BILL ANALYSIS                                                                                                                                                                                                    Ó



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          Date of Hearing:   June 10, 2014

                       ASSEMBLY COMMITTEE ON HIGHER EDUCATION
                                 Das Williams, Chair
                      SB 1247 (Lieu) - As Amended:  June 5, 2014

           SENATE VOTE  :   33-3
           
          SUBJECT  :   California Private Postsecondary Education Act of  
          2009.

           SUMMARY  :   Extends the sunset date for the California Private  
          Postsecondary Education Act of 2009 (Act) from January 1, 2015  
          until January 1, 2017; and, provides for an array of statutory  
          changes to the governance structure, the protections provided to  
          students, and the requirements placed on private postsecondary  
          educational institutions (institutions).  Specifically,  this  
          bill  :   

          1)Reestablishes the Bureau for Private Postsecondary Education  
            (BPPE) as the Board for Private Postsecondary Education  
            (Board) and provides for transition to the Board.

             a)   Provides that the Board consists of 11 members,  
               appointed as follows:

               i)     Three with a record of advocacy on behalf of  
                 consumers, one appointed by the Governor, one by the  
                 Senate Rules Committee, and one by the Assembly Speaker;

               ii)    Two current or former students of institutions,  
                 appointed by the Governor;

               iii)   Three representatives of institutions, appointed by  
                 the Governor;

               iv)    Two public members with experience or expertise in  
                 postsecondary education, appointed by the Governor;

               v)     One public member with knowledge or expertise in  
                 emerging fields of employment, appointed by the Governor.

             b)   Provides that a member of the BPPE Advisory Committee,  
               which is deleted in this bill, is eligible to be appointed  
               to the Board.








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             c)   Provides for a transition period from the BPPE to the  
               Board until July 1, 2015.  

             d)   Provides that the executive officer of the Board shall  
               be appointed by the Governor and subject to confirmation by  
               the Senate Committee on Rules.

          2)Makes the following changes to institutions exempt from the  
            Act:

             a)   Prohibits an institution, as specified, that receives  
               federal veteran aid funding, as specified, from claiming an  
               exemption from the Act.   

             b)   Clarifies that an exempt flight school may not accept  
               prepayment of more than $2,500.

          3)Requires the Board to contract with the Office of the Attorney  
            General to establish training that ensures staff can  
            investigate complaints.

          4)Requires the Board, by January 1, 2016, to initiate the  
            procedures governing approval or denial of all applications  
            that are pending as of January 1, 2015. 

          5)Requires the Board to post a list of all institutions denied  
            an approval to operate, and describe the reasons for the  
            denial, on the Board internet website.  Requires a disclosure  
            on the website informing students that the institutions were  
            denied approval to operate, are not in compliance with the  
            law, and that students are discouraged from enrolling in  
            unapproved institutions.

          6)Requires the Board to establish a task force to identify  
            standards for educational and training programs specializing  
            in innovative subject matter and instructing students in high  
            demand technology fields and report to the Legislature, by  
            January 1, 2016, regarding appropriate levels of oversight of  
            these institutions.  Allows the Board to delay application  
            processing until January 1, 2016. 

          7)Requires an unaccredited institution offering a degree that is  
            approved by BPPE as of January 1, 2015 to obtain and provide  
            evidence of accreditation by January 1, 2017.








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          8)Requires the Board to adopt regulations that ensure the  
            following students, and any other students deemed appropriate,  
            are eligible for payment from the Student Tuition Recovery  
            Fund (STRF):

             a)   In the event of a school closure, a student who attended  
               the institution within 120 days;

             b)   A student to whom an institution has been ordered to pay  
               refunds by the board but has failed to do so;

             c)   Students who have been awarded restitution, refunds or  
               monetary awards by an arbitrator or court, but who have  
               been unable to collect the award from the institution;

             d)   Students whose programs have been discontinued at the  
               campus they attended before they were able to complete the  
               program; and,

             e)   Students who suffered losses due to an institution's  
               violation of this act.

          9)Requires the Board to report to the Legislature by October 1,  
            2015 regarding efforts to streamline the Board's approval  
            process for institutions while ensuring the same or similar  
            data information is reported to students in a clear and  
            conspicuous manner.

          10)Removes authority for the Board to adjust annual fees for  
            individual institutions based on cost of providing oversight  
            of individual institutions.

          11)Requires announced and unannounced compliance inspections to  
            be conducted at least every five years, rather than every two  
            years, and requires the Board to adopt regulations that set  
            forth inspection policies to ensure that student protections  
            are the highest priority and that inspections are conducted  
            based on risk and potential harm to students.

          12)Requires the Board to establish a timeline by which  
            complaints are processed, and to establish procedures to  
            prioritize complaints as urgent, high-priority, and routine.

          13)Provides that if the Board has reason to believe that an  








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            institution's noncompliance with the provisions of the Act  
            significantly transcends the interests of the individual  
            complainant or the Board has determined that the complexity of  
            the case requires additional expertise and resources, the  
            Board shall contract with the Attorney General for  
            investigative and prosecutorial services.   

          14)Requires the Board to contract for an independent review of  
            staffing resources and provide the Legislature, within 30 days  
            of the review, a copy of this review along with an overview of  
            how the board intends to ensure staff is sufficiently  
            qualified for purposes of implementing the Act.

          15)Provides for various clean-up, technical, and non-substantive  
            changes to the Act.

          16)Extends the sunset date of the Act to January 1, 2017.

           EXISTING LAW  provides for, until January 1, 2015, student  
          protections and regulatory oversight of institutions in the  
          state pursuant to the Act.  The Act is enforced by BPPE within  
          the Department of Consumer Affairs (DCA).  (Education Code  
          §94800 et seq.)

           FISCAL EFFECT  :  Unknown.  According to the Senate Appropriations  
          Committee, the Governor's proposed 2014-15 budget would  
          appropriate approximately $11 million in state operations  
          funding to the BPPE (Special Fund). This proposal increases BPPE  
          funding by $1.6 million (for 11 new positions) above the 2013-14  
          level; the 2013-14 Budget Act appropriation was approximately  
          $1.4 million more than the previous year.   

           COMMENTS  :   Double-referral  .  This bill is double-referred to the  
          Assembly Business, Professions and Consumer Protection  
          Committee.

           Need for oversight  .  California's Master Plan for Higher  
          Education provides for recognition and establishes the missions  
          of the state's public and "independent" (non-profit,  
          degree-granting, accredited) segments of higher education.  In  
          1960, at the Master Plan adoption, for-profit postsecondary  
          education primarily existed as small, local certificate  
          programs.  

          Today, however, for-profit colleges are the fastest growing  








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          postsecondary schools in the nation.  According to the Center  
          for Analysis of Postsecondary Education and Employment (CAPSEE),  
          for-profit colleges enroll a disproportionately high share of  
          Black and Latino students, students from low-income households,  
          single parents, older/return students, and first-generation  
          college students.  CAPSEE notes that these colleges offer  
          baccalaureate and graduate-level degrees, in addition to  
          certificate and diploma programs.  CAPSEE notes that accredited  
          for-profit institutions receive most of their revenue from  
          taxpayer-funded sources; during the 2009-10 academic year,  
          for-profit institutions received $32 billion in federal grants  
          and loans.  According to the Veterans Legal Clinic, in 2011,  
          eight of the 10 largest recipients of GI Bill money disbursed  
          were for-profit colleges.

          According to the National Conference of State Legislatures  
          (NCSL), the over 12% of students that choose for-profit  
          institutions (an increase of 225% since 2000-01) often do so  
          because local community colleges have exceeded enrollment  
          capacities, and for-profit colleges offer flexible scheduling,  
          year-round enrollment, online options, small class sizes and  
          convenient locations.  Additionally, according to the federal  
          Government Accountability Office (GAO), for-profit colleges  
          focus on recruitment and enrollment activities; among 30  
          companies investigated, 41.8% of revenue went to marketing,  
          recruiting and profits, while only 17.7% to instruction  
          activities.  According to the a United States Senate analysis,  
          "in 2010, the for-profit colleges examined employed 35,202  
          recruiters compared with 3,512 career services staff and 12,452  
          support services staff, more than two and a half recruiters for  
          each support services employee."

          The United States Department of Education (USDE) data shows  
          students from for-profit colleges are twice as likely to default  
          on student loans as students from public or private non-profit  
          schools.  Students at for-profit colleges also tend to borrow  
          more, sometimes as much as $60,000 for two-year associate  
          degrees.  USDE data also shows graduates of for-profits often  
          have a tougher time finding employment compared to other sectors  
          of higher education.  

          Concerns over the significant growth and questionable student  
          outcomes at many for-profit and career colleges have led many  
          and federal policymakers to seek to enact stronger oversight of  
          these colleges and universities.  At the federal level, rules  








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          ensuring students are "gainfully employed" upon graduation are  
          in the process of being enacted; and, July 1, 2014, federal  
          rules take effect to require all institutions that receive  
          public student aid funds to (1) be "authorized" by the state in  
          which they operate, and (2) to have a state-level student  
          complaint process.  Public institutions in California are  
          authorized by, and complaints are investigated by, their system  
          offices; independent institutions appear to be authorized by the  
          California Student Aid Commission and complaints handled by the  
          Office of the Attorney General.  For-profit institutions can  
          meet the authorization rules through regulation and oversight by  
          the BPPE (under a voluntary pathway established in the 2013-14  
          Budget Act). 

          At the state level, reforms to protect students and public  
          expenditures have also been enacted in recent years.  Reforms to  
          the Cal Grant Program link an institution's participation to the  
          percentage of students borrowing federal loans and the number of  
          students defaulting on those federal loans and the number of  
          students graduating within 150% of the scheduled program length.  
           In the 2014-15 academic year, 122 institutions (primarily  
          for-profit colleges) are ineligible to participate in the Cal  
          Grant Program; students at ineligible institutions are required  
          to transfer to an eligible institution in order to receive their  
          Cal Grant award.  
             
          California early regulatory efforts  .  Independent institutions  
          have operated in California for hundreds of years, largely under  
          the rules and requirements governing non-profit entities.   
          For-profit colleges and non-profit certificate programs entered  
          the regulatory structure in the early 1990's.  In response to a  
          lack of meaningful state-level oversight, and a growing  
          reputation as the diploma mill capitol of the world, California  
          established the Private Postsecondary and Vocational Education  
          Council (Council), an independent 20-member body, to oversee the  
          sector.  

          According to the California Postsecondary Education Commission  
          (CPEC) review of the Council in 1995, the Council adequately  
          protected consumers while reflecting a balanced recognition of  
          institutional rights.  CPEC recommended a repeal of the sunset  
          date, allowing the law to operate indefinitely, and  
          strengthening the law to ensure appropriate enforcement powers  
          and punitive measures to address violations.  









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          However, in 1996, in response to concerns raised by the  
          institutional trade association that fees were too high and  
          regulation too burdensome, Governor Pete Wilson vetoed  
          legislation to extend the sunset date of the Council (AB 2960,  
          Firestone and Campbell), noting that despite the Council having  
          done much to rid California of its prior diploma mill status,  
          the Council's activities were negatively impacting institutional  
          owners livelihood.  

          In 1997, AB 71 (Wright) and AB 1286 (Calderon) were introduced.   
          Initially, AB 71 extended the sunset date for the Council while  
          AB 1286 transferred the responsibilities of the Council to the  
          Bureau for Private Postsecondary and Vocational Education  
          (BPPVE) within the DCA.  It was reported that the Governor's  
          Office supported moving the functions of the Council to the DCA.  
           Ultimately, AB 71 was amended to transfer Council functions to  
          the BPPVE within the DCA, and was subsequently signed into law  
          by Governor Wilson.     
           
          Regulatory efforts at DCA by BPPVE  .  The BPPVE operated at DCA  
          from 1998 through 2007.  In 2000, the California State Auditor  
          found that DCA was not fulfilling its oversight  
          responsibilities.  In 2002, an internal DCA audit made a number  
          of recommendations to BPPVE to improve operations and during the  
          2002 Legislative sunset review hearings, BPPVE committed to,  
          among other activities, simplify and streamline procedures and  
          adopt regulations that ensured comprehensive and effective  
          application of the law.  In 2005, an Operations Monitor report  
          found that BPPVE had not addressed many of the fundamental  
          problems with oversight and enforcement; finding that the BPPVE  
          both inadequately protected consumers and impeded the expansion  
          of quality postsecondary and vocational educational  
          opportunities.  In 2007, the BPPVE was allowed to sunset.  At  
          the time of its sunset, the BPPVE 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 lack of  
          funding, insufficient staffing, and confusing and conflicting  
          provisions of law.  

           Establishment of the BPPE  .  On January 1, 2010, AB 48  
          (Portantino), Chapter 310, Statutes of 2009, created the Act;  
          the bill established new minimum standards and disclosure  
          requirements for institutions and provided the BPPE an array of  
          enforcement tools to ensure institutions comply with the new  








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          law.  Specifically, BPPE:

           1)Licenses  approximately 1,200 non-exempt private postsecondary  
            educational institutions, serving over 300,000 students,  
            operating in California.  The Licensing process is designed to  
            ensure that institutions meet minimum operating standards.   
            Accredited institutions are provided approval by means of  
            their accreditation (meaning BPPE does not review these  
            institutions at the point of licensure).

          2)Conducts announced and unannounced  compliance inspections  of  
            licensed/approved institutions on a two-year cycle.   
            Inspections are designed to ensure institutions are in  
            compliance with minimum operating requirements.  If a  
            compliance inspection uncovers a minor violation, the  
            institution is provided a notice and the opportunity to  
            correct.  If a compliance inspection uncovers a material  
            (major) violation, the compliance inspector makes a referral  
            for an investigation of the violation.

           3)Investigates  complaints received by the general public and  
            internal investigative referrals.  Most investigations are  
            handled internally by BPPE staff; however, BPPE does have  
            authority (and has utilized) the DCA Division of  
            Investigations for complaints that require undercover  
            investigations and/or the presence of a sworn peace officer.    
               
                 
            4)Disciplines  institutions that have been found in violation of  
            law through citations (handled by BPPE staff) and formal  
            actions (BPPE is represented by the Office of the Attorney  
            General).  
                 
           5)Administers the  Student Tuition Recovery Fund  (STRF) to  
            provide refund to students affected by the closure of an  
            institution.  
                
          6)Collects data through  Annual Reports  provided by  
            licensed/approved institutions.  

           It should be noted that the Act provides a significant amount of  
          discretion to the BPPE/DCA in regards to the use of oversight  
          and enforcement powers.  As outlined in the committee analysis  
          of AB 48, "The degree to which the student protections outlined  
          in this bill will result in greater protection for students will  








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          depend largely on the degree to which the Bureau takes action to  
          ensure institutional compliance with this Act."
            
          The Bureau's ability to enforce the Act appears to have been  
          significantly impacted by delays in staffing and overall  
          understaffing.  The Act became effective on January 1, but it  
          wasn't until the passage of the 2010-11 Budget Act, on October  
          8, 2010, that BPPE was appropriated funding to support  
          operations.  At that time, a statewide hiring freeze impacted  
          BPPEs ability to fill positions in a timely manner.  It wasn't  
          until May 2012 that BPPE had filled all 57 authorized positions.  
           Of note, BPPE was initially provided 71 positions to support  
          operations; subsequent statewide personnel reductions (required  
          of the Administration despite the BPPE operating fund having  
          more than adequate revenue to support 71 positions) reduced  
          positions to 57.  Significant backlogs in the processing of  
          licensing applications led to the authorization of 9 additional  
          limited-term positions in the 2013-14 Budget Act.  Currently,  
          the 2014-15 Budget Act proposes an additional 11 positions to  
          support enforcement activities.  
              
           BSA review of the BPPE  .  In March 2014, the California State  
          Auditor released an audit report, as required by AB 48, which  
          reviewed the effectiveness and efficiency of BPPE operations.   
          The report found that BPPE has consistently failed to meet  
          responsibilities to protect the public's interest.   
          Specifically, the report notes that BPPE failed to conduct  
          compliance inspections, failed to identify and sanction  
          unlicensed institutions, failed to appropriately respond to  
          complaints against institutions, and failed to ensure students  
          were provided with accurate disclosures prior to enrollment.   
          The Auditor made a number of recommendations to BPPE/DCA;  
          generally BPPE/DCA agreed with the auditor's assessment and  
          recommendations.  Since release of the audit report, the BPPE  
          Bureau Chief has worked to identify solutions and take  
          corrective actions.     
           
          Major issues addressed in this bill  .  The major changes to the  
          Act proposed in this bill were discussed on April 21, 2014, at a  
          Joint Oversight Hearing that included the Senate Business,  
          Professions and Economic Development Committee, the Senate  
          Education Committee, the Assembly Business, Professions and  
          Consumer Protection Committee, and the Assembly Committee on  
          Higher Education (Sunset Hearing).  These changes include:









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           1)Bureau to Board  .  This bill would reconstitute BPPE as a board  
            comprised of members from specified categories with experience  
            and expertise in postsecondary education.  As discussed at the  
            Sunset Hearing, after numerous audits and analyses by internal  
            and outside agencies,  multiple legislative investigations and  
            significant public comment, "it has become abundantly clear  
            that the bureau structure at DCA for oversight of private  
            postsecondary institutions does not work."  The author  
            believes that an  independent board structure would allow for  
            increased public accountability and could provide clear  
            direction to a regulatory entity about its functions,  
            operations, priorities and organization, providing inherent  
            leadership and a clear path to fulfill its mission through the  
            transparent decision making process undertaken by board  
            members, in compliance with public meeting requirements.      

            The California Coalition of Accredited Career Schools (CCACS)  
            argues that transitioning the BPPE to a Board would be  
            disruptive and impact ongoing BPPE responsibilities.  CCACS  
            also argues that there has not been proper analysis as to why  
            a board would function better to protect the interests of  
            students and the public.

            The Center for Public Interest Law (CPIL) argues that a Board  
            will ensure meaningful and sensible sunset review through the  
            ability to hold board members responsible for Board actions,  
            and transparency and accountability through Bagley-Keene Open  
            Meeting requirements.  CPIL notes that "the seemingly  
                       intractable administrative and operational problems that have  
            afflicted this government agency warrant trying a different  
            accountability structure.  A board may not be better but we  
            know that the BPPE has recently been insufficient, as  
            repeatedly documented by outside monitors, most recently the  
            Bureau of State Audits. It is time to try something new."

            To address board transition and management, ensure sufficient  
            postsecondary education expertise, and provide ongoing support  
            to the Board and Executive Officer, Committee staff recommends  
            establishing between three and five deputy positions. 

            Committee staff also recommends providing statutory guidance  
            to carry over existing BPPE regulations in Education Code  
            section 94877, but providing the Board clear authority to  
            amend those regulations, or promulgate new regulations, as  
            necessary.     








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            Committee staff notes that, according to CPIL, "over the past  
            four decades, owing to pressure from the Legislature mindful  
            of the problem of regulatory capture, the composition of the  
            state's regulatory boards has changed, such that non-health  
            boards consist of a majority of public members. In SB 1247,  
            there needs to be a clearer majority of those who do not  
            directly or indirectly have ties to the entities being  
            regulated.  The author may wish to review this matter in the  
            Assembly Business, Professions and Consumer Protection  
            Committee.
          
           2)Licensing backlog  .  According to the California State Auditor,  
            BPPE faces a significant backlog in licensing applications.   
            BPPE has established internal timelines for application  
            review, but these timelines have not been met in large part  
            due to the existing application backlog.  In the 2013-14  
            Budget Act, BPPE was appropriated funding to support 8  
            additional licensing analysts.  These positions have been  
            filled and, according to the Chief, BPPE is working to clear  
            the licensing backlog.  This bill would require all  
            applications pending on January 1, 2015 to be acted on by  
            January 1, 2016.   
             
            To address ongoing licensing timelines, Committee staff  
            recommends enacting statutory guidance on appropriate  
            timelines for accredited and unaccredited application  
            processing; appropriate timelines can be taken from BPPE  
            current goals.   
                 
            3)Unlicensed activity  .  BPPE is required under the Act to  
            proactively identify unlicensed institutions.  However,  
            according to the State Auditor, as of January 2014, BPPE did  
            not have a program, nor the dedicated staff and resources, to  
            identify and take action against institutions operating  
            without a license.  BPPE's goals related to unlicensed  
            activity are to bring the institution into compliance with the  
            law and have them seek approval, but in some instances  
            compliance may not be the best option and BPPE may need to  
            take stronger steps to ensure that students are not taken  
            advantage of or deceived.  Some schools operating without  
            approval would never be able to obtain approval and swift  
            action, according to due process, may need to be taken.  This  
            bill would allow the Bureau to post institutional denials on  
            the Web site, with a specified consumer disclosure, to make  








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            consumers aware when an institution is operating without a  
            license and is unable to meet minimum operational standards.  

            Committee staff recommends an amendment to clarify that  
            institutional denial information shall be posted on the  
            website once the decision has been made final. 
                
           4)Coding academies.  A number of online programs, as well as  
            brick and mortar schools, provide technology-related skills  
            and training opportunities in an attempt to meet the need for  
            employees with a background in these specialized areas.  These  
            "coding boot-camps" are not accredited and do not accept Title  
            IV money; however, many students borrow significant sums of  
            money through private loans, credit cards, or friends and  
            family, to pay for the program and the time away from work.   
            In January, BPPE issued cease and desist letters to a number  
            of coding boot-camps, with the intention of bringing them into  
            compliance with the Act by becoming licensed.  Some of these  
            institutions have initiated the application process while  
            others have contacted the Legislature seeking an exemption  
            from state-level oversight.  This bill would require the Board  
            to establish a task force to review whether these types of  
            education and training programs should be provided special  
            consideration under the Act.  Committee staff notes that it is  
            unclear why institutions offering programs in technology  
            should be treated any differently than institutions offering  
            programs in other high demand fields, and suggests that the  
            author consider removing.

            The bill would also authorize the Board to delay processing  
            applications for these institutions until the work of the task  
            force is completed (January 1, 2016).  However, Committee  
            staff recommends removing this provision; institutions that  
            have sought Bureau approval should not have their applications  
            delayed at the discretion of the Board.  
               
           5)Veterans serving institutions  .  This bill would require that  
            for-profit institutions and non-degree granting non-profit  
            institutions receiving veteran benefits be approved by the  
            Board and subject to the Act.  This change is largely  
            consistent with the policy approved in AB 2099 (Frazier),  
            heard earlier this year; except that AB 2099 authorizes  
            for-profit institutions that meet the Cal Grant standard  
            (cohort default rate and graduation rate) to continue to be  
            exempt from the Act.  








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            According to a recent report by the Legislative Analyst's  
            Office (LAO), cohort default rates are susceptible to  
            manipulation by larger institutions.  According to LAO, many  
            large for-profit institutions employ "default management"  
            strategies to keep their rates below thresholds.  Strategies  
            include forbearance and deferment, with most students  
            ultimately increasing their total debt, and combining campuses  
            of multi-site institutions in ways that minimize the aggregate  
            default rate.  Some institutions encourage use of private  
            loans, which have less favorable terms for students but are  
            not included in default rate calculations.  

            According to information provided by the author, for-profit  
            schools have come under particular scrutiny for practices used  
            to recruit military veterans.  Recently, Attorney General  
            Kamala Harris filed suit against Corinthian Colleges, Inc.  
            (CCI) for false and predatory advertising, intentional  
            misrepresentations to students, securities fraud and unlawful  
            use of military seals in advertisements.  According to the  
            complaint, CCI included official Army, Navy, Air Force, Marine  
            Corps and Coast Guard seals in mailings and on Web sites.  

            The for-profit trade association (California Association of  
            Private Postsecondary Schools, CAPPS) opposes this change,  
            arguing it is unfair and punishes an otherwise exempt  
            institution.  CAPPS argues there is no policy justification  
            for this change.

            The Veterans Legal Clinic supports this proposal and argues  
            that " If a business elects to enroll veterans, ensuring the  
            business has at least been subject to some kind of  
            pre-screening for its quality, is required to provide the  
            veteran overall school performance information required by  
            California law prior to the veteran enrolling, and offering  
            the veteran a place to file a complaint and get it resolved  
            short of litigation, these are the least things we can do to  
            protect them and their one-time benefits."  

            The Veterans Legal Clinic has also recommended altering the  
            definition of "default" to include forbearance on repayment of  
            student loans - as an attempt to address cohort default rate  
            manipulation.  However, this change appears unnecessary based  
            on the requirement that all for-profit colleges that accept  
            Title 38 funds be approved by the Board.  Should this  








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            requirement be amended, the author may wish to reconsider this  
            recommendation. 

           6)Unaccredited degrees  .  This bill would require unaccredited  
            institutions offering degrees to obtain accreditation by  
            January 1, 2017.  According to the author, unaccredited  
            degrees can limit a student's career options.  Some career  
            fields and employers require degrees from accredited colleges;  
            this is especially true in professions like education and  
            health care, where certification or licensure is a  
            pre-requisite for employment.  The author believes students  
            will be better served, and the Bureau's workload decreased, by  
            amending the Act to require that degree granting programs be  
            accredited.  Unaccredited programs would still be able to  
            operate in the state and receive approval, but instead could  
            offer certificates or other types of completion awards other  
            than a degree.  

            CAPPS opposes this requirement, arguing that "the legislature  
            has no expertise or reason to eliminate non-accredited degrees  
            other than an opinion (not factually proved) that these  
            degrees would be better as accredited. Many existing  
            non-accredited degrees are specialty degrees that are not  
            included in the scope of accreditation of any National  
            Accreditor or WASC."  Committee staff notes that this  
            requirement would not prohibit instruction in these areas, but  
            would require institutions that are unable to obtain  
            accreditation to refer to these educational attainments as  
            "degrees".  

            CAPPS notes that an accreditation cycle may take longer than  
            two years.  Committee staff understands that accreditation,  
            depending on the type of institution and the rigorousness of  
            the accreditor, may require a timeline beyond two years.  It  
            is not the intent of the author to discourage institutions  
            from seeking accreditation from accreditors with high quality  
            standards.  Therefore, Committee staff recommends an amendment  
            authorizing the Board to extend the two-year timeline for an  
            individual institution upon satisfactory evidence provided by  
            the institution that progress toward accreditation is being  
            made. 
             
          7)Student Tuition Recovery Fund  .  One important tool to assist  
            students is the Student Tuition Recovery Fund (STRF).  The  
            STRF is designed to relieve or mitigate losses suffered by  








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            students; the Bureau has regulations that limit student claim  
            eligibility to cases when an institution has closed abruptly.   
            These restrictions may be the result of insufficient funding  
            in the former-Bureau recovery fund.  Currently, STRF has over  
            $25 million; there appears no reason to strictly restrict  
            student eligibility for STRF claims.  This bill would expand  
            the uses of STRF to include all students who have suffered a  
            loss due to an institution's violation of the Act.   

            Committee staff recommends clarifying language to specify that  
            STRF awards cannot exceed the student tuition/attendance  
            costs; to clarify that judgments must be based on a violation  
            of law and reviewed by the Board prior to claims processing;  
            and to provide the Board authority to seek repayment to STRF  
            from the institution found violating the law. 
               
           8)Disclosures to students  .  Many schools regulated by BPPE are  
            subject to multiple requirements for disclosures from multiple  
            entities; these institutions may be subject to duplicate and  
            conflicting data submissions by these multiple regulatory  
            bodies.  For example, an institution may be required to report  
            student outcome data by BPPE, USDE, the California Student Aid  
            Commission (CSAC), and the institutional accrediting agency.   
            A cursory review shows that there may be a number of  
            disclosure requirements that can be simplified and streamlined  
            to better provide students the real-time data they need to  
            make informed decisions about enrolling in a particular  
            educational program.  This bill would require the Board to  
            report to the Legislature on or before October 1, 2015  
            regarding streamlining reporting.  
               
            To clarify the author's intent, committee staff recommends the  
            following amendments:
                
             94929.9. (a) The board shall report to the Legislature on or  
            before October 1, 2015 on  whether data reporting and  
            disclosure requirements under the Act   efforts to streamline   
             could be appropriately consolidated with reporting required by  
            other regulatory bodies, including, but not limited to,  
            reporting required by the United States Department of  
            Education, the California Student Aid Commission, or  
            accrediting agencies.  T  he board's approval process for  
            institutions while ensuring   It is the intent of the  
            Legislature  that the same or similar data information, as is  
            required to be reported to the board pursuant to this article,  








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            is being reported to students in a clear and conspicuous  
            manner.  
            (b) (1) A report to be submitted to the Legislature pursuant  
            to subdivision (a) shall be submitted in compliance with  
            Section 9795 of the Government Code.
            (2) Pursuant to Section 10231.5 of the Government Code, this  
            section is repealed January 1, 2019.

           9)Individual institutional fee adjustment  .  BPPE is currently  
            granted broad authority to reduce an institution's fees if it  
            determines that the annual cost of providing oversight and  
            review of an institution is less than the amount of money the  
            institution pays.  This provision leaves BPPE in the  
            uncomfortable position of having a large pot of unspent money  
            and negotiating with unhappy licensees who use that factor to  
            try to require the Bureau to reduce their fees.  The former  
            BPPVE faced a number of criticisms for regulatory functions  
            being potentially left to staff and this provision has the  
            potential to create a haphazard system of fee collection, and  
            leaving what should be a consistent approach to the discretion  
            of staff.  If this provision were used by schools on a regular  
            basis, the current BPPE, facing its many regulatory  
            challenges, could very well be asked to reduce fees for the  
            bulk of its licensee population.  This bill deletes the  
            provision authorizing BPPE staff to decrease fees if it  
            determines that the cost of regulation of an institution is  
            less than the cost of fees.   

           10)Compliance inspections  .  BPPE is currently mandated to  
            perform at least one announced and one unannounced compliance  
            inspection on each approved institution during each two-year  
            cycle.  BPPE is not meeting its statutory mandate.  While  
            staffing and organizational challenges have played a part,  
            BPPE also lacks any necessary prioritization processes or  
            standards by which to allocate its limited staff to first  
            inspect the schools that may need the most attention.  This  
            bill would require compliance inspections to occur on a five  
            year cycle and grant the Board flexibility in determining when  
            to conduct announced and unannounced inspections based on an  
            evaluation of risk to students.

           11)Complaint processing  .  Accepting, processing and acting on  
            complaints from students is one of the key mechanisms by which  
            BPPE can ensure that licensees are in compliance with the Act  
            and that students have options for action in the event that  








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            they are the victims of fraud or taken advantage of by  
            schools.  The timely processing of complaints provides BPPE  
            with critical information about their licensees and could  
            assist in prioritizing workloads.  BPPE faces significant  
            delays in the time is takes to process complaints which could  
            result in necessary action being taken against institutions or  
            the activation of necessary steps to assist students.  This  
            bill would require the Board to establish a timeline by which  
            complaints must be processed, and establish procedures to  
            prioritize complaints based on potential harm to students and  
            consumers.  

            Committee staff recommends an amendment authorizing the Board  
            to contract with the Attorney General, or other appropriate  
            agency, to provide necessary staff training.  Committee staff  
            also recommends specific training focused on checking the  
            accuracy of the data contained in consumer disclosures. 
               
            This bill would also require the Board to contract with the  
            Attorney General for investigative/prosecutorial services if  
            noncompliance transcends the individual complainant (reaches  
            "class action" status) or the complexity of an investigation  
            requires additional expertise. CPIL supports this amendment,  
            noting " BPPE has neither the resources nor litigation  
            expertise of the Consumer Rights Division of the Attorney  
            General's office; the division currently suing Corinthian.   
            This explicit referral is therefore a welcome channeling of  
            complaints to the law enforcement agency best and most  
            appropriate for them, leaving the BPPE as the appropriate and  
            primary location for addressing individual student  
            complaints." The accredited institutional trade association,  
            CCACS is requesting removal of this provision, arguing "this  
            provision is unnecessary and further diminishes the agency's  
            ability to conduct the regulatory program it is authorized to  
            implement."
                
            12)Staffing resources  .  According to BPPE, even with recent  
            increases to staffing levels, additional positions may be  
            necessary to meet current mandates because of backlogs created  
            during the budget and hiring delays.  The BPPE notes that a  
            current review of the BPPE workload and process improvements  
            began on May 13, 2014, and is expected to take approximately  
            five months to complete.  This information is intended to  
            inform future BPPE staffing and process improvements.  This  
            bill, consistent with BPPE current plans, would require the  








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            Board to contract for an independent review of staffing  
            resources and provide the Legislature, within 30 days of the  
            review, a copy of this review along with an overview of how  
            the board intends to move forward.

            Committee staff recommends an amendment clarifying that  
            submission of the independent review currently underway at  
            BPPE will satisfy the requirements in this section. 

            To address concerns raised by institutions regarding fee  
            amounts, Committee staff recommends requiring this report to  
            include a review by the Board regarding estimated costs of  
            full implementation of Board activities and estimated fee  
            revenues with existing fee levels.  The Legislature can use  
            this information to review appropriate fee amounts.  

            The committee may wish to establish a deadline for the report  
            required under this provision; Committee staff recommends  
            March 1, 2015.
               
           13)Sunset extension  .  This bill would extend the sunset date for  
            the act by two years, until January 1, 2017, at which time the  
            Board would come back before the Legislature for review of the  
            Board's implementation of the law and interpretation of  
            Legislative intent.  

            The Committee may wish to consider establishing a five year  
            sunset to provide the new Board adequate time to bring itself  
            up and running.  The Legislature retains the authority to  
            propose legislation regarding the Act at any time, regardless  
            of sunset date.  To ensure the Board is meeting Legislative  
            intent and mandates, periodic reporting requirements could be  
            established and/or enhanced. 
          
           Major issues not addressed in this bill  .  A number of issues  
          were raised during the Sunset Hearing which are not addressed in  
          this bill, including:  

           1)Exemptions  .  Existing law provides exemptions from the Act for  
            all regionally accredited institutions.  At the time of  
            passage of AB 48, consumer groups raised serious concerns  
            about the lack of protections provided for students attending  
            for-profit, regionally accredited institutions due to these  
            exemptions.  As passed by the Assembly, AB 48 provided an  
            exemption for WASC-accredited institutions, but not  








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            institutions accredited by other regional accrediting  
            agencies.  At the time of drafting AB 48, there were no  
            verifiable criteria to differentiate between regional  
            accreditors and, as a result of concerns over  
            constitutionality of the provision; AB 48 was amended by the  
            Senate to grant an exemption to  all  regionally accredited  
            institutions.  In December 2013, the LAO noted that the  
            business practices of regionally accredited institutions are  
            the least well monitored, and that the Bureau has better  
            recourse for student complaints than accrediting agencies.   
            Specifically, among other recommendations, the LAO recommended  
            that the Legislature establish criteria to distinguish  
            low-risk from high-risk regionally accredited institutions and  
            target business practice oversight to high-risk institutions.   
            If the author and committee are interested in pursuing the LAO  
            recommendation, low- and high-risk institutions could be  
            identified by:  

              a)   Accrediting agency transparency.  While at the time of  
                                                                                  passage of AB 48, there were no discernable differences  
               between regional accrediting agencies, one important  
               difference exists today in regards to public accountability  
               and transparency; in 2012, WASC became the only accrediting  
               agency to require public disclosure of accrediting  
               documents.     

              b)   School ownership.  As previously indicated,  
               "independent" institutions have operated in California  
               under general non-profit corporation requirements for many  
               years.  The legislature could focus Board business practice  
               and consumer protection oversight on for-profit  
               institutions.
                
              c)   Track record or performance criteria.  As previously  
               indicated, California has established performance criteria  
               (cohort default rate and graduation rate) for institutions  
               that participate in the Cal Grant program.  The Legislature  
               could establish similar criteria for institutions deemed  
               "high-risk".   
                 
            2)Fees  .  Numerous licensees have raised concerns regarding BPPE  
            fee levels; in particular institutions have highlighted the  
            BPPE Administrative Fund reserve as evidence of excessive fee  
            levels.  However, much of the BPPE reserve can be traced to  
            delays in spending authority and hiring of staff.  Considering  








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            that the BPPE is currently failing to fulfill its statutory  
            mandates and there remain questions regarding the adequacy of  
            current staffing levels, reducing fee levels is probably  
            premature at this point.  Committee staff recommends the  
            Committee consider re-evaluating fees following receipt of the  
            independent staffing review.  
                 
            3)BreEZe  .  DCA is in the process of establishing a new  
            integrated licensing and enforcement system, BreEZe, which  
            would also allow for licensure and renewal to be submitted via  
            the internet.  BreEZe will replace the existing outdated  
            legacy systems and multiple "work around" systems with an  
            integrated solution based on updated technology.  BPPE  
            currently utilizes a different database than the majority of  
            DCA entities; Schools Automated Information Link, or SAIL, is  
            a flawed system to manage all of the data, licensing,  
            complaints and enforcement tools necessary for BPPE to fulfill  
            its mission and statutory mandates, as it is unable to  
            manipulate data and does not track basic information like  
            enforcement actions and timelines.  The State Auditor  
            highlighted numerous instances where the inadequacies of SAIL  
            prevent BPPE from having key information and performing key  
            functions.  According to DCA a complete assessment of the  
            Bureau's data needs, and plans for conversion to BreEZe will  
            take place in spring of 2015, a full year from now and five  
            years after the BPPE was reconstituted.  

            Committee staff recommends an amendment to require DCA to  
            report to the Legislature by March 1, 2015, an update of  
            anticipated timelines for BreEZe conversion and any  
            intermediate efforts underway intended to improve information  
            collection and tracking.
          
           4)Private Right of Action  . The prior law contained a private  
            right of action for students.  A private right of action was  
            not included in AB 48 as it was argued that the BPPE would  
            have sufficient authority to protect students.  It is true  
            that BPPE has a number of options to enforce the Act and take  
            action against institutions in violation of the Act.  However,  
            given the previously discussed struggles, BPPE has failed to  
            meet its enforcement mandates, protect students who have been  
            harmed by schools, and investigate complaints in a timely  
            manner.  Students in California may not fully be receiving the  
            benefits of a robust regulatory structure.  Consumer advocates  
            have requested that the Legislature consider re-establishing a  








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            private right of action to ensure, in the absence of full  
            implementation of the Act by the BPPE, students are protected.  
             

           Clarifying amendments  .  There are several areas in this bill  
          where clarifying amendments may be necessary, including the  
          following:

          1)Transition provisions.  Corrections to references to the prior  
            law need to be updated and corrected to reflect this bill.  

          2)Education Code (EDC) §94816 redefines applicant to specify  
            that an applicant is the owner of the institution and that  
            approvals to operate are issued to an applicant.  This change  
            is intended to ensure the Board has sufficient oversight of  
            those operating the institution.  Committee staff suggests  
            language be added to define "owner" as well as a  
            clarification, to ensure compliance with federal regulations,  
            specifying that an institution is approved to operate when an  
            owner's application is approved. 

          3)Ability to benefit examinations.  Given that these  
            examinations are no longer approved by the federal government,  
            statutory clarification on Board authority may be necessary.

          4)EDC §94837 defines an educational program to mean courses or  
            modules that provide education or training and experience  
            leading to the award of a recognized educational credential,  
            such as a degree or diploma.  As many current educational  
            programs provide training intended to lead to career  
            enhancement or marketability, and award a certificate of  
            completion, this definition should be amended accordingly.    

          The committee may wish to direct Committee and author staff to  
          draft and incorporate any necessary technical and clarifying  
          amendments.
          
           REGISTERED SUPPORT / OPPOSITION  :

           Support 
           
          The Children's Advocacy Institute
          Center for Public Interest Law 
          Veteran's Legal Clinic
          Young Invincibles








                                                                  SB 1247
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            Opposition 
           
          California Coalition of Accredited Career Schools


           Analysis Prepared by  :    Laura Metune / HIGHER ED. / (916)  
          319-3960