BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
SB 1192 (Hill) - Private postsecondary education: California
Private Postsecondary Education Act of 2009
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|Version: April 6, 2016 |Policy Vote: B., P. & E.D. 8 - |
| | 0, ED. 9 - 0 |
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|Urgency: No |Mandate: No |
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|Hearing Date: May 9, 2016 |Consultant: Jillian Kissee |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: This bill makes various changes to the Private
Postsecondary Education Act of 2009 to improve the effectiveness
of the Bureau for Private Postsecondary Education (Bureau).
Among other things, this bill: (1) establishes a new Office of
Student Assistance and Relief; (2) provides for an enforcement
monitor to evaluate the Bureau's enforcement efforts; (3)
authorizes the Bureau to give extensions for obtaining
accreditation based on specified criteria; and (4) requires
certain out-of-state institutions offering distance education to
California students to register with the Bureau.
Fiscal
Impact:
Bureau: Net increased costs of about $410,000 in the 2016-17
fiscal year and $360,000 ongoing. This estimate includes the
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Bureau's anticipated need for six positions and $829,000 in
fiscal year 2016-17 and $781,000 annually thereafter. It also
includes increased revenues of about $420,000 ($300,000
attributed to the fine increase from operating without a
proper approval and about $120,000 from the new authority to
issue citations, as specified. To the extent there are
additional fines or citations issued, increased revenues would
be generated.) Staff notes that the Private Postsecondary
Education Administration Fund has a structural imbalance and
is expected to become insolvent in the 2017-18 fiscal year
without accounting for the implementation of this bill.
Absent a different funding source or creation of an additional
fee, the fund could become insolvent sooner. See staff
comments. (Special Funds*)
Student Tuition Recovery Fund Claim Payout: Unknown payments
to students enrolled at a campus or an out-of-state online
program of a Corinthian Colleges Inc. institution. If 10
percent of estimated impacted students applied and were
approved for a claim in a given year, costs would be $5.8
million. Actual costs would depend upon a number of factors
including the number of impacted students making a successful
claim and the amount of the claim payouts. (Special Funds**)
Minor costs to the California Student Aid Commission, the
California Community College Chancellor's Office, and the
California Department of Veterans Affairs to fulfill the
consultation requirement with the Office of Student Assistance
and Relief, as required by this bill. It is unknown the
additional duties, and potential cost pressures, that might
result from the required consultation. (General Fund)
* Private Postsecondary Education Administration Fund
**Student Tuition Recovery Fund
Background: Existing law establishes the California Private Postsecondary
Education Act of 2009 (Act) until January 1, 2017, and requires
the Bureau within the Department of Consumer Affairs to, among
other things, 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 and institution/school to ensure compliance with
the Act and even seek closure of an institution/school if deemed
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necessary.
The Act requires unaccredited degree granting institutions to be
accredited by an accrediting agency recognized by the United
States Department of Education by 2020. The Act also provides
for specified disclosures and enrollment agreements for
students, requirements for cancellations, withdrawals and
refunds, and that the Bureau administer the Student Tuition
Recovery Fund (STRF) to provide refunds to student affected by
the possible closure of an institution/school. (Education Code
Section 94800, et seq.)
According to the author, this bill is necessary in order to
ensure continued oversight of private postsecondary institutions
that supports quality, innovative programs, which are approved
in a timely manner, while also ensuring a robust regulatory
structure to prevent predatory practices and promotes student
success. This bill seeks to incorporate changes outlined in a
Business, Professions and Economic Development Committee
background paper prepared for a joint hearing regarding the
Bureau's sunset.
Proposed Law:
This bill makes various changes to the Private Postsecondary
Education Act of 2009. Specifically, this bill:
Provides the Bureau the authority to give extensions on
deadlines for unaccredited degree-granting institutions to
become accredited provided certain criteria are being met.
Office of Student Assistance and Relief
Establishes an Office of Student Assistance and Relief to
serve as the primary contact to address the needs of private
postsecondary students.
Specifies the duties of the office to include: providing
assistance to these students; conducting proactive outreach to
these students; administering the STRF; and overseeing the
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registration of private postsecondary institutions that do not
have a physical presence in California but offer distance
education to California students.
Requires the office to work in consultation with state and
federal agencies, as specified, to determine the extent of
options and resources available to private postsecondary
students and criteria that indicates what additional steps
state agencies need to take to ensure the protection of the
public from the closure of a private postsecondary
institution.
Student Tuition Recovery Fund
Removes the Bureau's authority to establish regulations
related to STRF.
Makes specified California students enrolled at a campus or in
an out-of-state online program of a Corinthian Colleges Inc.,
(CCI) institution eligible for STRF.
Declares the intent of the Legislature to require a private
postsecondary education institution that does not maintain a
physical presence in this state and offers distance learning
to California students to file a surety bond for the benefit
of students suffering from economic loss. Surety bonds
typically refund a student's tuition if the school closes or
if the school fails to uphold the contract it signed with the
student.
Compliance, Enforcement, Process, and Penalties
Expands the authority of the Bureau to enforce the provisions
of California Private Postsecondary Education Act.
Authorizes Bureau staff to issue citations, with a fine not to
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exceed $5,000 for each violation before leaving an institution
when non-minor violations of the Act are found during an
inspection, as specified.
Provides due process procedures for institutions contesting
alleged violations.
Specifies that all administrative fines shall be deposited in
the Private Postsecondary Education Administration Fund.
Increases the penalty for operating an institution without
Bureau approval from $50,000 to $100,000.
Enforcement Monitor
Requires the Department of Consumer Affairs to supervise and
appoint an enforcement monitor for a period of two years.
Requires the enforcement monitor to monitor and evaluate the
Bureau's enforcement efforts, focusing on the adequacy of
Bureau compliance inspections, handling and processing of
student complaints, and timely application of sanctions or
discipline imposed on institutions and persons in order to
protect the public.
Submit reports, as specified, to the Department of Consumer
Affairs and the Legislature and be available to deliver oral
reports.
Specifies that the Bureau pay for all of the costs associated
with the employment of the enforcement monitor.
Sunsets the provisions related to the enforcement monitor on
March 1, 2019.
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Related
Legislation: AB 1916 (Irwin) requires a private postsecondary
institution to file a surety bond with the Bureau before January
1, 2016, as specified. AB 1916 is currently pending in the
Assembly Committee on Business and Professions Committee.
AB 2581 (Medina) provides financial and other assistance to
students of Heald, Everest, and WyoTech campuses in California,
which were owned by CCI and closed unlawfully on April 27, 2015.
AB 2581 is pending in the Assembly Appropriations Committee.
AB 2652 (Eggman) requires a private entity with no physical
presence in this state, that would be subject to the
requirements of the Act if the entity was located in this state,
to register with the Bureau and participate in the STRF. AB
2652 is pending in the Assembly Appropriations Committee.
Staff
Comments: The Bureau cites costs related to tracking any
pending or final civil or criminal case, as specified, that the
Bureau has received notice, and to post the information on the
Bureau's website. The bill expands potential cases of which to
track to local and state laws of every state outside of
California, instead of only those that would be actionable under
California or federal law. However, the level of additional
tracking that will materialize is unknown, but it is potentially
significant.
The Bureau cites costs of $352,000 in the 2016-17 fiscal year
and $320,000 ongoing for four positions to establish the new
Office of Student Assistance and Relief. This workload includes
an anticipated 1,000 out-of-state institutions that will be
required to file a surety bond with the Bureau, to the extent it
is authorized by federal law. However, the actual number of
institutions that will be required to file one as a result of
this bill is unknown. It is also unknown the extent to which
the number of students will be made eligible for STRF payments
as a result of this bill which could drive additional costs to
process the claims. For additional specific duties of the
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office, see the "Proposed Law" section.
The Bureau also anticipates costs of $96,000 in the 2016-17
fiscal year and $88,000 ongoing to track the additional
increases in citations issued during an inspection of an
institution. There may be additional administrative costs
incurred by the Bureau to develop a citation, as specified, and
conduct related hearings, upon request.
According to the Department of Consumer Affairs, the Bureau and
the department will require $300,000 ongoing to contract with a
consultant to provide services as an enforcement monitor. This
bill will also require the adoption of regulations and necessary
information technology system updates which could result in
costs to existing staff potentially in the tens of thousands.
Staff notes that this bill does not extend the authorization of
the California Private Postsecondary Education Act of 2009 which
is scheduled to no longer be in effect on January 1, 2017.
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