1 The 2019-20 Budget: Higher Education Analysis GABRIEL PETEK. L E G I S L AT I V E A N A LY S T. FEBRUARY 21, 2019. 2019-20 BUDGET. L E G I S L AT I V E A N A LY S T ' S O F F I C E. 2019-20 BUDGET. Table of Contents Executive Summary.. 1. Introduction .. 3. California Community Colleges.. 3. Overview.. 3. Apportionments.. 3. College Promise Program.. 8. Facilities .. 11. California State University.. 15. Overview.. 16. Compensation and Other Operational Costs .. 16. Enrollment Growth.. 20. Graduation Initiative.. 22. Project Rebound .. 26. Facilities .. 27. Covering Cost Increases.. 32. University of California.
2 35. Overview.. 35. Compensation and Other Operational Costs .. 37. Enrollment Growth.. 39. Student Success .. 43. Extended Education .. 46. Facilities .. 48. Covering Cost Increases.. 52. California Student Aid Commission.. 56. Overview.. 56. Cal Grants.. 56. Nontuition Coverage for Student Parents.. 59. Cal Grant Competitive Awards .. 62. Middle Class Scholarships .. 64. Summary of Recommendations .. 65. 2019-20 BUDGET. L E G I S L AT I V E A N A LY S T ' S O F F I C E. 2019-20 BUDGET. Executive Summary In this report, we analyze the Governor's Higher Education budget proposals. Below, we highlight key messages from the report.
3 California Community Colleges Opportunities Exist for Improving Student Success Component of New Apportionment Formula. The Governor is concerned about the quality of student outcome data and initial increases in formula costs. In response, he proposes to (1) postpone for one year the scheduled increase in the share of funding linked to student outcomes and (2) cap annual growth in this part of the formula at 10 percent. We recommend adopting the postponement but rejecting the proposed growth cap, as it could dampen districts' efforts to make genuine improvements in their student outcomes. We recommend exploring more targeted options, such as linking outcome-based funding to the highest award a student earns.
4 To address regular year-to-year fluctuations in student outcome data, we also recommend using a three-year rolling average for funding purposes. Recommend Rejecting Governor's Proposal to Expand California College Promise Program. The Governor proposes to increase College Promise funding by $40 million. This proposal would allow community colleges to waive two years of enrollment fees for nonfinancially needy students enrolled full time or use the funds for various student support purposes. We have three concerns with the proposal. first , expansion is premature, as data on how the program is affecting students is not yet available.
5 Second, while College Promise is intended to incentivize community colleges to improve student outcomes, the state now has other programs that create much stronger incentives to improve. Third, waiving fees for students without financial need might be a lower priority for the Legislature, given the remaining unmet need of other students. We recommend the Legislature reject the proposal and use the $40 million for Higher Proposition 98 priorities. Universities Compensation Decisions Are a Key Part of University Budgets. The largest of the Governor's proposed augmentations for the California State University (CSU) and University of California (UC) are increases in employee salaries and benefits.
6 The Governor's budget, however, supports increases for all CSU employees whereas it supports increases only for represented employees at UC. We encourage the Legislature to consider the extent to which the segments are attracting and retaining employees when evaluating CSU's and UC's compensation decisions. Several Factors to Consider When Setting Enrollment Targets. The Governor proposes $62 million to fund 2 percent enrollment growth at CSU in 2019-20 but sets no enrollment target for UC. The Legislature could consider several factors when setting enrollment targets. On the one hand, the number of high school graduates is projected to decline slightly the next couple of years.
7 Both segments also are drawing from beyond their traditional freshman eligibility pools. On the other hand, many eligible applicants at both segments are not admitted to their preferred 1. 2019-20 BUDGET. campus. Whereas the first two factors suggest the Legislature might wish to hold enrollment flat, the last factor suggests some growth might be warranted. Recommend Increasing Transparency and Accountability for Student Success Initiatives. The Governor proposes funding student success initiatives at both segments ($45 million for CSU's Graduation Initiative and $50 million for a new UC initiative). Were the Legislature interested in supporting these initiatives, we recommend linking the funding to the segments achieving certain performance expectations (such as improving graduation rates, reducing excess units, and narrowing achievement gaps by specified amounts).
8 Many Proposed Capital Outlay Projects Have Merit, but Some Not Justified. We have concerns with 4 of CSU's 18 proposed projects and 2 of UC's 7 proposed projects. We have concerns when projects are especially costly without justification, when the space requested is not warranted given existing facility utilization, and when promising, less costly alternatives exist. We recommend the segments not proceed with these six projects, though the segments could resubmit project proposals if they found ways to lower costs or better substantiate need. Opportunities Exist for Making Tuition More Predictable. The Governor calls for more fiscal predictability for students and their families.
9 The best way to promote such predictability is through sizeable state reserves sufficient to sustain university spending during an economic downturn and prevent steep tuition hikes. One way to free up General Fund for Higher reserves is to have student tuition cover a share of proposed 2019-20 cost increases. In tandem with building Higher reserves, we encourage the Legislature to adopt a policy explicitly establishing what share of cost nonfinancially needy students should pay. Such a policy would improve budget transparency and aim to treat student cohorts similarly, whether enrolling in college during good or bad economic times.
10 Cal Grants Recommend Rejecting Proposal to Increase Financial Aid for Student Parents. The Governor proposes $122 million to help some financially needy student parents attending the three public segments with more of their living costs. We have several concerns with this proposal. By creating new rules that apply only to one group of students, the proposal further complicates the state's financial aid system. By allocating additional aid based on students'. parental status rather than financial need, the proposal does not necessarily prioritize the highest-need students. By focusing only on existing Cal Grant recipients, the proposal would not benefit most financially needy student parents, who do not currently receive Cal Grants because of the limit on available awards.