LAO 2003-04 Budget Analysis: Education

Legislative Analyst's Office

Analysis of the 2003-04 Budget Bill

Student Aid Commission (7980)

The Student Aid Commission provides financial aid to students through a variety of grant, loan, and work-study programs. The proposed 2003-04 budget for the commission includes state and federal funds totaling $1.4 billion. Of this amount, $699 million is General Fund support. Of the total General Fund appropriation, 99 percent is for direct student aid for higher education and 1 percent is for the cost of operating the commission.

Major General Fund Budget Changes

Figure 1 (see next page) compares the revised 2002-03 budget with the Governor's 2003-04 budget proposal for the commission. As the figure shows, the Governor's budget requests total General Fund support that is $78 million, or 13 percent, above estimated General Fund expenditures in the current year. This amount includes both a $2.2 million reduction in state operations and an $80 million augmentation for the commission's local assistance programs.

Augments Funding for Cal Grant A and Cal Grant B Programs

Chapter 403, Statutes of 2000 (SB 1644, Ortiz), significantly expanded and revised the existing Cal Grant program by creating three distinct programs: (1) an entitlement program for recent high school graduates, (2) an entitlement program for younger community college students transferring to four-year universities, and (3) a competitive program for older and returning students. Within each of these three programs, students may receive either a Cal Grant A or a Cal Grant B award depending on their grade point average (GPA) and their family's income and assets. Cal Grant A awards cover education fees and tuition (up to $9,708 in 2002-03). Cal Grant B awards provide a subsistence allowance of $1,551 in a student's first year of college. In the remaining years of college, Cal Grant B recipients receive the $1,551 subsistence allowance as well as fee assistance (up to $9,708 in 2002-03).

Figure 1

Student Aid Commission General Fund Budget Summary

(Dollars in Millions)




Change From 2002-03


2002-03 Revised

2003-04 Proposed



State Operations





Local Assistance





New Cal Grant entitlement awards





New Cal Grant competitive awards





Existing awards





 Subtotals, Cal Grant awards





Cal Grant C awards





Cal Grant T awards





APLEa program





Graduate APLE program





Work study




Law enforcement scholarships





Federal Trust Fundb



 Totals, local assistance





  Grand Totals





a Assumption Program of Loans for Education.

b Federal Trust Fund monies directly offset Cal Grant program costs.

Under the entitlement programs, students must be recent high school graduates younger than 24 years old. Figure 2 provides GPA, income, and asset requirements for Cal Grant A and Cal Grant B entitlement recipients. 

Students who do not qualify for entitlement awards still may receive financial aid under the competitive Cal Grant program. The commission assigns a score to each student applying for a competitive award using several factors—including GPA, family income and household size, household status, parents' educational level, and social and educational background (such as having divorced parents or graduating from a high school with a large proportion of students participating in the free or reduced-price lunch program). Each year, the score needed to obtain an award depends on the number of applicants and the characteristics of the applicant pool. Chapter 403 authorizes the commission to issue 22,500 new competitive awards each year.

Figure 2

Eligibility Criteria for Cal Grant Entitlement Program


Eligibility requirement

Cal Grant A

Cal Grant B

Minimum high school GPA



Minimum transfer GPA



Income ceiling, by family sizea



 Six +









Asset Ceilinga



a Represents ceilings for dependent students and independent students with dependents other than a spouse. A family's asset level excludes its principal residence.

The Governor's budget includes a total of $659 million for the Cal Grant A and Cal Grant B programs. This is $82 million, or 14 percent, more than estimated current-year expenditures. The proposed augmentation results from three factors: (1) an increase in the total number of Cal Grant awards ($49 million), (2) an increase in the Cal Grant award amount for University of California and California State University students to accommodate proposed fee increases ($43 million), and (3) a partially offsetting reduction in the Cal Grant award amount for students attending private colleges ($10 million).

Figure 3 compares the total number of Cal Grant awards issued in 2001-02 and 2002-03 and budgeted for 2003-04. As the figure shows, the Governor's budget assumes the commission will issue 66,000 new entitlement awards to high school graduates in 2003-04. This is approximately 5,600 awards, or 9.3 percent, more than the commission issued in the current year. The budget also assumes the commission will issue 8,000 new transfer entitlement awards in 2003-04. Additionally, it assumes the commission will issue 22,500 new competitive awards—the same number as issued in the current year.

Figure 3

Cal Grant A and Cal Grant B Awards

(Number of Award Recipients)


Actual 2001-02

Revised 2002-03

Proposed 2003-04

High School Entitlement Program




New awards




Renewal awards



Transfer Entitlement Program




New awards



Renewal awards


Competitive Program




New awards




Renewal awards



Pre-Chapter 403a




Renewal awards




 Total awards




a Represents Cal Grant awards issued prior to the enactment of Chapter 403, Statutes of 2000 (SB 1644, Ortiz). As the numbers suggest, this award group will be phased out as students graduate or otherwise do not renew their awards.

Increases Funding for APLE Program by Almost Half

The Governor's budget augments funding for the Assumption Program of Loans for Education (APLE). The APLE program was established in 1983 and since that time has been revised and expanded considerably. Today, the APLE program helps graduates of teacher preparation programs to repay their college loans. Students may receive $11,000 in loan forgiveness if they teach full time in a public K-12 classroom for four consecutive years. They may receive an additional $4,000 in loan forgiveness if they teach in a subject-shortage area (such as mathematics, science, or special education) or if they teach in a school ranked in the bottom two deciles of the Academic Performance Index. Students teaching both in a subject-shortage area and at a low-performing school may receive both of these additional benefits—resulting in a total of $19,000 in loan forgiveness.

The budget proposal includes a total of $30 million for the APLE program. This is $9.5 million, or 46 percent, more than estimated current-year expenditures. The augmentation would allow the commission to provide loan forgiveness for an additional 4,388 APLE warrants—bringing the total number of APLE warrants to be redeemed in 2003-04 up to 16,898. In addition, the Governor's budget proposes budget bill language to allow the commission to issue 6,500 new APLE warrants (at no cost in the budget year). This would be 1,000 fewer warrants than authorized for the current year, but the same number as authorized in 2001-02.

Reduces Cal Grant C Program Funding to Slightly Below 2001-02 Level

The Cal Grant C program is a needs-based program that provides financial aid of up to $2,592 for tuition and fees and up to $576 for tools, books, and supplies for students enrolled in occupational or vocational programs. These programs must be between four months and two years in duration. The Cal Grant C program is the only state-funded financial aid program for students pursuing short-term technical and occupational training.

The Governor's budget includes $8.9 million for the Cal Grant C program. This is $3.2 million, or 26 percent, less than estimated current-year expenditures. The proposed funding would permit the commission to offer 7,690 awards in the budget year. This is approximately 3,040 fewer Cal Grant C awards than the commission offered in the current year. If the proposed reduction is made, the program will operate at slightly below its 2001-02 level. In 2001-02, the commission funded 8,440 Cal Grant C awards at a total cost of $11.3 million.

Reduces Cal Grant T Program Funding by About 50 Percent

The state established the Cal Grant T program in 1998-99 to help pay educational fees for financially needy students enrolled in teacher preparation programs. In 2001-02, the state amended the program to require Cal Grant T recipients to teach for one year in a low-performing school for each $2,000 of financial aid they receive. Recipients who do not fulfill the teaching obligation must pay back their financial aid award.

From its inception through 2001-02, the Cal Grant T program never was fully subscribed. Whereas the commission was authorized to fund 3,000 awards, only 1,739 students used Cal Grant T awards in 2001-02. In 2002-03, the state reduced the Cal Grant T appropriation to align it better with anticipated expenditures. A further reduction in 2003-04 therefore would cause a real cut in the number of Cal Grant T awards issued to students.

The Governor's budget provides $3 million for the Cal Grant T program. This is $3 million, or 50 percent, less than estimated current-year expenditures. The reduction would result in the commission offering approximately 540 fewer Cal Grant T awards—dropping from an estimated total of 1,390 awards in the current year to 850 awards in the budget year. The effect of the reduction, however, might be moderated by another state financial aid program for aspiring teachers—the fifth-year Cal Grant program. Fifth-year Cal Grant awards are provided to all students meeting certain program and financial requirements (meaning its total budget is not capped). Moreover, the federal government funds two loan-forgiveness programs for teachers. In short, even if funding for the Cal Grant T program was reduced, other financial aid opportunities would remain for aspiring teachers.

Eliminates Work Study Program

Lastly, the Governor's budget proposes to eliminate the state's Work Study program, thereby achieving $5.3 million in General Fund savings. This program currently operates at 40 colleges. The commission estimates that slightly more than 3,000 students will receive work-study benefits in the current year. The state established the California State Work-Study program in 1986. The program provides students with employment subsidies to help them defray a portion of their college expenses. The program initially was structured as a pilot—with only 15 colleges participating. Since 1989-90, the program has expanded gradually, but it remains quite small. Additionally, many campuses benefit from the federal work-study program, which is slightly less restrictive than the state program.

Intersegmental Financial Aid Issues

We address several financial aid issues in the "Intersegmental" section of this chapter. Figure 4 summarizes the five financial aid recommendations we make in that section, including three that relate to the Cal Grant program. 

Figure 4

Summary of Intersegmental Financial Aid Issues



Governor's Scholarship programs

Eliminate program because other programs reward academic merit and assist financially needy students. Results in $43 million General Fund savings.

Cal Grant awards for UC and CSU students

Approve $28 million Cal Grant augmentation associated with 15 percent increase in UC and CSU student fees.

Cal Grant awards for private-college students

Reject proposal to reduce value of Cal Grant awards for private-college students by 9 percent. Results in $10 million of additional Cal Grant costs.

UC and CSU institutional aid programs

End practice of setting aside one-third of additional student fee revenue for institutional financial aid. Instead, provide in budget act smaller augmentation for institutional aid. Frees up about $75 million in student fee revenue for general purposes.

Fee assistance for first-year Cal Grant B recipients

Provide fee assistance to all first-year Cal Grant B recipients. Results in approximately $95 million in additional Cal Grant costs.

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