, as this new requirement are not yet known, as it is discussed below. taking effect in 2020-21.) Other states have gone Assessment one step further to require high school students to submit a FAFSA, as described in the nearby Proposal Would Likely Leverage More Federal box. At the federal level, the recent Consolidated Financial Aid. Based on the limited outcome data Appropriations Act, 2021, reduces the amount of available from other states, we expect that the information required of financial aid applicants. Governor’s proposal would lead to an increase According to federal estimates, the new rules could in financial aid application and utilization rates decrease the number of FAFSA questions from among recent high school graduates. One key 108 to 36. These changes are scheduled to take benefit is that this would leverage additional federal effect in the 2023-24 award year. Pell Grant funding to support students with their total cost of attendance. The size of this effect Proposal would increase over the course of several years, Governor Proposes Requiring School as additional cohorts are impacted by the policy. Districts to Verify Completion of Financial Aid (Students may renew Pell Grants for up to six years Application. The proposed trailer bill language of full-time undergraduate study or the equivalent.) would require school districts to confirm that all Although the total amount of additional federal high school seniors complete a FAFSA or CADAA, funds that would be drawn down is uncertain, unless the student chooses to opt out or the it could conceivably be in the low hundreds of district exempts the student due to extenuating millions of dollars annually at full implementation. circumstances. Districts would also be required Proposal Could Notably Increase Cal Grant to direct students to support services provided by Entitlement Spending. Just as more students CSAC’s outreach programs. These requirements would be considered for Pell Grants, more students would take effect for seniors in the 2021-22 also would be considered for Cal Grants. If the academic year (applying for the 2022-23 award proposal were adopted, the state would likely see year). The trailer bill language provides districts additional high school entitlement spending starting with “complete discretion on how to implement” in the 2022-23 award year, with spending growing the requirements. The administration indicates over the next three years as the larger cohorts of this proposal is intended to increase financial aid new recipients convert to renewal awards. At full utilization rates, as well as potentially increase implementation, the increase in Cal Grant spending college participation among low-income students. over current levels could potentially be in the tens The proposal has no associated funding, though to low hundreds of millions of dollars annually. FAFSA Policies in Other States Three Other States Have Enacted “Mandatory FAFSA” Policies. In 2017-18, Louisiana became the first state to implement a policy requiring Free Application for Federal Student Aid (FAFSA) completion for high school seniors. That policy requires students to complete a FAFSA or receive a waiver as a high school graduation requirement. According to a study from The Century Foundation, Louisiana saw an 11 percentage point increase in its FAFSA completion rate among high school seniors in the first year of the policy. The number of high school graduates also increased that year, though college enrollment rates remained flat. In the coming years, more outcomes data will be available from additional cohorts, as well as other states. Illinois is implementing a similar policy in 2020-21, and Texas is scheduled to implement one in 2021-22. www.lao.ca.gov 13 analysis full gutter 2021-22 BUDGET (The Cal Grant spending effect depends on various could further simplify the application process for factors, including the policy’s effect on FAFSA students. completion, the share of new applicants who meet Proposal Could Potentially Create a Mandate Cal Grant eligibility requirements, the share of new for School Districts. Under Proposition 4 applicants who enroll in college, their segment of (1979), the state is required to reimburse local attendance, and their renewal rate.) governments, including school districts, for Impact of Proposal on College Participation the cost of new programs and higher levels of Is Uncertain. In addition to increasing financial service imposed by the state. If the Governor’s aid utilization, the administration indicates that the proposal were enacted—and if the Commission on Governor’s proposal could encourage low-income State Mandates (CSM) were to determine that it students to enroll in college by increasing their constitutes a mandate—then the state would need awareness of available aid. This effect is plausible to cover the associated cost for school districts. but uncertain. Research on the impact of FAFSA The cost would depend on the specific activities completion on college enrollment is limited, that CSM determines to be reimbursable. Although suggesting that FAFSA completion is associated the cost has yet to be determined, it would likely be with (but does not necessarily cause) college minor compared to the other fiscal impacts of this enrollment. Moreover, it is too soon to draw proposal (primarily increased Cal Grant spending). conclusions from states that have implemented Recommendation similar policies to date. Proposal Builds in Certain Student Adopt Proposal in Concept. We believe this Protections. In contrast to policies enacted in proposal is promising, as it could increase financial some other states, the Governor’s proposal does aid utilization and potentially college enrollment. not tie the completion of a financial aid application Importantly, the proposal also attempts to minimize to high school graduation requirements. This barriers that the new requirement might otherwise provision, together with the opt-out and exemption create for students. We recommend adopting provisions, are intended to remove the burden the proposal in concept and working with the of filling out the form for students who otherwise administration to further ensure that the new might not benefit from doing so. The Governor’s requirement does not create any unnecessary costs proposal also requires districts to direct students for school districts. Were the Legislature to adopt to CSAC’s outreach programs in order to help the proposal, we further recommend that it plan students navigate the application process. for increased out-year costs within the Cal Grant Forthcoming federal changes to the FAFSA form entitlement program. LAO PUBLICATIONS This report was prepared by Lisa Qing. It was reviewed by Jennifer Pacella and Anthony Simbol. 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. 14 LEGISLATIVE ANALYST’S OFFICE