BILL ANALYSIS Ó SENATE COMMITTEE ON BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT Senator Jerry Hill, Chair 2015 - 2016 Regular Bill No: AB 509 Hearing Date: June 22, 2015 ----------------------------------------------------------------- |Author: |Perea | |----------+------------------------------------------------------| |Version: |April 23, 2015 | ----------------------------------------------------------------- ---------------------------------------------------------------- |Urgency: |No |Fiscal: |Yes | ---------------------------------------------------------------- ----------------------------------------------------------------- |Consultant|Sarah Mason | |: | | ----------------------------------------------------------------- Subject: California Private Postsecondary Education Act of 2009: exemptions. SUMMARY: Creates an exemption from the California Private Postsecondary Education Act for preapprenticeship programs offered by a bona fide organization, association or council that offers preapprenticeship training programs on behalf of one or more apprenticeship programs approved by the Division of Apprenticeship Standards, if certain conditions are met. Existing law: 1)Establishes the California Private Postsecondary Education Act (Act) of 2009 until January 1, 2015, and requires the Bureau of Private Postsecondary Education (Bureau) within the Department of Consumer Affairs to, among other things, to review, investigate and approve private postsecondary institutions, programs and courses of instruction pursuant to the Act and authorizes the Bureau to take formal actions against an institution/school to ensure compliance with the Act and even seek closure of an institution/school if determined necessary. The Act also provides for specified disclosures and enrollment agreements for students, requirements for cancellations, withdrawals and refunds, and that the Bureau shall administer the Student Tuition Recovery Fund to provide refunds to students affected by the possible closure of an institution/school. (Education Code (EC) § 94800 et seq.) AB 509 (Perea) Page 2 of ? 2)Exempts the following from oversight by the Bureau: a) An institution that offers solely avocational or recreational educational programs. b) An institution offering educational programs sponsored by a bona fide trade, business, professional, or fraternal organization, solely for that organization's membership. c) A postsecondary educational institution established, operated, and governed by the federal government or by this state or its political subdivisions. d) An institution offering either test preparation for examinations required for admission to a postsecondary educational institution or continuing education or license examination preparation, if the institution or the program is approved, certified, or sponsored by a government agency, other than the Bureau, that licenses persons in a particular profession, occupation, trade, or career field, a state-recognized professional licensing body, such as the State Bar of California, that licenses persons in a particular profession, occupation, trade, or career field or a bona fide trade, business, or professional organization e) An institution owned, controlled, and operated and maintained by a religious organization lawfully operating as a nonprofit religious corporation whose instruction is limited to the principles of that religious organization and the diploma or degree granted is limited to evidence of completion of that education. The institution is only eligible to offer degrees and diplomas in the beliefs and practices of the church, religious denomination, or religious organization and shall not award degrees in any area of physical science. Any degree or diploma granted by an institution owned, controlled, and operated and maintained by a religious organization lawfully operating as a nonprofit religious corporation shall contain on its face, in the written description of the title of the degree being conferred, a reference to the theological or religious aspect of the degree's subject area. The degree must reflect the nature of the degree title, such as AB 509 (Perea) Page 3 of ? "associate of religious studies," "bachelor of religious studies," "master of divinity," or "doctor of divinity." f) An institution that does not award degrees and that solely provides educational programs for total charges of two thousand five hundred dollars ($2,500) or less when no part of the total charges is paid from state or federal student financial aid programs. g) A law school that is 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) A nonprofit public benefit corporation that is qualified under Section 501(c)(3) of the United States Internal Revenue Code, is organized specifically to provide workforce development or rehabilitation services and is accredited by an accrediting organization for workforce development or rehabilitation services recognized by the Department of Rehabilitation. i) An institution that is accredited by the Accrediting Commission for Senior Colleges (ACSC) and Universities, Western Association of Schools and Colleges (WASC), or the Accrediting Commission for Community and Junior Colleges (ACCJC). j) An institution that has been accredited, for at least 10 years, by an accrediting agency that is: recognized by the United States Department of Education (USDE); has operated continuously in this state for at least 25 years and has not filed for bankruptcy protection pursuant to Title 11 of the United States Code during its existence; has a cohort default rate on guaranteed student loans does not exceed 10 percent for the most recent three years, as published by the DOE; maintains a composite score of 1.5 or greater on its equity, primary reserve, and net income ratios, as provided under Section 668.172 of Title 34 of the Code of Federal Regulations; provides a pro rata refund of unearned institutional charges to students who complete 75 percent or less of the period of attendance; provides to all students the right to cancel the enrollment agreement and AB 509 (Perea) Page 4 of ? obtain a refund of charges paid through attendance at the second class session, or the 14th day after enrollment, whichever is later; submits to the Bureau copies of its most recent IRS Form 990, the institution's Integrated Postsecondary Education Data System Report of the USDE, and its accumulated default rate; and is incorporated and lawfully operates as a nonprofit public benefit corporation and is not managed or administered by an entity for profit. aa) Flight instruction providers or programs that provide flight instruction pursuant to Federal Aviation Administration (FAA) regulations and do not require students to enter into written or oral contracts of indebtedness and do not require or accept prepayment of instruction-related costs in excess of $2,500. bb) An institution that is accredited by a regional accrediting agency, recognized by DOE, other than WASC, so long as the institution complies with requirements related to student tuition recovery. (EC § 94874) This bill: 1) Creates an exemption from the California Private Postsecondary Education Act for preapprenticeship programs offered by a bona fide organization, association or council that offers preapprenticeship training programs on behalf of one or more apprenticeship programs approved by the Division of Apprenticeship Standards, if the following conditions are met: a) It is not on the Eligible Training Provider List (ETPL) established and maintained by the California Workforce Investment Board (CWIB) but has met the requirements for placement on the list. b) It is on the ETPL established and maintained by the CWIB and meets the requirements for continued listing. 2)Provides that if an organization, association, or council has been removed from the ETPL for failure to meet performance standards, it is not exempt until it meets all applicable performance standards. AB 509 (Perea) Page 5 of ? FISCAL EFFECT: This bill is keyed "fiscal" by Legislative Counsel. According to the Assembly Committee on Appropriations analysis dated May 6, 2015, any costs to the Bureau will be minor and absorbable. COMMENTS: 1. Purpose. The California Workforce Association is the Sponsor of this bill. According to the Author, who represents the Fresno Regional Workforce Investment Board which has multi-craft pre-apprentice training being conducted by the Fresno Madera Tulare Kings Building Trades Council (FMTK BTC), Workforce Investment Act (WIA) Funds cannot be used to operate the pre-apprenticeship programs because these programs are not on the ETPL required by WIA. According to the Author, these pre-apprenticeship programs are unable to prove eligibility based on the exemption for apprenticeship programs in the Private Postsecondary Education Act because under Section 94892 of the BPPE Act of 2009 because legal counsel at the Department of Industrial Relations, Division of Apprenticeship Standards opined that pre-apprentice programs are not under their jurisdiction. According to the Author, this situation leaves the pre-apprenticeship training programs in limbo. The Author believes that without an avenue for these programs to be eligible for WIA funding, the programs go largely unfunded and local WIBs are unable to use funding for these programs to meet their minimum 25 percent training expenditure requirement (current law requires local WIBs to expend a minimum of 25 percent of funds on training, which increases to 30 percent on July 1, 2016.) The Author states that by creating an exemption for a bona fide organization, association, or council that offers pre-apprenticeship training programs on behalf of one or more apprenticeship programs that are approved by the Division of Apprenticeship Standards from the Private Postsecondary Education Act of 2009 as this bill does, WIBs can utilize WIA funding for pre-apprenticeship programs. The Author states that "pre-apprenticeship programs are vital to maintaining a healthy workforce in California. Pre-apprenticeship programs prepare students for entrance AB 509 (Perea) Page 6 of ? into state approved apprenticeship programs. In fact, California currently has over 500 state approved apprenticeship programs in many fields. The vast majority of apprentices are enrolled in the Building and Construction Trades apprenticeship programs. Joint-Labor management programs make up 90% of the approved programs. Labor-management programs invest over $100 million annually on training the next generation of skilled workers to meet California's infrastructure demands, and the use of apprentices is required on public works projects." According to the Author, exempting pre-apprenticeship programs from the Act as this bill does will ensure California continues to have a skilled labor workforce. 2. Background. a) The California Private Postsecondary Education Act and Bureau for Private Postsecondary Education. After numerous legislative attempts to remedy the laws and structure governing regulation of private postsecondary institutions in California, AB 48 (Portantino, Chapter 310, Statutes of 2009), established the Act and created the Bureau within the Department of Consumer Affairs for the purpose of regulating private postsecondary educational institutions that provide educational services in California. The Act made many substantive changes that both created a new, solid foundation for oversight and responded to the major problems with the Former Act. The Act requires all unaccredited colleges in California to be approved by the Bureau, sets timelines by which unaccredited schools offering degrees shall become accredited, and requires all nationally accredited colleges to comply with numerous student protections. It is important to note that not all private institutions are covered by the provisions of the Act; full and partial exemptions are provided for low-cost programs, recreational schools, schools accredited by regional accrediting agencies, among other types of institutions. The Act establishes prohibitions on false advertising and inappropriate recruiting and requires disclosure of critical information to students such as program outlines, graduation and job placement rates, and license examination information, and ensures colleges justify those figures. The Act also guarantees students AB 509 (Perea) Page 7 of ? can complete their educational objectives if their institution closes its doors while providing BPPE with enforcement powers necessary to protect consumers. The Act directs BPPE to: Create a structure that provides an appropriate level of oversight, including approval of private postsecondary educational institutions and programs; Establish minimum operating standards for California private postsecondary educational institutions to ensure quality education for students; Provide students a meaningful opportunity to have their complaints resolved; Ensure that private postsecondary educational institutions offer accurate information to prospective students on school and student performance, thereby promoting competition between institutions that rewards educational quality and employment success; and, Ensure that all stakeholders have a voice and are heard in the operations and rulemaking process of BPPE. The Bureau is required to actively investigate and combat unlicensed activity, administer the STRF, and conduct outreach and education activities for private postsecondary educational institutions and students within the state. The Act establishes processes for penalties for non-compliance, providing the Bureau authority to perform site visits and investigations, order fines and student tuition refunds, and ultimately suspend or revoke an institution's approval to operate. a) Exemptions. The Bureau has oversight of all the non-exempt, private postsecondary institutions located in California. AB 48 contained numerous exemptions to state-level oversight, the most notable of which is an exemption from BPPE authority and regulation under the Act granted to for-profit and nonprofit regionally accredited institutions. Currently, construction trades unions that are registered with the Joint Apprenticeship and Training Committee of the State of California, Department of AB 509 (Perea) Page 8 of ? Industrial Relations, Division of Apprenticeship Standards for purposes of their apprentice training, are exempt from the Bureau for purposes of apprenticeship programs. b) Workforce Innovation and Opportunity Act (WIOA). The federal Workforce Innovation and Opportunity Act (WIOA), formerly known as the federal Workforce Investment Act (WIA) of 1998, provides for workforce investment activities, including activities in which states may participate and also contains various programs for job and employment investment, including work incentive programs, as specified. WIOA was signed into law in 2014 and generally takes effect July of this year. WIOA supersedes WIA and also authorizes the Job Corps, YouthBuild, Indian and Native Americans, and Migrant Seasonal Farmworker programs, in addition to the core programs. The new federal WIOA aims to modernize our workforce development system bringing together and enhancing several key employment, education, and training programs. WIOA also seeks to make the workforce system more comprehensive in its approach to service delivery and more responsive to the demands of our economy. Following passage of the federal WIA in 1998, the state established the California Workforce Investment Board (CWIB) and charged the board with the responsibility of developing a unified, strategic planning process to coordinate various education, training, and employment programs into an integrated workforce development system that supports economic development. Local chief elected officials in a local workforce development area were required to form, pursuant to specified guidelines, a Local Workforce Investment Board (Local WIB) to plan and oversee the workforce investment system at the local level. Under WIA, funds were distributed to the states based on formulas that consider unemployment rates and other economic and demographic factors. WIA required that 85 percent of federal funds go to the Local WIBs, with the remainder allocated for state discretionary purposes. Local WIBs created one or more One-Stop Centers in the local workforce area, which provide access to career information, counseling, funding for education, training and supportive services. Job training programs include classroom training, customized training, and on-the-job training (also known as incumbent worker training). Training funds are often distributed through vouchers to job seekers to enroll in AB 509 (Perea) Page 9 of ? eligible training programs. Local WIBs determine which training programs are eligible to receive the vouchers. California's ETPL was established in compliance with WIA for the purpose of providing customer-focused employment training for adults and dislocated workers. Training providers who are eligible to receive Individual Training Accounts (ITAs) through WIA Title I-B funds are listed on the ETPL. EDD is responsible for accepting information on training providers from local boards, compiling a single statewide list of eligible training providers and disseminating the statewide ETPL to local boards for distribution to their One-Stop Career Centers. Programs are required to be periodically determined as eligible to continue on the ETPL. This determination is to be made within 18 to 24 months of their initial listing and annually thereafter. EDD's policy and procedure document on the ETPL provides additional background and sets out requirements for approval that includes, among other things, the following: In order to be listed on the ETPL, training providers must submit an application to the local board in any Local Workforce Investment Area in which the training provider desires to offer programs and services. It is important to note that initial eligibility is determined based on criteria that relates to a provider/program's approval authority and/or authorization to operate. Performance is not considered in making initial eligibility determinations. Providers are encouraged to submit information on performance outcomes to facilitate customer choice but this is not a requirement and the information provided cannot be used to determine their initial eligibility for listing. Local boards are responsible for reviewing and verifying applications submitted by training providers, determining if the applicant meets the State's criteria for initial eligibility and forwarding the information to EDD for those training providers and programs that meet the criteria. EDD will accept applications for the ETPL from local AB 509 (Perea) Page 10 of ? boards on any working day of the year. Approved applications will appear on the list within 30 days of their submission by the local board to the State. The local boards are responsible for submitting changes to EDD for programs or training providers already listed on the statewide ETPL to ensure that the information remains current. 1. Related Legislation This Year. SB 410 (Beall) changes the definition of graduates for purposes of reporting student information as required under the Act. ( Status: The bill is currently pending in the Assembly Committee on Higher Education.) 2. Prior Related Legislation. SB 1247 (Lieu, Chapter 840, Statutes of 2014) extended the operation of the Bureau until January 1, 2017; and, among other changes, clarified the conditions upon which a flight school could be exempt from the Act. SB 71 (Committee on Budget and Fiscal Review, Chapter 28, Statutes of 2013) enacted various budget-related items, including a provision allowing exempt institutions to voluntarily seek operating approval from the Bureau. The bill provided a temporary delay in those institutions reporting certain information on the Student Performance Fact Sheet. SB 619 (Fuller, Chapter 309, Statutes of 2011) exempted flight instructors and flight schools that do not require students to enter into contracts of indebtedness and do not require prepayment of fees in excess of $2,500 from regulation by the Act and BPPE. 3. Arguments in Support. The California Workforce Association (CWA) believes that this bill will create parity between pre-apprenticeship and apprenticeship programs offered by the same institutions, as apprenticeship programs are already exempt from the BPPE process. The CWA asserts that this bill will simply extend the exception to pre-apprenticeship programs operated in conjunction with high-quality apprenticeship programs, ensuring efficiency and continuity in institutions' pre-apprenticeship and apprenticeship offerings. AB 509 (Perea) Page 11 of ? Also writing in support of the bill, the State Building and Construction Trades Council of California and Building and Construction Trade Councils of Stanislaus, Merced, Tuolumne & Mariposa Counties, and of Fresno, Madera, Kings & Tulare Counties state that pre-apprenticeships programs are vital to maintaining a healthy workforce in California, prepare students for entrance into sate approved apprenticeship programs and that exempting them from the Act will ensure California continues to have a skilled labor workforce. 4. Staff Comments. This bill creates the first exemptions to the Act since 2011 when flight schools subject to FAA approval that do not require students to enter into contracts of indebtedness and do not require prepayment of fees in excess of $2,500 were explicitly granted an exemption from the Bureau's oversight authority. The issue of appropriateness of exemptions within the Act has been discussed since the Act was established in 2009 and subsequently as a piece of multiple policy discussions surrounding the Bureau's operations, legislative proposals to explore further exemptions, in a 2013 Legislative Analyst Office (LAO) report to the Legislature and most recently as part of the comprehensive Sunset Review process undertaken by Legislative Committees with jurisdiction for the Bureau and Act. The Bureau is again subject to Sunset Review beginning in the fall of this year, culminating with legislation in 2016 that will very likely again explore in depth the exemptions outlined in the Act, the necessity to continue to provide for certain exemptions and whether additional exemptions from Bureau oversight are necessary, such as those proposed in this bill. NOTE: Double-referral to Senate Committee on Education, second. SUPPORT AND OPPOSITION: Support: California Workforce Association (Sponsor) Building and Construction Trades of Fresno, Madera, Kings and Tulare Counties Building and Construction Trades of Stanislaus, Merced, Tuolumne and Mariposa AB 509 (Perea) Page 12 of ? Counties Opposition: None on file as of June 16, 2015. -- END --