Newsom opposes major changes to Cal Grants

Gov. Gavin Newsom’s administration opposes a Legislature-backed overhaul of the Cal Grant program, declaring the package too expensive.

The legislation, Assembly Bill 1456, has been praised by student leaders and financial aid advocates, but the state’s Department of Finance opposes the bill, arguing that implementing it would cost too much, block aid for some students, and could motivate the state’s four-year universities to hike tuition.

Proponents of the bill estimate it would expand Cal Grant eligibility to up to roughly 200,000 more students. The Cal Grant is the state’s main financial aid program.

Most of the students who would benefit under the bill are community college students who would no longer need a minimum GPA to receive the awards. The bill also aims to simplify the Cal Grant program. Students would begin applying for grants under the new system in fall 2023 and begin receiving them in the 2024-25 academic year.

Newsom has until Oct. 10 to decide whether to sign the bill. Newsom’s office did not respond to a request for comment. Newsom has three options: sign, veto or allow the bill to become law without his signature. When asked whether Newsom could negotiate with lawmakers over the bill, H.D. Palmer, a spokesman for the Department of Finance, said Newsom could “certainly have discussions with the Legislature on any given measure or issue.”

In an analysis of the bill that describes its opposition, Newsom’s Department of Finance wrote that the bill would create “significant one-time and ongoing general fund costs” that aren’t included in the budget that was agreed to over the summer, “likely in the hundreds of millions of dollars annually.”

The department estimates that the annual costs of the program would be higher than the costs estimated by the California Student Aid Commission, which backs the bill. According to the Finance Department, the commission estimates that the revisions would create annual costs of $82.6 million, while Finance estimates it would be $174.4 million above current levels.

The aid commission disputes that the bill would require annual costs not covered by this year’s budget deal.

The department also is concerned that the bill could motivate CSU and UC to raise the cost of tuition. The bill restricts UC and CSU students to only use Cal Grants to pay for tuition and fees. Under the legislation, UC and CSU will be expected to use institutional aid to help students cover nontuition expenses.

“Relying upon institutional aid to further support non-tuition costs could create pressure for institutions to increase tuition and mandatory fees,” the department wrote in its analysis. This summer, UC’s board of regents approved a plan for tuition increases beginning in fall 2022. Under the plan, tuition will be increased for each incoming class of students but will then be frozen for the duration of their enrollment, assuming they finish college within six years.

The Finance analysis also estimates that some future students who would be eligible for Cal Grants under the current system would no longer be eligible under AB 1456, thanks to changes to income qualifications.