BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 2746
                                                                  Page  1

          Date of Hearing:   April 10, 2008

                       ASSEMBLY COMMITTEE ON HIGHER EDUCATION
                              Anthony Portantino, Chair
                    AB 2746 (Niello) - As Amended:  April 9, 2008
           
          SUBJECT  :   California Private Postsecondary Education Act of  
          2008

           SUMMARY  :   Recasts and revises the provisions of the Private  
          Postsecondary and Vocational Education Reform Act of 1989  
          (Former Act) into the Private Postsecondary Education Act of  
          2008 (Act).  Specifically,  this bill  :  

          1)Places the Bureau for Private Postsecondary Education (Bureau)  
            in the Department of Consumer Affairs (DCA) as the successor  
            to the former Bureau for Private Postsecondary and Vocational  
            Education (Former Bureau).

          2)Provides for a transition to the provisions of this Act,  
            including that:

             a)   Any statutory or regulatory reference to the former  
               Private Postsecondary Education and Student Protection Act,  
               the Former Act, or the former education code postsecondary  
               education provisions will be construed as referring to this  
               Act.

             b)   Any institution that had approval to operate by the  
               Former Bureau on June 30, 2007, shall maintain that  
               approval for two-years after the expiration date of that  
               approval.

             c)   Applications pending before the Former Bureau prior to  
               January 1, 2006, shall be granted approval to operate until  
               2010, and applications received after January 1, 2006,  
               shall be granted approval to operate until 2011.  Requires  
               that students enrolling in these institutions be notified  
               during the enrollment process that the institution's  
               application for approval was not fully reviewed by the  
               Bureau.

             d)   The Bureau shall adopt emergency regulations that  
               conform to the provisions of this Act by February 1, 2009,  
               and these regulations shall become permanent through the  








                                                                  AB 2746
                                                                  Page  2

               regular rulemaking process within one year of the date of  
               enactment of this Act.

             e)   Continues and renames the Private Postsecondary and  
               Vocational Education Administration Fund to be the Private  
               Postsecondary Education Administration Fund (PPEAF).

             f)   Continues the Student Tuition Recovery Fund (STRF) and  
               provides that processing of claims pending before the STRF  
               that were received prior to July 1, 2007, or any claims  
               received between July 1, 2007, and June 30, 2008, shall be  
               in accordance with this Act.

             g)   All applications, excluding STRF and certificate of  
               authorization applications, pending before the Former  
               Bureau as of July 1, 2007, shall be deemed approved.

             h)   Allows any institution that did not have approval from  
               or a pending application with the Former Bureau on June 30,  
               2008, that began operations after July 1, 2007, to continue  
               to operate but requires the institution to comply with this  
               Act within six months of the application becoming  
               available.

             i)   For any claim or cause of action that arose prior to  
               June 30, 2007 and commenced on or before June 30, 2007,  
               final judgments and/or legal remedies available under the  
               Former Act will be continued.

          3)Provides definitions for various terms used in this Act.

          4)Exempts the following from the requirements of this Act and  
            from the oversight of the Bureau:

             a)   Institutions offering solely vocational or recreational  
               educational programs.

             b)   Institutions offering programs sponsored by trade,  
               business, professional, or fraternal organizations solely  
               for that organization's members.

             c)   Institutions operated by the federal or state government  
               or their subdivisions.

             d)   Institutions offering continuing education where the  








                                                                  AB 2746
                                                                  Page  3

               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)   Institutions owned, controlled, and operated and  
               maintained by a church or religious institution that meets  
               several other outlined requirements.

             f)   Institutions certified to offer flight instruction and  
               aircraft maintenance by the Federal Aviation  
               Administration.

             g)   Institutions that provide solely educational programs  
               for total charges of $2500 or less, with no part of the  
               charges paid by state or federal student financial aid  
               programs.

             h)   Institutions that offer solely educational programs in  
               law leading to a Juris Doctor, Master of Laws, Doctor of  
               Jurisprudence degree or similar degrees in law.

             i)   Institutions giving instruction for driving motortrucks  
               of three or more axles and more than 6,000 pounds.

             j)   Institutions participating in the Federal Higher  
               Education Act Title IV student financial aid programs.

          5)Provides for the following directives and duties to be carried  
            out by the Bureau:

             a)   In regulating private postsecondary educational  
               institutions, directs the Bureau to make protection of the  
               public the highest priority, and whenever protection of the  
               public is inconsistent with other interests, the protection  
               of the public shall be paramount.

             b)   Provides the Director of DCA with the powers set forth  
               in the Act; allows the Director to delegate the duties to a  
               bureau chief, appointed by the Governor; provides that the  
               bureau chief may delegate any powers and duties to a  
               designee; and provides that the Director may appoint and  
               fix compensation of personnel; establishes the Legislative  
               intent that employees with the Former Bureau have the  
               opportunity to transfer to their former positions with the  








                                                                  AB 2746
                                                                 Page  4

               new Bureau.

             c)   Requires the Bureau to, in accordance with the  
               Administrative Procedures Act, adopt regulations necessary  
               to implement this Act within one year of the date of  
               enactment of the Act and to adopt emergency regulations in  
               accordance with existing law.

             d)   Requires the Bureau to adopt a fee schedule, sufficient  
               to cover the objectively assessed expected cost of Bureau  
               activities, for the institutions covered by this Act to  
               pay.  Requires fees collected to be deposited into the  
               PPEAF and provides that these funds shall be used to cover  
               the implementation of the Act.  Requires the fee schedule  
               to be publicly available.

             e)   Requires the Bureau to maintain a website with  
               information provided by the institutions and verified by  
               the Bureau, and establishes that the website shall include  
               completion rates, placement rates, total program charges,  
               starting salaries of graduates and license examination pass  
               rates if those figures are provided by an institution  
               during enrollment, status of the institutions approval to  
               operate, and institutional refund policies.

             f)   Allows the Bureau to conduct outreach to secondary and  
               postsecondary school students about how to make informed  
               decisions when selecting an institution, allows the Bureau  
               to appoint an advisory committee, and allows the Bureau to  
               conduct workshops to assist institutions in complying with  
               the provisions of this Act.

             g)   Allows the Bureau to empanel visiting committees to  
               assist in evaluating institutional applications, requires  
               visiting committee members to serve at no expense to the  
               state and establishes that the Bureau may facilitate  
               reimbursements from an institution under evaluation to  
               cover visiting committee expenses, and entitles visiting  
               committee members to defense and indemnification.

             h)   Provides that, once complaints reach final disposition,  
               the Bureau shall make the nature and disposition of the  
               complaint available to the public on the Bureau's internet  
               website.









                                                                  AB 2746
                                                                  Page  5

             i)   Requires the Bureau to establish a program to target  
               unapproved schools and take all legally appropriate action.

          6)Provides that, except for any institutions exempted from this  
            Act, all private postsecondary institutions operating in  
            California must have the approval of the Bureau, as follows:

             a)   Requires the Bureau to establish minimum operating  
               standards for institutions, and specifies that the  
               standards should address educational program content,  
               withdrawal policies, institutional financial stability, and  
               the handling of records and transcripts.

             b)   Requires institutions to present sufficient evidence to  
               the Bureau of meeting the operating standards outlined by  
               the Bureau, and requires the Bureau to independently verify  
               the information provided.

             c)   Requires the Bureau to establish a process whereby  
               institutions can obtain approval to operate.

             d)   Establishes that approvals to operate shall be for five  
               year terms.

             e)   Requires that, for an institution that is granted  
               approval by the Bureau by means of that institution's  
               accreditation, the term of approval coincide with the  
               accreditation term, and that institution comply with all  
               other applicable standards in this Act.  

             f)   Requires the Bureau to adopt regulations covering the  
               renewal of an approval to operate, and requires that a  
               renewal of approval coincide with the institution  
               demonstrating continued capacity to meet minimum standards.

             g)   Provides that approval from any other state agency to  
               offer an educational program shall be sufficient to satisfy  
               the requirements of the Bureau.

             h)   Requires prior authorization from the Bureau for  
               institutions wishing to make substantive changes, such as a  
               change in ownership or educational objectives.  Provides  
               that the institution's approval may be suspended or revoked  
               for failing to obtain prior approval.  Requires the Bureau  
               to establish a process for reviewing requests for  








                                                                  AB 2746
                                                                  Page  6

               authorization to make substantive changes.

          7)Establishes the following fair business practices:

             a)   Prohibits institutions from conducting several actions,  
               including using the seal of the state on a diploma,  
               promising employment, presenting or advertising specified  
               information including inaccurate information, using "help  
               wanted" ads to solicit students, compensating students for  
               recruitment activities, making untrue or misleading  
               statements regarding, directing an individual to violate  
               this Act or persuading a student not to file a complaint,  
               among other prohibitions.

             b)   Prohibits institutions from merging classes unless  
               students receive the same amount of instruction; prohibits  
               institutions from, after a student has enrolled, making  
               unscheduled suspensions of classes unless caused by  
               circumstances beyond institutional control, or changing the  
               day or time of the class unless certain other requirements  
               are met; prohibits institutions from moving the location of  
               classes without meeting certain requirements, or converting  
               the means of delivery of instruction.

             c)   Provides that, for career fields that require licensure  
               by the state, institutions offering educational programs  
               must have approval to conduct that educational program.

             d)   Allows 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; prohibits an  
               institution from requiring more than one term/four months  
               of advance payment at a time until 50% of coursework has  
               been completed; provides exemptions from the aforementioned  
               requirements for the purposes of federal and state  
               financial aid payments; and allows, under certain  
               conditions, students to choose to pay all fees and tuition  
               upon enrollment.  Requires 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.
             e)   Prohibits and institution from requiring prospective  
               students to provide personal contact information before  
               being granted access to educational program information via  
               the institution's internet website.








                                                                  AB 2746
                                                                  Page  7


          8)Requires recruiters for institutions to be employees, requires  
            identification from the institution, and requires recruiters  
            to physically possess the identification when recruiting.

          9)Establishes the following requirements in regards to  
            enrollment and enrollment agreements:

             a)   Students shall enroll solely by signing an enrollment  
               agreement.

             b)   Students shall be provided a catalog or brochure  
               containing, at a minimum, admission policies including  
               acceptance of credits from other institutions, a  
               description of the instruction provided in the student's  
               program of interest and other specified information, the  
               number of credit hours of the program, attendance and  
               refund policies, qualifications of faculty, the schedule of  
               charges, information regarding institutional participation  
               and the student eligibility in state and federal financial  
               aid programs, and a description of the student's rights and  
               responsibilities under the STRF.

             c)   Provides that an enrollment agreement shall not be  
               enforceable unless the student has first received the  
               institution's brochure or catalog.

             d)   Requires that an "ability to benefit student" (defined  
               as a student without a certificate of graduation from a  
               school providing secondary education) take a USDE  
               prescribed examination and achieve a score specified by the  
               USDE showing that the student may benefit from the training  
               offered before executing an enrollment agreement.

             e)   Requires institutions offering programs in professions  
               that require licensure to, during enrollment, exercise  
               reasonable care to determine if a student will be eligible  
               to obtain licensure; and for students that may be  
               disqualified from licensure due to age, physical  
               conditions, or criminal convictions, prohibits the  
               institution from executing an enrollment agreement unless  
               the student's stated objective is other than licensure.

             f)   Prohibits an institution from discussing job placement  
               assistance or salaries during the enrollment process, but  








                                                                  AB 2746
                                                                  Page  8

               allows an institution to discuss job placement assistance  
               after the student has completed 60% of the program.

             g)   Requires an enrollment agreement to include the  
               following:

               i)     A statement with the Bureau's contact information  
                 informing the student that they may direct questions  
                 regarding the enrollment agreement to the Bureau, 

               ii)    The name and specified information regarding the  
                 educational program, and the name and address of the  
                 institution where the classes will be held.

               iii)   A schedule of total charges, including a list of  
                 non-refundable charges, and on the same page as where the  
                 student will sign, underlined and in capital letters, the  
                 total charges.

               iv)    A statement that the student is responsible for  
                 paying the STRF assessment.

               v)     A clear statement that the agreement is legally  
                 binding when signed and accepted.

               vi)    Specified disclosure language regarding a student's  
                 understanding of rights and responsibilities, requiring  
                 the student's signature.

             h)   Requires specified disclosures to a student prior to  
               executing an enrollment agreement, including:

               i)     Disclosure of completion rates (calculated through a  
                 specific process) and disclosures supporting  
                 institutional claims relative to placement rates,  
                 starting salaries, or license examination passage rates.   
                 If the program is too new to provide such data, requires  
                 a notice to that effect.  

               ii)    Specified disclosure language informing the student  
                 that credit transferability is at the discretion of the  
                 institution to which the student seeks to transfer, and  
                 informing the student of his/her responsibility to ensure  
                 that this program meets his/her long-term educational  
                 goals.








                                                                  AB 2746
                                                                  Page  9


               iii)   Disclosure of a buyer's right to cancel, and  
                 requires that the institution provide a student with the  
                 right to cancel up until the first day of class or the  
                 seventh day after enrollment, whichever is later.   
                 Requires disclosure of the refund policy and examples of  
                 its application, and requires a description of the  
                 procedures a student must follow to cancel the enrollment  
                 agreement and obtain a refund.

               iv)    A statement provided by the Bureau specifying the  
                 requirement that a student pay a state-imposed assessment  
                 for the STRF and a statement regarding the purpose of the  
                 STRF and requirements for filing a claim.

               v)     A statement specifying that if the student obtains a  
                 loan to pay for the educational program, the student is  
                 responsible for repaying the full amount of the loan plus  
                 interest, less the amount of any refund.

               vi)    A statement specifying that if the student defaults  
                 on a state or federally guaranteed loan, the state or  
                 federal government or loan guarantee agency may take  
                 certain action against the student, and the student may  
                 not be eligible for any other financial aid or government  
                 assistance until the loan is repaid. 

               vii)   A statement specifying that the institution is not a  
                 public institution and a statement specifying whether the  
                 institution has a pending bankruptcy petition.

             i)   Requires disclosure forms to be acknowledged by a  
               student's initials or signature and prohibits a student  
               from waiving receipt or any term.

             j)   Requires an enrollment agreement to be written in a  
               language that is easily understood, and if English is not  
               the student's primary language and the student is unable to  
               understand the terms and conditions of the agreement, then  
               the student is entitled to a clear explanation of the terms  
               in his/her primary language, and provides that if  
               recruitment was conducted in a language other than English  
               then the enrollment agreement and related disclosures shall  
               be in that language.









                                                                  AB 2746
                                                                  Page  10

             aa)  Provides that an enrollment agreement becomes operative  
               when the student attends his/her first class.

             bb)  Prohibits an enrollment agreement from containing a  
               provision that requires a student to invoke internal  
               institutional dispute procedures before enforcing any  
               contractual or other legal rights or remedies, but does not  
               preclude a requirement for binding arbitration as  
               authorized under the Federal Arbitration Act.

             cc)  Provides that an enrollment agreement is not enforceable  
               unless, at the time of execution, the institution held  
               approval to operate.

          10)Requires an institution extending credit or lending money for  
            educational costs to a student, to place a notice in the  
            lending documents informing the student that they may assert  
            against the holder of the promissory note all of the claims  
            and defense that could be asserted against the institution up  
            to the amount already paid under the promissory note; provides  
            that such a lending note is not enforceable unless the  
            institution held an approval to operate at the time of  
            execution; and provides that institutional loans to students  
            must comply with the Federal Truth in Lending Act.

          11)Establishes the following requirements for cancellations,  
            withdrawals, and refunds:

             a)   Requires an institution that participates in and  
               complies with federal student aid program regulations under  
               Title IV of the Higher Education Act of 1965 to advise  
               students that cancellation notices must be in writing and  
               that a withdrawal may be noticed by a student in writing or  
               by the student not attending courses; and requires the  
               institution to provide a pro rata refund to students who  
               completed 60% or less of the period of attendance.

             b)   Requires that, for institutions not participating in the  
               federal student financial aid program: 

               i)     The institution advise students that cancellation  
                 notices must be in writing and that a withdrawal may be  
                 noticed by a student in writing or by the student's  
                 conduct including lack of attendance.









                                                                  AB 2746
                                                                  Page  11

               ii)    The institution refund 100% of the amount paid less  
                 a reasonable deposit not to exceed $250 if notice of  
                 cancellation is made through attendance at the first  
                                                                    class or the seventh class day after enrollment,  
                 whichever is later.

               iii)   Allows the Bureau to adopt regulations establishing  
                 a different method of calculating refunds for instruction  
                 delivered by other means such as distance education.

               iv)    The institution establishes a refund policy and  
                 entitles students who have completed 60% or less of the  
                 period of attendance to a pro rata refund.

               v)     The institution pay or credit refunds within 45 days  
                 of a student's cancellation or withdrawal.

               vi)    Allows an institution offering educational programs  
                 for which the aforementioned refund calculations cannot  
                 be utilized to petition the Bureau for alternative  
                 methods of calculating tuition refunds.

             c)   Provides that a student may not waive any of the  
               aforementioned provisions.

          12)Provides that the Bureau shall adopt regulations governing  
            the administration and maintenance of the STRF, including  
            requirements related to assessments on students and student  
            claims against the STRF; provides that the STRF monies are  
            continually appropriated to the Bureau; and provides that the  
            STRF may not exceed $25 million at any time.

          13)Establishes the following requirements for institutional  
            closures and teach-outs:

             a)   Requires an institution to notify the Bureau in writing  
               at least 30 days prior to closing, and requires the notice  
               to include a closure plan that speaks to, at least,  
               providing teach-outs of educational programs or  
               arrangements for making appropriate refunds, a plan for  
               providing students information on federal financial aid  
               programs and institutional closures if the institution is a  
               participant in these programs, and a plan for the  
               disposition of student records.









                                                                  AB 2746
                                                                  Page  12

             b)   Provides that an institution will be in default of an  
               enrollment agreement if an institution closes prior to  
               completion of the program.  If the Bureau finds that the  
               institution has made arrangements for the student to  
               complete their program at another institution for the same  
               cost to the student, the student's institutional charges  
               may be refunded on a pro rata basis; if the institution  
               does not make such a provision, the student is entitled to  
               receive a total refund of all institutional charges.

             c)   Requires an institution to provide the Bureau with  
               information including student records and transcripts. 

          14)Requires institutions to collect, maintain, and report to the  
            Bureau annually the number of students who enroll and the  
            number of students who complete institutional programs.   
            Requires institutions that advertise or make representations  
            regarding student placement rates to report placement rate  
            data to the Bureau annually and establishes requirements for  
            calculating such data.  Provides that if an institution's  
            accreditation agency has quantitative student completion and  
            placement requirements in its standards, an institution in  
            compliance with those standards is considered in compliance  
            with the aforementioned requirements.  Requires an institution  
            to use the aforementioned data in the Student Performance Fact  
            Sheet.

          15)Establishes the following processes and penalties in regards  
            to compliance with and enforcement of this Act:

             a)   Establishes that the Bureau shall determine any  
               institution's compliance with this Act, and that the Bureau  
               shall have the authority to require additional reports be  
               filed by an institution, to send staff for institutional  
               site visits, and to require documents and responses from  
               any institution in order to monitor compliance.  Provides  
               that when the Bureau has reason to believe that an  
               institution is out of compliance, it may conduct an  
               investigation of that institution. 

             b)    Provides that the Bureau may perform unannounced  
               inspections of institutions.

             c)   Provides that the Bureau may impose penalties, including  
               mandating a specified timetable for remedying  








                                                                  AB 2746
                                                                  Page  13

               noncompliance, imposing fines, placing the institution on  
               probation, or suspending or revoking approval, as deemed  
               appropriate by the Bureau and depending on the severity of  
               the violation.

             d)   Requires the Bureau to seek to resolve instances of  
               noncompliance to the extent possible, including the use of  
               alternative dispute resolution procedures.

             e)   Requires an institution to submit an annual report by  
               July 1 to the Bureau, in a format prescribed by the Bureau,  
               that includes, the total number of students enrolled,  
               degrees awarded, of degrees offered, educational program  
               completion rates, and the total charges for each  
               educational program, including a statement indicating  
               whether the institution is current in remitting STRF  
               assessments, along with any other information deemed  
               necessary by the Bureau.

             f)   Requires Bureau staff who detects a minor violation of  
               this Act during inspection, to issue a notice to comply  
               before leaving the institution.  

               i)     Requires the Bureau to establish a formal appeal  
                 process through regulation, and exempts the regulation  
                 from the provisions of the Administrative Procedures Act;  
                 provides that, unless a writ of mandate is filed, a  
                 citation issued, or a disciplinary proceeding initiated,  
                 a notice to comply shall not be subject to the California  
                 Public Records Act.

               ii)    Provides that an institution that receives a notice  
                 to comply shall have no more than 30 days from the date  
                 of inspection to remedy the noncompliance, and provides  
                 that the institution shall sign and return the notice to  
                 comply upon achieving compliance.

               iii)   Requires a single notice to comply be issued  
                 separately, listing all the minor violations cited during  
                 the inspection, and provides that no notice shall be  
                 issued if compliance is achieved immediately in the  
                 presence of the Bureau staff.  Provides that immediate  
                 compliance may be noted in the inspection report but not  
                 subject to further action by the Bureau.









                                                                  AB 2746
                                                                  Page  14

               iv)    Provides that a notice to comply is the only means  
                 the Bureau may use to cite a minor violation discovered  
                 during an inspection and prohibits the Bureau from taking  
                 other enforcement action against an institution for a  
                 notice to comply if the institution complies with this  
                 process.

               v)     Provides that if an institution disagrees with a  
                 notice to comply, the institution shall send the Bureau a  
                 written notice of disagreement, and allows the agency to  
                 take administrative enforcement action to ensure  
                 compliance with the requirements of the notice to comply.

               vi)    Allows the Bureau to take administrative enforcement  
                 action against an institution that fails to comply with a  
                 notice within the specified time period.  

               vii)   Defines a minor violation as a deviation from the  
                 requirements of this Act or the regulations adopted  
                 pursuant to this Act, that the Bureau does not find to  
                 result in the harm to students and is not committed  
                 knowingly or intentionally or a repeated violation or a  
                 pattern of neglect or disregard for the provisions of the  
                 Act.

             g)   Allows the Bureau to issue a citation for noncompliance  
               of the Act or regulations found during an investigation,  
               and provides that the citation may contain an order of  
               abatement that may require the demonstration of future  
               compliance, or an administrative fine not to exceed $10,000  
               per violation.  Provides specific criteria for the Bureau  
               to consider when assessing the amount of administrative  
               fines.  Provides that the citation shall be in writing and  
               shall contain specified information regarding the violation  
               and the institution's right to a hearing within 30 days.   
               Provides that an administrative fine is due either 30 days  
               from citation, or 30 days from the final judgment following  
               a hearing.  Provides that all administrative fines are to  
               be deposited into the PPEAF.

             h)   Allows the Bureau to suspend or revoke an institution's  
               approval to operate for fraud or for repeated violations of  
               the Act that have caused harm to students.  Provides that  
               the Bureau shall adopt regulations governing probation and  
               suspension of an approval to operate and that the Bureau  








                                                                  AB 2746
                                                                  Page  15

               may seek reimbursement for the costs of an investigation.   
               Provides that an institution shall not be responsible for  
               paying the cost of an investigation to more than one  
               agency.

             i)   Provides that if the Bureau determines the need to make  
               an emergency decision to protect students, prevent  
               misrepresentation to the public, or prevent the loss of  
               public funds or monies paid by students, it may do so  
               pursuant to an outlined process and in accordance with  
               Bureau-adopted regulations.

             j)   Provides that the Bureau may bring an action for  
               equitable relief for violations of this Act, including  
               restitution, a temporary restraining order, the appointment  
               of a receiver, and a preliminary or permanent injunction  
               and that the action may be brought in the county in which  
               the defendant resides or in the county in which any  
               violation has occurred or may occur; and provides that  
               these remedies supplement, and do not supplant, any other  
               remedies and penalties provided under law.

             aa)  Provides that in the case of adverse administrative  
               action by the Bureau, an institution may request a hearing  
               in accordance with law.

             bb)  Provides any individual who believes an institution has  
               violated this Act or subsequent regulations may file a  
               complaint with the Bureau and that the Bureau shall take  
               action to verify the complaint, and provides the Bureau  
               with authority to take appropriate administrative  
               enforcement action upon discovering the facts in regards to  
               the complaint.

             cc)  Provides that if the Bureau finds that an institution's  
               violation of this Act or subsequent regulations has caused  
               damage or loss to a student or group of students, the  
               Bureau may order the institution to pay appropriate refunds  
               or restitution to that student or group of students. 

             dd)  Provides that a student or graduate may bring an action  
               for any material violation of this Act that is not a minor  
               violation, as defined, and upon prevailing in such an  
               action, is entitled to relief in the amount that would  
               compensate for all detriment proximately caused.  Provides  








                                                                  AB 2746
                                                                  Page  16

               that this remedy supplements, and does not supplant, other  
               remedies and penalties provided in law.

             ee)  Establishes that knowingly operating an institution  
               without approval or knowingly providing false information  
               to the Bureau on an application shall be considered  
               infractions and are public offenses.

             ff)  Requires an institution to maintain an agent for service  
               of process within the state, and provide the agent's name  
               and contact information to the Bureau; makes the  
               aforementioned information available to the public upon  
               request.

             gg)  Provides that the Bureau may not subject any person to a  
               fine exceeding $50,000 for operating an institution without  
               Bureau approval.

          16)Provides for severability of the Act, in that, if any  
            provisions in this Act are held as invalid, that invalidity  
            shall not effect other provisions, so long as those provisions  
            do not require the invalid provisions in order to be applied.

          17)Repeals the Act on January 1, 2015 unless a later statute is  
            enacted to extend this date.

          18)Requires the Bureau to provide annual progress updates to the  
            Legislature, in the form of oversight hearings by the  
            committee(s) with jurisdiction, regarding the enforcement of  
            this Act and subsequent regulations.

          19)Requires the Legislative Analyst's Office to provide the  
            Legislature and the Governor, by July 1, 2013, a comprehensive  
            review on the extent to which the Bureau has implemented the  
            provisions of this Act.

          20)Prohibits a person, beginning January 1, 2009, from owning or  
            operating an institution or providing driving instruction for  
            motortrucks of three or more axles that are more than 6,000  
            pounds unless the institution has been approved by the  
            Department of Motor Vehicles (DMV).  Requires the institution  
            to maintain proof of compliance with liability insurance  
            requirements and a satisfactory safety rating by the  
            California Highway Patrol.  Requires the institution to  
            maintain the vehicles used in training in safe mechanical  








                                                                  AB 2746
                                                                 Page  17

            condition with all maintenance records.  Provides that driving  
            instructions must meet other specified requirements, as well  
            as any other terms and conditions required by the DMV.

           EXISTING LAW:

           1)Expresses the intent of the Legislature to provide for the  
            protection and interests of students and institutions that  
            have matters pending under the Former Act, which became  
            inoperative on July 1, 2007.

          2)Provides for the continuation of all matters pending before  
            the Former Bureau on July 1, 2007, until July 1, 2008.

          3)Allows, until July 1, 2008, limited state oversight of private  
            postsecondary schools by the DCA.

          4)Creates the Bureau for Private Postsecondary Education  
            (Bureau). 
           
          FISCAL EFFECT  :   Unknown

           COMMENTS  :    Purpose of this Bill:   The author notes that there  
          is no existing law governing private postsecondary education in  
          California, as the Former Act was repealed on July 1, 2007.  The  
          stop-gap legislation that established minimal temporary  
          oversight of private postsecondary institutions is set to expire  
          July 1, 2008.  The author believes that this bill builds on the  
          successful framework utilized in other states to establish a  
          regulatory structure for private institutions with strong and  
          effective student protections, meaningful institutional  
          standards, and a sensible workload for the Bureau.   

           Background on the Former Bureau and Former Act:  During the late  
          1980s, when regulation of the private postsecondary education  
          industry was carried out by a division within the State  
          Department of Education, the state developed a reputation as the  
          "diploma mill capital of the world."  As a result of concerns  
          over the integrity and value of the degrees issued by these  
          institutions, the Former Act and the Maxine Waters School Reform  
          and Student Protection Act were enacted.  The regulatory  
          framework established by the merging of the Waters Act and the  
          Former Act led to duplicative and conflicting statutory  
          provisions plaguing California's oversight of these institutions  
          with problems that continued through the sunset of the law on  








                                                                  AB 2746
                                                                  Page  18

          January 1, 2007.

          In 2004, because of the persistent problems with the Former  
          Bureau in enforcing the provisions of the Former Act, the  
          Legislature enacted SB 1544 (Figueroa), which required the  
          appointment of an Enforcement Monitor (Monitor) to provide an  
          in-depth and impartial examination of the Former Bureau's  
          operations.  The Monitor's report (Report), presented to the  
          Joint Committee on Boards, Commissions and Consumer Protection  
          on December 7, 2005, outlined a "twenty-year record of  
          repeatedly identified, fundamental problems in every one of the  
          Bureau's key operations."  The Report found that the Former  
          Bureau both inadequately protected consumers and impeded the  
          expansion of quality postsecondary and vocational educational  
          opportunities.  The Monitor's specific findings included:

          1)Licensing:  The Monitor found that numerous schools operated  
            for years under "temporary" licenses; in 2005, over a quarter  
            (75) of approved degree-granting schools were operating on  
            temporary approvals and of those, 29 operated on such  
            approvals for more than two years, seven for more than four  
            years.

          2)Enforcement:  The Monitor found that the Former Bureau did not  
            conduct unannounced site visits as required by law, never  
            revoked the license of a school, and had never placed a school  
            on probation.  The Monitor further found that the fine amounts  
            for unapproved schools ($2,500) were too low to promote  
            compliance, and fines were rarely assessed.  The Monitor noted  
            that inadequate staffing levels led to complaints that  
            unapproved schools were not being investigated; and even when  
            investigated, the investigations largely relied on documents  
            generated by the schools themselves.  The Monitor noted that  
            even with better investigative resources, the remedies at the  
            Former Bureau's disposal were inadequate; the Former Bureau  
            did not have the power to order refunds or restitution to a  
            student or group of students.

          3)Reporting:  The Monitor found that a significant number of the  
            reports required from schools by law, including reports  
            showing how many students actually obtain jobs six months  
            after graduation, were past due and chronically late, and the  
            Former Bureau never verified the data.

          4)STRF Program:  The Monitor reported that claims for payment  








                                                                  AB 2746
                                                                  Page  19

            sometimes lingered for more than two years, the Former Bureau  
            rarely ensured that institutions were paying the right amount  
            of fees, and the staff believed that only about half of the  
            legally required fees were being paid.  Due to these STRF  
            shortages, the Former Bureau routinely used fees paid by  
            degree-granting institutions to pay claims of students from  
            non-degree granting schools.

          5)Bureau Insolvency:  The Monitor's report identified  
            significant problems with the fee structure; the  
            statute-imposed study found that revenue was "insufficient to  
            support ongoing operations," but the Former Bureau failed to  
            recommend raising fees.

          6)Arbitrary Regulatory Practices:  The Monitor found that the  
            Former Bureau's regulatory practices were unpredictable,  
            creating a financially risky environment for schools seeking  
            to open in California, which potentially impeded educational  
            opportunities.  Specifically, the Monitor found that the  
            Former Bureau assessed fees on schools without the statutory  
            or regulatory authority to do so; due to the gross  
            deficiencies in the enforcement program, the Former Bureau  
            attempted to pursue enforcement by forcing schools to agree to  
            conditions before granting approval; and the Former Bureau  
            inappropriately required schools to submit re-approval  
            applications beyond what was required by law.

          The concerns and recommendations raised by the Monitor were  
          generally consistent with concerns raised by the California  
          Postsecondary Education Commission (CPEC) in 1995, an  
          independent report from Price Waterhouse in 1997, within a  
          Bureau of State Audit's report in 2000, and the DCA's own  
          internal investigation in 2002.  The Former Bureau, by the time  
          of its sunset, had not addressed many of its fundamental  
          problems with oversight and enforcement; however, as the  
          Monitor's report identifies, many of the root causes of  
          enforcement and oversight failures can be traced back to  
          deficiencies within the Former Act.  

          The Monitor's Report identified three major structural  
          deficiencies within the Former Act and made recommendations for  
          addressing those deficiencies:

          1)The Monitor indicated that the Former Act's different  
            standards and requirements for different categories of  








                                                                  AB 2746
                                                                  Page  20

            institutions were inherently complex and recommended a  
            consolidated system that would apply to all institutions.  

          2)The Monitor noted the 9 to 12 month time frame for granting  
            approval to new institutions was insufficient, leading to the  
            Former Bureau heavily relying on temporary approvals.  The  
            Monitor recommended establishing an approval process for  
            institutions similar to the process for institutions to obtain  
            accreditation, lasting two to three years, and allowing the  
            Bureau to monitor the institution as it matures and  
            demonstrates its ability to comply with the state's standards  
            and requirements.  

          3)The Monitor found that the Former Act's sanctions and  
            penalties were insufficient to deter future misconduct by  
            industry participants and recommended providing the Bureau  
            with the authority to issue formal warning notices, increasing  
            fine amounts, and separating the enforcement process from the  
            renewal process.

          The Monitor made several other recommendations including:  
          allowing consumers to access enforcement and other public  
          documents via the Bureau's website; improving the approval  
          process to have schools evaluated over the course of years;  
          establishing a proactive enforcement program to target  
          unapproved schools; simplifying the institutional approval  
          applications process; revising the annual reporting statutes to  
          more clearly outline the Legislature's expectations of the  
          Bureau; adopting a meaningful minimum school financial standard;  
                                                                             completing initial site reviews within 4 to 6 months of schools  
          opening; implementing unannounced inspections as required by the  
          Former Act; seeking additional resources to allow for several  
          hundred site visits per year; levying higher fines to cover the  
          costs of implementing the Act; and allowing public access to  
          school complaint information via the Bureau's website.
           
          Does This Bill Meet Shared Goals for the Oversight of Private  
          Postsecondary Education?  

          As noted above, many of the deficiencies with the Former Bureau  
          can be directly linked to deficiencies within the Former Act.   
          As the Legislature sets out to establish a successor Bureau, the  
          Legislature should evaluate the degree to which the successor  
          Act corrects the statutory deficiencies identified in the Former  
          Act.  As with SB 823 (Perata), the private postsecondary  








                                                                  AB 2746
                                                                  Page  21

          oversight measure approved by this Committee in July 2007 and  
          now pending in the Assembly Appropriations Committee, this bill  
          is a work in progress that will likely undergo many changes and  
          alterations should it pass out of this Committee and continue to  
          move through the Legislature.  

          Many of the amendments recommended by Committee staff have been  
          incorporated into the April 9, 2008, amended version of this  
          bill.  However, the following policy questions are raised  
          without an attempt at reconciliation, those questions are for  
          the author and Legislature to consider should this bill move  
          forward.  

           Student Protections:   The paramount goal of any such law is the  
          protection of students, both to prevent abuse and to ensure  
          quality.  This bill contains an array of requirements aimed at  
          protecting students, including disclosures, rules for  
          cancellation and refunds, admission standards, enrollment  
          agreement requirements, restrictions on recruiting and false  
          advertising, and safeguards against disruption of class  
          schedules.  However, some requirements of the Former Act, such  
          as disclosure of placement and completion rates, clear notice of  
          non-transferability of credits, and a private right of action,  
          are not found in this bill.  Further, while there are many  
          specific institutional requirements outlined in this bill, the  
          majority of oversight and enforcement activities are left to  
          Bureau discretion and the adoption of implementing regulations  
          by the Bureau.  Until those regulations are implemented, it is  
          difficult to know how well the student protections and  
          institution monitoring and enforcement activities respond to the  
          concerns and recommendations raised by the Monitor.  The degree  
          to which these outlined protections will result in greater  
          protection for students will depend largely on the degree to  
          which the Bureau, and the students themselves, can and do take  
          action to ensure institutional compliance with the Act.  
           
          Regulatory Discretion:   As noted above, this bill outlines many  
          specific requirements for institutions; however, the adoption of  
          implementing regulations and the general enforcement of this Act  
          is largely left to the discretion of the Bureau.  This bill  
          contains permissive language, which allows rather than requires  
          the Bureau to take action to ensure the provisions of the Act  
          are followed.  While there are statutory examples of the  
          successful delegation of decisions to specific agencies, the  
          Former Bureau failed to demonstrate an ability to establish  








                                                                  AB 2746
                                                                  Page  22

          appropriate regulations to carry out its basic responsibilities.  
           The sponsor has informed committee staff that the language in  
          this bill is modeled after the permissive language contained in  
          other DCA statutory programs.  However, the Legislature may wish  
          to consider whether it is appropriate to remove some of the  
          Bureau's enforcement discretion, making enforcement activities  
          mandatory instead of discretionary.  
           
          Appropriate Exemptions:   No challenge is greater than deciding  
          which institutions need state oversight and which do not.  The  
          current version of this bill contains a mixture of exemptions,  
          including:

                  Title IV Financial Aid Participants  :   Institutions  
               participating in Federal Higher Education Act Title IV  
               financial aid programs are exempt from this Act.  This  
               provision aims at exempting institutions accredited by a  
               USDE-approved accrediting body, meaning that the  
               institution provides basic student support services and has  
               some level of ongoing oversight by the USDE.  In evaluating  
               institutions for Title IV programs, the USDE examines three  
               major factors including institutional eligibility (based on  
               accreditation and other factors), administrative  
               capability, and financial responsibility.  While this  
               exemption largely focuses the Bureau's resources on  
               unaccredited schools, where it can be argued that private  
               loan and other abuses are more prevalent, the Legislature  
               may wish to clarify the scope of the exemption should this  
               bill move forward.  For example, in order to qualify for  
               this exemption, should these institutions also be required  
               to participate in the Cal Grant program?  And, are there  
               areas where the state should keep some oversight of  
               institutions, such as institutions granted provisional  
               approval or those who have received a negative  
               accreditation action?  The Legislature may also wish to  
               require the Legislative Analyst's Office to examine and  
               report on the sufficiency of this exemption.

                  Programs Costing Less Than $2,500  :  Institutions that  
               provide educational programs for charges less than $2,500,  
               when no part of the charges are paid by state or federal  
               financial aid programs, are exempt from this Act.  The  
               threshold for exemption from the Former Act was $500, and  
               the threshold for exemption in SB 823 (Perata) is $1,000.   
               Should this bill move forward, the author and Legislature  








                                                                  AB 2746
                                                                  Page  23

               may wish to evaluate whether $2500 is an appropriate  
               threshold for exemption.   

                  Flight Instruction Institutions  :  This bill provides an  
               exemption for institutions certified to offer flight  
               instruction and aircraft maintenance by the Federal  
               Aviation Administration (FAA).  FAA-approved schools are  
               required to meet standards with respect to equipment,  
               facilities, personnel, and curricula.  It does not appear  
               that the FAA examines the financial solvency of these  
               institutions.  Recent examples of flight training schools  
               filing bankruptcy, such as the Nevada-based Silver State  
               Helicopters, and leaving students without certification and  
               with significant amounts of debt may be reason for the  
               author and the Legislature to reevaluate the  
               appropriateness of this exemption.

           REGISTERED SUPPORT / OPPOSITION  :   

           Support
           
          Department of Consumer Affairs (Sponsor)

          Support Based on the March 24, 2008 Version of this Bill:
               American InterContinental University
               Association of Independent California Colleges and  
          Universities
               Association of Reporter Training Schools
               Brooks Institute of Photography, Santa Barbara and Ventura 
               California Association of Private Postsecondary Schools
               California Culinary Academy, San Francisco
               California School of Culinary Arts, Pasadena
               Corinthian Colleges, Inc.
               International Academy of Design and Technology, Sacramento
               Kitchen Academy Hollywood and Sacramento
               Log Cabin Republicans
               Western Pacific Truck School

           Opposition 
           
          Opposition Based on the March 24, 2008 Version of this Bill: 
               Accredited Out of State Colleges and Universities in  
          California
               Association for Private Postsecondary Education in  
          California








                                                                  AB 2746
                                                                  Page  24

               Center for Public Interest Law
               Consumer Attorneys of California
               Consumers Union
               Education Management Corporation
               Institute for Advanced Study of Human Sexuality
               Legal Aid Foundation of Los Angeles
               Service Employees International Union, Local 1000
               Sanville Institute
               Western Institute for Social Research
           
          Analysis Prepared by  :    Laura Metune / HIGHER ED. / (916)  
          319-3960