BILL ANALYSIS Ó
SB 1192
Page 1
Date of Hearing: June 28, 2016
ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS
Rudy Salas, Chair
SB 1192(Hill) - As Amended June 16, 2016
SENATE VOTE: 37-0
NOTE: This bill was double-referred to the Assembly Committee
on Higher Education and passed on a 10-0 vote.
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).
EXISTING LAW:
1)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
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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 (EDC) Section 94800, et. seq.)
THIS BILL:
2)Requires a private entity with no physical presence in this
state that provides postsecondary education to California
students for an institutional charge to comply with specified
provisions, including registering with the BPPE; requires the
BPPE to adopt regulations for the process and procedure
whereby an institution can apply for and obtain registration;
specifies that an institution that fails to comply is not
authorized to operate in this state.
3)Removes two positions from the Advisory Committee and
specifies that a quorum be comprised of a majority of those
appointed members; authorizes the chairs of policy committees
of the Senate and Assembly with jurisdiction over legislation
relating to the BPPE to designate a representative to attend
the Advisory Committee meetings if he or she is unable to
attend.
4)Extends the sunset date for an institution that is not
accredited by an accrediting agency recognized by the United
States Department of Education, but is approved by the BPPE,
to obtain accreditation or have an accreditation plan that
outlines the process by which the institution will achieve
accreditation candidacy, pre-accreditation, or full
accreditation, by specified dates.
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5)Extends the sunset date for an institution that is not
accredited by an accrediting agency recognized by the United
States Department of Education, and is seeking approval by the
BPPE, to obtain accreditation or have an accreditation plan
that outlines the process by which the institution will
achieve accreditation candidacy, pre-accreditation, or full
accreditation, by specified dates.
6)Provides BPPE the authority to give extensions on the timeline
for unaccredited degree granting institutions to become
accredited according to certain evidence.
7)Requires during the enrollment process that 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
requirements.
8)Increases the penalty for operating an institution without
BPPE approval from $50,000 to $100,000.
9)Provides that any representation or agreement by a person or
entity to not collect a student loan obligation does not
reduce a student's eligibility for recovery from the STRF or
reduce the student's economic loss, unless the student loan
obligation is forgiven, discharged, or canceled.
10)Limits the timeframe for a written application that to be
received by the BPPE to four years after the date of the
action that made the student eligible for recovery from the
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STRF.
11)Authorizes the BPPE to use evidence collected during a
compliance inspection in support of issuing a citation.
12)Require institutions to notify BPPE of investigations by
other governmental agencies.
13)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.
14)Establishes an Office of Student Assistance and Relief (OSAR)
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 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.
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15)Specifies that an ombudsperson will be appointed by the
director of DCA and is responsible for reporting to the
director and the BPPE Advisory Committee.
16)Establishes a Pilot Program, to be administered by the OSAR,
to provide grants to community-based organizations to assist
students harmed by recent school closures with receiving
relief under loan forgiveness and STRF.
17)Provides that a student who was enrolled at a California
campus of Corinthian Colleges, Inc. (CCI), or was a California
student enrolled in an online program offered by an
out-of-state campus of a CCI institution, who also meets all
of the other eligibility requirements, if the student was
enrolled as of June 20, 2014, is eligible for STRF.
18)Makes various technical changes.
FISCAL EFFECT: According to the Senate Committee on
Appropriations, this bill will result in:
1)BPPE: Net increased costs of about $410,000 in the 2016-17
fiscal year and $360,000 ongoing. This estimate includes the
BPPE'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
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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.
2)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.
3)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.
COMMENTS:
Purpose. This bill provides for various changes to the Act and
its oversight provided by the BPPE. This bill is
author-sponsored. According to the author, "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."
Joint Oversight Hearings and Sunset Review of the DCA Licensing
Boards. In March of 2016, the Assembly Committee on Business
and Professions and the Senate Committee on Business,
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Professions and Economic Development (Committees) conducted
multiple joint oversight hearings to review 11 regulatory boards
within the DCA and one regulatory entity outside of the DCA.
The sunset bills are intended to implement legislative changes
recommended in the respective background reports drafted by the
Committees for the agencies reviewed this year.
The Sunset Review Process. The sunset review process provides a
formal mechanism for the DCA; the Legislature; the regulatory
boards, bureaus and committees; interested parties; and
stakeholders to make recommendations for improvements to the
authority of consumer protection boards and bureaus. This is
performed on a standard four-year cycle and was mandated by SB
2036 (McCorquodale), Chapter 908, Statutes of 1994. Each
eligible agency is required to submit to the Committees a report
covering the entire period since last reviewed that includes,
among other things, the purpose and necessity of the agency and
any recommendations of the agency for changes or reorganization
in order to better fulfill its purpose. During the sunset
review hearings, the Committees take public testimony and
evaluate the eligible agency prior to the date the agency is
scheduled to be repealed. An eligible agency is allowed to
sunset unless the Legislature enacts a law to extend,
consolidate, or reorganize the eligible agency.
Background on BPPE. The BPPE is responsible for oversight of
private postsecondary educational institutions operating with a
physical presence in California. After numerous legislative
attempts to remedy the laws and structure governing regulation
of private postsecondary institutions, AB 48 (Portantino),
Chapter 310, Statutes of 2009 was enacted 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
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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. The 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.
This bill proposes the following major changes to the Act:
1)Definition of Licensure. 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.
Rather than redefining licensure, this bill requires during
the enrollment process that an institution offering
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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
requirements.
2)Unaccredited Degree Granting Programs. 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 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.
3)Office of Student Assistance and Relief (OSAR). The BPPE 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 BPPE regulations.
The BPPE does not appear to focus similar efforts on student
outreach to inform students about the Bureau's work and
available recourse for students.
This bill establishes the OSAR (as its own Article within the
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Act) to be managed by an ombudsperson and to serve as a
primary point of contact to address the needs of private
postsecondary education students, including 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 the STRF. The ombudsperson
will be appointed by the director of the DCA and is
responsible for reporting to the director and the BPPE
Advisory Committee. 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 institution, who also meets all
of the other eligibility requirements, if the student was
enrolled as of June 20, 2014, is eligible for STRF.
4)Online Institutions. This bill requires a private
postsecondary education institution that does not maintain a
physical presence in this state and offers distance education
to California students to participate in the STRF for their
California students.
5)Compliance and Enforcement. BPPE faces a significant backlog
of complaints and investigations associated with internal
referrals resulting from compliance inspections. Unlike other
licensing agencies, the BPPE 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 BPPE was failing to
properly and consistently enforce the Act. 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. This
bill implements those recommendations and additionally
implements the BPPE's request to require institutions to
notify the BPPE of investigations by other governmental
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agencies.
6)BPPE Fees. The California Association of Private
Postsecondary Schools (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. The CAPPS has requested
"fee fairness" be included in SB 1192. A revised fee schedule
that will more appropriately reflect the BPPE workloads and
the size/revenue of BPPE-regulated institutions is anticipated
to be included in SB 1039 (Hill), pending in Assembly Business
and Professions Committee, which contains revised fee
schedules for a number of DCA Boards and Bureaus.
7)OSAR consultation. The Legal Aid Foundation of Los Angeles
(LAFLA) has requested that OSAR be required to consult with
legal aid foundations in the performance of its duties.
Committee staff recommends that the OSAR be authorized to
consult with relevant community based organizations, as the
OSAR determines necessary in fulfilling its duties.
8)STRF. A coalition of consumer organizations has requested a
variety of amendments to expand the STRF eligibility for
students. This bill provides 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.
9)Advisory Committee. This bill removes two positions from the
Advisory Committee that are necessary to improve the
operations of the Committee. These two positions have remained
unfilled since 2010. Additionally, this bill requires the OSAR
ombudsperson to report to the Advisory Committee and requires
that a quorum be comprised of a majority of those appointed
members.
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10)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, the BPPE was asked to review the
institution's compliance with California law. However, the
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.
11)OSAR Appropriation. LAFLA has expressed concern that the
OSAR will require an appropriation in order to effectively
conduct its duties. This issue is anticipated to be raised in
the Appropriations Committee.
12)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. The Assembly Committee on Higher Education staff
recommended that changes to the SPFS be delayed until after
the report required under current law is submitted to the
Legislature.
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13)STRF Collection. Ashford University has requested an
amendment to clarify that the BPPE must notify institutions
prior to beginning STRF collection. The BPPE reports that
altering the STRF assessment is a regulatory change that
requires the BPPE to follow notification procedures outlined
in the Administrative Procedures Act. Due to this, the change
requested by Ashford does not appear necessary.
Current Related Legislation. AB 1835 (Holden) of the current
Legislative Session, exempts institutions that grant doctoral
degrees in psychoanalysis from the provisions of the Act
requiring unaccredited degree granting institutions to be
accredited if all of the institution's students hold master's or
doctoral degrees before enrollment in the institution and the
institution has obtained accreditation from, or has submitted a
self-study application to, the Accreditation Council for
Psychoanalytic Education on or before July 1, 2017. STATUS:
The bill is currently pending in the Senate Committee on
Education.)
AB 1916 (Irwin) of the current Legislative Session, requires a
private postsecondary institution to file a surety bond with the
BPPE before January 1, 2019, as specified. STATUS: This bill
failed passage in the Assembly Committee on Business and
Professions.
AB 2581 (Medina) of the current Legislative Session, 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. STATUS: This bill is
pending in the Senate Committee on Business, Professions and
Economic Development.
AB 2652 (Eggman) of the current Legislative Session requires a
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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 BPPE and
participate in the STRF. STATUS: This bill is pending in the
Senate Committee on Business, Professions and Economic
Development.
Prior Related Legislation. AB 573 (Medina) of 2015, included a
number of components contained in AB 2581. NOTE: The bill was
vetoed by Governor Brown who noted in his veto message: "I am
sympathetic to the many students who were enrolled at Corinthian
Colleges when the company abruptly shuttered its doors earlier
this year?[USDE] has taken the matter of loan discharge
seriously. In recent months, it has greatly eased the burden of
filings for many students, and its work to provide a simple,
swift and fair process for students continues. As such, it
appears premature to create an attorney grant program,
especially one that provides little direction on how funds
should be used. While the bill's provisions to extend Cal Grant
eligibility for Heald students are well-intentioned, I am not
comfortable creating new General Fund costs outside of the
budget process, particularly given the Cal Grant augmentations
already included in this year's budget."
SB 1247 (Lieu), Chapter 840, Statutes of 2014, extended the
sunset date for the BPPE and the Act until January 1, 2017 and
made statutory changes to the protections provided to students
and the requirements placed on private postsecondary educational
institutions, including prohibiting an institution from claiming
an exemption from the Act if the institution is approved to
participate in Title 38 programs. The bill also contained an
exemption for an institution that meets a series of criteria
including being accredited by WASC for at least 10 years,
headquartered in California, operated continuously for at least
25 years, previously held approval to operate by the former
Bureau and derives at least 12.5 percent of its revenues from
sources other than state or federal student assistance like
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Title 38 and CalGrant monies. One institution is currently
claiming an exemption pursuant to this provision in SB 1247.
ARGUMENTS IN SUPPORT:
A coalition of organizations* write in support, "We believe this
bill will strengthen existing law, and will improve the [BPPE's]
ability to address the needs of students."
ARGUMENTS IN OPPOSITION:
The California Association of Private Postsecondary Schools
(CAPPS) is opposed unless amended and writes, "This challenging
state environment coupled with aggressive Federal actions have
made it very difficult to operate a private postsecondary
school, which is highlighted by the number of schools that have
closed in recent years. Despite these challenges our members
support the extension of the BPPE because we know it's important
for students and schools to have strong yet fair regulator. We,
however, can't simply support a bill that extends the BPPE and
ignore the changes that create a more burdensome and costly
Act."
The University of Phoenix (UOPX) is opposed unless amended and
writes "UOPX previously had a 'support if amended' position on
the bill however recent amendments necessitate a change in that
position."
REGISTERED SUPPORT:
Center for Public Interest Law*
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Children's Advocacy Institute*
Public Advocates*
Public Law Center*
SEIU California*
Veterans Legal Clinic*
REGISTERED OPPOSITION:
California Association of Private Postsecondary Schools (CAPPS)
University of Phoenix
Analysis Prepared by:Gabby Nepomuceno / B. & P. / (916) 319-3301