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Other Budget Issues

Last Updated: 5/30/2012
Budget Issue: Governor's May Revision proposal to restrict institutional eligibility for Cal Grants
Program: Student Aid Commission
Finding or Recommendation: Adopt modified changes to institutional eligibility for Cal Grant programs that are less restrictive than Governor's May Revision proposal, which goes too far. A maximum cohort default rate of 20% (instead of 15%) and no graduation rate limit (instead of 30%) would provide $14 million in savings (instead of $24 million), assuming reduced awards for students at private institutions.
Further Detail

The Governor's May Revision proposal would significantly reduce access to postsecondary institutions for Cal Grant recipients, eliminating more than 80 percent of for-profit institutions and 15 percent of nonprofit institutions from Cal Grant participation. In addition, use of the existing graduation rate data is problematic for some institutions that serve few first-time, full-time students.

We recommend adopting modified restrictions which reduce the cohort default rate limit below the current level of 24.6 percent, but not as far as the Governor's proposed 15 percent. In addition, we recommend holding off on applying a graduation rate limit until a better measure of student success can be identified. Stricter eligibility criteria could be phased in, allowing both students and institutions time to adapt.

The table below shows the Governor's proposal, our estimate of associated savings, and several alternative scenarios. The first column of figures reflects savings assuming the Legislature adopts the Governor's January proposal to reduce award amounts at private institutions, and the second column reflects larger savings should the Legislature reject the lower award amounts. (In that event, the Legislature would forgo about $157 million in savings associated with reduced award amounts.)

Estimated Savings in Millions With Jan Reductions to Private Award Amounts With No Reduction in Private Award Amts
Governor's Proposal:  CDR 15, Grad Rate 30 $38.4 N/A
LAO Revised Estimate of Governor's Proposal $24.2 $57.8
Alternative: CDR 20, Grad Rate 30 $18.3 $44.0
Alternative: CDR 20, No Grad Rate Limit $14.0 $34.0