BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
48 (Portantino)
Hearing Date: 8/17/2009 Amended: 7/23/2009
Consultant: Bob Franzoia Policy Vote: B,P&ED 6-1, Ed 7-0
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BILL SUMMARY: AB 48, which would recast and revise the Private
Postsecondary and Vocational Education Reform Act of 1989 as the
California Private Postsecondary Education Act of 2009, would do
the following:
- Establish the Bureau for Private Postsecondary Education in
the Department of Consumer Affairs (DCA) as a successor agency
to the former bureau.
- Appropriate $580,000 from the Private Postsecondary and
Vocational Education Administration Fund to the bureau to fund
five education administration positions and continue that fund
as the Private Postsecondary Education Administration Fund.
- Continue in existence the continuously appropriated Student
Tuition Recovery Fund STRF) and would provide procedures for the
resolution of claims under the former act.
- Impose reporting requirements on the bureau, the Bureau of
State Audits (BSA) , and the Legislative Analyst's Office
regarding compliance with the act.
- Impose fees on private postsecondary institutions operating
under the act and require those fees to be deposited in the
Private Postsecondary Education Administration Fund for
expenditure, upon appropriation.
- Exempt institutions from provisions of the act, including an
exemption for an institution that is accredited by specified
accrediting agencies and, until January 1, 2016, an institution
that is accredited by a regional accrediting agency recognized
by the US Department of Education.
- Require the bureau to appoint an advisory committee.
- Repeal the act on January 1, 2016.
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
Re-establish regulatory Special*
bureau operations $5,385 $8,411 $8,411
- fee revenue** ($5,038) ($10,076) ($10,076)
Appropriation $580 Special*
Reporting requirements $220-$270 Special*
* Private Postsecondary and Education Administration Fund
** The bureau shall establish a reasonable fee to reimburse the
bureau's costs associated with implementation of the act. Costs
and revenues based on DCA projections.
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STAFF COMMENTS: This bill meets the criteria for referral to the
Suspense File.
The Private Postsecondary and Vocational Education Reform Act of
1989 established
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AB 48 (Portantino)
the Bureau for Private Postsecondary and Vocational Education
(BPPVE) in the Department of Consumer Affairs (DCA) for the
purpose of approving and regulating private postsecondary and
vocational educational institutions in the state. The
provisions governing the operation and administration of the
BPPVE and the approval and regulation of the private
postsecondary and vocational institutions became inoperative on
July 1, 2007, and were repealed as of January 1, 2008. Chapter
67/2007 (AB 1525, Cook) declared legislative intent to protect
students, allowed for the continuation of matters pending before
the BPPVE, and provided for minimal oversight of institutions by
DCA until February 1, 2008. Chapter 635/2007 (SB 45, Perata)
extended limited DCA oversight of private postsecondary schools
from February 1, 2008 to July 1, 2008. No state law currently
regulates private postsecondary institutions in the state. In
2006, there were over 1,500 BPPVE approved institutions
operating in the state serving more than 400,000 students split
300,000 students at non degree granting institutions and 100,000
students at degree granting institutions.
Estimated expenditures for the new bureau are, as follows:
Personal services (salaries, wages, benefits)$5,217,000
Operating expenses $3,194,000
Total state operations expenditures $8,411,000
DCA is projecting 33.7 personnel years in 2009-10 and 67.4
personnel years in 2010-11 and ongoing.
Chapter 740/2004 (SB 1544, Figueroa) required the appointment of
an Enforcement Monitor to provide an in-depth and impartial
examination of the bureau's operations. The monitor's report
noted that, among other things, that STRF student claims
payments sometimes lingered for more than two years, the bureau
rarely ensured institutions were paying the correct amount of
fees and staff believed that only about half of the legally
required fees were being paid.
The STRF was established to relieve and mitigate pecuniary
losses suffered by any California resident who is a student of
an institution holding an approval. Students are entitled to
file a claim against STRF if they prepaid tuition and suffered a
financial loss due to the institution closing, or they did not
receive the quality or value of the education they were entitled
to receive. All monies deposited into STRF are derived from
quarterly assessments of institutions collecting a STRF fee from
their students. To be eligible for STRF, the student must be a
California resident and not have had his or her tuition paid by
a third party such as through a vocational rehabilitation
program.
This bill requires the bureau to adopt regulations governing the
administration and maintenance of the STRF and would set a limit
of $25 million at any time on the amount of assessments in the
STRF. As this bill would sunset the bureau, students may again
face the uncertainty of having a STRF claim honored after
January 1, 2016. Staff recommends this bill be amended to
authorize the DCA to disburse claims after the sunset until all
claims are paid or the fund becomes insolvent.
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AB 48 (Portantino)
To comply with Joint Rule 37.4 (b) which requires that any bill
requiring action by the BSA shall contain an appropriation for
the cost of any study or audit staff recommends this bill be
amended to appropriate $270,000 from the Private Postsecondary
and Education Administration Fund to the BSA for the purposes of
completing the performance audit, as follows:
The sum of two hundred seventy thousand dollars ($270,000) is
hereby appropriated to the Bureau of State Audits from moneys
which will be deposited into the Private Postsecondary Education
Administration Fund, pursuant to Section 94806 of the Business
and Professions Code, on the effective date of this act for
purposes of Section 94949 of the Business and Professions Code,
to be expended in the 2012-13 fiscal year. All unexpended
moneys shall be returned to the Private Postsecondary Education
Administration Fund.
The Monitor's report identified significant problems with the
fee structure and found that revenue was insufficient to support
ongoing operations," but the bureau failed to raise fees. Fees
are provided in Business and Professions Code 94930 (b)
If the bureau determines by regulations that the adjustment of
the fees established by this article is consistent with the
intent of this chapter, the bureau may adjust the fees.
However, the bureau shall not implement any increase in any fee
established by this article without express legislative
approval.
Staff recommends this section be amended to strike the last
sentence because it is vague and instead permit the bureau to
increase fees annually by not more than the consumer price index
or the state-local government deflator while accruing a fund
balance of not more than six months of operation.
Originally a council, which provided a forum for institutions
and consumers, the bureau was created in 1997. Since that time,
displeasure with the act and its administration has continued to
increase and has moved from the bureau and the department to the
Legislature and the Administration with seemingly little
resolution of the various complaints. In the interest of
providing an opportunity for more involvement in the
administration of the act, staff recommends the bureau, which at
this time does not exist, be replaced with a seven member board
representing schools, consumers, and the public. This board
would be appointed by the Governor, subject to Senate
confirmation, and would be repealed on January 1, 2014 and
replaced with a bureau. The board would be required to issue a
report on the act by January 1, 2015 with recommendations on how
to improve its operation which could then be considered by the
Legislature and the Governor when the act may be proposed for
extension by January 1, 2016.
If a board governance structure is adopted, staff recommends
sunsetting the advisory committee after two years.