BILL ANALYSIS Ó
SENATE COMMITTEE ON
BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT
Senator Jerry Hill, Chair
2015 - 2016 Regular
Bill No: SB 1192 Hearing Date: August 25,
2016
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|Author: |Hill |
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|Version: |August 19, 2016 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant|Sarah Mason |
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Subject: Private postsecondary education: California Private
Postsecondary Education Act of 2009
SUMMARY: Makes various changes to the California Private Postsecondary
Education Act of 2009 intended to improve the effectiveness of
the Bureau for Private Postsecondary Education and opportunities
for student success.
NOTE : The Assembly amendments create a new bill and this
measure has been referred to the Committee pursuant to Senate
Rule 29.10 (d) for consideration. The Committee may, by a
vote of the majority, either: (1) hold the bill, or (2)
return the bill to the Senate floor for consideration of the
bill as amended in the Assembly.
Existing law: Establishes the California Private Postsecondary
Education Act of 2009 (Act) until January 1, 2017, and requires
the Bureau for Private Postsecondary Education (BPPE or Bureau)
within the Department of Consumer Affairs (DCA) to, among other
things, review, investigate and approve private postsecondary
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 to include
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
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students, requirements for cancellations, withdrawals and
refunds, and the BPPE is required to administer the Student
Tuition Recovery Fund (STRF) to provide refunds to students
affected by the possible closure of an institution/school.
(Education Code § 94800 et seq.)
This bill:
1)Requires the DCA director to receive complaints from students
related to BPPE'S performance of its responsibilities,
including concerns related to the administration of the STRF.
2)Requires the director to include in his or her bi-annual
report to the Legislature a summary of information received
under 1) above, including the total number of student
complaints received, the general nature of these complaints,
and the outcome of these student complaints.
3)Requires an out of state online institution to comply with
specified provisions, including registering with the BPPE,
with registrations valid for two years; authorizes BPPE to
adopt emergency regulations to establish an application
process; requires an out-of-state institution to pay an
application fee of $1500; specifies that an institution that
fails to comply is not authorized to operate in this state.
4)Removes two positions from the BPPE Advisory Committee
(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; and requires the
Chief of the Office of Student Assistance and Relief (OSAR) to
attend and report at all Advisory Committee meetings.
5)Extends the sunset date for a degree-granting institution that
is not accredited by an accrediting agency recognized by USDE
to obtain accreditation and provides BPPE the authority to
give extensions on the timeline for unaccredited degree
granting institutions to become accredited according to
certain evidence.
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6)Requires, 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
requirements.
7)Increases the penalty for operating an institution without
BPPE approval from $50,000 to $100,000.
8)Authorizes a student who has obtained legal counsel that
resulted in the cancellation of student loans to seek
reimbursement from the STRF of services rendered, not to
exceed $500; requires BPPE to obtain evidence of student loan
debt being "paid in full" when negotiating student loan
obligations with loan servicers or debt holders; and limits
the timeframe for a written application to be received by the
BPPE to four years after the date of the action that made the
student eligible for recovery from the STRF, except that a
student whose loan is subsequently revived by a loan holder or
debt collector to re-apply for recovery from STRF.
9)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.
10)Authorizes the BPPE to use evidence collected during a
compliance inspection in support of issuing a citation or
pursuing an action.
11)Requires institutions to notify BPPE of investigations by
other governmental agencies, as specified.
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12)Reduces the annual fee calculation from 0.75 percent to 0.45
percent of an institution's revenue derived from California
students, increases the annual fee cap from $25,000 to
$60,000, establishes the annual fee calculation for branch
campuses and establishes an overall cap for institutions of
$750,000.
13)Establishes Legislative intent that the fees in 12) above be
evaluated in the 2017-18 state budget process and, if
necessary, adjusted by subsequent legislation based upon the
information provided to the Legislature by DCA and the BPPE.
Provides that the annual fee calculation shall automatically
increase to 0.55 percent on July 1, 2018, in the absence of
Legislative action.
14)Establishes the OSAR to provide outreach and individualized
assistance to students impacted by the unlawful activities or
closure of a BPPE-approved institution, including support for
students affected by the closure of CCI and to serve as a
primary point of contact to address the needs of private
postsecondary education students. Specifies that a Chief will
be appointed by the director of DCA.
15)Extends the BPPE sunset date from January 1, 2017 to January
1, 2021.
16)Makes various technical changes.
FISCAL
EFFECT: This bill is keyed fiscal by Legislative Counsel.
According to an Assembly Committee on Appropriations analysis
dated August 1, 2016, the BPPE estimates approximately 500
out-of-state institutions will register with the Bureau to
provide online education to California students, resulting in
ongoing cost of 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
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agency to ensure compliance with the Act. The analysis notes
ongoing costs of $600,000 for six positions to fulfill the new
OSAR's responsibilities. According to the analysis, the Bureau
estimates approximately 9,000 Heald and 117 Everest Online
students were impacted by the CCI closure and the Bureau
indicates that approximately eight percent of those students
attending Corinthian institutions (Wyotech and Everest)
regulated by the Bureau submitted a STRF claim, with 39 percent
of those claims approved resulting in 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. The analysis notes that the
number of applications and approvals could be larger. 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. The analysis noted that the Bureau's
revenue would increase by about $300,000 per year as a result of
the increase in the fine from $50,000 to $100,000 for operating
an institution without proper approval to operate. At the time
of the Appropriations Committee analysis, the bill did not
include the fee adjustments as currently proposed, which are
intended to provide the Bureau with the resources it needs to
effectively operate.
COMMENTS:
1. Purpose. This bill is sponsored by the Author, and is one a
number of "sunset bills" the Author is sponsoring this year.
According to the Author, this bill is necessary to make
changes to the Act in order to ensure continued oversight of
private postsecondary institutions that supports quality,
innovative programs which are approved in a timely manner,
while also making sure a robust government structure prevents
predatory practices and promotes student success. According
to the Author, the focus of any conversation about the Bureau
and the Act should be about finding balance between a
thoughtful regulatory structure that allows good schools to
thrive while at the same time establishing meaningful
opportunities for students. The Author notes that "we must
continue to ensure that the Californians working to better
their lives through education and skills based training have
some confidence in the quality of education and training they
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receive. It is also important for us to find ways to
increase accountability for California students, as well as
for the significant amount of public and private resources
spent on educational and training endeavors." According to
the Author, most significantly, it is important to ensure
that students are provided proper recourse through the Bureau
and the vast array of tools the Bureau has to help students
in the event that they are not provided all of the
opportunities they were promised.
2. Oversight Hearings and Sunset Review of Licensing Boards and
Programs. Beginning in 2015, the Senate Business and
Professions Committee and the Assembly Business and
Professions Committee (Committees) conducted joint oversight
hearings to review 12 regulatory entities: DCA, Acupuncture
Board, Board of Behavioral Sciences, California Massage
Therapy Association, Court Reporters Board, Board of
Pharmacy, Physician Assistant Board, Board of Podiatric
Medicine, BPPE, Board of Psychology, Bureau of Real Estate,
Bureau of Real Estate Appraisers, and Veterinary Medical
Board
The Committees conducted two hearings in March and joined
with the Senate Committee on Education and Assembly Committee
on Higher Education to review BPPE. This bill and the
accompanying sunset bills are intended to implement
legislative changes as recommended by staff of the Committees
and which are reflected in the Background Papers prepared by
Committee staff for each agency and program reviewed this
year.
3. Background on BPPE. The BPPE is responsible for 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.
AB 48 established BPPE's authority to regulate private
postsecondary institutions and enforce the provisions of the
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new Act and to respond to the major problems with the former
laws governing the industry in California. The Act provides
for prohibitions on false advertising and inappropriate
recruiting and requires disclosure of critical information to
students such as program outlines, graduation and job
placement rates, and license examination information, and
ensures colleges justify those figures. The Act also
provides BPPE with enforcement powers necessary to protect
consumers. The Act directs BPPE to:
Create a structure that provides an appropriate
level of oversight, including approval of private
postsecondary educational institutions and programs;
Establish minimum operating standards for California
private postsecondary educational institutions to ensure
quality education for students;
Provide students a meaningful opportunity to have
their complaints resolved;
Ensure that private postsecondary educational
institutions offer accurate information to prospective
students on school and student performance; and,
Ensure that all stakeholders have a voice and are
heard in the operations and rulemaking process of BPPE.
BPPE is also tasked with actively investigating and
combatting unlicensed activity, administering the STRF, and
conducting outreach and education activities for students and
private postsecondary educational institutions within the
state.
1. Review of the BPPE - Issues Identified and Recommended
Changes. Private postsecondary institutions play an
important role in ensuring access to higher educational
opportunities for California's students. The landscape of
schools that are now regulated under BPPE, and that have
become central in California's discussion of private
postsecondary education, has evolved significantly in recent
decades. The smaller, independent for-profit institutions
that made up the bulk of the former-Bureau's licensee
population have shifted. Today, a large number of California
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students are being served by multi-campus, publicly-traded
institutions with a national presence. These institutions
also receive significant public funds; under federal law, up
to 90 percent of revenues can come from the Title IV
financial aid program. In 2009-10, nationally, for-profit
institutions received $32 billion in Title IV grants and
loans. High-profile state and federal investigations have
revealed deceptive and illegal practices by some institutions
within the 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.
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.
The following are some of the major issues pertaining to BPPE
along with background information concerning the particular
issue. Recommendations were made by Committee staff
regarding the particular issue areas that needed to be
addressed.
a) Issue : Outreach/School Closures and STRF.
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 focus similar efforts on student
outreach to inform students about the Bureau's work and
available recourse for students.
The Bureau has a number of new tools it has employed since
the prior sunset review to communicate more directly with
schools, including offering workshops once a month to
assist institutions in completing applications for approval
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throughout the state as well as webinars and videos to help
schools provide accurate information to the Bureau. These
proactive efforts have helped reduce the licensing backlog
and are likely a means by which institutions have increased
awareness of Bureau requirements and activities.
It does not appear that the Bureau focuses the same effort
and resources on proactive outreach to students. Based on
the large scale closures during the past year and increased
exposure to students about BPPE and the Act, it does not
appear that students attending Bureau regulated schools are
as aware of the Bureau and options available provided by
BPPE. Some students may first interact with the Bureau
during site visits amidst an abrupt closure of their school
and while BPPE staff have been swift in trying to make
contact with students at these school sites, it does not
appear that the Bureau utilizes student information
collected in a proactive way to then continue communicating
with students about their options for recourse. Staff
provides students STRF applications during these school
closure visits, but the onus is then on students to contact
the Bureau again for additional follow up. While BPPE
reported during the CCI closure that it made contact with
almost 80 percent of Wyotech and Everest students who would
be STRF eligible, earlier this year it had received only
about 300 applications. BPPE also reported that it has
received over 10,000 calls related to the CCI closure and
while the Bureau notes that it documents student contact
information for students who attended schools under the
Bureau's jurisdiction, it does not appear that contact
information is tracked for all students who contact BPPE.
The Committees were interested in providing a simple,
streamlined process to students in the wake of a school
closure and proposed in AB 573 (Medina, 2015) first a
closed schools task force and then a single state point of
contact to lead the synchronization of other state agencies
with a role in assisting students, monitoring regulatory
efforts at the state and federal level and be in a position
to work with partner agencies to establish key criteria for
determining the appropriate steps the state should take to
protect students, particularly in light of abrupt school
closures.
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The STRF is an important tool to assist harmed students.
STRF, administered by the BPPE, exists to relieve or
mitigate economic loss suffered by students enrolled at
non-exempt private postsecondary education institutions due
to the institutions' closure, the institutions' failure to
pay refunds or reimburse loan proceeds, or the
institutions' failure to pay students' restitution award
for a violation of the Act. Students enrolled in
institutions that are exempt from, or not covered by the
Act are not eligible for STRF. Due to broad exemptions in
the Act, over 13,000 students enrolled in Heald College
(owned by CCI) at the time of the institution's unlawful
closure were not eligible for STRF. Further, as a result
of the requirement in the Act that schools under BPPE
oversight have a physical presence in the state, a number
of California students enrolled in Everest Online (owned by
CCI but housed outside of California) are not eligible for
STRF. Several other large, publicly traded colleges are
now under regulatory, financial, and legal pressure similar
to that facing CCI prior to closure.
Recommendation and Proposed Statutory Change : The
Committees may wish to explore establishing a single point
of contact for prospective and current students of private
postsecondary education institutions. The Committees may
wish to extend the timeframe in which a student may file a
STRF claim. The Committees may wish to establish an
independent student advocate to work with nonprofit
community organizations, to provide outreach and support to
students that may be eligible for state or federal relief,
and to make recommendations to the DCA Director regarding
improving student outreach and protection. The Committees
may wish to require institutions, including exempt or
online institutions) to participate in STRF and/or obtain a
surety bond to protect against unlawful activities or
closures. The Committees may wish to ensure BPPE has clear
authority to help students harmed by illegal or deceptive
school practices; for example, to order institutional
refunds/restitution to students who have been defrauded or
to require institutions to cancel student loan debt when
the institution operates as a private lender.
This bill makes the following changes to the Act related to
outreach, school closures and STRF:
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Requires the director of the DCA to receive complaints from
consumers concerning student concerns related to BPPE'S
performance of its responsibilities, including concerns
related to the administration of the STRF.
Requires the director to include in his or her bi-annual
report to the Legislature a summary of information received
under 1) above, including the total number of student
complaints received, the general nature of these
complaints, and the outcome of these student complaints.
Requires an out of state online institution to comply with
specified provisions, including registering with the BPPE,
with registrations valid for two years; authorizes BPPE to
adopt emergency regulations to establish an application
process; requires an out-of-state institution to pay an
application fee of $1500, specifies that an institution
that fails to comply is not authorized to operate in this
state.
Authorizes a student who has obtained legal counsel that
resulted in the cancellation of student loans to seek
reimbursement from the STRF of services rendered, not to
exceed $500; requires BPPE to obtain evidence of student
loan debt being "paid in full" when negotiating student
loan obligations with loan servicers or debt holders; and,
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
STRF, except that a student whose loan is subsequently
revived by a loan holder or debt collector to re-apply for
recovery from STRF.
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.
Establishes an OSAR to provide outreach and individualized
assistance to students impacted by the unlawful activities
or closure of a BPPE-approved institution, including
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support for students affected by the closure of CCI and to
serve as a primary point of contact to address the needs of
private postsecondary education students. Specifies that a
Chief will be appointed by the director of DCA.
b) Issue : Relationship of the Bureau to Other Regulatory
Entities.
Background : The Act provides that 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. The law is intended to deal with the issue of
students completing an educational program specifically
designed to prepare them for certain occupations that in
reality does not meet any requirements for education
required for licensure.
As the Bureau noted during the prior review, the Act may
also be strengthened to ensure students receive training
necessary for employment and licensure. Specifically, the
definition of "licensure" contained in Education Code
section 94848 does not specify certification or
registration, but if these are required for a given
profession, specific language may be included in this
definition. Also, in some professions there are no
requirements for official recognition but there may be
preferred certification requirements. In those cases,
there should be stronger disclosures to students regarding
employment impediments they may encounter. For example,
ultrasound technicians are not required to graduate from an
institution that is accredited by the American Registry for
Diagnostic Medical Sonography (ARDMS) but many employers
will not hire students who have not graduated from an ARDMS
accredited institution.
Recommendation and Proposed Statutory Change : The
Committees may wish to amend the Act to clarify the
definition of licensure and enhance disclosures to students
regarding necessary requirements for training programs.
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This bill makes the following changes to the Act related to
completion of an education or training program designed to
prepare graduates for employment in a profession,
occupation or trade:
Requires, 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 requirements.
c) Issue : Unaccredited Degree Granting Programs.
Background : During the prior sunset review, the Committees
were significantly concerned about the ongoing approval by
BPPE of institutions that offer degrees but are not
accredited. California is one of few states to continue to
allow unaccredited degree granting programs, with
approximately 140 approved institutions offering
unaccredited degrees. A 2012 New York Times article
outlined the experience of students attending these
institutions, including one seeking a bachelor's degree,
who had never spoken to a teacher but instead received an
email package of reading materials to read with an open
choice multiple-choice exam. The practice of offering
degrees primarily online and primarily targeted to foreign
students has long been at the heart of the state's role as
the diploma mill capital of the world.
Some career fields and licensing agencies require degrees
from accredited colleges; this is especially true in
professions like education and health care, where
certification or licensure is a pre-requisite for
employment. Although California licensure requirements in
the health care field vary, many practitioners must obtain
their required degrees from accredited institutions or
institutions approved by their respective licensing boards.
While the accrediting process is not perfect, as
highlighted by the unlawful activities of institutions
accredited by some accrediting agencies, and does not focus
on fair business practices that can impact a student's
success, accreditation is designed to provide a baseline
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measure of the quality of a particularly educational
program.
In response to these concerns and as a means of better
serving students while aiming to decrease the Bureau's
significant workload associated with reviewing unaccredited
degree granting institutions, SB 1247 (Lieu, Chapter 840,
Statutes of 2014) 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.
It appears that some authority to provide extensions for
meeting deadlines is still desirable, as the Bureau's
Statement of Reasons provided to the Office of
Administrative Law in support of the regulations for
implementing the accreditation requirement notes that "a
scenario, in which a program was very close, but not quite
to the stated goal, was envisioned, where the parties could
easily agree that the program would meet the requirement,
but it needed a couple more months. In short, substantial
performance could be demonstrated. However, extensions were
rejected as the statute states that programs failing to
meet the deadlines must be automatically suspended, which
allows for no other alternatives."
Unaccredited degree granting institutions have also
expressed concerns about the timeframes established in the
law to become accrediting, noting that the 2020 deadline is
too short.
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Recommendation and Proposed Statutory Change : The
Committees may wish to provide the Bureau discretionary
authority, as outlined in previous version of SB 1247, to
extend the deadline by which a school must be accredited,
according to certain measures showing meaningful progress
toward accreditation.
This bill makes the following changes to the Act related to
unaccredited degree granting institutions:
Extends the sunset date for a degree-granting institution
that is not accredited by an accrediting agency recognized
by USDE to obtain accreditation and provides BPPE the
authority to give extensions on the timeline for
unaccredited degree granting institutions to become
accredited according to certain evidence.
d) Issue : Unlicensed Activity/Compliance Inspections/BPPE
Investigations Backlog and Enforcement Powers.
Background : The Act provides that BPPE's primary mission
is to protect students. One of the ways BPPE achieves this
objective is through announced and unannounced compliance
inspections that ensure institutions are meeting the
minimum operating standards outlined in the Act and
regulations. Upon conclusion of a compliance inspection,
institutions are issued a notice to comply for any "minor
violations" identified during the inspection. Violations
that are not "minor" are referred to the complaint
investigations unit for further investigation. Committee
staff understands that this internal referral occurs
because BPPE believes, unlike most other DCA boards and
bureaus, it does not currently have the authority to issue
a citation for more serious violations identified during
the compliance inspection.
Information regarding pending investigations is not made
available to the public until a citation or accusation has
been issued by the BPPE. This means that students seeking
information regarding an institution may be provided
inaccurate information regarding an institution's
compliance with the law. For example, 13 unannounced
compliance inspections were completed in 2015 of Everest
and WyoTech (owned by CCI) campuses. According to the
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compliance inspection outcome data posted on the BPPE
website, no minor violations were detected at any of the
inspected campuses. These compliance inspections occurred
after the AG, and a number of other states and federal
agencies, filed charges against CCI for unlawful practices.
The degree to which compliance inspections lead to
investigations that result in the issuance of a citation
and/or accusation is also unclear; BPPE does not report
data on this point. Further, BPPE staff from different
units generate complaints and it appears that this internal
referral process contributes to the current complaints
backlog. According to BPPE data, by 2015 year-end, 32
percent of the 1,045 pending complaints were internal
referrals.
The USDE establishes that states are responsible for
providing primary protection of consumers and students
attending postsecondary educational institutions. BPPE
approval not only authorizes institutions to operate and
serve students in California, it can also, as outlined
above, enable institutions to receive public funds through
the federal Title IV financial aid program.
In the last few years, a number of postsecondary
educational corporations have been accused by federal and
state regulators of engaging in misconduct and fraud.
Often, these actions originate from public complaints. The
BPPE faces a growing complaint and investigation backlog
that may significantly reduce California's ability to
protect students and ensure appropriate use of taxpayer
funds.
SB 1247 directed BPPE to consult with the Advisory
Committee and adopt regulations to establish complaint
priorities. BPPE was required specifically to prioritize
complaints related to unlawful, unfair, or fraudulent
business practices and institutions making unfair,
deceptive, or misleading statements regarding educational
programs, placement, loans, tuition and fees, and other
outlined areas. BPPE reports the Advisory Committee has
discussed new regulations regarding complaint
prioritization, and the proposed regulations are currently
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in the internal review process.
Currently, BPPE reports that it is prioritizing complaints
based on a risk assessment score that reviews the following
criteria:
Allegations of complaint
Population of surrounding community
Number of open/closed complaints
Age of complaint
Institution status
The risk score is used to categorize the complaint as
urgent, high, or routine.
BPPE appears to have made some progress toward meeting the
Legislature's directives contained in SB 1247; however,
increased staffing and complaint prioritization changes
have not reduced the BPPE complaint backlog. Further, as
the details of complaints and resolutions are not made
available to the Legislature, it is unclear if complaints
are being acted upon properly in order to enforce the Act
and protect students.
Recommendation and Proposed Statutory Change : To reduce
the complaints backlog associated with internal referrals
resulting from compliance inspections, the Committees may
wish to amend the Act to authorize the Bureau, consistent
with all due process requirements, to issue citations for
non-minor violations detected during a compliance
inspection. To ensure BPPE compliance inspections are
properly identifying and responding to institutional
violations of law, the Committees may wish to require an
independent review and report on the adequacy of BPPE
compliance inspections. The Committees may wish to require
an independent review of complaint prioritization and
investigation and resolution procedures to ensure BPPE is
using all authorized tools to mitigate harm to students.
This bill makes the following changes to the Act related to
enforcement:
Increases the penalty for operating an institution without
BPPE approval from $50,000 to $100,000.
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Authorizes the BPPE to use evidence collected during a
compliance inspection in support of issuing a citation or
pursuing an action.
Requires institutions to notify BPPE of investigations by
other governmental agencies, as specified.
a) Issue : Fees.
Background : BPPE is funded through regulatory fees and
license fees. The Act requires institutions to pay
application fees and annual institutional fees to BPPE,
which are deposited in the Private Postsecondary Education
Administration Fund. The Bureau's fees were established by
AB 48 and have not been adjusted since BPPE became
operative in 2010.
The majority of BPPE funding is derived from annual fees.
Pursuant to AB 48, annual fees for a main campus are set at
0.75 percent of the institution's annual California
revenues (capped at $25,000) and $1,000 for each branch
location. Institutions are only authorized to have one
"main" campus; all other campuses are designated as branch
campuses or satellite locations. For large institutions,
annual fees can be manipulated based on the BPPE-approved
organizational structure. For example, if a corporation
owns 26 colleges, and is approved by the Bureau as one
"main" and 25 branch locations, it could pay $50,000
annually. If that same corporation enters the bureau with
4 main colleges and 22 branch locations, it could pay
$122,000 annually. Additionally, because of the cap, an
institution with annual revenues of $4 million will pay the
same $25,000 annual fee for their main location as an
institution with annual revenues of $40 million.
The appropriateness of fees collected by the Bureau has
been the source of discussion since AB 48 was introduced.
The former BPPVE was consistently insolvent and its fee
schedule was questioned in numerous reports and audits.
Fees were set in AB 48 to attempt to prevent history from
repeating itself and arm the Bureau with the financial
resources necessary to do its job. The California
Association of Private Postsecondary Schools (CAPPS) has
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weighed in on this issue and has especially been concerned
about the high annual institution fee for small-to-medium
sized institutions, lack of "fiscal calculations done by
the Governor or the Legislature about how many fees were
actually required to operate the BPPE. There was no
consideration that the overall number of institutions
governed by this statute were shrinking?There are a number
of schools paying over $100,000 a year in annual fees
alone." CAPPS has specifically referenced the disparity in
requiring each "main" campus to pay an annual fee.
BPPE is projected to have a fund reserve of just 2.7 months
at the end of FY 2015/16. In a March 2015 letter to the
Legislature, the Director of the DCA noted that "the Bureau
is undergoing a major change of operations and staffing
levels?Based on the unpredictable nature of implementation,
it would be premature to recommend a change to the fee
structure at this time." The Advisory Committee discussed
the current fee structure at an August 2015 meeting and
again at a November 2015 meeting. At its February 2016
Advisory Committee meeting, the Bureau indicated it was in
the process of contracting to have a fee audit conducted
"as a means of making decisions moving forward".
Recommendation and Proposed Statutory Change : The Bureau
and DCA should report on the long term resources necessary
for the Bureau to effectively regulate institutions and
protect students moving forward.
This bill makes the following changes to the Act related to
fees:
Reduces the annual fee calculation from 0.75 percent to
0.45 percent of an institution's revenue derived from
California students, increases the annual fee cap from
$25,000 to $60,000, establishes the annual fee calculation
for branch campuses and establishes an overall cap for
institutions of $750,000. While this change will result in
an increase for a school earning tens of millions of
dollars, that school will pay a smaller percent of revenue
than they are today while a small school will pay thousands
of dollars less than they are today. Close to 40 percent
of schools regulated by BPPE will see a decrease in fees.
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Establishes Legislative intent that the fees above be
evaluated in the 2017-18 state budget process and, if
necessary, adjusted by subsequent legislation based upon
the information provided to the Legislature by DCA and the
BPPE. Provides that the annual fee calculation shall
automatically increase to 0.55 percent on July 1, 2018, in
the absence of Legislative action.
1. Comments from Stakeholders on the Current Version of SB 1192.
A coalition of organizations including the Center for Public
Interest Law , Children's Advocacy Institute , Consumer
Federation of California , Housing and Economic Rights
Advocates , Public Counsel, Public Law Center , SEIU
California , and Veterans Legal Clinic are supportive of this
bill. The groups note that "Californians have been
disproportionately harmed by for-profit education businesses
that fail to deliver on their promises to students. Strong
state oversight will help protect students, so that fewer
Californians are harmed in the future. A vigorous BPPE is
needed more than ever."
SUPPORT AND OPPOSITION:
Support:
Center for Public Interest Law
Children's Advocacy Institute
Consumer Federation of California
Housing and Economic Rights Advocates
Public Counsel, Public Law Center
SEIU California
Veterans Legal Clinic
Opposition:
None on file as of August 24, 2016.
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