Bill would cut tuition by closing corporate loophole

Tuition for the University of California system is three times what it was a decade ago.

Democratic lawmakers are offering a way to help California’s middle class families cope with soaring college tuition: close a corporate tax loophole and use the money for scholarships.

But the “Middle-Class Scholarship Act,” which receives its first committee hearing this week, already is facing several obstacles.

Five out-of-state corporations are lobbying against it, and Republican lawmakers are promising to block Democrats from reaching the two-thirds majority vote they need in the Legislature.

AB1500 and AB1501, by Assembly Speaker John Perez, would reduce tuition by more than half for families whose annual household income exceeds the cap for getting a free ride at California’s public universities ($70,000 a year for CSU and $80,000 for UC) but is less than $150,000.

“This is not just an issue that impacts students; it’s not even just an issue that affects parents who have children in college. This is a broader question about opportunity in the state,” Perez, D-Los Angeles, said in a telephone interview.

Tuition for the University of California and California State University systems is three times what it was a decade ago.

Total for tuition and fees for undergraduates at the 10 University of California campuses is expected to be $13,000 next year. The Perez plan would save those students at least $8,000 a year.

The plan would save at least $4,000 annually for students at the 23 California State University campuses, where tuition and fees will be $7,000 next year.

Community colleges, where fees generally are less than $1,500 a year, would receive $150 million to reduce costs to students.

The act is expected to benefit about 200,000 college students and could take effect as soon as this fall if it passes the Legislature and is signed by the governor. Lawmakers have their first chance to weigh in Tuesday, when one of the two bills comes before the Assembly Higher Education Committee.

The legislation’s divisiveness stems from how it funds the scholarships.

To do so, it eliminates a $1 billion corporate tax break the Legislature approved in 2009 as a way to get a handful of Republican lawmakers to vote for the annual budget.

The deal, constructed during the height of the state’s budget crisis, allowed companies operating in multiple states to choose the cheaper of two formulas for calculating their tax liability in California. They can use an option that considers sales, property and payroll, or a “single-sales” formula based on product sales in California.

In the years since the deal, Democrats have sought to force corporations to use only the single sales factor, a change the nonpartisan Legislative Analyst’s Office has endorsed. At least 11 other states, including Texas and New York, require that corporations calculate their tax obligations this way, according to the Federation of Tax Administrators.