BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Kevin de León, Chair
SB 1069 (Torres) - Student Tuition Recovery Fund Claims
Amended: April 29, 2014 Policy Vote: Education 8-0,
BP&ED 9-0
Urgency: No Mandate: No
Hearing Date: May 12, 2014 Consultant: Jacqueline
Wong-Hernandez
This bill meets the criteria for referral to the Suspense File.
Bill Summary: SB 1069 requires the Bureau for Private
Postsecondary Education (BPPE) to adopt regulations to make
students who utilize a Cal Grant, a Pell Grant, or both,
eligible to apply for payment from the Student Tuition Recovery
Fund (STRF), as specified.
Fiscal Impact:
STRF: Potentially significant costs (Special Fund) to
reimburse claims by third party payers. Costs would depend
on how many BPPE-regulated institutions close in the future,
and how many students seeking STRF reimbursement also
received grants that would be eligible for repayment.
Cal Grant: Potentially significant General Fund savings, to
the extent that the state is reimbursed for Cal Grants
awarded to students who become eligible to receive
reimbursement from the STRF because their institutions close
or lose accreditation.
Administration: Potentially significant workload, likely
necessitating at least one additional PY, at a cost of
$75,000, to process new claims (Special Fund).
Background: Existing law, until January 1, 2015, establishes the
California Private Postsecondary Education Act of 2009, which
provides for the approval, regulation, and enforcement of
certain private postsecondary educational institutions by the
BBPE within the Department of Consumer Affairs. (Education Code
§ 94800-94950)
Among other things, the CPPE Act requires the BPPE to adopt
regulations and procedures governing the administration and
maintenance of the STRF, including requirements relating to
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assessments on students and student claims against the STRF. The
STRF exists to relieve or mitigate economic losses suffered by a
student in an educational program at a qualifying institution if
the student was a California resident.
To fund STRF, institutions are required to charge students fifty
cents ($.50) per one thousand dollars ($1,000) of institutional
charges, rounded to the nearest thousand dollars which the
institution then submits to BPPE as payment into the fund.
Students seeking reimbursement from STRF must submit a claim and
supporting documents to BPPE. BPPE staff review the claim, and
determine whether to approve or deny the claim.
Current law limits the amount in the STRF to no more than $25
million at any time.
(EC § 94923)
Current law authorizes the Cal Grant Program, administered by
the California Student Aid Commission (CSAC), to provide grants
to financially needy students to attend college. The program
consists of the Cal Grant A, Cal Grant B, and Cal Grant C
programs, and eligibility is based upon financial need, grade
point average, California residency, and other eligibility
criteria, as specified. (EC § 69430-69433.9)
Proposed Law: This bill requires the BPPE to adopt regulations
regarding the administration and maintenance of the STRF to make
students who utilize a Cal Grant, Pell Grant, or both, eligible
to apply for payment from the fund. This bill's provisions
become operative only if the CPPE Act is amended or repealed to
delay or eliminate the January 1, 2015 sunset date.
Related Legislation: SB 1247 (Lieu) extends the CPPE Act, which
governs the regulation of private postsecondary educational
institutions and the operation of the BPPE, until January 1,
2019. That bill will also be heard in this Committee on May 12,
2014.
Staff Comments: The STRF exists to mitigate economic losses
suffered by a student at an institution regulated by the BPPE.
Bureau regulations define "economic loss" as a student's
tuition, cost of equipment and materials required for the
educational program, and interest on any student loan used to
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pay for such charges, collection costs and penalties. Those
regulations prohibit a student whose total charges were paid by
a third-party payer to be eligible to make a claim against the
STRF fund. As a result, a student who used a portion of their
Cal Grant eligibility at a now ineligible institution is not
able to seek repayment from the STRF for that portion of his or
her costs, and the CSAC cannot seek reimbursement.
Because Cal Grants are limited to the equivalent of 4 full-time
academic award years, the student has functionally lost a year
of his or her Cal Grant award eligibility; and, the state
General Fund has lost the money. This bill would allow the CSAC
to recoup the Cal Grant award amount. To the extent that the
student then, in turn, utilized the award at another
institution, "savings" would be eroded.
This bill is likely to result in an increase in claims at a time
when the BPPE is struggling to meet its current claim processing
workload. The average STRF claim takes 120 days to process, and
a recent Bureau of State Audits report found that some claims
took 290 days. The BPPE will likely require an additional staff
person to start, and possibly more, depending on the number of
claims. On average, the BPPE paid $5,284 per approved claim in
2012-13.
Staff notes that tuition funded by Pell and Cal Grants is not
currently subject to the assessment charged to students; so, any
reimbursement received by the state or federal government is
being funded by students who paid into the STRF.