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Donations to state fund for Cal Grant B awards minimal over past months

By Emily Liu

April 14, 2015 1:31 a.m.

Donations to a state fund for Cal Grant B awards have come in slowly, with just about $6.3 million collected out of a $500 million annual cap, according to the state treasurer’s office.

In the upcoming May legislative session, the state will discuss plans to extend the College Access Tax Credit Fund by a year, support greater outreach for the program and expand tax credits to insurance companies that donate to the fund.

Created in September, the fund collects donations from individuals and corporations for Cal Grant B competitive awards, which cover textbooks and other living expenses for low-income students. The fund, which was created under Senate Bills 174 and 789, is currently set to accept donations until 2017.

In the 2013-2014 school year, 1,500 University of California students received Cal Grant B competitive awards, totaling about $15.5 million, according to data from the California Student Aid Commission.

According to research from the Institute for College Access and Success, Cal Grant B awards were only worth about $1,437 on average per student in the 2012-2013 school year, when they would have been worth about $5,900 if the grants had kept pace with inflation.

The California Student Aid Commission aims to raise about $560 million in donations by 2017, which would increase the award amount to about $3,500 per student in the 2015-2016 year and help about 196,000 recipients.

Currently, the $6 million in funds so far will raise average Cal Grant B awards by about $10 per student, according to estimates by the Legislative Analyst’s Office.

Patti Colston, spokeswoman for the California Student Aid Commission, which administers state financial aid, said she thinks the main reason for the small amount collected so far is the short donation period. As a result, the Legislature is considering extending the fund for another year until 2018, Colston added.

Eligible donors who submit an application to the California Educational Facilities Authority are able to claim state tax credits – 60 percent for the 2014 taxable year, 55 percent for 2015 and 50 percent for 2016 – for the amount they donated, said Jacob Roper, spokesman for the state treasurer.

Some donors can also claim federal tax deductions because donating to the fund is considered a charitable donation. This means that donors may be able to get back up to 95 percent of their donations through state tax credits and federal tax deductions.

“In a way, it’s a cross-subsidy from the Fed to the state for higher education,” said Patrick Murphy, a higher education analyst at the nonpartisan think tank Public Policy Institute of California.

The donations are first transferred to the state general fund to cover the costs of the tax credits, so the state tax revenue is not affected, said Paul Golaszewski, a higher education analyst at the Legislative Analyst’s Office, a nonpartisan policy advisory office for the state Legislature.

After tax credits are awarded, the remaining funds are then used to cover administrative costs and increase Cal Grant B competitive awards, Golaszewski said.

“The fund is a way for the state to increase financial aid without using general funds by taking advantage of this tax mechanism,” Golaszewski said. “It’s not necessarily going to be the primary way to fund financial aid, but since the state could do this without compromising on general funds then it seems like a no-lose situation.”

Unlike Cal Grant entitlement awards, which automatically cover full tuition, the Cal Grant competitive awards have failed to keep up with inflation, Colston said.

Cal Grant Entitlement awards are guaranteed for all eligible students who apply. Students who are not eligible for entitlement awards may apply for competitive awards, but these are not guaranteed. In 2013-2014, about 44 percent of more than 484,800 qualified applicants were offered a Cal Grant award.

After the College Access Tax Credit Fund went into effect in September, donations were collected from Nov. 3 to Jan. 2, when the tax credit application period closed, according to the state treasurer. The majority of the donations to the fund so far have come from individuals, not corporations, Colston said.

Unlike other tax credit programs, the fund has a $500 million annual cap in credits that can be given out. In the 2014 taxable year, only about $3.75 million in credits of a possible $500 million were allocated.

Outreach efforts for the new program have been limited as the laws did not allocate outreach funding for the program, Colston said. This is another issue being examined in the upcoming legislative session, she added.

Analysts said they expect donations to increase in the future as more people find out about the fund.

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Emily Liu
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