No Demonstrated Need for Additional Dream Loan Funding
Proposed Increase in DSIG Award Amounts Would Promote Participation. Given that one possible reason for low participation in the DSIG program is the availability of higher?paying work opportunities, the proposed trailer bill language could make the program more attractive to potential participants. Because the increased award amounts align with the state minimum wage of $15 per hour, the program would be compensating students at an hourly rate more comparable to what they could earn elsewhere.
Award Amounts for Part?Time Students Would Remain Low. Under the proposed trailer bill language, a student enrolled half?time and a student enrolled three?quarters time would receive the equivalent of $7.50 per hour and $ per hour of service, respectively. Given that these rates are well below the state minimum wage, they are very likely to continue discouraging program participation among part?time students. Moreover, we see no strong rationale for compensating part?time students at a lower hourly rate for their service than full?time students.
At both UC and CSU, current funding for the Dream Loan program is sufficient to meet student demand. Neither segment has needed to maintain a waitlist or turn students away from the program. Moreover, both segments tend to have unspent funds in the program. This is particularly the case at UC, which had an ending balance of $12.8 million in its Dream Loan revolving fund in 2020? 21-more than four times total program spending in that year.
Modify Proposed Increase in DSIG Award Amounts. We think the Governor’s proposed increase to the maximum award amount is a reasonable way to increase participation in an undersubscribed program. However, we recommend amending the language to remove the proration of awards for part?time students, as this would address an additional disincentive for these students to participate. With this amendment, the program would compensate both part? and full?time students at an hourly rate equivalent to the state minimum wage.
Reject Redirection of Unspent Funds to Dream Loans. Given that current funding for the Dream Loan program is sufficient to meet demand, we recommend rejecting the redirection of unspent DSIG funds to Dream Loans. Instead, the Legislature could allow unspent DSIG funds to revert to the General Fund. In future years, as more data becomes available on DSIG participation, the Legislature could revisit the ongoing funding level to align it better with demand, thus minimizing the amount of unspent DSIG funds.
Add Reporting Requirement for DSIG Program. To inform future funding ending the proposed trailer bill language to require CSAC to submit a report annually starting . At a minimum, we recommend this report include the number of program recipients and the total amount of aid provided in the previous award year, by segment. The Legislature may also wish for the report to include a list of organizations providing service opportunities under the program and the number of hours served at each organization.
Scholarshare Investment Board
In this section, we cover the Governor’s budget proposals for SIB. We provide background on the California Kids Investment and Development Savings (CalKIDS) program; describe the Governor’s proposals to fund program administration, marketing, and outreach; assess these proposals; and offer associated recommendations.
State Created CalKIDS Program in 2019?20 to Serve All Newborns. Under the original program, the state is to open a college savings account for every newborn in California and provide a seed deposit of at least $25 in each account. The 2019?20 budget provided $25 million one?time General Fund to SIB to launch the program. This funding was deposited into the newly created CalKIDS Program Fund, from which funding is continuously appropriated. While the program was intended to serve all children born on or after , the eligibility date was postponed in the 2021?22 budget to a SIB?determined date no later than ?22 budget also provided $15.3 million ongoing General Fund to SIB to support deposits for future cohorts of newborns. Upon launching, the program is expected to enroll approximately 450,000 newborns annually.