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Anticipating cuts to the program, the California Student Aid Commission, which is responsible for distributing Cal Grants, recommended several options for lawmakers to consider. Reporting at the time listed the University of Phoenix among the institutions that would lose access to Cal Grants under new default-rate based restrictions, a result that would have been disastrous for the school.
But the Apollo Group—and the rest of the private college industry—fought back with an intense lobbying campaign. According to state records, the Apollo Group spent a total of $150,040 on lobbying in California from January 2011 through the end of March 2012. The company lobbied on Cal Grants and related bills throughout that time period.
The Apollo Group also spent heavily on electoral contributions, donating $113,000 to state-level politicians in California throughout 2011. The vast majority—$91,000—went to the California Democratic Party, whose members dominate both houses of the state legislature.
Rauzon says that by aggressively lobbying, the University of Phoenix is standing up for its students. "In California, we've got 120 legislators, we've got the Student Aid Commission, we've got the governor, and we're going to try to reach all of them in as many different ways as we can within the law of political activity, and argue heavily that you shouldn't cut University of Phoenix students out."
Those efforts paid off. After intense negotiations, California lawmakers tweaked the regulations on the Cal Grant program, raising the default-rate threshold—damaging some for-profit colleges, but narrowly sparing the University of Phoenix.
But now the school is battling the biggest threat yet to its Cal Grant eligibility: Gov. Jerry Brown's revised budget proposal released in May.
Brown is perhaps an unlikely foe for the University of Phoenix. The company donated $25,000 to his 2010 gubernatorial campaign, and in December, he appointed a longtime Apollo Group executive to the California Student Aid Commission.
But confronted with a $16 billion budget shortfall, Brown proposed brutal spending cuts across the board, including restricting Cal Grant institutional eligibility to schools with a three-year cohort default rate below 15 percent. It was a drastic change from his January budget recommendation, which proposed maintaining the current 24.6 percent threshold.
The University of Phoenix's default rate is moving in the opposite direction. The company disclosed that the draft three-year rate for the 2009 cohort, to be finalized in September, was 26.7 percent, a substantial increase from the 2008's 21.1 percent.
Assembly Democrats have released a budget plan that recommends approving a modified version of the governor's proposal on Cal Grant institutional eligibility. The plan includes "placeholder" language setting the cohort default rate limit at 15.5 percent. The following day, a state Senate committee approved the 15.5 threshold.
As the clock ticks down past state lawmakers' budget deadline, the Apollo Group is engaged in an all-out lobbying effort against the proposal.