California scholarship funds for middle class at risk in state budget battle. What’s next?

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Thousands of California students from middle class families may have a tougher time attending four-year schools if Gov. Gavin Newsom and state lawmakers cannot come to an agreement in short order as they iron out how to manage a $45 billion budget deficit.

That’s because their separate budget proposals are $826 million apart on how much money should be allocated for the Middle Class Scholarship program: Newsom’s plan calls for $100 million in the scholarship pot after his proposed trims. The Legislature is gunning for $926 million, aiming to continue what was previously planned and including a one-time $289 million addition for the next two years.

The scholarship is open to undergraduates and students seeking teaching credentials at state universities with family income under $217,000.

Nearly 300,000 students from middle class families received scholarships in the 2022-23 academic year. The number of students served was a big jump from previous years because of an injection of $515 million into the program, boosting it to $632 million for the budget year. Before then, fewer than 60,000 students received scholarships annually from the decade-long program.

Scholarship money is still being paid out for the 2023-24 academic year, with 272,651 students already awarded funds to date, according to the California Student Aid Commission.

State Sen. John Laird, D-Santa Cruz, who chairs the Senate Budget Subcommittee on Education, said not restoring full funding would defer the dreams of many who want to attend four-year schools.

“The scholarship system in California really favors those that are lower income and families in the middle struggle with the huge cost of college and tuition, and the Middle Class Scholarship helps those families,” Laird said. “These cuts would come right at the time with delays in FAFSA and right at the time students are making a decision on college, and this would likely keep many students from moving to four-year institutions.”

After a botched roll out of this year’s revamped Free Application for Federal Student Aid form, or FAFSA, lawmakers approved and Newsom signed a bill extending the application deadline.

The governor’s plan

Newsom’s budget revisions in May reduced by $510 million the ongoing funds for the Middle Class Scholarship program, leaving $100 million for the next fiscal year. And, it forgoes the one-time $289 million boost.

The program’s creation was something he “enthusiastically” supported as lieutenant governor, Newsom said during his revision presentation and press conference in May. “We worked with Governor Brown to initiate the program with $117 million in the first year,” Newsom said.

“We’re basically leveling steady back to where it was,” the governor continued. “But that’s the haircut of the enhancements that we’ve made the last few years. Not because we enthusiastically want to do that. Quite the contrary. So those that express disappointment in that, let me add my voice to that.”

H.D. Palmer, a Department of Finance spokesman, added this week the governor’s budget maintains the state’s primary student financial aid program. A broad goal of the May budget revision was to close the deficit while avoiding funding cuts to core programs, he said.

The governor’s budget “continues to propose funding for the Cal Grant program at $2.5 billion for FY 2024-25, which will fund more than 400,000 awards,” Palmer said.

Cal Grants serve middle- and low-income students. The 2022-23 policy changes to the Middle Class Scholarship program created an important nexus with the Cal Grant program to serve students, said Shelveen Ratnam, a spokesman for the California Student Aid Commission.

“Because the majority of MCS recipients are also Cal Grant recipients, Cal Grant awards often first cover tuition for many of these awardees and then MCS picks up the ‘last dollar,’” Ratnam said. “This means that when more students are eligible for Cal Grant, the goals of the MCS program are also advanced by MCS not having to cover the costs of tuition for those students.”

College dreams

The Cal State Student Association said in a statement that it was grateful to the Legislature “for the adjustments made to the Middle Class Scholarship, the inclusion of Cal Grant Reform in the recent budget discussions, and their continued investment in student success. We hope to see these adjustments included in the final budget.”

The legislative proposal calls for keeping last year’s budget agreement intact, with the state providing $926 million in all for the scholarship program, including $637 million in ongoing money and $289 million in one-time increase for the next two fiscal years.

Laird said he is hopeful that an agreement with the governor to keep the full $926 million available for the Middle Class Scholarship will come through.

“We want to restore the cuts and not have cuts to the program … so that families know it’s there. And, the governor’s cut is really deep. The underlying issue here is having enough revenue to do what we want. In the proposed legislation we gave the governor the path to the revenue to do this,” the senator said, adding that adjustments can be made in other areas of the budget “so we can make this happen.”

“For many, a four-year school is the dream,” Laird said.