BILL ANALYSIS Ó SB 1247 Page 1 SENATE THIRD READING SB 1247 (Lieu) As Amended August 22, 2014 Majority vote SENATE VOTE :33-3 HIGHER EDUCATION 9-2 BUSINESS & PROFESSIONS 9-3 ----------------------------------------------------------------- |Ayes:|Williams, Bloom, Fong, |Ayes:|Bonilla, Campos, | | |Fox, | |Dickinson, Eggman, | | |Jones-Sawyer, Levine, | |Gordon, Holden, Mullin, | | |Medina, Quirk-Silva, | |Skinner, Ting | | |Weber | | | | | | | | |-----+--------------------------+-----+--------------------------| |Nays:|Olsen, Wilk |Nays:|Jones, Maienschein, Wilk | | | | | | ----------------------------------------------------------------- APPROPRIATIONS 12-0 ----------------------------------------------------------------- |Ayes:|Gatto, Bocanegra, | | | | |Bradford, | | | | |Ian Calderon, Campos, | | | | |Eggman, Gomez, Holden, | | | | |Pan, Quirk, | | | | |Ridley-Thomas, Weber | | | | | | | | ----------------------------------------------------------------- SUMMARY : Extends the sunset date for the Bureau for Private Postsecondary Education (BPPE), under the California Private Postsecondary Education Act (Act), from January 1, 2015, until January 1, 2017; and, provides for statutory changes to the protections provided to students and the requirements placed on private postsecondary educational institutions (institutions). Specifically, this bill : 1)Reestablishes BPPE until January 1, 2017 and provides for various clarifying and technical changes throughout the Act. 2)Authorizes a currently operating institution, as specified, that has had their application to operate denied, as specified, to continue operating during the appeal process. SB 1247 Page 2 Requires the institution to disclose to current and prospective students that the application was denied and that the loss of appeal may result in the institution's closure. Requires BPPE to make an emergency decision if the BPPE determines that the continued operation of the institution poses a significant risk of harm to students. 3)Changes exemptions to the Act as follows: a) Prohibits an institution, beginning January 1, 2016, from claiming an exemption from the Act if the institution is approved to participate in federal veterans' financial aid programs, except that an institution, as specified, that meets outlined requirements and student performance standards may continue to claim an exemption. b) Clarifies that an exempt flight school may not accept prepayment of more than $2,500. 4)Clarifies that the director of the Department of Consumer Affairs (DCA) is responsible for the implementation of the Act. 5)Requires BPPE to contract with the Office of the Attorney General to establish training that ensures staff is able to fully investigate complaints. 6)Requires BPPE to institute training to ensure staff is equipped to review and verify accuracy of data contained in consumer disclosures. 7)Requires BPPE to post specified final civil or criminal cases on the BPPE Web site and requires BPPE to post a list of all institutions denied an approval to operate, describe the reasons for the denial, and include a specified disclosure that the institution is not compliant with law and that students are discouraged from enrolling in unapproved institutions. 8)Makes several changes to the BPPE Advisory Committee: a) Adds the following ex-officio members: i) The chair of the policy committee of the Assembly with jurisdiction over legislation relating to the SB 1247 Page 3 bureau, or designee, appointed by the Speaker of the Assembly; ii) The chair of the policy committee of the Senate with jurisdiction over legislation relating to the bureau, or designee, appointed by the Senate Committee on Rules; b) Prohibits a public member of the Advisory Committee from having an interest in any institutions regulated by BPPE, as specified. c) Expands the Advisory Committee functions to include the examination of the oversight functions and operational policies of BPPE, specifically, the fee schedule and the equity of the schedule relative to the way institutions are structured, and the licensing provisions of this chapter. Requires the Advisory Committee to make recommendations with respect to policies, practices, and regulations relating to private postsecondary education, and provide any assistance as may be requested by BPPE. d) Requires BPPE to seek input from the Advisory Committee prior to the adoption, amendment, or repeal of its regulations and take comments into consideration and provide feedback to Advisory Committee members. e) Requires the BPPE chief to attend all Advisory Committee meetings and designate ongoing support staff. f) Requires the DCA director to personally attend, and testify and answer questions at, each meeting of the Advisory Committee. g) Requires the Advisory Committee to have the same access to records within DCA related to the operation and administration of the Act as do members of constituent boards of the DCA in regard to records related to their functions. h) Requires Advisory Committee meetings to be subject to the Bagley-Keene Open Meetings Act (Act) and for meeting materials to be posted on the Internet. i) Requires the Advisory Committee to meet at least quarterly and to appoint a member of the committee to SB 1247 Page 4 represent the committee for purposes of communicating with the Legislature. j) Requires DCA to review, and revise if necessary, the conflicts of interest regulations to ensure that each Advisory Committee member is required to disclose conflicts of interest to the public. 9)Requires BPPE 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 July 1, 2016, regarding appropriate levels of oversight of these institutions. 10)Requires an institution seeking an approval to operate and to offer a degree to either: a) Be accredited by an accrediting agency recognized by the United States Department of Education (USDE) to offer the degree(s); or b) Have an accreditation plan, approved by BPPE, for the institution to become fully accredited within five years of the BPPE issuance of a provisional approval to operate. An institution in this category must comply with specified student disclosure, visiting committee review and degree limitation requirements. 11)Requires an unaccredited institution that is approved to operate and to offer degree programs by BPPE prior to January 1, 2015, to submit an accreditation plan to BPPE, to obtain pre-accreditation by July 1, 2017, to obtain accreditation by July 1, 2020, and to comply with various student disclosure and visiting committee review requirements. 12)Requires BPPE to adopt licensing application processing goals and timelines, as specified. 13)Removes the requirement that an accredited institution provide a School Performance Fact Sheet (SPFS) to a non-California prospective student and removes the requirement that the SPFS include data regarding non-California students. 14)Provides that the Student Tuition Recovery Fund (STRF) exists SB 1247 Page 5 to relieve or mitigate economic loss suffered by students in educational programs at non-exempt institutions who, at the time of enrollment was a California resident or was enrolled in a California residency program, prepaid tuition, and suffered economic loss. 15)Requires BPPE to adopt regulations that ensure specified students, and any other students deemed appropriate, are eligible for payment from STRF. 16)Authorizes BPPE to seek repayment to the STRF from an institution found in violation of the Act for which a STRF claim was paid. Provides that an institution may not renew its approval to operate with BPPE if the repayment is not made as requested. 17)Requires BPPE to define "economic loss" in regulation and provides BPPE guidance on the definition. 18)Provides that if BPPE has temporarily stopped collecting STRF assessments because the fund has approached the $25 million limit, BPPE shall resume collecting assessments when the fund falls below $20 million. 19)Provides that an otherwise eligible student who enrolled during a period when institutions were not required to collect STRF assessments is eligible for STRF payments despite not having paid any STRF assessment. 20)Requires BPPE to report to the Legislature by December 31, 2016, regarding how reporting requirements under the Act should be altered to ensure accurate, useful, and consistent reporting by private postsecondary institutions to the bureau and students. 21)Removes authority for the Board to adjust annual fees for individual institutions based on cost of providing oversight of individual institutions. 22)Requires announced and unannounced compliance inspections to be conducted at least every five years, rather than every two years, and requires BPPE 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. SB 1247 Page 6 23)Requires BPPE to, in consultation with the Advisory Committee, establish priorities for enforcement resources and complaints processing. Provides that institutions and complaints of specified characteristics should be prioritized. 24)Provides that if BPPE has reason to believe that an institution has engaged in a pattern or practice of violating the provisions of the Act or any other applicable law that involves multiple students or other claimants, BPPE shall contract with the Attorney General for investigative and prosecutorial services, as necessary. 25)Requires the DCA director to provide written updates to the Legislature every six months and participate in oversight hearings as requested. 26)Requires the DCA director to provide the Legislature with a copy of the independent review of staffing resources within 30 days of the review, along with an overview of how the director intends to ensure staffing is sufficient for purposes of implementing the Act. 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 DCA (Education Code Section 94800 et seq.). FISCAL EFFECT : According to the Assembly Appropriations Committee: 1)Extension of the Act's sunset by two years will continue expenditures to implement the Act over this period. The bureau's operating budget for 2014-15 is $11.1 million for 76 positions. The bureau's operating fund is projected to have a fiscal year-end balance of $10.8 million. In addition, $2 million is estimated in payments from the STFR, which is projected to have a balance of $31.4 million as of July 1, 2015. 2)In addition to the base budget, new requirements of the Act will require nine permanent and four limited-term positions at an estimated cost of $1.4 million in 2015-16, $1.2 million in 2016-17, and $800,000 annually thereafter, assuming the new sunset date of January 1, 2017 is subsequently extended or SB 1247 Page 7 repealed. 3)These costs will be partially offset to the extent currently exempt institutions register with the bureau in order to continue participating in federal veterans educational financial aid (Title 38) programs. COMMENTS : On January 1, 2010, AB 48 (Portantino), Chapter 310, Statutes of 2009, created the Act, establishing minimum standards for institutions and an array of enforcement tools for BPPE to ensure institutional compliance with the new 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 from 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 STRF to provide refunds to students affected SB 1247 Page 8 by the closure of an institution. 6)Collects data through Annual Reports provided by licensed/approved institutions. Under the provisions of AB 48, BPPE and the Act are scheduled to sunset on January 1, 2015. 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 Review Hearing). According to the author, private postsecondary education institutions can play an important role in providing access and education for otherwise underserved students. This bill stems from the Sunset Review Hearing process for the Bureau for Private Postsecondary Education and seeks modest but important improvements in the way these schools are regulated in California. Analysis Prepared by : Laura Metune / HIGHER ED. / (916) 319-3960 FN: 0005316