BILL ANALYSIS Ó
SB 1192
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Date of Hearing: August 3, 2016
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez, Chair
SB 1192
(Hill) - As Amended June 16, 2016
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| |Business and Professions | |12 - 2 |
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Urgency: No State Mandated Local Program: NoReimbursable: No
SUMMARY:
This bill makes numerous changes to the California Private
Postsecondary Education Act of 2009, including:
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1)Requiring a private entity with no physical presence in this
state that provides postsecondary education to California
students to comply with specified provisions of the Act,
including registering with the Bureau for Private
Postsecondary Education (BPPE), and requiring the BPPE to
adopt regulations for the process and procedure whereby an
institution can apply for and obtain registration.
2)Increasing the required penalty for operating an institution
without BPPE approval from $50,000 to $100,000.
3)Requiring the Director of the Department of Consumer Affairs
(DCA) 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.
4)Establishing an Office of Student Assistance and Relief
(OSAR), within DCA, to serve as a primary point of contact to
address the needs of private postsecondary education students
and to administer the Student Tuition Recovery Fund (STRF).
The OSAR is to be headed by an ombudsperson appointed by the
Director of DCA.
5)Establishing a Pilot Program until January 1, 2021, 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, and appropriates $1.3 million from the STRF for this
purpose.
6)Providing 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
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out-of-state campus of a CCI institution, who was enrolled as
of June 20, 2014, and meets all of the other eligibility
requirements is eligible for STRF.
FISCAL EFFECT:
1)Enforcement Monitor. Annual cost of around $200,000 for two
years to contract for the enforcement monitor. [BPPE
Administration Fund]
2)Out-of-State Registration and Enforcement. The BPPE estimates
approximately 500 out-of-state institutions will register with
the Bureau to provide online education to California students.
Ongoing cost will be around $170,000 for two positions to
register these institutions and to work with students and the
out-of-state institution's home regulatory body or accrediting
agency to ensure compliance with the Act. [BPPE Administration
Fund]
3)OSAR. In addition to the one-time STRF appropriation of $1.3
million for grants to community-based organizations, ongoing
costs will be $600,000 for six positions to fulfill the new
office's responsibilities. [BPPE Administration Fund]
4)Corinthian Students. The Bureau estimates approximately 9,000
Heald and 117 Everest Online students were impacted by the
Corinthian closure. The Bureau indicates that approximately
eight percent of those students attending Corinthian
institutions (Wyotech and Everest) regulated by the Bureau
submitted a STRF claim and 39 percent of those claims were
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approved, with an average payout of $3,800. Assuming the same
application and approval rates for all students, the Bureau
would receive 720 STRF claims, of which 39 percent. (281
cases) would be approved, for a total STRF payout of almost
$1.1 million [STRF]. The number of applications and approvals
could be larger, however, with the assistance provided to
nonprofits under contract to OSAR. The Bureau will also
require $190,000 for two years for two positions to administer
this assistance. [BPPE Administration Fund]
5)Office Space. The BPPE indicates that the additional positions
described above will require larger office space, resulting in
$1 million in one-time moving costs and $250,000 annually in
increased rental charges. [BPPE Administration Fund]
6)Increased Revenue. Increasing, from $50,000 to $100,000, the
fine that may be issued to a person for operating an
institution without proper approval to operate will increase
revenues by about $300,000 per year to the BPPE Administrative
Fund.
7)Fund Condition. The BPPE Administrative Fund is projected to
have a balance of only about $200,000 as of June 30, 2017, and
thus would not be able to absorb all of the additional costs
described above.
COMMENTS:
1)Purpose. In March, the Assembly Committee on Business and
Professions and the Senate Committee on Business, Professions
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and Economic Development conducted multiple joint oversight
hearings to review 11 regulatory boards within the DCA and one
regulatory entity outside of the DCA. The sunset bills,
including SB 1192, 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 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.
2)Background. After numerous legislative attempts to remedy the
laws and structure governing regulation of private
postsecondary institutions, the Act-AB 48 (Portantino),
Chapter 310, Statutes of 2009-established 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 changes aimed at reducing backlogs and
increasing meaningful enforcement.
3)Private Postsecondary Institutions. 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 337 institutions that received $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. For
California, BPPE's approval can enable these institutions to
access the Title IV program, with the US Department of
Education relying on the bureau to provide oversight and
student protection.
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4)Related Legislation. AB 2581 (Medina) provides assistance to
students of Heald, Everest, and WyoTech campuses in California
that were owned by CCI and closed unlawfully on April 27,
2015. AB 2581 was not heard in Senate Business and
Professions.
AB 2652 (Eggman), contains provision similar to those in this
bill that require 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 BPPE and participate in the STRF. AB 2652 was not
heard in Senate Business and Professions.
5)Sunset Extension. This bill currently lacks an extension of
the act beyond the current sunset date of January 1, 2017. The
length of the sunset extension is currently a subject of
negotiations.
6)OSAR Staffing and Funding. The bill appropriates $1.3 million
from the STRF to the OSAR for the pilot program, yet OSAR,
which is proposed to be independent from the BPPE, will not be
established until January 1, 2017, and will likely not have
operational funding until enactment of the 2017-18 Budget Act
next July. In the interest of providing more immediate
assistance to students, the author may wish to instead
consider making the appropriation to the BPPE, and vesting the
bureau with the pilot program until OSAR is able to assume
this responsibility.
Analysis Prepared by:Chuck Nicol / APPR. / (916)
319-2081
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