BILL ANALYSIS Ó
SB 1192
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Date of Hearing: June 14, 2016
ASSEMBLY COMMITTEE ON HIGHER EDUCATION
Jose Medina, Chair
SB
1192 (Hill) - As Amended April 6, 2016
[Note: This bill is double referred to the Assembly Business and
Professions Committee.]
SENATE VOTE: 37-0
SUBJECT: Private postsecondary education: California Private
Postsecondary Education Act of 2009
SUMMARY: Provides for various changes to the California Private
Postsecondary Education Act of 2009 (Act) and the oversight of
the Act provided by the Bureau for Private Postsecondary
Education (BPPE). Specifically, this bill:
1) Provides BPPE the authority to give extensions on the
timeline for unaccredited degree granting institutions to
become accredited according to certain evidence.
2) Establishes an Office of Student Assistance and Relief
(Office) to serve as a primary point of contact to address
the needs of private postsecondary education students.
Specifies that the duties of the Office include but are not
limited to providing assistance to students, conducting
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proactive outreach to students, administering the Student
Tuition Recovery Fund (STRF) and overseeing the registration
of institutions that do not have a physical presence in this
state and are offering distance education to California
students. Requires the Office to establish and maintain a
website to provide information to students about their rights
and protections available to them as well as information
about free services available to students provided by a local
nonprofit community service organization with demonstrated
experience assisting students in areas like legal services
and student loan matters.
3) Provides recourse through the STRF to students impacted by
the abrupt closure of Corinthian Colleges, Inc. (CCI).
4) States the intent of the Legislature to require a private
postsecondary educational institution that does not maintain
a physical presence in this state and offers distance
education to California students to file a surety bond for
the benefit of students suffering economic loss. Requires
these institutions to register with BPPE.
5) Authorizes BPPE staff to issue a citation, with a fine not to
exceed $5,000, before leaving an institution when non-minor
violations of the Act are detected during an inspection.
6) Increases the penalty for operating an institution without
BPPE approval from $50,000 to $100,000.
7) Requires the Director to appoint an enforcement monitor for a
period of two years to monitor the BPPE's enforcement
efforts, with a specific concentration 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. Requires the enforcement monitor to
submit reports to the Director and Legislature and be
available to make oral reports to both if requested to do so.
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8) Makes various technical changes.
EXISTING LAW: Establishes the Act until January 1, 2017, and
requires BPPE, within the Department of Consumer Affairs (DCA)
to, among other things, review, investigate and approve private
postsecondary institutions (or institutions), programs and
courses of instruction pursuant to the Act and authorizes BPPE
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 requires
unaccredited degree granting institutions to be accredited by an
accrediting agency recognized by the United States Department of
Education (USDE) by 2020. The Act also provides for specified
disclosures and enrollment agreements for students, requirements
for cancellations, withdrawals and refunds, and that the BPPE
shall administer the Student Tuition Recovery Fund (STRF) to
provide refunds to students affected by the possible closure of
an institution/school. (Education Code Section 94800 et. seq.)
FISCAL EFFECT: According to the Senate Appropriations
Committee:
Bureau: Net increased costs of about $410,000 in the 2016-17
fiscal year and $360,000 ongoing. This estimate includes the
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.) 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. (Special Funds)
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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)
COMMENTS: Background on BPPE Sunset Review. As previously
outlined, existing law sunsets the Act on January 1, 2017.
Legislation is necessary to extend the sunset date of the Act
and the oversight provided by the BPPE. On March 28, 2016, the
Assembly Higher Education Committee and the Senate Business,
Professions and Economic Development Committee were joined by
the Senate Education Committee and the Assembly Business and
Professions Committee to conduct a Sunset Review hearing of the
BPPE. This bill is intended to implement legislative changes as
discussed and recommended during the Sunset Review process.
Additional information regarding the BPPE and recommended
changes to the law can be found in the Background Paper prepared
by Committee staff, available on the Committee website.
Background on BPPE. BPPE (or Bureau) is responsible for
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oversight of private postsecondary educational institutions
operating with a physical presence in California. Established
by
AB 48 (Portantino, Chapter 310, Statutes of 2009) after numerous
legislative attempts to remedy the laws and structure governing
regulation of private postsecondary institutions, the bill took
effect January 1, 2010, to make many substantive changes that
created a foundation for oversight and gave the BPPE enforcement
tools to ensure schools comply with the law. SB 1247 (Lieu,
Chapter 840, Statutes of 2014) reauthorized the Act until
January 1, 2017 and made a series of improvements aimed at
reducing backlogs and increasing meaningful enforcement. The
Act directs BPPE to, among numerous outlined activities, approve
institutions and programs, establish and enforce minimum
operating standards to ensure quality education, provide
students a meaningful opportunity to have their complaints
resolved, and ensure that institutions offer accurate
information to prospective students on school and student
performance. BPPE is also required to actively investigate and
combat unlicensed activity, administer the STRF, and conduct
outreach and education activities for students and institutions
within the state.
Background on regulated industry. The landscape of schools
regulated under BPPE has shifted in recent decades. Today, most
students attending BPPE-regulated institutions are enrolled in
multi-campus, publicly-traded institutions with a national
presence. According to the 2014 Annual Report (self-reported
data from BPPE-approved institutions), of the 275,624 students
enrolled, 161,226 were enrolled in institutions that receive
federal Title IV financial aid. These 337 institutions received
about $5.8 billion in federal Title IV financial aid. In
response to high-profile state and federal investigations that
revealed deceptive and illegal practices by some institutions
within this sector. Federal regulators responded by increasing
student outcome and institutional accountability measures.
Specifically, in California, BPPE's approval can enable these
institutions to access the Title IV program; USDE relies on the
Bureau to provide oversight and student protection.
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Major changes to the Act contained in SB 1192. The author notes
that "students, the public and quality private postsecondary
educational institutions are best served by a well-functioning
regulatory entity that effectively enforces the Act. The Bureau
has faced significant difficulties in implementing the law. It
is important that California's approval and oversight of an
institution assures minimum quality and student protections."
To that end, this bill proposes the following major changes to
the Act:
1)Definition of Licensure.
Background. Under the Act, if an institution offers an
educational program in a profession, occupation, trade, or
career field that requires licensure in California, the
institution must have educational program approval from the
appropriate state licensing agency for any student who completes
that program to sit for any required licensure exam.
This bill. Amends the definition of licensure to explicitly
include certification and registration for purposes of BPPE
approval of a program intended to lead to licensure and adds
requirements for institutions to disclose voluntary
certification or registration available to a student.
Staff recommendations. The University of Phoenix has expressed
concern that this new definition and required disclosures could
include non-governmental, voluntary licensure and certification
to which an institution would not be aware. BPPE reports that
the existing definition of licensure includes mandatory
California certification or registration. Therefore, Committee
staff recommends removing changes to the definition of
licensure, and instead requiring, during the enrollment process,
an institution offering educational programs designed to lead to
positions in a profession, occupation, trade, or career field
where voluntary licensure by a government agency is available,
to provide all students seeking to enroll in those programs with
a written copy of the voluntary government agency licensure
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requirements.
2)Unaccredited Degree Granting Programs.
Background. SB 1247 amended the Act to require that degree
granting programs be accredited. Institutions offering a degree
that seek BPPE approval are now required to either be accredited
by an accrediting agency recognized by the USDE to offer the
degree(s) or 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. For
these schools, the Act requires compliance with certain student
disclosures about accreditation, review by a visiting committee
and degree limitation requirements. SB 1247 also outlined a
process for institutions that are currently approved by BPPE and
offer degrees to submit an accreditation plan to the Bureau by
July 1, 2015, 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.
This bill. Due to concerns that unaccredited degree granting
institutions may not be able to meet the timeframes established
in the law to become accredited, but are still actively working
toward the accreditation requirement, this bill provides BPPE
the authority to give extensions on the timeline for
unaccredited degree granting institutions to become accredited
according to certain evidence provided by the institution.
Staff recommendations. Technical and clarifying amendments to
this section have been requested by the BPPE and staff
recommends these amendments be adopted.
3)Office of Student Assistance and Relief (OSAR).
Background. The Bureau has focused significant efforts to
provide outreach to schools, including new workshops to assist
with application completion and web-based tools to allow
institutions to better understand how they can be compliant with
the Act and Bureau regulations. The Bureau does not appear to
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focus similar efforts on student outreach to inform students
about the Bureau's work and available recourse for students.
For example, following the closure of Corinthian Colleges, Inc.
(CCI), BPPE estimated about 6,000 students would be immediately
eligible for tuition recovery under the STRF. BPPE reports that
only about 300 CCI students have filed STRF applications. The
chart below identifies similarly low STRF participation rates
for other colleges that have closed unlawfully in recent years.
--------------------------------------------------------------------------------------------------------
| School Name |# of Students | Claims | Approved | Denied | Pending |% STRF Claims |
| | at Closure | Received | | | | Approved |
|--------------+--------------+--------------+--------------+--------------+--------------+--------------|
|WyoTech (CCI) | 1586 | 100 | 34 | 11 | 55 | 2.1% |
|--------------+--------------+--------------+--------------+--------------+--------------+--------------|
|Bryman (+Bio | 311 | 89 | 39 | 31 | 19 | 12.5% |
|Health) | | | | | | |
|--------------+--------------+--------------+--------------+--------------+--------------+--------------|
|Career | 771 | 127 | 44 | 73 | 10 | 5.7% |
|Colleges of | | | | | | |
|America | | | | | | |
|--------------+--------------+--------------+--------------+--------------+--------------+--------------|
|Everest (CCI) | 4336 | 214 | 75 | 40 | 99 | 1.7% |
|--------------+--------------+--------------+--------------+--------------+--------------+--------------|
|Four D | 620 | 55 | 17 | 9 | 29 | 2.7% |
|College | | | | | | |
|--------------+--------------+--------------+--------------+--------------+--------------+--------------|
|IME | 480 | 317 | 180 | 129 | 8 | 37.5% |
--------------------------------------------------------------------------------------------------------
This bill. The OSAR, created by this bill, would serve as a
primary point of contact to address the needs of private
postsecondary education students, and would administer the STRF.
The bill would also provide a student who was enrolled at a
California campus of CCI, or was a California student enrolled
in an online program offered by an out-of-state campus of a CCI
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institution, who also meets all of the other eligibility
requirements, if the student was enrolled as of June 20, 2014,
is eligible for STRF. The bill also states 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 education to California students to
file a surety bond for the benefit of students suffering
economic loss.
Staff recommendations.
OSAR. Committee staff recommends the OSAR be established in its
own Article of the Act (outside of STRF) and managed by an
ombudsperson, which is appointed by the director of the DCA and
responsible for reporting to the director and the BPPE Advisory
Committee. Additionally, the OSAR, and not the BPPE, should be
responsible for outreach to students, coordinating with relevant
governmental and non-governmental agencies, and conducting a
Pilot Program to provide grants to community-based organizations
to assist students harmed by recent school closures with
receiving relief under loan forgiveness and STRF.
Online Institutions. Committee staff recommends, rather than
requiring institutions to file a surety bond, these institutions
are required to participate in STRF for their California
students.
4)Compliance and Enforcement.
Background. BPPE faces a significant backlog of complaints and
investigations associated with internal referrals resulting from
compliance inspections. Unlike other licensing agencies, the
Bureau does not have the authority to issue citations for
non-minor violations detected during a compliance inspection.
Additionally, concerns have been expressed as to whether BPPE is
properly identifying and responding to institutional violations
of law; in 2013, the Bureau of State Audits found that the
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Bureau was failing to properly and consistently enforce the Act.
This bill: authorizes Bureau staff to issue a citation, with a
fine not to exceed $5,000, before leaving an institution when
non-minor violations of the Act are detected during an
inspection; increases the penalty for operating an institution
without BPPE approval from $50,000 to $100,000; and, requires
the Director to appoint an enforcement monitor for a period of
two years to monitor the BPPE's enforcement efforts.
Staff recommendations. The California Association of Private
Postsecondary Schools (CAPPS) has expressed serious concern
regarding due process violations that could occur from allowing
BPPE to issue citations at compliance inspections. BPPE has
indicated that it believes its backlog problem could be
addressed, instead, by allowing evidence collected during a
compliance inspection to be used in support of issuing a
citation. Staff recommends adopting BPPE's recommended
amendments. Staff recommends approval of the BPPE requested
amendment to require institutions to notify BPPE of
investigations by other governmental agencies.
Additional issues and requested amendments. A number of
organizations have requested additional amendments to the Act
and this bill. What follows is a summary of those requests and
Committee staff recommended actions.
1)BPPE Fees. CAPPS notes that under the current fee structure,
many schools with fewer school sites, fewer students and less
revenue are paying more in fees than schools with a much
larger footprint. CAPPS has requested "fee fairness" be
included in SB 1192.
Committee staff understands that the author is working with
BPPE and DCA regarding a revised fee schedule that will more
appropriately reflect the BPPE workloads and the size/revenue
of BPPE-regulated institutions. This fee schedule is
anticipated to be included in SB 1039 (Hill), pending in
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Assembly Business and Professions Committee, which contains
revised fee schedules for a number of DCA Boards and Bureaus.
2)Consumer Disclosures. Ashford University has requested
amendments to better align disclosures (School Performance
Fact Sheet or SPFS) that are required under the Act with
disclosures required by accrediting agencies and the federal
government. A coalition of organizations that includes SEIU,
Public Advocates, and the Veteran's Legal Clinic has also
requested amendments to the SPFS, specifically regarding
employment. SB 1247 required the Bureau to report to the
Legislature by January 1, 2017 regarding student disclosures
and possible statutory amendments to streamline and enhance
the SPFS.
Committee staff recommends that changes to the SPFS be delayed
until after the report required under current law is submitted
to the Legislature.
3)STRF Collection. Ashford University has requested an
amendment to clarify that the BPPE must notify institutions
prior to beginning STRF collection. BPPE reports that
altering the STRF assessment is a regulatory change that
requires BPPE follow notification procedures outlined in the
Administrative Procedures Act. Due to this, the change
requested by Ashford does not appear necessary.
4)OSAR Appropriation. The Legal Aid Foundation of Los Angeles
(LAFLA) has expressed concern that the OSAR will require an
appropriation in order to effectively conduct its duties.
Committee staff recommends this issue be raised in the
Appropriations Committee.
5)OSAR consultation. LAFLA has requested that OSAR be required
to consult with legal aid foundations in the performance of
its duties. Committee staff recommends that OSAR be
authorized to consult with relevant community based
organizations, as OSAR determines necessary in fulfilling its
duties.
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6)STRF. A coalition of consumer organizations has requested a
variety of amendments to expand STRF eligibility for students.
Committee staff recommends, of those requests, the bill be
amended to provide students 4-years to file a STRF claim and
to require that student loans be formally discharged, rather
than an agreement not to collect, before a student's STRF
eligibility is reduced.
7)Advisory Committee. Committee staff understands that
revisions to the Advisory Committee are necessary to improve
the operations of the Committee, including removing positions
that have remained unfilled since 2010, requiring the OSAR
ombudsperson to report to the Advisory Committee, and
requiring that a quorum be comprised of a majority of those
appointed members.
8)Unintended exemption. An article by Buzzfeed, (Making the
Grade, published on May 26, 2016) uncovered a series of
documents that implicated a non-profit institution operating
in California for manipulating student records and improperly
using funds. According to the article, the college "has no
full-time, permanent faculty, despite having a student body
larger than the undergraduate population of Princeton." In
response to the article, BPPE was asked to review the
institution's compliance with California law. Committee staff
understands that BPPE has no jurisdiction to review this
institution because it receives an exemption from law under
Education Code 94847(j). The Committee may wish to consider
removing this exemption as it appears the exemption may no
longer be serving its original purpose.
REGISTERED SUPPORT / OPPOSITION:
Support
Center for Public Interest Law
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Children's Advocacy Institute
Consumer Federation of California
East Bay Community Law Center
Housing and Economic Rights Advocates
Legal Aid Foundation of Los Angeles
Public Advocates
Public Law Center
SEIU California
Veterans Legal Clinic
Opposition
Professional Beauty Federation of California
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Analysis Prepared by:Laura Metune / HIGHER ED. / (916)
319-3960