BILL ANALYSIS                                                                                                                                                                                                    Ó



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          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