DREAM Act could cost more than previously estimated, according to report

A new report released by California’s bipartisan financial analyst predicts that the state DREAM Act will cost about $25 million more than previously estimated and could decrease the funding available for resident students currently seeking aid.

The state Legislative Analyst’s Office report released Wednesday states that resident students seeking state financial aid could receive less because of the funding that will be allotted to students newly eligible under the act. The report projects the act’s cost to total $65 million annually once fully implemented, higher than the estimated annual cost of $40 million calculated by the state Senate Appropriations Committee earlier this year.

The cost of the act will rise annually until 2015-16, when the cost is then expected to rise significantly slower, according to Judy Heiman, a principal analyst at the office.

The cost of Cal Grants for students newly eligible under the act is also predicted to increase from the $13 million estimated in the committee’s bill analysis to $50 million by 2016-17, according to the report.

The bill analysis introduced on the state Assembly floor before the August vote did not include a rising cost estimate for increasing numbers of students newly eligible under the act, although it did stipulate that rising costs were likely due to increased AB 540 student participation in higher education.

Heiman said the information in the bill analysis only included the first-year implementation costs of the bill, despite the analysis’s indication that the costs are annual and ongoing.

“(The new report) takes into consideration the cumulative costs,” she said. “Each year, you get another crop of high school grads who are eligible for four years of Cal Grants.”

The cost of Cal Grants will increase by about $15 million every year from the act’s implementation in January 2012 until 2016, according to Heiman. To generate the estimate, she said analysts looked at the ratio of renewals to new awards for existing Cal Grants and made an assumption that some of those ratios would be similar for undocumented students pursuing a college education.

If the number of awards to resident students is not affected by students newly eligible under the act, the state will either have to award smaller institutional aid awards to resident students or seek additional funding from sources other than the state, according to the report.

“If you’re gonna keep the same number of awards and add the students who qualify for this new benefit, then everyone is going to have to get a little less,” Heiman said. “You’re just spreading the same pot of money thinner.”Read the full report below:

Damian Ortellado covers higher education.