If the State Cannot Afford to Expand the Cal Grant Program, Key Trade-Offs Loom

Last year California lawmakers agreed to expand the Cal Grant, financial aid for low-income students next spring, but only if there’s enough money in the state budget.

If dollars are scarce, some advocates say the state should pull money from a new scholarship partly for middle class students to pay for more aid to students of lesser means. But key figures in the Legislature and Newsom’s administration disagree with that approach.

“I would not pull and redirect funds that are currently serving 300,000 students,” said Marlene Garcia, executive director of the California Student Aid Commission, the state agency that handles college financial aid.

“Let me just be really clear: No,” added Chris Woods, budget director for the Senate’s top lawmaker, Sen. Toni Atkins, a Democrat from San Diego.

Both made those comments at a Tuesday forum hosted by CalMatters about the state’s efforts to provide debt-free college to public college and university students. Among the forum’s themes was whether California lawmakers should prioritize fully funding the Cal Grant, which benefits low-income students, while pulling some funding from the Middle Class Scholarship.

Such a decision would have to be approved through the state’s annual budget process that requires agreement between the Legislature and the governor. The debate over what to fund and by how much will be key financial aid sticking points during budget negotiations next spring.

Gov. Gavin Newsom’s top education advisor, Ben Chida, was also skeptical of shifting money from one program to another, but didn’t fully rule it out. “Probably not,” he said Tuesday. He cautioned that the answer ultimately depends on addressing the “myopic interests” of advocates, lawmakers and administrators and then “when it’s time, make sure the governor makes the decision that is maximizing the good for people who are hurting.”

How we got here

The middle class award debuted last year for roughly 300,000 University of California and California State University students. It provided nearly $3,000 to students with family incomes above $100,000, while students with household incomes below $50,000 got about $1,500 each on average.

But the scholarship excludes all community college students. Meanwhile, at least 100,0000 low-income California college students aren’t eligible for the Cal Grant, which waives tuition to the University of California and California State University while also providing about $1,650 in cash to community college students. A Cal Grant expansion would apply to community college students who don’t currently meet minimum GPAs and to university students who took more than a year between graduating high school and pursuing higher education. It would also waive age restrictions for university students. However, under the proposed expansion, some middle class students would no longer be eligible because of lower income ceilings.

Nearly 400,000 California students received the grant in 2021-22.

A budget deal reached between the Legislature and Newsom last year said the state would put up the cash to expand the Cal Grant program if budget forecasts show the money is there. This was after lawmakers expanded the grant in 2021 to include more community college students. The student aid commission last April calculated that expanding the grant to include all those people excluded would cost about $370 million a year.

This year lawmakers increased the Middle Class Scholarship from $630 million to about $850 million. The Cal Grant is expected to cost $2.2 billion in 2023-24. Overall, California commits far more college grant aid than any other state in the nation, according to 2020-21 data.

The Middle Class Scholarship to date isn’t fully funded. How much it needs is a moving target, but 2022 projections suggested the state would need to pour $2.5 billion into the program.

Where the money would come from to expand the Cal Grant in 2024 is a big unknown. The Legislature’s nonpartisan budget scorekeeper, the Legislative Analyst’s Office, wrote in February that because of the state’s shaky fiscal outlook, “Cal Grant reform is very unlikely to be triggered in 2024‑25.”

One leading advocate who supports Cal Grant expansion said if funding is tight, the state should pull money from the middle class award to fully fund Cal Grant. “I believe that the state made a promise and the state needs to follow up on that promise and fund Cal Grant reform,” said Jessica Thompson, vice president of The Institute for College Access and Success, at Tuesday’s forum. She also pressed the state to increase the amount of cash support students get from Cal Grant.

Program trade-offs

Complicating the idea of pulling money from the Middle Class Scholarship to fully expand Cal Grant is the fact that many lower-income students who got the grant also received the middle class award — about 157,000 out of nearly 300,000, according to 2022-23 data that the student aid commission provided CalMatters.

Nor does the student aid commission want to tell students that the middle class award they expected would decrease.

”You face the student and tell them you’re now going to get less,” Garcia said at the Tuesday forum.

There are also key differences between how Cal Grant and Middle Class Scholarship funds reach students. The grant is a fixed, upfront amount. Students who are promised an award know exactly how much they’ll get. The middle class program is based on a complicated formula that first takes the total amount a student needs to pay for college — including tuition, housing and other costs — and subtracts all the grant aid and scholarships the student will get. The middle class award also assumes students will work enough to earn about $8,000 a year that they can use to pay for college costs. Families with incomes above $100,000 also pitch in more as part of the state’s debt-free promise.

Federal data that CalMatters analyzed show that while California public university students with low and moderate incomes pay among the lowest amounts for the total cost of college, families with incomes above $110,000 pay above the national average.

Still, another analysis shows that low-income families pay a far greater share of their incomes than those with higher incomes to support students enrolled at California’s public universities — or take out loans.