The California Legislature is aiming to limit nonresident student enrollment at the University of California (UC) to 18% at each campus. This could result in more seats for Californians, but—because nonresidents have become an increasingly important source of revenue—there are important financial considerations for the system.

Over the past 15 years, UC’s enrollment of nonresident students—who come from other states and countries—has grown rapidly as a share of the undergraduate population. To make up for state funding shortfalls during the Great Recession, the UC system increased tuition and began enrolling more nonresident students. In 2006–07, nonresident students represented just 5% of UC undergraduates, compared to 17% in 2019–20.

Nonresident students pay the standard in-state tuition and fees (currently $14,100) plus supplemental tuition (currently $29,000), making their total tuition costs about three times that of a resident student. As nonresident enrollment levels and tuition have grown, this funding source has come to account for about a quarter of the core funding for UC.

In 2017, the UC Regents limited nonresident enrollment to 18% for the systemwide average. But the three most in-demand campuses—Berkeley, Los Angeles, and San Diego—were allowed to maintain their higher rates of nonresident enrollment. In fall 2020, more than one in five undergraduates at these campuses were nonresidents. These campuses are in high demand among Californians as well: each receives over 60,000 applications from state residents and admits a third or less of these applicants.

The state budget trailer bill that would limit nonresident enrollment also proposes funding more enrollment slots for California residents. However, this funding may not replace all of the lost revenue to UC that would come from lowering nonresident enrollment.

Limiting nonresident enrollment would allow for more Californians to attend the most in-demand campuses, improving the ability of more high school graduates to climb the economic ladder. However, a hard cap on nonresidents could limit UC’s ability to generate revenue in the event of an economic downturn. Moreover, the UC Regents just passed a tuition policy that limits its ability to raise tuition for current students and future cohorts, leaving the system with even fewer financial options during a recession.

With substantial federal stimulus funding and a $75 billion state budget surplus, California has the opportunity to reimagine the future of its world-renowned higher education institutions. Planning for the next downturn will be essential. Policymakers and UC leadership should work together to ensure that the state and UC have the necessary reserve funding to maintain resident enrollment levels during a recession and prevent a reduction in access or quality for Californians at UC.