After three years of disruption, California and its higher education institutions are ready to turn the page on the COVID-19 pandemic. But learning loss in the K–12 system, enrollment concerns across segments, widening equity gaps, and a potential recession may impede the state’s efforts to reach Governor Newsom’s ambitious 70% postsecondary attainment goal by 2030.

In 2022, California made historic investments and policy changes to improve equity and streamline the educational pipeline. The University of California (UC) and California State University (CSU) systems eliminated or made optional standardized admissions tests. Informed by our research, policymakers strengthened laws to reform developmental education in community colleges. The governor also developed compacts with the UC and CSU that will provide 5% funding increases for the next five years if the systems meet equity, enrollment, completion, and affordability targets. Governor Newsom’s 2023–24 budget proposes to maintain these funding increases in the coming year.

As the state continues to address lingering issues from the pandemic, here are important changes to watch for in higher education in 2023:

• California may take targeted steps to shrink expanding equity gaps.
  With higher completion rates in courses leading to transfer, improvements in transfer rates overall, and UC and CSU four-year graduation rates reaching all-time highs, recent reforms were showing signs of success before the pandemic. Unfortunately, the pandemic increased challenges for low-income students and students of color, and many delayed their studies or dropped out of college.
  Policy changes and budget priorities that encourage UC, CSU, and the community colleges to address equity gaps in access and completion are poised to help students regain momentum.
• Declining enrollment may lead to greater coordination.
  Enrollment of transfer-intending students at community colleges declined by about 20% over the past two years, a decline that is already affecting the state’s four-year colleges. With funding to California public higher education dependent on sustained enrollment growth, competition for students is likely.
  To ensure that students benefit from such competition for enrollment, the state must incentivize coordination and equity through its policies, programs, and funding structures. Promising steps include a new dual admissions program that guarantees admission to a UC or CSU if a high school student successfully completes courses at a designated community college, and dual enrollment, which allows students to take college courses and earn college credit while in high school.  The College and Career Access Pathway (CCAP) dual enrollment program is one great example of this. The program is helping to boost equity in college access by expanding dual enrollment opportunities for students who had long been underrepresented in dual enrollment and higher education more broadly—the funding model is considered a win-win for K–12 and community colleges.
• A new financial aid policy could provide more student aid and improve college access.
  In the 2022–23 school year California school districts will be required to show that all of their graduating high school class completes the Federal Application for Federal Student Aid (FAFSA), California Dream Act Application (CADAA), or an opt-out form. Only about half of California high school students complete the FAFSA or CADAA, leaving an estimated $560 million in annual federal aid on the table for California.
  Universal FAFSA/CADAA completion could provide low-income students with federal grant aid and enable access to state financial aid programs like Cal Grants. Other states like Louisiana and Texas have implemented a similar program, with significant increases in college-going rates. However, universal FAFSA/CADAA will demand intensive support services and outreach to students and their parents.
• Policymakers and system leaders may need to prepare for revenue declines.
  The Legislative Analyst’s Office has predicted a $24 billion deficit for the coming year in their most recent Fiscal Outlook forecast, similar to the shortfall specified in the proposed 2023–24 budget. UC and CSU funding tends to be particularly vulnerable to cuts during recessions due to a lack of constitutional protections.
  In the past, UC and CSU could raise tuition and enroll out-of-state students to mitigate declines in state funding. However, changes to the tuition policy at UC and a limit on the share of nonresident students present challenges to this approach in the future. If the state faces a prolonged recession, the governor’s compact with UC and CSU to provide a five-year, 5% annual increase may be difficult to sustain.

The coming year will test California’s higher education institutions as they seek to regain their pre-pandemic momentum in improving student outcomes. However, the state’s commitment to past investments, even during its recent revenue decline, provides hope.