Assembly Discusses Student Housing in Budget Subcommittee

Today, Assembly Budget Subcommittee No. 2 on Education Finance had a robust discussion about the SB 169 Higher Education Student Housing Grant Program. The hearing included testimony from student groups, each of the systems (UC, CSU, and California Community Colleges), the Department of Finance (DOF), and the Legislative Analyst’s Office (LAO). Legislators examined the recommendations made by DOF regarding which projects should receive grant funding in the first cycle. The 2021 Budget Act provided $500 million (one-time General Fund) for the program’s first year of funding. The Governor proposes the second installment of $750 million for FY 2022-23. DOF recommended to fund five community college projects (including one intersegmental project with CSU) worth $214 million from the 2021 allocation, as well as to provide $18 million for 75 planning grant applications.

The LAO stated that DOF’s approach is reasonable and would address affordability, but they provided other options for prioritizing the state’s investment. LAO said that the program includes risks, such as construction cost overruns, and identified recommendations to address contingencies, scope changes, and reporting requirements.

Lizette Navarette (Chancellor’s Office) requested funding for all of the eligible community college projects, including 7 additional projects that were deemed eligible but not recommended for funding in the first round by DOF.

Chair Assembly Member McCarty reflected on the decision to offer 100% construction funding to student housing projects, and he asked each of the segments if they would prefer a model that included a local match, so that more projects across the state could be funded. Dr. Navarette said that if affordability is the focus, then the approach of providing 100% construction funding is preferable. She said it should be paired with a long-term strategy to address housing needs, such as a revolving loan fund program with no-interest or low-interest loans. LAO clarified that while the statute does not specify a state/local match requirement for this program, CSU is planning a 35% local match; 4 of the 8 projects recommended for funding by DOF have a local match, and 4 are 100% state funded.

The subcommittee members discussed the options for prioritizing grant funding. Assembly Member Ting (Chair, Assembly Budget Committee) said that the evaluation criteria (cost of construction per bed, and how far proposed rents are below the statutory maximum) were not known by applicants in advance. DOF said that they utilized these evaluation criteria because they are metrics consistent across applications. Assembly Member Ting indicated that the criteria do not take into account regional construction cost differences, whether projects are shovel ready, or other priorities in SB 169. He also asked whether finite resources should be used for other campus capital outlay priorities beyond student housing. Two of the subcommittee members questions why projects in their region were not included on DOF’s list of recommendations.

Assembly Member O’Donnell asked about the use of Public-Private Partnerships (P3s) for projects funded by SB 169 grant funds, which is permitted for CCCs but not UC or CSU. Assembly Member McCarty indicated that he is wary of P3s because “Wall Street” makes money on the backs of students. Assembly Member O’Donnell pushed back on that characterization, saying that if done correctly, P3s can work well.

During public comment, CCFC Legislative Advocate Rebekah Cearley said that the Legislature does not need to pick winners and losers in the SB 169 grant program this year. Instead, they can fund all 12 of the projects deemed eligible by DOF, which would require an additional $332 million investment or advancing funds from the proposed FY 22-23 allocation. She stated that delay harms viable projects, as the resulting cost escalation means that fewer beds will be built by the state’s investment. Representatives from a number of colleges testified in support of funding all 12 of the eligible community college projects.

Click here for the subcommittee hearing agenda and background information.

Rebekah Cearley
CCFC Legislative Advocate