BILL ANALYSIS AB 48 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 48 (Portantino and Niello) As Amended September 4, 2009 Majority vote ----------------------------------------------------------------- |ASSEMBLY: |70-4 |(June 2, 2009) |SENATE: | |(September 11, | | | | | | |2009) | ----------------------------------------------------------------- (vote not available) Original Committee Reference: HIGHER ED. SUMMARY : Renames the Bureau for Private Postsecondary and Vocational Education (Former Bureau) as the Bureau for Private Postsecondary Education (Bureau) within the Department of Consumer Affairs (DCA) and provides for Bureau oversight and regulation of private postsecondary institutions operating in California. Specifically, this bill : 1)Requires the Bureau to disclose on its internet website information on suspensions and revocations of an institution's approval to operate, as well as any enforcement action, including the issuance of a notice to comply, taken against an institution by the Bureau. 2)Authorizes the Bureau to take specified action to cease unlawful advertising including disconnecting the telephone services of an institution if the Bureau finds that the institution is advertising in a telephone directory without an approval to operate issued by the Bureau. 3)Removes the Former Bureau from provisions of law requiring ongoing review by the Joint Committee on Boards, Commissions, and Consumer Protection. 4)Establishes the California Private Postsecondary Education Act of 2009 (Act) and provides that any statutory or regulatory reference to the Private Postsecondary and Vocational Education Reform Act (Former Act) or Former Bureau shall be construed as referring to the Act and Bureau. 5)Makes various findings and declarations regarding the importance of private postsecondary institutions, previous failures to regulate these institutions, the importance of AB 48 Page 2 Bureau oversight of private postsecondary institutions, and the need for ongoing review of Bureau activities by the Legislature. 6)Provides for a transition to the provisions of the Act, including: a) 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) An institution that had an application to renew an approval to operate pending before the Former Bureau prior to January 1, 2006, shall be granted approval until 2012, and an institution that submitted an application to renew an approval to operate after January 1, 2006, shall be granted approval to operate until 2013; students enrolling in these institutions are required to be notified in writing by the institution that the institution's renewal application was not reviewed by the Bureau; c) Provides that the Bureau may determine that the application for approval to operate that was pending with the Former Bureau satisfies the requirements of the new application for an approval to operate; d) The Bureau shall adopt emergency regulations that conform to the provisions of the Act, including repealing provisions no longer relevant, by February 1, 2010, and these regulations shall become permanent through the regular rulemaking process within one year of the date of enactment of the Act; e) The Bureau shall have possession and control of all records, supplies, and real property used by the Former Bureau; f) The Private Postsecondary and Vocational Education Administration Fund be continued and renamed to the Private Postsecondary Education Administration Fund (PPEAF); g) The Student Tuition Recovery Fund (STRF) be continued and provides that processing of claims pending before STRF that were received prior to July 1, 2007, or any claims received between July 1, 2007, and December 31, 2009. AB 48 Page 3 Provides that a student's right to recover from STRF shall be based on the law that was in effect at the time the student enrolled in the institution and paid a STRF fee; h) An institution that had an application for an approval to operate pending before the Former Bureau on July 1, 2007, and an institution that did not have a pending application filed with the Former Bureau on June 30, 2007, that began operations on or after July 1, 2007, may continue to operate but must comply with the Act and submit an application for approval to operate within six months of the application becoming available; students enrolling in these institutions must be notified in writing by the institution during the enrollment process that the institution's application for approval to operate was not reviewed by the Bureau; and these institutions shall not use the terms "approval," "approved," "approval to operate," or "approved to operate" without clearly stating that the application for approval to operate has not yet been reviewed by the Bureau; i) 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. Provides that student complaints received from July 1, 2007 through December 31, 2008, shall continue to be duly recorded and investigated by the Bureau; and, j) 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 Act will be continued. 7)Provides that the Bureau shall adopt a process whereby an institution exempt under this article may request and obtain verification of their exempt status and allows the Bureau to charge a fee to the institution to cover any costs associated with the Bureau verifying the exemption. Exempts from the requirements of the Act and from the oversight of the Bureau: a) Institutions offering solely vocational or recreational educational programs; b) Institutions offering programs sponsored by trade, AB 48 Page 4 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 test preparation for examinations 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) Institutions owned, controlled, and operated and maintained by a non-profit religious organization that meet several other outlined requirements; f) Institutions that provide solely educational programs for total charges of $2500 or less, and do not offer degrees, with no part of the charges paid by state or federal student financial aid programs. Allows the Bureau to adjust this cost threshold based upon the California Consumer Price Index; g) Law schools that are accredited by the Council of the Section of Legal Education and Admissions to the Bar of the American Bar Association or a law school or law study program that is subject to the approval, regulation, and oversight of the Committee of Bar Examiners; h) Nonprofit public benefit corporations that are organized specifically to provide workforce development or rehabilitation services and accredited by an accrediting organization for workforce development or rehabilitation services recognized by the Department of Rehabilitation; i) Nonprofit institutions that have been accredited for at least 10 years, that have operated in the state for at least 25 years continuously, and that meet several other outlined conditions; j) Institutions accredited by the Accrediting Commission for Senior Colleges and Universities or the Accrediting Commission for Community and Junior Colleges and AB 48 Page 5 Universities of the Western Association of Schools and Colleges (WASC); and, aa) Until January 1, 2016, all other institutions that are accredited by a non-WASC Regional Accrediting Agency, except that these institutions are required to participate in the STRF. 8)Provides the Bureau with powers and duties, including: a) Provides the Director of DCA (Director) with the powers set forth in the Act; allows the Director to delegate the duties to a bureau chief, appointed by the Governor, subject to Senate Confirmation, and exempt from the State Civil Service Act; provides that the bureau chief may delegate any powers and duties to a designee; and provides that the Director may, in accordance with the State Civil Service Act, appoint and fix compensation of personnel; b) Requires the Bureau to, in accordance with the Administrative Procedures Act, adopt regulations by January 1, 2010 necessary to implement the Act in accordance with existing law; requires the Bureau to develop and implement an enforcement program to implement the Act, including a plan for investigating complaints filed with the Bureau; and requires the Bureau to develop a program to proactively identify unlicensed institutions, identify material or repeated violations of this chapter and regulations, and take all appropriate legal action; c) Requires the Bureau to maintain a Web site, to be kept current, with information provided by the institutions and establishes that the website shall include a searchable directory of all approved institutions, the status of the institution's approval to operate, the information provided by the institution in the annual report and the Student Performance Fact Sheet, and specified information regarding pending and finalized disciplinary actions taken against the institution, and an explanation of the Bureau's transition plan and scope of authority; d) Requires the Bureau to provide all of the aforementioned information to the California Postsecondary Education Commission; AB 48 Page 6 e) Requires the Bureau to conduct outreach to secondary and postsecondary school students about how to make informed decisions when selecting an institution and allows the Bureau to conduct workshops to assist institutions in complying with the provisions of the Act; f) Establishes a 12-member advisory committee to be comprised of consumer advocates, past or current students of institutions, representatives of institutions, employers, and public members. Provides for appointments to the advisory committee from the Senate Committee on Rules, Speaker of the Assembly, and Director. Requires the Bureau to actively seek input from, and consult with, the advisory committee regarding the development of regulations to implement this chapter; and, 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, establishes that the Bureau may facilitate reimbursements from an institution under evaluation to cover travel and per diem, and entitles visiting committee members to defense and indemnification. 9)Provides that, except for any institutions exempt from the Act, all private postsecondary institutions operating in California must have the approval of the Bureau and requires the Bureau, by January 1, 2011, to establish minimum operating standards for institutions. Establishes that approvals to operate shall be for five-year terms. Establishes a process for the Bureau to issue institutional approvals to operate, and to renew approvals to operate. 10)Requires prior authorization from the Bureau for institutions wishing to make substantive changes, such as a change in ownership or educational objectives, among other outlined changes. Provides that the institution's approval may be suspended or revoked for failing to obtain prior approval. Requires the Bureau to adopt regulations by January 1, 2011, establishing a process for reviewing requests for authorization to make substantive changes. Provides that an institution granted approval to operate by means of its accreditation shall make substantive changes in accordance with accreditation standards and shall notify the Bureau of the changes. AB 48 Page 7 11)Establishes fair business practices, which: a) Prohibits institutions from: using the seal of the state on a diploma, promising employment or otherwise overstating the availability of jobs in the local economy upon graduation, presenting or advertising specified information including inaccurate information, failing to include distance education information in advertisements, inaccurately advertising approval or accreditation status, using "help wanted" ads to solicit students, compensating or providing gifts to students for recruitment activities, making untrue or misleading statements, willfully falsifying or destroying documents, improperly implying approval or licensure or failing to completely disclose what approval or licensure means, directing an individual to violate the Act or persuading a student not to file a complaint, compensating an employee by bonus or commission for recruitment or student assistance except as specified, and requiring prospective students to provide personal contact information before being granted access to educational program information via the institution's internet website, among other outlined prohibited practices; 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; and prohibits, during the period of attendance, changing the day or time of the class unless certain other requirements are met; prohibits institutions from moving the location of classes more than 25 miles without meeting certain requirements; and prohibits 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; and, 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 AB 48 Page 8 institution from requiring more than one term (up to 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. 12)Requires an institution to maintain specified student and educational program records for not less than five years. Provides that the recordkeeping requirements do not apply to accredited institutions so long as the institution is required to abide by similar recordkeeping requirements under the accreditation. 13)Establishes various requirements for enrollment agreements, and catalogs Student Performance Fact Sheet disclosures to students, which: a) Provides that students enroll solely by signing an enrollment agreement; and outlines the conditions that must be met for it to be enforceable; b) Prohibits students from waiving any terms or receipts of any disclosure; c) Requires an "ability to benefit student" (defined as a student without a certificate of graduation from a school providing secondary education) to take a United States Department of Education (USDE) prescribed examination and achieve a USDE specified score showing the student may benefit from the training offered before executing an enrollment agreement; d) Requires institutions offering programs in professions that require licensure to provide a potential enrollee with a written copy of the requirements for state licensure, prohibits execution of an enrollment agreement with a student known to be ineligible for licensure unless the student's stated objective is other than licensure, and establishes limitations and disclosure requirements if an institution discusses internships or student job AB 48 Page 9 availability during the enrollment process; e) Requires an enrollment agreement to be written in easily understood language, entitles a student to a clear explanation of the agreement in his/her primary language, as specified, and requires the agreement and related disclosures be in the same language used in recruitment; f) Prohibits an enrollment agreement from requiring a student to invoke internal institutional dispute procedures before enforcing any contractual or other legal rights or remedies; g) Requires information or statements required to be included in the catalog, School Performance Fact Sheet, or enrollment agreement to be printed in at least the same size font as the majority of the text in that document; h) Requires an institution to provide a school catalog to a student prior to enrollment that includes, at minimum 15 specified categories of information and disclosures; i) Requires an institution to provide a prospective student a School Performance Fact Sheet containing completion rates, placement rates, license examination passage rates, if applicable, and salary and wage information, if the school makes any express or implied claims related to preparing students for a particular career, occupation, vocation, trade, job or job title; and, j) Requires an enrollment agreement to include at minimum, 10 specified categories of information and disclosures. 14)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. 15)Establishes specified requirements for student cancellations, AB 48 Page 10 withdrawals, and refunds. 16)Provides that the Bureau shall adopt regulations governing the administration and maintenance of STRF, including requirements related to assessments on students and student claims against STRF; provides that STRF monies are continually appropriated to the Bureau; and provides that STRF may not exceed $25 million at any time. Provides that DCA may disperse claims after the sunset of the Bureau until all claims or paid or until the fund becomes insolvent. 17)Establishes specified requirements for institutional closures and teach-outs. 18)Requires each institution to annually report to the Bureau and to annually publish specific data, such as completion rates and job placement rates, in its School Performance Fact Sheet. 19)Establishes a specified fee schedule and provides that all fees collected are to be, upon appropriation by the Legislature, used for Bureau expenditure to cover the cost of administering the Act. Provides that the Bureau may change fee amounts under specified circumstances. Provides for late payment penalties to be assessed against institutions failing to submit fee payments within the Bureau-specified timeline. 20)Establishes processes and penalties in regards to compliance with and enforcement of the Act, including: a) Establishes that the Bureau shall determine any institution's compliance with the 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 shall conduct an investigation of that institution, and if the Bureau finds the institution has violated any applicable law or regulation, requires the Bureau to take appropriate action; b) Provides that, as part of its compliance program, the Bureau shall perform announced and unannounced inspections of institutions at least every two years. Provides that on AB 48 Page 11 or before January 1, 2011, the Bureau shall adopt regulations setting forth policies and practices to ensure that institutions are subject to an equal number of announced and unannounced inspections for each two-year period. The regulations shall also set forth policies and practices for providing notice to students enrolled at an institution of the results of each inspection of the institution; c) Provides that the Bureau shall 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 and depending on the severity of the violation; d) 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, 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; e) Requires Bureau staff who detect a minor violation of the Act during inspection, to issue a notice to comply before leaving the institution; establishes a process for the issuance of a notice to comply, and requires the Bureau to take administrative enforcement action against an institution that fails to correct the issues raised in a notice to comply within 30 days; f) Requires, as a consequence of an investigation and upon a finding that the institution has committed a violation, 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, and/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 AB 48 Page 12 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 PPEAF; g) Allows the Bureau to place an institution on probation or suspend or revoke an institution's approval to operate for fraud or for material or repeated violations of the Act that have caused harm to students. Defines "material violation" to include, but not be limited to, misrepresentation, fraud in the inducement of a contract, and false or misleading claims or advertising, upon which a student reasonably relied in executing an enrollment agreement and that resulted in harm to the student. Provides that the Bureau shall adopt regulations governing probation and suspension of an approval to operate and that the Bureau may seek reimbursement from an institution, but provides that an institution shall not be responsible for paying the cost of an investigation to more than one agency; h) 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; i) Provides that the Bureau may bring an action for equitable relief for violations of the 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; j) Provides 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 provides the Bureau with authority to take appropriate administrative AB 48 Page 13 enforcement action upon discovering the facts in regards to the complaint; aa) Provides that if the Bureau finds that an institution's violation of the 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; bb) Requires the Bureau to establish a toll-free telephone number staffed by a Bureau employee by which a student or member of the public may file a complaint under the Act. Provides that the Bureau shall make a complaint form available on its Internet Web site and that the Bureau shall permit members of the public to file a complaint under the Act through the Bureau's Internet Web site; cc) Establishes that knowingly operating an institution without approval or knowingly providing false information to the Bureau shall be considered infractions and are public offenses; dd) 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; ee) Provides that the Bureau may not subject any person to a fine exceeding $50,000 for operating an institution without Bureau approval; ff) Provides that each institution subject to the Act shall be deemed to have authorized the Bureau or accrediting agency to provide the Attorney General (AG), district attorney, or city attorney copies of all documents and other materials concerning the institution. Requires an accrediting agency to provide such materials free of charge within 30 days of receiving written notice to share documents; and, gg) Provides that nothing in the Act shall preclude the enforcement of rights or remedies under any other applicable statute, or limit or preclude the AG, a district attorney, or a city attorney from taking any action AB 48 Page 14 otherwise authorized under any other applicable statute or law. 21)Provides for severability of the Act, in that, if any provisions in this Act are held as invalid, that invalidity shall not affect other provisions, so long as those provisions do not require the invalid provisions in order to be applied. 22)Requires the Legislative Analyst's Office, by October 1, 2013, report to the Legislature and the Governor on the appropriateness of the exemptions provided by the bill. 23)Requires the Bureau to contract with the Bureau of State Audits (BSA), by August 1, 2013, to conduct a performance audit to evaluate the effectiveness and efficiency of the Bureau operations. The BSA is required to report the results of the audit to the Legislature and the Governor. Appropriates $270,000 from the PPEAF to the BSA for the costs of the audit. 24)Repeals the Act on January 1, 2016, unless a later statute is enacted to extend this date. 25)Appropriates $580,000 from the Former Act 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. The Senate amendments add findings and declarations; expand the number of institutions that are exempt from Bureau oversight; make the Bureau Chief subject to Senate confirmation; expand the information that is to be reported on the Bureau's Web site; strengthen the role of the advisory committee and provide for Legislative appointments to the advisory committee; establish specified institutional fee amounts in the fee schedule; expand Bureau enforcement authority; increase the number of disclosures that institutions are required to provide to students; and other technical and non-technical clarifying changes. EXISTING LAW relating to the regulation of private postsecondary education is inoperative. Recently inoperative statute expressed the intent of the Legislature to provide for the protection and interests of students and institutions that have AB 48 Page 15 matters pending under the Former Act, which became inoperative on July 1, 2007; provided for the continuation of all matters pending before the Former Bureau on July 1, 2007, until July 1, 2008; and allowed, until July 1, 2008, limited state oversight of private postsecondary schools by the DCA. The statutes became inoperative on July 1, 2008. AS PASSED BY THE ASSEMBLY, this bill was substantially similar to the version passed by the Senate. FISCAL EFFECT : According to the Senate Appropriations Committee: Fiscal Impact (in thousands) Major Provisions 2009-10 2010-11 2011-12 Fund Bureau operations $5,385 $8,411 $8,411 Special* - Fee revenue** ($5,038) ($10,076) ($10,076) Appropriation $580 Special* Reporting requirements $220-$270 Special* * PPEAF ** 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. COMMENTS : Purpose of this bill : According to information from DCA, there are approximately 1,500 private postsecondary institutions that had been approved by the Former Bureau to operate in California. This includes approximately 1,200 vocational training schools and 300 branch satellites, as well as, approximately 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 establish the Bureau's authority to regulate private postsecondary institutions and enforce the provisions of the Act. AB 48 Page 16 Overview of previous private postsecondary regulatory attempts : 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 was enacted to overhaul the state's regulatory program, transferring oversight responsibility for the program to a 20-member Council. Concurrently, the Maxine Waters School Reform and Student Protection Act (Waters Act) was 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 January 1, 2007. In 2004, in response to the persistent problems with the Former Bureau, the Legislature enacted SB 1544 (Figueroa), Chapter 740, Statutes of 2004, 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, 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 concerns and recommendations raised by the Monitor were generally consistent with concerns raised by the California Postsecondary Education Commission in 1995, an independent report from Price Waterhouse in 1997, a BSA 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. Analysis Prepared by : Laura Metune / HIGHER ED. / (916) AB 48 Page 17 319-3960 FN: 0003073