California’s Revised Budget Plan Slashes Financial Aid Funding

The proposed budget includes $510 million in cuts to the Middle Class Scholarship and no additional funding to expand Cal Grant, California's specialized financial aid program.
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Published on May 20, 2024
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  • California Gov. Gavin Newsom released his revised state budget proposal for the 2024-2025 fiscal year.
  • The proposal includes $510 million in cuts for the Middle Class Scholarship.
  • The state is struggling with a $27 billion deficit, which is projected to reach $28 billion next year.

California Gov. Gavin Newsom unveiled his revised 2024-2025 budget proposal, which targets funding to financial aid programs in an effort to alleviate a portion of the state's $27 billion deficit.

The state budget, finalized in June, includes $510 million in cuts to the Middle Class Scholarship and excludes funding for changes to Cal Grant, California's financial aid program.

Established in 2013, the Middle Class Scholarship program was designed to help decrease the cost of attendance at the University of California (UC) and the California State University (CSU) for students with a household income of $217,000 or less. The proposed cuts leave just $100 million in sustained support for the approximately 300,000 students who benefit from the program.

The scholarship provides eligible students with up to 40% of mandatory systemwide tuition and fees. The program also applies to students pursuing a teaching credential and those enrolled in a bachelor's degree program at California Community Colleges.

Since the program was fully implemented in the 2018-2019 academic year, both allocated funding and participation have surged. In 2020, the program received $117 million in state funds, helping more than 55,000 students. Fast forward two years later, state funding ballooned to $632 million and student participation soared to over 297,000.

The budget also leaves off investments to Cal Grant. In 2020, the state Legislature passed the Cal Grant Reform Act to be implemented in the state budget in the 2024-2025 academic year, unless funding was not available.

Higher Education Leaders Navigate Budget Challenges

Leaders from both the UC and the CSU systems acknowledge the tough position Newsom was in considering the state's multibillion deficit.

This is a challenging budget period for California, and Gov. Newsom's revised budget proposal reflects that reality, UC President Michael Drake said in a statement.

Under the new proposal, UC faces a $125 million reduction in base funding in 2024-2025, with the intention to restore the lost funding in 2025-2026, according to CalMatters. For the CSU, the proposal includes a $75 million budget reduction, also to be restored in 2025-2026.

Both systems would also see reduced annual budget increases. In 2022, UC and the CSU agreed to a multiyear compact with Newsom. It would give the systems 5% budget increases annually over five years, given they work toward certain shared goals, including making college more affordable, increasing enrollment of California residents, and improving graduation rates.

In January, Newsom proposed that UC and the CSU would defer their 5% budget increase to the following year, leading to a 10% increase in 2025-2026. The updated plan outlines a mere 2% ongoing state funding increase in 2025-2026.

The 10% increase would mean over $1 billion in funding to the university systems, according to the Legislative Analyst's Office. A modest 2% increase would amount to approximately $200 million, as reported by CalMatters.

In a statement, CSU Chancellor Mildred García said the system was deeply concerned about what the proposal means to our students and 23 universities.

As the institution that educates the evolving workforce of California, this budget places us in a position of making difficult decisions, she said.

In contrast, California Community Colleges were largely spared from significant cuts in the May revision of the budget.

We are grateful to Gov. Newsom and his administration for maintaining our core funding during a difficult budget year, California Community Colleges Chancellor Sonya Christian said in a statement.

Christian further added that the allocated funds would support critical workforce training initiatives, including helping community college nursing programs, expanding avenues for students to earn academic credit through prior learning, and aiding low-income workers looking to transition to new career paths to help ease income disparities.