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Summer Financial Aid: A Tool for Boosting Low-Income Students’ Graduation Rates

July 2019 | By Amy Rose

Ensuring college students graduate from California’s public universities in a timely manner is necessary for the state to satisfy student demand for higher education and to meet the state’s workforce needs. As previously discussed in our analyses, the high cost of college attendance and overcrowded degree programs make it difficult for many low-income students to graduate on time. One way students can graduate more quickly is to enroll in summer courses. However, many low-income students miss out on summer enrollment because of insufficient financial aid. Providing low-income students with financial aid during the summer can help ensure timely graduation, which means less student loan debt, greater earning potential, and more room for the next cohort of students to start college. The 2019-20 budget includes summer-term financial aid to help some low-income students cross the graduation stage in a timely manner, but leaves others without support.

Limited Summer Financial Aid Keeps Low-Income Students Away

Students attending the state’s public four-year universities, California State University (CSU) and University of California (UC), pay for college through a combination of family contributions, earnings from work, and federal, state, and institutional aid. Many low-income students receive state and federal need-based financial aid to help pay for tuition and living expenses.

At the federal level, Pell Grants provide financial aid to low-income students to help afford the cost of college such as food and housing. The maximum Pell Grant award for 2019-20 is $6,195. In 2017, Congress reinstated the Year-Round Pell Grant, which allows students to receive a Pell Grant during the summer without drawing from their lifetime eligibility.

In California, Cal Grants are the foundation of the state’s financial aid for college students. In 2019-20 the maximum Cal Grant tuition award at CSU is $5,742 and $12,570 at UC. While Pell Grants are available for summer coursework, Cal Grants have limitations. If students take more courses during the summer it draws from their total lifetime financial aid eligibility. This means that students who wish to attend summer courses must: 1) do so without the support of Cal Grants or 2) cut into their lifetime award eligibility — leaving them without aid later in their academic careers.

As a recent Budget Center report highlighted, for students experiencing unmet basic needs, lack of financial support is a barrier to success, so receiving financial aid in the summer might allow students to continue their studies year-round and could shorten the time it takes for students to earn a degree. While a growing number of students are graduating from high school and more are attending college, completion rates at CSU and UC are low. At CSU, only 26% of students graduate in four years and 69% do so in six years. At UC, 61% of students graduate in four years and 85% graduate in six years.

For low-income students, the time it takes to earn a bachelor’s degree is often much longer because of a variety of factors, including limited availability of financial aid and other expenses of affording college. At CSU, the four- and six-year graduation rate for low-income students is 18.5% and 56.2%, respectively. Among this population, outcomes vary significantly by race and ethnicity. Black students and Latino and Hispanic students graduate at about half of the rate as their White counterparts (13.7% and 15.6%, respectively, compared to 29.3%). The CSU is working to improve graduation rates and eliminate achievement gaps through their Graduation Initiative 2025. While graduation rates are higher at UC than CSU, racial disparities still exist. Four-year graduation rates for White UC students is 70% compared to 50% for Black UC students. These racial disparities in graduation rates mimic disparities in socioeconomic status, health outcomes, and health care for people of color and reflect a legacy of discriminatory policies and practices that cut people of color off from opportunity.

Summer Financial Aid Can Help Boost Graduation Rates and Ease Capacity Limits

Summer financial aid can help more students graduate on time and ease the capacity limitations at CSU and UC.

Every year thousands of students who are qualified for admittance to the CSU and UC do not attend these colleges due to capacity limitations. These students either delay entering college, attend a private nonprofit or for-profit (often at much higher costs), or skip college completely, which disproportionately impacts low-income students who may not have the financial resources to attend a private university or who may take on staggering amounts of debt to cover the higher costs. Turning away qualified students is also counterproductive to the state’s efforts to increase the number of bachelor degrees awarded at CSU and UC in order to meet future workforce demands. To meet these needs, the CSU and UC should increase enrollment and improve graduation rates.

Limited capacity at CSU and UC also affects current students, many whom struggle to get the courses they need due to “impacted” campuses, which occurs when the number of qualified applicants is greater than the number of available spaces in a major. When programs are impacted students must wait for classes to become available, delaying their time to graduation. The sooner students graduate the sooner they can enter the workforce and free up space at a campus for another student.

California lawmakers have followed the lead of the federal Pell Grant’s extension to summer by funding some summer financial aid in the 2019-20 state budget. The budget allocates $6 million to CSU and $4 million to UC to provide summer-term financial aid to eligible students, including undocumented students. While this is a step in the right direction, the spending plan leaves behind students attending California community colleges and the state’s private institutions. Additionally, the budget notes that this funding will be suspended in two years unless General Fund revenues are higher than expected in the coming years.

Ensuring all students have access to quality public higher education is a long-standing priority of state leaders. The 2019-20 state budget builds on recent institutional efforts to help students more quickly earn a bachelor’s degree at UC and CSU. Now it’s time for the state to support these efforts by extending financial aid to summer at all of California’s colleges.

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The Trump Administration has quietly announced a proposal to change the way the federal poverty line is updated each year for inflation. This proposal is far more than a minor technical change affecting government statistics — it would cut low-income Californians’ access to health care, basic nutrition, and other essential needs. These consequences arise because the federal poverty line forms the basis of criteria that determine whether individuals are eligible to access many vital public supports that are funded (at least in part) by federal dollars — like public health insurance through Medi-Cal, food assistance through CalFresh, and home energy assistance through the Low Income Home Energy Assistance Program (LIHEAP). As a result, changing the method for updating the poverty line as proposed would threaten low-income Californians’ ability to meet their most basic needs.

The Trump Administration’s under-the-radar proposal, included in a notice requesting public comments issued by the Office of Management and Budget (OMB), puts forward the idea of updating the Census Bureau’s official poverty thresholds, or poverty line, using an alternative measure of inflation in place of the inflation measure currently used to update the thresholds each year (the Consumer Price Index for All Urban Consumers, or CPI-U). Two alternative inflation measures specifically mentioned as options are the chained Consumer Price Index (the chained CPI, or C-CPI-U) or the Personal Consumption Expenditures Price Index (PCE Price Index). Using either of these alternative inflation measures would make the poverty thresholds increase more slowly over time. There are several reasons that this proposed change would actually make the federal poverty line less accurate rather than more accurate as a measure of basic economic security. What is more, the Trump Administration is explicitly not requesting input to understand how this change would affect people’s access to vital public supports that help address families’ and individuals’ most basic needs.

Slowing Down the Annual Increase in the Poverty Line Would Make It Less Accurate, Not More Accurate, Especially in California

Switching to a slower-rising inflation measure to update the federal poverty line each year would make the official poverty thresholds less accurate as a measure of a minimum adequate level of economic security. The federal poverty line is already far lower than the basic cost to support a family, particularly in California, where the cost of living is high in many regions. According to the Budget Center’s Making Ends Meet analysis, the statewide average cost of a basic family budget for a working single parent with two children — including housing and utilities, food, child care, health care, transportation, taxes, and miscellaneous other basic necessities — totals nearly $66,000 (in 2017 dollars), while the 2017 official poverty threshold for the same family was only $19,749. In the most expensive parts of the state the cost of basic needs is much higher — as much as $103,423 for this same family in San Francisco County, or more than five times the federal poverty line. Even in Fresno County, a county with relatively low costs, the basic family budget for a single parent with two children is more than $50,000, or two and a half times the poverty line. Slowing down the rate by which the poverty thresholds are updated each year would only make this disconnect worse.

The slower-rising chained CPI and PCE Price Index are also unlikely to be more accurate ways to measure inflation specifically for low-income households, or to update a poverty threshold, which represents a minimum level of resources to meet basic needs. The largest basic needs expense in a household budget is typically housing, and housing costs in California in recent years have increased much faster than even the standard CPI-U inflation measure currently used to update the federal poverty line. While the CPI-U rose by 21.6% from 2006 to 2017, median household rent in California rose by 41.6%, or nearly twice as fast. Research has shown that costs for the overall bundle of goods typically purchased by low-income households have risen faster than costs for the goods typically purchased by higher-income households. Also, the reason that the chained CPI increases more slowly than the standard CPI-U inflation measure used currently to update the poverty line is because the chained CPI assumes that consumers will trade more expensive items for similar less expensive items as prices change (e.g., they will buy chicken instead of beef if the price of beef rises). The PCE Price Index makes the same assumption. However, housing and child care are typically the two largest expenses in the basic family budgets for working families, and both are items where it is unlikely that families can easily switch to a similar, lower-cost alternative if they face an increase in price.

The Trump Administration has framed considering alternative inflation measures as an important technical question for accurate calculation of the federal poverty line, but research on ways to improve the measurement of poverty has not identified slowing down the annual inflation update as a key strategy. An expert panel of the National Academy of Sciences examined many technical aspects of the official federal poverty measure in 1995 and issued recommendations for improving the government measure of poverty, resulting in the creation of the Supplemental Poverty Measure (SPM). The SPM poverty line is higher than the official poverty line for most people, particularly in California. For example, the SPM poverty threshold for a family of two adults and two children who rent their home in the Los Angeles metropolitan area was $34,308 in 2017, while the official federal poverty threshold for the same family was only $24,858. The SPM incorporates many other improvements to measuring poverty. (See the Budget Center poverty explainer webinar for more details on the SPM.) If the objective is to improve poverty measurement, it would make more sense to consider all of these types of improvements rather than focusing on just one item, the choice of inflation measure. This is particularly true because switching to one of the proposed alternative inflation measures alone would cause the poverty thresholds to shrink over time, when research provides more support for increasing the thresholds.

Changing the Way the Poverty Thresholds Are Updated Could Reduce Low-Income Californians’ Access to Vital Public Supports

This proposal would have serious, concrete consequences in the lives of low-income individuals and families. That is because the federal poverty thresholds are the basis for the federal poverty guidelines that are used to determine eligibility, benefits, and funding levels for a wide variety of public supports and federal grants that help families and individuals meet their basic needs. Millions of Californians with low incomes are enrolled in Medi-Cal (known as Medicaid at the federal level) for public health insurance, for example, and millions of Californians access CalFresh food assistance (known as the Supplemental Nutrition Assistance Program, or SNAP, at the federal level) to meet their basic need for food. To be eligible to access these public supports, a family’s or individual’s income must be less than the federal poverty guideline or a multiple of it. Slowing down the annual increase in the poverty guidelines would result in fewer Californians eligible to access these critical public supports over time, with a small impact at first but a large impact over the long term.

The Public Can Submit Comments on This Proposal Now

The public has until Friday, June 21 to submit comments to the Office of Management and Budget via an online submission form  on this proposed change to how the poverty line is updated each year for inflation. Individuals and organizations are encouraged to share the implications of the proposal for their households or those they serve, keeping comments substantive and unique, with at least 70% of the content different from other submitted comments. The Trump Administration explicitly did not request public comments on how the proposed change to the poverty thresholds would affect the federal poverty guidelines and eligibility for vital public supports. However, organizations can draw attention to the importance of this cascading effect of the proposal by describing what questions the federal government should take the time to research, and what additional input the government should solicit and consider, before deciding whether to move forward with the change.

The poverty line is more than a measure, and ensuring that low-income Californians have access to vital public supports such as health care and food assistance, and that those benefits are not diminished over time under the guise of a technical change, should be a priority for all Californians.

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With the Legislature scheduled to start voting today on a final 2019-20 state budget, the Budget Center team is sharing an update on the five key issues we have been watching that affect the health and well-being of millions of low- and middle-income children, families, and adults. And with Governor Newsom signaling his approval of the budget bill earlier this week, it’s anticipated significant investments will move forward for Californians.

Read on to learn more about how the 2019-20 budget bill:

  • helps children and parents in need of subsidized child care;
  • promotes financial stability for CalWORKs parents;
  • better supports students on Competitive CalGrants; and
  • sets in motion the extension of the managed care organization tax.

Plus, we break down what remains to be worked out on an expansion of the CalEITC.

  1. Expansion of California’s Earned Income Tax Credit — CalEITC

1. Expansion of California’s Earned Income Tax Credit – CalEITC

Governor Newsom and state legislators have yet to reach agreement on an expansion of the CalEITC. The Senate Budget Committee proposed to spend somewhat more on the expansion than the Governor, while the Assembly Budget Committee proposed to spend slightly less. Also, the budget committees in both houses proposed extending the credit to immigrant communities who are currently excluded — a proposal not included in the Governor’s expansion plan. Another significant sticking point in the negotiations pertains to the Governor’s tax conformity proposal. Since January, the Governor has proposed offsetting the cost of an expanded CalEITC by conforming to several federal tax law provisions mainly affecting business income that would, on net, increase state revenue. These changes would require a two-thirds vote of each house of the Legislature. Budget committees in both houses resisted linking tax conformity to the expansion of the CalEITC and proposed deferring action on the Governor’s tax conformity proposal. The budget bill that will be voted on today assumes a revenue loss from a CalEITC expansion and a revenue gain from tax conformity. However, the specific policy changes behind these assumed revenues appear to still be in negotiation.

What’s at stake for California children and families:

In our recent piece — Expanding the CalEITC Is an Effective Way to Invest in California’s Children, But Hundreds of Thousands of Children of Immigrants Won’t Benefit Unless Policymakers Act — we argued that making the CalEITC more inclusive of immigrant families would be a smart investment for California, particularly given that it would increase economic security for up to around 300,000 children at relatively little additional cost (an estimated $167 million). More broadly, our March chartbook — Expanding the CalEITC: A Smart Investment to Broaden Economic Security in California — showed that expanding the CalEITC would help low-earning workers and their families who are struggling to afford California’s high cost of living. We also suggested that it could serve as an investment in California’s children given research linking earned income tax credits to improvements in children’s health, educational attainment, and adult earnings.

Regarding tax conformity, our piece — California Can Raise Revenue for New Investments in an Unexpected Way — By Adopting Parts of Last Year’s Federal Tax Giveaway, plus a fact sheet on the the Governor’s Proposed Tax Conformity Package — show that conforming to selected portions of federal tax law would raise revenues for new investments while also making California’s tax code fairer. One component of the original tax conformity package that the Budget Center has expressed concerns about is the Governor’s proposal to provide state-level tax incentives for investments in Opportunity Zones (OZs). Learn more about what the OZ Program is and how it may affect California’s communities in our report, The Federal Opportunity Zones Program and Its Implications for California Communities.

2. Additional Spaces for Children in Subsidized Child Care Programs

The Legislature’s negotiated budget agreement includes funding that could serve roughly 21,000 additional children from low- and moderate-income families in California. The increased investment breaks down to $80.5 million Prop. 64 for the Alternative Payment Program, $50 million General Fund for the General Child Care program, and $31 million General Fund for full-day slots in the California State Preschool Program. Funding to serve more children is in addition to hundreds of millions in other investments for the state’s subsidized child care and development system that were included in the administration’s and the legislature’s budget plans.

What this means for children and families:

As our recent series of fact sheets show, 1 out of 3 children in California are eligible for subsidized child care and development programs, yet 1.8 million children are unable to access care. A substantial investment in the state’s system must always include additional spaces for children in order to provide relief for hard-working families that are struggling to make ends meet. While there is much work to be done, the budget agreement is a positive step forward for low- and moderate-income families in California.

3. Increasing Investments in CalWORKs

The Legislature has agreed to two significant increases in CalWORKs. First, they are expected to raise the CalWORKs asset limit under the budget agreement. Under current law, families are ineligible for CalWORKs if they have more than $2,250 in assets (such as in a checking or savings account) or own a vehicle worth more than $9,500. This restriction can prevent families from saving for unexpected emergencies and keeps them vulnerable to economic shocks. The Legislature proposes increasing the asset limit to $10,000 and allowing a car’s value to reach $25,000.  

Second, the Legislature has also decided to increase the value of the earned-income disregard (EID). The EID is the amount of a CalWORKs recipient’s gross monthly earnings that is overlooked when their grant levels are calculated. State law exempts the first $225 of monthly earnings, then 50% of the remainder. Unfortunately, the value of the EID has remained stagnant for over two decades, falling behind the rising cost of goods and services, as well as a growing minimum wage. State legislators have now agreed to increase the EID to $500, which would allow CalWORKs parents to keep more of their earnings. However, they have decided against ensuring that the EID will keep pace with inflation.

What this means for CalWORKs families:

The Legislature’s actions are a welcome addition in their renewed support for families receiving CalWORKs support. Though legislators did not approve eliminating the asset test entirely, raising the limit still promotes financial stability for struggling families. Additionally, raising the value of the EID allows CalWORKs parents to retain more of their earnings so they can better meet their basic needs. In future years, policymakers should tie the EID to inflation, so that its value does not decline. To learn more about the disregard, see the Budget Center’s analysis: The Earned-Income Disregard Falls Short of Supporting Working Families in CalWORKs.

4. Increasing the Number of Competitive Cal Grants

State leaders have agreed to increase the number of available Competitive Cal Grant awards by over 15,000. Nontraditional students, such as those who attend college more than a year after high school, are not guaranteed state financial aid. Instead, they must apply for a Competitive Cal Grant. There are nearly 350,000 students eligible for competitive cal grants and only 25,700 awards are available. The budget agreement increases the number of awards available to 41,000.

What this means for students:

As our previous analysis noted, increasing the number of Competitive Cal Grant awards would help ensure college is affordable for a larger share of nontraditional students. The budget agreement makes a step in the right direction. However, even with the increased number of awards, over 300,000 eligible students will not receive financial aid.

5. The Pending Expiration of the Managed Care Organization (MCO) Tax

Governor Newsom dropped his initial reluctance to ask the federal government to approve an extension of California’s tax on health insurance plans — or MCOs — that expires on July 1. The 2019-20 budget package will authorize a new MCO tax, which presumably would be in effect for at least three fiscal years (2019-20 to 2021-22) assuming a new tax wins federal approval in the coming months, which is highly likely. Currently, the MCO tax generates a net state General Fund benefit of well over $1 billion per year, and this benefit would continue if the tax is extended beyond July 1. However, Governor Newsom and state legislators agreed that the 2019-20 state budget should not reflect this General Fund benefit until California receives federal approval for the MCO tax extension. In other words, these General Fund dollars will not be recognized in the 2019-20 budget because they are not yet in hand.

What this means for low- and middle-income Californians:

By creating a substantial General Fund benefit, the MCO tax increases the capacity of the state budget to support public services and systems, including health care. Without an extension of this tax, California would lose a major opportunity to create or expand investments that can improve the lives of low- and middle-income Californians. For more information on the MCO tax and why an extension is essential, read: Five Key Facts About California’s Soon-to-Expire “MCO Tax.”

Support for this piece was provided by First 5 California.

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College can be stressful for students, especially during this time of the year as students are completing final examinations and graduating. Considering the challenging academic workload, it is normal for students to feel worried, anxious, restless, or sad from time to time. If these feelings or other mental health symptoms persist and start to interfere with daily living and academic performance, it may be indicative of a mental health issue. Without treatment for mental health issues, college students are more likely to drop out, abuse substances, and even commit suicide.

According to the 2018 Center for Collegiate Mental Health Annual Report, college students across the country are increasingly experiencing and reporting mental health issues. Anxiety and depression were identified as the most common concern — as assessed by clinicians that provide mental health services to students. Some students may be at a higher risk for mental health challenges, including undocumented students, veteran students, and LGBTQ students. Having a low socioeconomic background and low social support may also put some students at a higher risk, especially considering the increasing cost of attendance (tuition, housing, books) and related food insecurity issues.

Years of rising demand in mental health services among California college students have contributed to longer wait times and growing pressure to improve access to these services. California higher education leaders and policymakers are taking steps to reduce the gap between students’ need for mental health services and their use of these services.

In light of Mental Health Awareness Month, and as budget deliberations are underway in the state legislature, this piece describes mental health trends and examines current state proposals to maintain, improve, and/or expand access to mental health supports in college campuses across California.

The 2018 National College Health Assessment reports that in the past year, 63% of college students surveyed felt overwhelming anxiety, 42% felt so depressed that it was difficult to function, 62% felt very lonely, and 12% seriously considered suicide. Researchers at UC Berkeley found that nationally, the percentage of students who reported being diagnosed or treated for anxiety disorder in the past year doubled from 2008 to 2016 from 10% to 20%.

Students in California’s public colleges report similar experiences. At the California State University (CSU), students reported an increase in hopelessness, loneliness, sadness, depression, anxiety, and suicidal thoughts in the past two years and 16% of students received some psychological counseling or treatment on campuses last year. At the University of California (UC), the percentage of students seeking mental health services in the past 10 years rose 78%, nearly three times higher than enrollment growth during the same period. While the demand for mental health services has increased significantly, it may actually understate the need, as many students may choose not to seek support due to the stigma attached to counseling.

At California Community Colleges (CCC), students experience similar rates of psychological distress as UC and CSU students — uncomfortable feelings or emotions that affect daily living — according to a recent study. However, students from CCC reported higher rates of impaired academic performance due to mental health issues than students at CSU and UC campuses. CCC students were half as likely to receive referrals for counseling or mental health services by a faculty member and were also less likely to receive services on campuses than their UC and CSU counterparts.

Availability of Mental Health Services and Resources for College Students Varies Across the State

The UC, CSU, and CCC have long recognized the need to provide mental health resources on campus, but have differed in their responses to meet increasing demand due to budget constraints and other factors. For that reason, students’ access to mental health services varies depending on the sector and campus.

At the UC, each campus has a Student Counseling Center that provides direct services, outreach and prevention services, and campus consultation services. In response to the increasing demand for mental health services at these centers, the UC Board of Regents approved a 5% annual increase in the Student Services Fee (SSF) for five consecutive years (2014 – 2019), with half of revenues earmarked for Student Mental Health. In 2018-19, the UC received $4.8 million in State General Fund in lieu of another SSF increase. As a result of this funding, UC was able to hire 70 Full Time Equivalent (FTE) counseling providers, reduce the average wait times for intakes from 12-18 days to 9-11 days, increase the use of case managers and launch integrated care efforts, and more.

The CSU campuses also provide myriad services to support students, focusing on efforts around education outreach, training, and acute crisis care. All campuses provide baseline mental health services: counseling, suicide and violence prevention, emergency crisis interventions, outreach, consultation, and referral resources.

Several CSU campuses have attempted to address the increased demand for mental health in a variety of innovative ways. Some campuses offer wellness workshops, a series of emotional well-being workshops led by counselors. At CSU Fresno, the Let’s Talk Program has allowed counselors to meet with students anonymously for 20-minute sessions in locations around campus, during which the counselor assesses the student’s need. Campuses have also invested in peer mentoring programs, which have “increased academic and social integration” as well as “improved student outcomes for all students, particularly those from historically underserved communities,” according to the CSU Office of the Chancellor.

CSU is also working to strengthen community partnerships in order to increase mental health services. Earlier this year, the Office of the Chancellor hosted a systemwide convening to connect campuses with their local county behavioral health offices. The goal of this convening was to develop partnerships that will bring additional mental health services to CSU students.

Compared to the UC and CSU systems, mental health services at the CCC appear to be less consistent, partly because community colleges typically do not offer their own health insurance plans. Currently, 90 of the 115 community colleges offer mental health services, with students averaging one to three counseling sessions per semester. Establishing health services is optional for community college districts, and districts that provide health services cannot charge a student health fee that exceeds $21 per semester, which means student health services are typically more scarce on campuses with relatively small student populations.

In 2011, CCC implemented the California Community Colleges Student Mental Health Program (CCC SMHP), a statewide effort focusing on prevention and early intervention. The CCC SMHP promotes faculty and staff training, peer counseling, and suicide prevention. According to a recent CCC SMHP report, nearly 168,000 students, faculty, and community members have been reached through prevention and early intervention trainings.

Barriers to Accessing Mental Health Support

One of the greatest challenges on California college campuses is that mental health funding has not kept pace with demand. This disinvestment in crucial services results in understaffed counseling offices, long wait times, and inadequate facilities — all of which negatively affect students seeking help.

The International Association of Counseling Services advises there to be one professional for every 1,000 to 1,500 students — an effort pushed for by legislators and vetoed by Governor Brown in 2018. Recent reports suggest that staffing ratios at the UC and CSU are close to that ratio (about 1,100 students per counselor at UC and 2,000 students per counselor at CSU); however, ratios at the CCC exceed more than 7,000 students per counselor. While the rates of both perceived and personal stigma have decreased in recent years, it is particularly salient for black students, Latinx students, and others who may already suffer from discrimination. Ensuring diversity among counseling staff may help with stigmatization and is a priority advocated for by students.

Before students can receive counseling, many must wait up to a few weeks for an available appointment. Additionally, many campuses have inadequate counseling infrastructure, with appointments taking place in non-discrete locations.

Current Budget and Policy Proposals to Improve Access to Mental Health Services

Improving access to mental health services for college students is a widely shared goal among policymakers, students, and institutional leaders. Several budget and policy proposals have been introduced this year from the legislature, Governor, and educational institutions.

In the legislature, AB1689 (McCarty) would create the College Mental Health Services Program, a matching grant program to enhance the provision of mental health services at CSU, UC, and CCC. Additionally, the Assembly’s budget provides $2 million ongoing and $3 million one-time of Proposition 63 state administration fund to support student mental health services at UC and CSU, and $10 million ongoing and $12 million one-time Proposition 63 state administration fund for the community colleges. The Senate’s budget allocates $550 million for “Mental Health Partnerships” between local behavioral health departments and K-12 schools, county offices of education, and public colleges within a county region.

For the UC, Governor Newsom’s proposed 2019-20 budget includes $5.3 million ongoing General Fund to improve mental health programs on campuses, which UC proposes using to hire more counselors and stabilize funding for existing counselors. Ultimately, UC notes that this funding would help to improve capacity for direct services, further enhance provider diversity, and bolster targeted prevention efforts for vulnerable students. In 2018-19, UC received $4.8 million in State General Funds to support expanding mental health services. This year, UC asked to make this funding permanent and ongoing and warned that without it, there is a potential for counseling staff layoffs, worsening accessibility, longer wait times, and decreased provider diversity.

For the CSU, the Governor’s budget proposal includes $15 million in one-time funding for the Basic Needs Initiative, which helps to support a variety of students’ basic needs, including mental health. It is not clear how much, if any, of the Basic Needs funding would be allocated for mental health and counseling services.

For the CCC, there are no funds included in the Governor’s budget for the mental health needs of students. However, last year the legislature approved $10 million dollars of one-time funding in the 2018-19 state budget for California Community Colleges to support mental health services and training.

Mental Health Services Are Critical to Student Success

Given the increased rate of mental health issues among college students, California colleges must work to improve access to mental health services and treatment. Increased mental health funding should be directed to prevention and early intervention as well as direct services for students, considering that the demand for these services already exceeds the availability at many campuses across the state. Adequately funding these services can help mitigate the negative toll that mental health conditions can take and help students succeed academically.

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With the members of the budget conference committee expected to start their work soon to reconcile differences among the budgets proposed by Governor Newsom, the Senate, and the Assembly, the Budget Center team is closely following how the agreed upon policies will affect the health and well-being of millions of low- and middle-income Californians.

Certainly, there is much to watch as final budget deliberations move forward. Read on about five key issues we’re tracking as the 2019-20 state budget is finalized in the coming weeks.

1. Expansion of California’s Earned Income Tax Credit – CalEITC

The issue:

Governor Newsom has proposed a substantial expansion of the CalEITC, including three major changes: raising the income limit so that all adults working up to full-time at a $15-per-hour wage (the state minimum wage as soon as 2022) would be eligible for the credit; increasing the size of credits for many tax filers who currently get very small credits; and adding an extra $1,000 credit “boost” for filers eligible for the CalEITC who have children under age six. State legislators generally support the Governor’s proposal, though the Assembly has proposed a somewhat smaller expansion. Legislators differ from the Governor in proposing to extend the CalEITC to a group of workers who are currently excluded from accessing the credit: immigrant workers and their families who file taxes using a federally-assigned Individual Taxpayer Identification Number (ITIN) rather than a Social Security Number.

Our take:

As we discussed in our March chartbook — Expanding the CalEITC: A Smart Investment to Broaden Economic Security in California — expanding the CalEITC would improve economic security for many who are struggling to afford California’s high cost of living. This is particularly important for children. Research shows that increasing incomes for children growing up in poverty are linked to short- and long-term improvements in health, educational attainment, and adult earnings. The vast majority of children who would benefit from the proposed CalEITC expansion are children of color, who are disproportionately likely to live in poverty in California.

We’ve also noted the current CalEITC requirement that tax filers and all the children they claim must have a Social Security Number valid for work excludes many working immigrant families and individuals from accessing the CalEITC. Extending the credit to excluded workers who file taxes using an ITIN or any federally-issued Social Security Number would increase economic security for a significant number of immigrant individuals and families as well as contribute to a better future for many children growing up in our state.

See the Budget Center’s piece from earlier this month: Expanding the CalEITC Is an Effective Way to Invest in California’s Children, But Hundreds of Thousands of Children of Immigrants Won’t Benefit Unless Policymakers Act.

2. Additional Spaces for Children in Subsidized Child Care Programs

The issue:

Governor Newsom campaigned on an early childhood agenda and his May Revision follows through on a number of campaign promises by expanding full-day, full-year preschool, providing additional subsidized child care spaces for school-age children, and setting aside hundreds of millions of dollars in one-time funding for child care infrastructure. Yet, both the Senate and the Assembly have advanced budget plans that provide significantly more spaces for children in subsidized child care programs.

Our take:

As our Fact Sheet shows, in 2017, just 1 in 9 children eligible for subsidized child care programs were enrolled in a program that could serve families for more than a few hours a day and throughout the entire year. Some parents have been waiting for subsidized child care for years. Substantial investment in California’s subsidized child care and development system must include increased access to child care programs for children and families, regardless of age. This gives providers the ability to prioritize families with the lowest incomes first.

For the Budget Center’s take, check out our series on the unmet need for subsidized child care:

3. Raising the Earned-Income Disregard in CalWORKs

The issue:

The earned-income disregard (EID) is the amount of a CalWORKs recipient’s gross monthly earnings that is overlooked when their grant levels are calculated. Since the implementation of CalWORKs in 1997-98, state law has exempted the first $225 of monthly earnings, then 50% of the remainder. Unfortunately, the value of the EID has not changed in more than 20 years, falling behind the rising cost of goods and services, as well as a growing minimum wage. State legislators are now considering increasing the EID to allow CalWORKs parents to keep more of their earnings. The Governor’s May Revision does not increase the disregard.

Our take:

As we said in a March analysis, in failing to increase the EID over the years, state policymakers have left struggling families with even fewer resources to meet their basic needs in our state. Raising the value now is a promising step to better serve CalWORKs families. To keep the disregard from losing value in the future, policymakers should ensure that the EID is increased annually to keep pace with inflation. To learn more about the disregard, see the Budget Center’s analysis: The Earned-Income Disregard Falls Short of Supporting Working Families in CalWORKs.

4. Increasing the Number of Competitive Cal Grants

The issue:

Nontraditional students, such as those who attend college more than a year after high school, are not guaranteed state financial aid. Instead, they must apply for a Competitive Cal Grant. There are nearly 350,000 students eligible for competitive cal grants and only 25,700 awards available. Governor Newsom’s May Revision increases the number of available grants to 30,000 while the Assembly seeks to increase available awards to 70,000, and the Senate proposes 44,000.

Our take:

Competitive Cal Grants are one of the most effective financial aid investments the state can make to promote access and affordability because they support the lowest-income and least represented students. Our August analysis shows that increasing the number of Competitive Cal Grant awards would help ensure college is affordable for a larger share of nontraditional students.

5. The Pending Expiration of the Managed Care Organization (MCO) Tax

The issue:

Governor Newsom and state legislators are at odds over whether to seek an extension of California’s current tax on health insurance plans — or MCOs — which expires on July 1. The Governor wants to let this tax expire; the Assembly and Senate are pushing to extend it. The MCO tax generates a net state General Fund benefit of well over $1 billion per year. If the MCO tax goes away, so does this General Fund benefit.

Our take:

As we said earlier this month, allowing the MCO tax to expire would reduce the capacity of the state budget to support public services and systems, including health care. For more information, see this Budget Center piece: Five Key Facts About California’s Soon-to-Expire “MCO Tax.”

Support for this piece was provided by First 5 California.

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In the next few weeks, state policymakers will decide whether to expand California’s Earned Income Tax Credit (CalEITC) — a refundable state tax credit that boosts the incomes of families and individuals who earn little from their jobs. Governor Newsom’s revised budget proposes to expand the credit beyond what he proposed in January, as we explain in our analysis of the May Revision. (For details on the Governor’s January proposal, see our chartbook.) Now all eyes turn to the Assembly and Senate budget committees, which will decide whether to adopt or revise this proposal as they develop their respective budgets in the coming days. On Tuesday, May 14, Assembly Budget Subcommittee 4 will hear the Governor’s proposal, and Senate Budget and Fiscal Review Subcommittee 4 is expected to hear it later in the week.

We at the Budget Center evaluate state policy choices based on research, and this is a case where the evidence is clear: expanding the CalEITC is a smart investment for California’s children. Decades of studies show that earned income tax credits help low-earning workers better provide for their families, while also improving children’s future prospects. Notably, while EITCs are not explicitly health or education policies, they appear to provide important health and educational benefits that likely contribute to a stronger future for children. For example, studies suggest that the EITC:

  • Fosters better health for children, potentially improving their health and economic circumstances later in life. Babies born to mothers who likely received the largest increases in the federal EITC following an expansion of the credit had the greatest improvements in standard infant health measures, such as birth weight, which is highly predictive of health and economic well-being in adulthood. Also, the likelihood of having a low-birth-weight baby fell by more than four times as much for black mothers as for white mothers, suggesting that the EITC could be a tool for advancing health equity, as rates of low birth weight are much higher for black mothers. A recent study examining state EITCs found similar effects. Rates of low birth weight fell significantly more in states with more generous, refundable EITCs. In addition, black mothers experienced the largest percentage point decline in low-birth-weight rates.
  • Boosts children’s school achievement and educational attainment, potentially improving their earnings prospects in adulthood. Children in families who received larger credits as a result of an expansion of the federal EITC scored better on reading and math tests, with higher scores among younger children. These children were also more likely to complete high school, attend college, be employed as young adults, and earn more. In addition, children whose families received larger credits from the federal EITC during the spring of their senior year in high school were more likely to enroll in college.

Although most research focuses on the federal EITC, it’s reasonable to think that the CalEITC amplifies the benefits of the federal credit, particularly given that California’s credit is the most generous, refundable state EITC in the nation for households with very low incomes. Furthermore, it’s likely that increasing the size and scope of the CalEITC, such as through the Governor’s expansion plan, which targets the largest increases to families with young children, would further enhance these benefits.

Hundreds of Thousands of California’s Children Could be Excluded From the Governor’s Proposal

As policymakers consider expanding the CalEITC, they should recognize that hundreds of thousands of California’s children whose parents earn little from their jobs can’t share in the benefits of the credit currently and won’t benefit from an expansion of the credit unless policymakers act. That’s because tax filers and all of the children they claim must have Social Security Numbers (SSNs) that are valid for work in order to qualify for the CalEITC. As a result, many California children who have immigrant parents — including US-born children — are excluded from the credit. And many more could lose access to the credit if they or their parents lose immigration relief, such as Deferred Action for Childhood Arrivals (DACA) or Temporary Protected Status (TPC), due to federal actions.

With a simple rule change California policymakers could make the CalEITC more inclusive of immigrant families and extend the credit’s benefits to their children. Specifically, policymakers could permit tax filers to claim the credit using a federally assigned Individual Taxpayer Identification Number (ITIN) or any federally assigned SSN. According to my colleague Sara Kimberlin’s estimates, more than two-thirds of the tax filers who’d benefit from this policy change live in households with children. Her estimates also show that this rule change would benefit 208,000 to 297,000 children if policymakers also approve the Governor’s expansion of the credit, at relatively little additional cost: around $117 million to $167 million. This is less than the cost of the Governor’s May Revision proposal to invest another $190 million in the CalEITC.

If policymakers allow tax filers to use ITINs or SSNs to claim the CalEITC but do not also approve the Governor’s expansion, Sara estimates that 158,000 to 226,000 children would benefit from the credit, at an added cost of just $40 million to $57 million. These estimates assume a 50% CalEITC take-up rate among tax filers who appear eligible to use ITINs. However, take up could be lower given that many immigrants fear using public benefits due to anti-immigrant actions by the federal government.

Allowing tax filers to use a federally assigned ITIN or SSN to claim the CalEITC would not only allow more of California’s children to enjoy the credit’s benefits, but also it would:

  • Help to reduce the substantial disparities in economic hardship by race, ethnicity, and immigration status. The vast majority of children who could benefit from this policy change are children of color (97%) — primarily Latinx (90%) — and, by definition, all of them are children of immigrants. In California, Latinx children are more than twice as likely to live in poverty as white children. California children of immigrants in working families are also more than twice as likely to live in poverty as other children in working families.
  • Reward workers who provide valuable contributions to our state. Immigrants, including those who are undocumented, contribute billions of dollars each year to California’s state and local revenues, helping to support services that benefit all of us. Immigrants and their children are also vital to the state’s labor force, comprising more than half of California’s workers. Undocumented immigrants’ labor alone contributes more than $180 billion each year to California’s economy, according to state Controller Betty Yee.
  • Help to reduce economic instability due to low pay and immigration-related labor violations. The Californians who stand to benefit the most from a more inclusive CalEITC include farm workers, cooks, housekeeping cleaners, construction laborers, grounds maintenance workers, and janitors, according to our estimates. These workers are engaged in important, but low-paid — and often unstable — work. Compounding their economic challenges, some may be paid less than they are owed. Immigrant workers are far more likely to be victims of wage theft and other workplace violations, in spite of legal protections that cover workers regardless of their immigration status.

Making the CalEITC more inclusive of immigrant families would be a smart investment for California to make both from an equity perspective — given the valuable, but often under-valued, contributions immigrants make to our society — and from an economic perspective — given that the strength of our collective future depends on the investments we make in all of our state’s children today.

— Alissa Anderson

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As we mark Mother’s Day, we at the Budget Center believe it is an important opportunity to recognize how California can improve the health and well-being of all mothers. Becoming a mother should be a joyous occasion, but too many women in the United States die due to pregnancy-related causes. In 2015, the United States had the highest maternal mortality rate of any developed country. While other countries have successfully taken steps to decrease maternal mortality, the rate of pregnancy-related deaths in the US has doubled in 20 years. This is despite the fact that women in the US pay top dollar for maternity care compared to women in other countries.

Over a decade ago, the California Department of Public Health (CDPH) noticed the alarming rise in pregnancy-related deaths, and state administrators took action in 2006 by launching an investigation of maternal deaths and by forming the California Maternal Quality Care Collaborative (CMQCC). The CMQCC has been credited in reducing the number of mothers dying in childbirth by using data and research to improve outcomes. It seems to be working. California’s maternal mortality rate peaked in 2006 and has since dropped by more than half. In 2013, the most current and accurate data available, the maternal mortality rate in California was 7.3 maternal deaths for every 100,000 live births — one-third the rate for the US, overall (22.0).

While this is certainly good news for mothers in California, this figure masks severe and persistent disparities experienced by black women. While pregnancy-related deaths have declined in California for women of all races and ethnicities, the black maternal mortality rate was still 3.8 times higher than the rate for white women in 2013. In fact, in California the rate of maternal mortality for black women has consistently been 3 to 4 times higher than the rate for white women over the past two decades.

It’s becoming increasingly clear that race can affect health and wellness over the lifespan, including outcomes in pregnancy and childbirth. For black women who live at the inhospitable intersection of racism and sexism, it can be deadly. A recent report from the Center for American Progress (CAP) recognizes these systemic problems, and outlines a range of policies to address the health inequities experienced by black women, some of which are active policy proposals this year in California. CAP recommendations include:

  • Improving the quality of care pregnant women receive. Senator Holly Mitchell’s Dignity in Pregnancy and Childbirth Act (SB 464) would require evidence-based implicit bias training for health care practitioners who provide care to mothers before, during, and after childbirth.
  • Addressing maternal mental health outcomes. In a blog post earlier this month, the Budget Center discussed strategies to improve maternal mental health, including expanded mental health care for new mothers enrolled in Medi-Cal (AB 577).
  • Enhancing supports for families. The Governor’s proposed budget for the next fiscal year invests more dollars in home visiting programs and in the Black Infant Health Program, both designed to improve outcomes for families.
  • Helping families meet their basic needs. The Governor and state legislators are backing a wide range of budget and policy proposals that would do just that, such as boosting CalWORKs cash assistance, increasing the size of the CalEITC, expanding access to subsidized child care, and extending the duration of paid family leave.

While California has done a commendable job in reducing the maternal mortality rate, the state can do more to address the severe disparities in the number of black women dying due to pregnancy-related causes. Budget and policy proposals outlined above provide a path forward, but there is significant work to be done to ensure all mothers have the opportunity to celebrate Mother’s Day.

— Kristin Schumacher

Aureo Mesquita provided research assistance on this blog post. Support for this piece was provided by First 5 California.

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When Governor Gavin Newsom released his proposed 2019-20 budget this past January, one of the biggest surprises was that he did not include a proposal to extend California’s tax on health insurance plans — or  “managed care organizations” (MCOs) — which expires on July 1. (An extension of this tax would require federal approval.) The Governor’s position is puzzling because the MCO tax package generates a net state General Fund benefit of roughly $1.5 billion each year. If the MCO tax goes away, so does this General Fund benefit, thus reducing the capacity of the state budget to support public services and systems, such as child care for working families and higher education.

The Governor has expressed concern that pursuing a reauthorization of the MCO tax could conflict with the state’s efforts to renegotiate, with the federal government, two Medi-Cal “waivers” that will expire in 2020. (Waivers help to determine how services are delivered in Medi-Cal, our state’s Medicaid program.) However, the nonpartisan Legislative Analyst’s Office (LAO) has evaluated this concern and concluded that the Newsom Administration “has not laid out a convincing rationale” for letting the MCO tax package lapse. Furthermore, the LAO notes that “California’s prospects of receiving federal approval of a reauthorized MCO tax are strong.”

In order to help shed light on a critical policy issue that has major implications for the state budget but has largely been flying under the radar, here are five key facts about California’s current MCO tax package:

1. The current MCO tax package took effect in 2016 following more than a year of intense lobbying by the Brown Administration.

The current MCO tax package was approved by the Legislature on a bipartisan vote in early 2016, following over a year of all-hands-on-deck lobbying by Governor Brown and his administration. Due to new federal rules, California’s then-current MCO tax no longer complied with federal guidelines and needed to be revised. Ultimately, Governor Brown called the Legislature into special session with the goal of creating a new MCO tax that would adhere to federal rules while also generating substantial General Fund savings. In addition to a revamped MCO tax, the final tax package included offsetting state tax cuts for the health insurance industry that were designed to ensure that the industry, as a whole, would be no worse off financially as a result of the revised MCO tax. The final tax package won broad support, including from health plans, and took effect on July 1, 2016.

2. The MCO tax package reduces — or “offsets” — state General Fund spending on Medi-Cal by well over $1 billion per year, freeing up these dollars to support other state priorities.

This General Fund offset results from a complex financing arrangement. (See this LAO report for an overview of how it works.) Essentially, California taxes MCOs and uses the proceeds to leverage federal funds to support Medi-Cal, our state’s Medicaid program. The MCO tax package frees up around $1.5 billion in General Fund revenues each year that would otherwise go to Medi-Cal. These freed-up funds support an array of public services and systems that are funded through the state budget.

3. By leveraging federal dollars for Medi-Cal — at no cost to the state’s General Fund — the MCO tax allows California to come closer to claiming its fair share of federal Medicaid funding.

It’s long been known that the main formula for determining how much federal funding states receive for their Medicaid programs is flawed, and in a way that puts California at a financial disadvantage. (This formula is officially known as the “FMAP.”) For California, the key problem is that the state “receives a low federal matching rate despite its relatively low ability to fund [Medi-Cal] program services,” according to the US Government Accountability Office (GAO). By providing another way for California to tap federal Medicaid funds — at no cost to the General Fund — the MCO tax helps to lessen the inequities that are built into the FMAP formula by boosting federal support for Medi-Cal.

4. If the MCO tax were allowed to expire, state General Fund costs for Medi-Cal would ultimately increase by more than $1 billion per year, but without any additional benefit to the Medi-Cal program.

If the MCO tax expires, policymakers would have to replace the lost MCO tax revenues with state General Fund dollars in order to maintain current federal Medicaid matching funds and keep the Medi-Cal program whole. In fact, this is what Governor Newsom’s proposed 2019-20 budget assumes — that the General Fund will backfill the foregone MCO tax revenues. This, in turn, would reduce the amount of state funds available to support other key public services and systems.

5. Alternatively, extending the MCO tax would free up General Fund dollars that could be used to expand key services beginning in the 2019-20 fiscal year, which starts on July 1.

As noted above, Governor Newsom assumes that state General Fund spending on Medi-Cal will rise beginning in 2019-20 due to the (presumed) expiration of the MCO tax — an assumption that is built into his proposed state budget. Alternatively, if the MCO tax were extended, this General Fund “backfill” for Medi-Cal would not be necessary. As a result, these General Fund dollars, ultimately reaching around $1.5 billion per year, would be newly available — relative to the Governor’s current multi-year budget forecast — to pay for other state priorities. For example, these freed-up dollars could help to move California closer to universal health coverage. Key policy options here include improving and expanding Medi-Cal and creating new state subsidies to reduce the cost of coverage for low- and moderate-income Californians who purchase health insurance on the individual market.

Conclusion

The current MCO tax package leverages federal funds for Medi-Cal, leaves the health insurance industry no worse off financially, and provides a net annual state General Fund benefit of roughly $1.5 billion, with these freed-up dollars supporting critical public services and systems. It’s not too late for the Newsom Administration to reverse course and work with state lawmakers to craft an updated MCO tax package that can win federal approval this year.

— Scott Graves

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