BILL ANALYSIS
AB 48
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Date of Hearing: May 20, 2009
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
AB 48 (Portantino and Niello) - As Amended: April 2, 2009
Policy Committee: Higher
EducationVote: 8-0
Business and Professions 10-0
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill reestablishes, until January 1, 2016, state regulation
of private postsecondary schools in California, with specified
exemptions, by a bureau within the Department of Consumer
Affairs (DCA).
This bill enacts the California Private Postsecondary Education
Act of 2009 (Act), and establishes the Bureau for Private
Postsecondary Education (Bureau) with specified functions,
including adopting relevant regulations, approving institutions
to operate in California, maintaining a website of information
for consumers, providing outreach to students, conducting
on-site inspections of institutions, developing an enforcement
program, and providing annual reports to the Legislature and
governor.
FISCAL EFFECT
1)The DCA's preliminary estimate indicates that the new bureau
will require 31.5 positions in 2009-10, at a cost of $3.2
million, and 63 positions in 2010-11 and thereafter at cost of
$8 million. The department expects to have a more detailed
cost estimate in the near future. These costs will be
supported by fees paid by the regulated schools, though
start-up costs will likely come from a loan from another DCA
bureau.
2)One-time appropriation of $580,000 from the Private
Postsecondary and Vocational Education Administration Fund to
the new Bureau.
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3)Absorbable costs to the Legislative Analyst's Office for an
evaluation of the Act.
SUMMARY CONTINUED
This bill also:
1)Provides that any statutory or regulatory reference to the
Private Postsecondary and Vocational Education Reform Act
(Former Act) or former Bureau for Private Postsecondary and
Vocational Education (BPPVE) shall be construed as referring
to the Act and the Bureau.
2)Provides for a transition to the provisions of the Act,
including:
a) Stipulating that any institution approved to operate by
the former Bureau on June 30, 2007, shall maintain that
approval for three years after the expiration date of the
approval.
b) Requiring the Bureau, by February 1, 2010, to adopt
emergency regulations conforming to the provisions of the
Act, including repealing provisions no longer relevant.
c) Continuing the Student Tuition Recovery Fund (STRF) and
providing for processing of STRF claims pending and
received prior to July 1, 2007, or any claims received
between July 1, 2007, and December 31, 2009.
d) Establishing that any matter, except a STRF claim,
submitted to the Former Bureau prior to July 1, 2007, shall
remain pending, and with respect to deadlines, no time
shall be deemed elapsed from July 1, 2007 through January
1, 2010.
e) Providing that student complaints received from July 1,
2007 through December 31, 2008, shall continue to be duly
recorded and investigated by the Bureau.
f) Providing that, for any claim or cause of action that
arose prior to June 30, 2007, notwithstanding the
inoperative status or repeal of the Former Act, final
judgments and/or legal remedies available under the Former
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Act will be continued.
3)Exempts from the requirements of the Act and from Bureau
oversight those institutions:
a) Offering solely vocational or recreational educational
programs.
b) Offering programs sponsored by trade, business,
professional, or fraternal organizations solely for that
organization's members.
c) Operated by the federal or state government or their
subdivisions.
d) Offering test preparation for examination required for
admission to postsecondary institutions and continuing
education or license and examination preparation where the
institution or program is certified or sponsored by a
government agency licensing persons in a particular field,
a state-recognized professional licensing body, or a trade,
business, or professional organization.
e) Owned, controlled, operated and maintained by a church
or religious organization and meeting several other
specified requirements.
f) Providing solely educational programs for total charges
of $2,500 or less, with no part of the charges paid by
state or federal student financial aid programs.
g) Offering solely educational programs in law leading to a
Juris Doctor, Master of Laws, Doctor of Jurisprudence
degree or similar degrees in law.
4)Provides the Bureau with specified duties, including requiring
the Bureau to:
a) Adopt regulations by January 1, 2010, in accordance with
the Administrative Procedures Act, as necessary to
implement the Act in accordance with existing law; develop
and implement an enforcement program to implement the Act,
including a plan for investigating complaints filed with
the Bureau; and develop a program to proactively identify
unlicensed institutions and take all appropriate legal
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action.
b) Maintain a website with specified information provided
by the institutions.
c) Conduct outreach to secondary and postsecondary school
students about how to make informed decisions when
selecting an institution.
d) Appoint an advisory committee consisting of
representatives of institutions, student representatives,
and employers who hire students.
5)Requires the Bureau, by January 1, 2011, to:
a) Establish minimum operating standards for institutions,
as specified.
b) Establish processes: whereby institutions can seek an
approval to operate and a renewal of that approval; that
the Bureau will follow in approving or denying an
application; and whereby an applicant whose application has
been denied may appeal. Approvals to operate shall be for
five years.
c) Establish a process whereby an institution that is
accredited may apply for and obtain approval to operate by
means of accreditation, and requires that the term of the
approval to operate coincide with the term of
accreditation, and that the institution comply with all
other applicable requirements of the Act.
6)Establishes specified fair business practices, including:
a) Allowing institutions, when offering courses with a term
of four months or less, to require payment of all tuition
and fees on the first day of instruction; prohibiting an
institution from requiring more than one term (up to four
months) of advance payment at a time until 50% of
coursework has been completed; providing exemptions from
the aforementioned requirements for the purposes of federal
and state financial aid payments; and allowing students,
under certain conditions, to choose to pay all fees and
tuition upon enrollment.
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b) Requiring that institutions providing private loan
funding ensure that a student is not obligated for
indebtedness that exceeds the total cost of the current
term of enrollment.
7)Stipulates that students shall enroll solely by signing an
enrollment agreement, and prescribes contents of the agreement
and specifies other materials to be provided to the student,
including a school catalog and a School Performance Fact
Sheet.
8)Establishes specified requirements for student cancellations,
withdrawals, and refunds.
9)Requires the Bureau to adopt regulations governing the
administration and maintenance of the STRF, continuously
appropriates STRF monies to the Bureau; and provides that the
STRF balance may not exceed $25 million.
10)Requires each institution to annually report to the Bureau
and to annually publish specified data, such as completion
rates and job placement rates, in its School Performance Fact
Sheet.
11)Establishes a series of as-yet-unspecified application and
renewal fees and annual fees for all institutions that will
vary according to an institution's annual revenues.
12)Establishes the processes and penalties regarding compliance
and enforcement of the Act, including:
a) Requiring the Bureau, when it has reason to believe that
an institution is out of compliance, to conduct an
investigation, and if the Bureau finds the institution has
violations, to take appropriate action.
b) Requiring the Bureau to perform announced and
unannounced inspections of institutions.
c) Requiring the Bureau to impose penalties, including
mandating a specified timetable for remedying
noncompliance, imposing fines, placing the institution on
probation, or suspending or revoking approval, as deemed
appropriate by the Bureau.
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d) Authorizing the Bureau, upon a finding that an
institution has committed a violation, to take specified
actions, including imposing an administrative fine of up to
$10,000.
e) Providing that the Bureau may bring an action for
equitable relief for violations of the Act.
f) Providing any individual who believes an institution has
violated the Act or subsequent regulations may file a
complaint with the Bureau and that the Bureau shall take
action to verify the complaint and may take appropriate
administrative enforcement action.
g) Providing that the Bureau may not subject any person to
a fine exceeding $50,000 for operating an institution
without Bureau approval.
13)Requires the Bureau to provide annual progress updates to the
Legislature, in the form of oversight hearings by the
committee(s) with jurisdiction, and requires the Legislative
Analyst's Office (LAO) to provide the Legislature and the
Governor by July 1, 2012, a comprehensive review on the extent
to which the Bureau has implemented the provisions of the Act,
and the appropriateness of the exemptions provided in the Act.
14)Appropriates $580,000 from the Private Postsecondary and
Vocational Education Administration Fund to the Bureau for the
purpose of funding five education administrator positions, and
provides that these positions shall be included in the annual
budget for the Bureau.
COMMENTS
1)Private Postsecondary Education in California . Approximately
1,500 private postsecondary institutions had been approved by
the Former Bureau to operate in California. This included
approximately 1,200 vocational training schools and 300 branch
satellites as well as 300 degree-granting institutions with an
estimated student enrollment of approximately 400,000. The
Former Bureau also registered approximately 700 private
institutions providing short-term career/seminar training,
continuing education, intensive English language programs, and
license exam preparation courses. The author intends for this
bill to reestablish state authority to regulate private
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postsecondary institutions and enforce the provisions of the
Act.
2)History . A thorough history of the bills, hearings, laws,
investigations and reports on the regulation of private
postsecondary education in California was contained in the
Senate Business and Professions Committee analysis of a
similar bill from the 2007-08 legislative session, (SB 823,
Perata), which detailed a 20-year troubled history, including
reports and hearings that found California's oversight to be
plagued with problems, lacking in leadership, governed by a
confusing and ineffective law that was difficult to interpret,
criticized in courts, and implemented by an entity with a poor
reputation and inadequate funding. The most recent and most
focused review of California's oversight was conducted by an
administration and operations monitor, who issued a report in
September 2005. The monitor summarized previous reviews and
concluded that, "Nearly all of the problems previously
identified continue to persist." The monitor summarized his
own review by stating, "Significant problems were identified
with nearly every significant component of the state's current
regulatory program."
3)Recent Legislative History . In 2006, SB 1473 (Figueroa), which
would have recast and reauthorized the Reform Act, was held on
the Senate Appropriations' Suspense file. AB 2810 (Liu) of
2006, which would have extended the June 30, 2007 date on
which the Reform Act became inoperative, was vetoed, with the
governor arguing that overall reform be accomplished in 2007.
The Reform Act and the BPPVE thus became inoperative on June
30th. AB 1525 (Cook), an urgency measure chaptered in July
2007, provided for a continuation of matters pending pursuant
to the Reform Act through January 2008, in anticipation of a
new regulatory scheme being enacted to take effect January
2008. A subsequent measure, SB 45 (Perata)/Chapter 635 of
2007, extended the provisions of AB 1525 until July 1, 2008.
Last year AB 823 (Perata), which would have reestablished
state regulation by a new bureau, similar to this bill, was
vetoed, with the governor arguing for a clearer bill to strike
what he considered the appropriate balance between protecting
students and being fair to schools.
4)Major Problems With the Former Act and BPPVE . Among the
problems cited by the independent monitor were the following:
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a) Fragmented Statutory Structure . The Former Act was
created by the concurrent enactment of two separate bills,
the Private Postsecondary and Vocational Reform Act (SB
190, Morgan) and the Maxine Waters School Reform and
Student Protection Act (AB 1420, Waters), but the
provisions of these bills were never fully reconciled. The
Act contained rules governing both degree and non-degree
granting institutions and separate articles with rules
specific to degree and non-degree institutions,
respectively. The Maxine Waters Act, which applied to some,
but not all, non-degree granting institutions, was inserted
as a separate article within the Reform Act.
b) The BPPVE always ran a yearly operating deficit, and
over time fully depleted a $5.3 million reserve that was
carried over from its predecessor, the Council for Private
and Postsecondary and Vocational Education.
c) Provisions of the Act regarding tuition recovery
required separate STRF accounts for degree and non-degree
institutions. This led to the non-degree account being
exhausted in 2003-04, after which the bureau paid claims
with degree-account funds without statutory authority.
d) The BPPVE never established a fully functional
enforcement program, rarely conducted field investigations
of complaints, never implemented a voluntary arbitration
program, rarely issued citations or assessed fines, never
placed an institution on probation, and did not review
verify or audit annual reports submitted by
institutions-25% of which were chronically delinquent in
being submitted.
e) The enforcement monitor was particularly critical of the
BPPVE's practice of "leveraging" its approval authority, in
lieu of initiating an enforcement action, to obtain
compliance from institutions in cases where staff believed
an institution was not in compliance with the Act, thus
essentially circumventing due process requirements.
f) In March 2005, the DCA completed a workload, staffing,
and fee study for the bureau that demonstrated the bureau's
revenues and costs were not aligned, but made no
recommendations to address the bureau's fiscal issues.
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5)AB 48 attempts to address these and other issues raised by the
monitor. The bill attempts to provide a clear and concise law
for the Bureau to administer and enforce as well as provide
annual reporting to the Legislature so the Bureau's progress
and performance can be monitored. It should be noted that,
while the bill outlines numerous specific student protections,
a majority of oversight and enforcement activities are left to
Bureau discretion and reliant upon Bureau adoption of
implementing regulations. Until those regulations are
implemented, it is difficult to know how well students will be
protected and how adequately institutions will be monitored.
In addition, the bill establishes a fee structure but has left
blank fee amounts. The author has indicated intent to place
fee amounts in statute and provide the Bureau with the
authority to adjust fee amounts through regulation if
necessary. The author indicates that he is working with DCA on
specific fee amounts to be amended into the bill.
6)Exemptions . A major challenge is deciding which institutions
need state oversight and which can be exempt, and specifically
whether it is appropriate to exempt institutions based on
their accreditation. Accreditation is a voluntary,
non-governmental peer review process utilized for the purpose
of determining academic quality of higher education
institutions and programs. Under federal law, USDE is required
to publish a list of recognized accrediting agencies deemed
reliable authorities on the quality of education or training
provided by their accredited institutions. Only those
institutions accredited by a USDE-recognized accrediting
organization are eligible to participate in the federal
student financial assistance programs. The USDE recognizes
both regional and national accrediting agencies.
At the time of its sunset, the Former Act provided a full
exemption for institutions accredited by the Western
Association of Schools and Colleges (WASC), one of six
regional accrediting agencies. The Former Act also partially
exempted non-WASC regionally accredited institutions from the
Bureau's approval process. (Last year's vetoed attempt at
establishing a new bureau, SB 823 (Perata), would have
exempted from regulation both WASC and non-WASC regionally
accredited institutions.) Currently, this bill allows
institutions accredited by a United State Department of
Education (USDE)-approved accrediting agency to be granted
approval to operate via their accreditation, but does not
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provide full exemptions for these institutions based on their
accreditation. A principal argument for not exempting
accredited institutions is that the Bureau's roles and
responsibilities are complementary to those of accrediting
agencies-the Bureau provides for operating standards and
student protections, while the accrediting agency generally
reviews educational program content. Additionally, accrediting
agencies have no legal control over educational institutions
or programs.
Proponents of exempting accredited institutions argue that
such institutions are subject to more rigorous oversight by
USDE and the accrediting agency, and the Bureau's efforts
should be focused on institutions that are not being fully
reviewed by any other accrediting or regulatory agency.
Several reports previously prepared on the issue of whether or
not accrediting agencies provide a sufficient level of
protection in the state's interest in ensuring that students
are treated fairly have not definitively answered this
question. The author has indicated intent to continue
examining the accreditation process in order to determine
which institutions should be granted an exemption based on
accreditation. Both WASC and the Accredited Out-of-State
Colleges and Universities in California, which represents many
of the non-WASC accredited institutions, are opposed to the
bill absent amendments exempting their accredited
institutions.
7)Consumers Union (CU) and the Consumer Federation of California
have taken "oppose unless amended" positions. CU argues that
no other state is known to lodge the regulation of trade
institutions in a consumer/business agency rather than an
education agency. CU believes that DCA's failed regulation of
the Former Bureau highlight the need to move the regulation to
an education agency. CU believes that institutions should not
be granted approval to operate by means of accreditation, that
many accredited institutions have perpetrated some of the most
egregious examples of fraud and deception. CU believes the
disclosures to students are inadequate, particularly regarding
job placement and transferability of credits earned. CU argues
that the Bureau's enforcement authority is confusing and
potentially too constraining. The Center for Public Interest
Law (CPIL) has taken an "oppose unless amended" position and
generally agrees with the comments of CU.
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8)California Association of Private Postsecondary Schools
(CAPPS) has taken a "support if amended" position and have
submitted several amendments to the author, including removing
the preservation clause for the private right of action under
the Former Act, removing the requirement that institutions
post specific information on their websites, and removing the
requirement for a 3-day cooling off period before a student
may sign an enrollment agreement, among other suggested
amendments.
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081