WHEREAS, The Legislature recognizes that postsecondary education has expanded opportunities for Californians to qualify for high-quality jobs and entry into the middle class, providing clear benefits to this state’s economy; and
WHEREAS, In response to decreased state support, costs at the University of California (UC) and the California State University (CSU) have grown significantly over the past decade. In 2000, the total cost of a year of education at UC was $15,000. By 2013, this figure had more than doubled to $32,400. Costs at CSU are lower, but still increased by nearly 70 percent in this period. These increases far outpace inflation; and
WHEREAS, Tuition at California’s public institutions of higher education has been rising far more rapidly than family incomes. In 2000, the cost of attendance for a UC student living on campus was 25 percent of California’s median family income. In 2009, this cost had grown to 39 percent of median family income. Costs at CSU also grew relative to incomes, increasing from 19 percent of median family income in 2000 to 29 percent of median family income in 2009; and
WHEREAS, The increasing unaffordability of a college education has forced students to borrow more money to pay for higher education, causing 51 percent of students graduating from four-year institutions of higher education in California to borrow an average of $18,879; and
WHEREAS, In the 1970s, the General Fund provided $12 for every dollar that students paid in fees. By 2009, this amount had fallen to $1.40 for every dollar in student fees; and
WHEREAS, High levels of student debt are damaging not only to an individual student’s ability to succeed financially but also will have grave consequences for the future economy of this state; and
WHEREAS, As of spring 2011, only 83 percent of UC students and 51.4 percent of CSU students entering as freshmen had graduated within six years. For transfer students, only 79.6 percent of UC students and 64.6 percent of CSU students had graduated within four years; and
WHEREAS, By 2025, California is projected to have a shortage of 2.3 million college graduates in the state’s workforce if the number of young and older adults who go to college and complete a higher education is not significantly increased; and
WHEREAS, The Legislature finds that it must halt the decrease in the state’s support for public education and, over time, must increase its contribution to the funding of higher education; and
WHEREAS, The Legislature finds that it must immediately seek another approach to financing a student’s share of the cost of higher education in the state that will not result in students graduating from California colleges and universities burdened with debt; and
WHEREAS, There is growing interest in a new financing strategy; and
WHEREAS, The Legislature recognizes that it is in this state’s interest to study and recommend a potential pilot program; and
WHEREAS, It is the intent of the Legislature that revenue received from a Pay it Forward, Pay it Back pilot program would be managed by the state; and
WHEREAS, It is further the intent of the Legislature that a Pay it Forward, Pay it Back pilot program would not replace existing forms of financial aid, including grants, scholarships, and loans, but would instead serve as an additional option for students to finance their education; now, therefore, be it
Resolved by the Assembly of the State of California, That the Student Aid Commission and the Legislative Analyst are encouraged to conduct a study of the effects of enacting, in future legislation, a Pay it Forward, Pay it Back Pilot Program, with the Legislative Analyst encouraged to be the lead agency in charge of preparing the study. The study should evaluate a pilot program designed to provide an additional option for students to finance the costs of their education, including the costs of upfront tuition, fees, and room and board, for enrollment at institutions of higher education; and be it further
Resolved, That the pilot program should allow a student who is a state resident, as determined by the respective institution, and who otherwise qualifies for admission to that institution, to enroll at the institution without paying upfront tuition, fees, or room and board and provide that, in lieu of paying upfront tuition, fees, or room and board, a student may sign a binding contract to, upon graduation, pay 2 to 4 percent, inclusive, of his or her annual adjusted gross income to the state or the institution for a specified number of years; and be it further
Resolved, That the pilot program could vary by institution, in regard to the total cost of attendance at the institution required to be reimbursed, the portion of the total cost of attendance to be paid by the state, the number of years that a student would be required to make payments, as specified in the contract, and the percentage of annual adjusted gross income to be paid by a student, as specified in the contract; and be it further
Resolved, That the study of the pilot program should identify at least one campus of the University of California, one campus of the California State University, one campus of the California Community Colleges, and one campus of a nonprofit private postsecondary educational institution that would participate in the pilot program. The campuses identified pursuant to this paragraph should be regionally diverse. The study of the pilot program should also, based on current research and projections of state subsidies, specify the number of years and percentage of annual adjusted gross income for a contract at each participating institution that would reimburse the cost of a student’s attendance, suggest an immediate source of funding for the first 15 to 20 years, inclusive, of the pilot program, which would include the establishment of a revolving fund for the deposit of payments made
under the pilot program, and consider the possibility of using social impact bonds, meaning an agreement between a nongovernmental entity and an institution of higher education under which a student’s cost of attendance is paid for by the nongovernmental entity in exchange for a security interest in the payments made by the student, as an immediate funding source; and be it further
Resolved, That the study of the pilot program should be presented for consideration by the Legislature. The Legislative Analyst is encouraged to submit a report on the study of the pilot program to the Assembly Committee on Higher Education and the Senate Committee on Education on or before September 30, 2015; and be it further
Resolved, That the Chief Clerk of the Assembly transmit copies of this resolution to the author for appropriate distribution.