OFFICE OF FISCAL ANALYSIS

Legislative Office Building, Room 5200

Hartford, CT 06106 (860) 240-0200

http://www.cga.ct.gov/ofa

sHB-5371

AN ACT ESTABLISHING THE FREE 2 START SCHOLARSHIP PROGRAM.


OFA Fiscal Note

State Impact:

Agency Affected

Fund-Effect

FY 19 $

FY 20 $

Board of Regents for Higher Education

GF - Cost

5.0 million

Less than 11.6 million

Community Colleges

Tuition - Revenue Gain

655,000

1.7 million

State Universities

Tuition - Revenue Loss

Up to 1.0 million

Up to 1.1 million

Higher Ed., Off.

GF - Potential Cost

Up to 50,000

None

Note: GF=General Fund

Municipal Impact: None

Explanation

The bill appropriates $5.0 million in FY 19 to the Board of Regents for Higher Education to administer a new need-based community college scholarship program, Free 2 Start. The scholarship's cost in FY 20 is expected to be less than $11.6 million. The scholarship will result in additional revenue to the community colleges and a revenue loss to the state universities.

Scholarship costs. The bill limits Free 2 Start funding to $5 million in FY 19. It is estimated the scholarship will require less than $6.9 million in FY 19, and less than $11.6 million in FY 20. The bill specifies that if scholarship distributions would otherwise exceed the appropriation, the Board of Regents will prioritize allocations as it determines. This estimate is based on several factors described below.

(1) The number of full-time first-time for-credit freshmen meeting the scholarship's income limit (roughly, federal Pell Grant eligibility) at the community colleges is projected to be 3,135 freshmen in FY 19 and 3,219 in FY 20. This estimate includes an increase of five percent from FY 18 projected to FY 19, and an increase of ten percent from FY 18 projected to FY 20. These increases are included due to the research that an enrollment increase of at least ten percent is likely when a statewide need-based scholarship covering tuition and fees begins.

(2) The scholarship in FY 19 is available only to qualifying freshmen students, but thereafter is available for renewal in the sophomore year. Freshman-to-sophomore year retention for students who qualify for the scholarship is estimated to be 56 percent, based on recent retention rates for a group of similar Connecticut community college students. These factors result in 1,768 sophomores eligible for and receiving the scholarship in FY 20.

(3) The estimate relies on the most recent available Pell Grant distribution data for community college students nationwide to approximate the Pell Grant awards of Free 2 Start eligible students, and subtracts those Pell Grant awards from projected FY 19 and FY 20 community college tuition and fees to determine maximum Free 2 Start costs excluding Willis scholarship dollars (see below) or institutional aid. Students with Pell grant awards that come within $500 of or exceed tuition and fees, will have Free 2 Start scholarships of $500, which is included in the estimate.

(4) The total amount of qualifying students' gap between: (a) tuition plus fees, and (b) Pell grant dollars, is reduced by approximately half the estimated amount of state-provided Roberta Willis need-based scholarship dollars to full-time community college students.1 Willis scholarship dollars are estimated to total $1.5 million to these Free 2 Start qualifying students (freshmen only) in FY 19, and $2.3 million in FY 20. To the extent that Willis scholarship dollars to the community colleges increase or decrease in either fiscal year, the cost of the scholarship will decrease or increase (respectively) beyond the estimate.

To the extent that Free 2 Start participants receive institutional grants, the Free 2 Start scholarship costs will be further reduced. For context, in FY 17, the community colleges spent approximately $15.2 million on institutional aid for full- and part-time students with an expected family contribution above zero. Financial aid package information that would allow institutional grants to be appropriately deducted from scholarship costs was unavailable.

Tuition revenue impacts. The increase in community college students is anticipated to generate additional tuition revenue for that constituent unit, totaling approximately $655,000 in FY 19 and $1.7 million in FY 20. This figure includes tuition revenue from all sources.

A portion of the revenue gain to the community colleges will be experienced by the state universities as a revenue loss, based on other states' experiences. The level of state universities' revenue loss in Connecticut is not anticipated to reach that in other states because the Free 2 Start scholarship will have fewer potential qualifying students, due to the income limit. At most, the state universities' tuition and fees revenue loss could be estimated at $1.0 million in FY 19 and $1.1 million in FY 20, assuming: (1) 20 percent of the new community college enrollments would have otherwise attended a state university, the upper limit in other states; and (2) state university tuition and fees rise 3.9% annually.

To the extent that: (1) qualifying students transfer to a Connecticut community college, or (2) qualifying students attend full-time in the summer, scholarship costs will increase beyond the estimate.

New scholarship implementation plan. Finally, to the extent that a private consultant is sought, the bill's provision requiring the Planning Commission for Higher Education to develop an implementation plan for a different type of scholarship program may result in a cost within the Office of Higher Education of up to $50,000 in FY 19.

The Out Years

The annualized ongoing fiscal impact identified above would continue into the future subject to inflation in constituent unit tuition and fees, changes in the number of eligible students, and qualifying students' decisions on whether to attend a community college instead of another type of state or private institution. Community college tuition and fees are expected to increase 2.5 percent at the community colleges between FY 19 and FY 20, which is included in this estimate's calculations.

Over the longer-term, based on other states' experiences with need-based scholarships, it is likely scholarship costs would rise considerably as: (1) tuition and fees increase, (2) more qualifying students choose to attend a constituent unit college or university to save money, and (3) more students are aware of the scholarship. For example, the Oregon Promise scholarship cost approximately $12 million in its first year (FY 17), which was $2 million above projections, and is anticipated to cost approximately $20 million annually in the program's second and third years.

Sources:

"2015-2016 Federal Pell Grant Program End-of-Year Report," Table 20A, U.S. Dept. of Ed.

 

"Oregon State Grants: Oregon Opportunity Grant and Oregon Promise," Juan Baez-Arevalo, Feb. 20, 2017 presentation.

 

"Senate Bill 81 Legislative Report: The First Term of the Oregon Promise," Higher Ed. Coordinating Commission, December 2016.

 

"Tennessee Promise Annual Report 2017," Tenn. Higher Ed. Commission & Tenn. Student Assistance Corp.

 

Perna, Laura, "Understanding College Promise Programs," June 2016, www.collegepromise.org.

1 About half of the Willis scholarship dollars are excluded because approximately half of Free 2 Start qualifying students will have $500 Free 2 Start scholarships. These students' costs are already accounted for in the estimate (see (3) above) and therefore Willis dollars they receive should not be included in this step.