Legislative reform will save student housing at Cerritos College, 18 other campuses
by Mikhail Zinstein , calmatters
Cerritos College in Los Angeles County was about to cancel plans to build affordable dorms for 396 students at rents for a little more than $700 a month.
Another community college, Sierra College in Rocklin, was planning to abandon construction of homes for 354 students at rents of $450 a month.
Now two bills are making their way through the Legislature that would allow those projects to continue and reverse the June budget deal that left community colleges nervous.
Although Cerritos, Sierra and 17 other community colleges in California were promised $1.1 billion in state cash to build affordable student housing, state lawmakers and Governor Gavin Newsom in June blocked California’s then-$31.5 billion budget. That money was spent to bridge the budget shortfall.
Instead, those community colleges were asked to borrow that money using a financial instrument called revenue bonds, in which the state promised to cover loan payments for 30 years. But without a solid guarantee that the state would supply the campuses with $78.5 million annually to cover their loan payments, at least two colleges — Cerritos and Sierra — would have backed out of their plans.
Community colleges’ withdrawal from the dorm program would have weakened a unique state effort to house nearly 6,000 community college students in affordable student housing and thousands more at the state’s public universities — at a time when 20% of community college students are homeless. Experience being.
Both bills would allow community colleges to keep money they’ve already received and return the cash by the beginning of summer next year. With those funds in place, the bill package says the state intends to find funding before that summer deadline so that community colleges don’t have to plow through this quagmire. Colleges love fixes.
The presidents of Cerritos College and Sierra College, Jose Fierro and Willie Duncan, both told CalMatters that they would not have built affordable student housing projects without this change. The bills are expected to pass the Legislature and Newsom will likely sign them.
‘It wasn’t what we applied for’
“The changes to the June budget were not what we applied for and it was not the kind of program that was put forward to us,” Duncan said. He said he would not have applied for the program, initially, if it had required campuses to raise revenue.There was an additional complication in Duncan’s case: Sierra College was one of several campuses that received a share of nearly $500 million to begin construction last year. The roadmap revealed in the 2022 budget deal says about $500 million more would be given to other community colleges in 2023. The change in June upended those plans.
Duncan said, “I have to tell the state that not only can I not continue this project, but I have spent about $7 million so far of the money you gave me and I don’t have the money to pay it back.” There is no means.” Said.
The dilemma facing colleges looks like this: Imagine a rich relative who promises to give you cash to buy a house, and then at the last minute your family warbucks says, just kidding, “Borrow the money. Take it and I’ll cover your mortgage payment.”
This sounds fine in theory, unless you struggle to qualify for a loan or a relative decides not to pay for a year.
The June decision, while saving the budget for California’s treasury, caused concern for California community college leaders and initiated a two-month effort to craft a legislative solution.
“I’m working really hard on this,” said Senator John Laird, a Democrat from Santa Cruz who has fought to preserve the state’s affordable student housing program since its inception in 2021.
“It’s only in the finance world where you can take a billion dollars out of the budget and say it’s not a cut,” he said in an interview with CalMatters. Like some affected college leaders, the June change took him by surprise. As recently as May, Newsom was still promising colleges upfront cash, mostly in line with the plan in 2022.
“It was difficult to juggle two bills of reform in two months,” said Laird, who worked with community college presidents, the community college system’s chancellor’s office, legislative leaders and Newsom’s administration to reach a solution.
Not all affected premises may have moved out of their housing projects. While Lake Tahoe Community College’s board had concerns ranging from upfront cash to bond issuance, “they trusted the state and were still willing to move forward because they knew it was the right thing to do for our students,” the college said. said Laura Metune, senior director of government relations. “But state borrowing is a better option for college.”
Compton College President Keith Curry also would not have given up on his college’s project of 250 dorm beds. “My track record as a college president is that we figure out the things that are important to our students,” he told CalMatters.
How will both bills work?
The legislative reform would reverse the June budget deal, which called for colleges receiving grants to be reimbursed that money from the 2022 Budget Act Now, Explained to Laird’s staff, Instead, both bills are asking those colleges to return the cash to the state by June 29, 2024, or shortly thereafter. Doing so allows those colleges to move forward with their construction plans and avoid delays, Laird told CalMatters, which can be costly in construction.
Both bills also promise that the state will issue a bond itself or pursue some other financing option to supply community colleges with the money they need to continue their construction projects.
When the state plans to find new revenue remains an unresolved question. The bill’s language sets a deadline of late June or July of next year. But Laird is urging the governor’s administration to settle the matter by January at the earliest.
“It would be nice to have some certainty and put everyone at ease,” Laird said at a Senate Budget Committee hearing last week.
The three community colleges selected to build affordable housing this year were initially going to split the cost with the University of California. With this budget determination UC will pick up the tab through its debt-financing program and cover the state system’s annual debt payments.
Both the UC and California State University systems were promised cash up front to build student housing and then asked to issue bonds in exchange. However, they have a long history of operating student dormitories and generating income from them, so they can manage the new bond arrangement.
Why was this a financial risk?
For colleges, the problems were manifold. The state budget approves expenditure plans on a year-by-year basis. This means that a program funded for one year may be cut the next year if there is an economic recession. Colleges fear that the annual loan payments the state is promising to make for campus bonds could disappear for several or more years, Chris Ferguson, manager of the California Department of Finance, wrote in an email to CalMatters.
Without a 30-year guarantee of state money flowing into colleges and a decline in state support, campuses would have to cut their operating budgets to pay off the debt originally imposed on them, which could result in cutting classes. and other student programs, Duncan said.
He added, “And then I probably wouldn’t be able to keep housing affordable anymore.” “I would have had to raise the rent.”
Some community colleges were concerned that financial companies buying the bonds would view the schools as risky bets. Without someone buying the bonds, a college would not be able to access the money needed to build a new dormitory.
Since rents had to be reduced, community colleges could not rely on additional revenue to finance their bonds. And without a state guarantee of money coming in annually, there will be no financial aid that colleges can point to as a way to allay the concerns of potential bond buyers. Nor do California’s community colleges, with a few exceptions, manage student housing, so they cannot rely on revenue from existing dormitories.
“With the bond passage, we will have to change the scope of the project to be able to generate revenue,” Fierro said. He said, fare for students will no longer be affordable.
More affordable housing for students is coming
Sierra College’s dorm project will consist of three-bedroom apartments that will house two students in each bedroom. The apartments will include two bathrooms, a living room and a kitchen, Duncan said.
The hostel building will also have computer laboratories and study space where campus teachers can help students. The college expects the homes to be ready for occupancy by 2025, which will be adjacent to the campus food service area and library. Duncan said the campus has raised more than $1 million, including through local businesses to waive rent for some students experiencing homelessness.
Cerritos College’s four-story dormitory will be on the campus and will include 32 single-occupancy studios and a mix of two- and four-bedroom apartments, each with two bathrooms. According to the campus plan, two-bedroom apartments will house two students per bedroom.
Without legislative reform, these homes would not exist.
“You have to reflect the sense of urgency that exists among those making decisions and that was my job so people don’t get turned away,” Laird said.
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