BILL ANALYSIS                                                                                                                                                                                                    

Date of Hearing:  March 18, 1997

                        Ted Lempert, Chair

           AB 71 (Wright) - As Amended:  March 12, 1997
                Urgency Statute.  2/3 Vote Requirement.
  SUBJECT  :  Private Postsecondary and Vocational Education Reform  
Act of 1989.

  SUMMARY  :  Extends by five and a half years, from June 30, 1997 to  
January 1, 2003, the sunset date for the Private Postsecondary and  
Vocational Education Reform Act of 1989 (Reform Act) and the  
Maxine Waters School Reform & Student Protection Act of 1989 (  
Waters Act/Article 7), and makes numerous substantive and  
technical nonsubstantive changes to the Act.  The Reform Act also  
created the Council on Private Postsecondary and Vocational  
Education (CPPVE) and designated it the lead agency in  
implementing and enforcing the Act. Specifically,  this bill  :

1) Makes substantive changes to the Reform Act that are intended  
to bring   about greater flexibility and efficiency, while also  
reducing paperwork,        administrative costs, fees, and  
administrative requirements.  Some of the      changes include the  
following:  (a) allows the schools to use a less         costly  
process to appeal an administrative action to the Council in lieu  
of an expensive and lengthy administrative hearing,(b) reduces  
costly and                                                
time-consuming administrative reporting requirements, (c)  
increases the                                            maximum  
length of approvals for non-degree schools, simplifies the process  
filing renewal applications which will also result in fee  
reductions,                                              and (d)  
provides additional exemptions both from the Act and from  
specified sections of the Act.

2)  Exempts English language instruction programs from Article 7  
that meet the following criteria:  (a) exclusively enroll  
international students who are   not immigrants, refugees or  
permanent residents, (b) prepare students for    entrance exams at  
accredited or approved postsecondary institutions, (c)        
accept no federal or state financial aid, and (d) are not offered  
to lead   to occupational employment.  These programs would  
continue to be subject    to the less rigorous requirements of the  
Reform Act.  
3)  Relates regulation and student protection to type of program  
as opposed to the entire institution so that schools offering a  
variety of programs from   certificates through doctoral degrees  
are not required to apply the more       restrictive vocational  
program requirements. 

4)  Makes other minor, technical nonsubstantive and conforming  



5)  Requires CPEC to review and evaluate the effectiveness of  
these acts and report its findings to the Legislature by January  
1, 2001 and every five  years thereafter. 

6) Revises and specifies the scope and contents of an annual  
report that the Council is required to submit to the Legislature  
by January 1 of each year  to include such items as: (a) data on  
scope and operation of California       private postsecondary and  
vocational schools, (b) information on consumer    complaints  
received and action taken,(c) number of license appeals, and d)     
 enforcement information. 


                                                          AB 71  
                                                         Page 3

  FISCAL EFFECT  :  CPPVE is an independent, special fund agency and  
the Council receives no general fund revenues. This bill would  
result in minor absorbable costs to the Council and CPEC.


1)  In 1989, the Legislature enacted the Private Postsecondary and  
Vocational Education Reform Act of 1989 which establishes the  
regulatory framework       for all private postsecondary  
educational institutions, including                       
degree-granting, vocational and non-degree granting schools.   
Within the                                               Reform  
Act is the Maxine Waters School Reform and Student Protection Act  
which establishes consumer protection and financial standards for  
for-profit certificate- or diploma-granting schools (i.e. private  
vocational schools).  

2)  These acts addressed two related problems: (a) diploma mills  
that in    essence sold academic degrees without adequate  
educational programs, and    (b) unscrupulous trade schools, or  
those engaged in fraudulent recruitment   and student loan  
practices that left students with tremendous debt but no     new  
job skills and the government with escalating student loan  

   This reform legislation was intended to resolve these issues by  
significantly strengthening the standards for state licensure and  
transferring licensure responsibility from the State Department of  
to the new Council. 

3)  To receive or keep a license, institutions must maintain and  
disclose   minimum rates for student program completion and job  
placement as well as      standards for financial responsibility.  
The law also establishes a special      fund to reimburse student  
tuition losses when schools close and provide       standards for  
ownership, recruitment and advertising.  The law is among         
the most stringent in the United States and serves as a national  
model.      Following its enactment Congress passed similar  
regulatory legislation in  this area. 

4)  Currently a number of third-party funding agencies, including  
worker's   compensation, rehabilitation, and JTPA require Council  
approval for a                                           school as  
a condition of funding.

5) The 20-member Council includes representatives from private  
postsecondary schools, the public, state agencies, and appointees  
from the Governor and  the Legislature.  The Council staff carry  
out the administrative,                                  research,  
and regulatory responsibilities of the agency, which include:  (a)  
approval of degree and nondegree institutions; (b) assisting  
consumers   by investigating complaints and providing refunds in  


                                                          AB 71  
                                                         Page 4

circumstances; (c) investigating schools operating without Council  
(d) conducting research on private postsecondary education; and  
(e) assessing licensure fees for schools.

   Presently, there are nearly 2,500 approved institutions  
educating over   400,000 students.  Approximately eighty-five  
percent of the schools are        non-degree granting and fifteen  
percent grant degrees.  Approximately                     
twenty-one percent of the students are enrolled in degree  

6)  CPEC completed its review of the Reform Act in October 1995,  
and formally 
   submitted its report the Legislature in a joint hearing of the  
Senate   Education Committee and Assembly Higher Education  
Committee on February        28, 1996.  CPEC conclusions  
concerning the Reform Act included the                    
following: (a) consumers were sufficiently protected, (b) the  
integrity of                                             degrees  
and diplomas were effectively protected, (c) student and  
institutional protections and rights reflected a balanced view.   
For these                                                reasons,  
CPEC recommended removal of the repeal date, allowing the law to  
operate indefinitely.

7)  At the end of the 1996 Legislative Session the Governor vetoed  
a similar bill, AB 2960 (Firestone and Campbell).  In the  
Governor's Veto Message    the following concerns were raised:

   a)  The level of fees required for compliance and the ability  
of small       schools to stay in business.  Larger more  
capitalized schools do not          have the same problem as the  
smaller schools that operate on a much            smaller margin.

   b)  The manner in which the staff of the Council carry out  
their        responsibilities. There were reports from some  
schools of alleged       reprisals and vindictiveness by Council  
staff.  It was recommended           that the council provide an  
administrative appeal process short of        litigation.

   Both issues are addressed in this bill through substantive  
changes, i.e. exemptions for small schools and an administrative  
appeals  process. 

   The author's intention in this bill is solely to address the  
Governor's  concerns listed in the veto message and to avoid the  
expiration of the law     on June 30, 1997.  Both the author and  
the Governor's staff have verbally      agreed on compromise  
language contained in this bill.

8)  The Reform Act was the product of bipartisan efforts lead by  
then       Assemblywoman Maxine Waters (D) and Senator Becky  
Morgan (R), and was                                      signed  
into law by Governor Deukmejian.  Legislation in this area  
continues to garner bipartisan support, i.e. last year AB 2960  


                                                          AB 71  
                                                         Page 5

passed both                                              the  
Assembly and Senate with only one opposing vote.  

9)  Frequently, school owners argue that the Reform Act has  
negatively      impacted schools by quoting school closure  
figures.  According to the                               Council,  
prior to the Act, in 1980-1982, 911 businesses closed compared to  
1993-1995 when only 595 schools closed. Each year since 1993, more  
schools                                                  have  
opened than closed in California.

10)  The Reform Act sunsets on June 30, 1997, and is repealed on  
January 1,  1998.

  Arguments In Support  :  CPEC contends that the Reform Act has  
become a model for federal standards and other states, its  
regulation of private postsecondary education is a major  
improvement over the conditions that existed prior to its  
creation.  Consumers contend that oversight of the schools by the  
Council has proved to be an effective means of ensuring that  
scarce state and federal resources are paid only to legitimate  
educational institutions from which students receive a verifiable  

The author states that student complaints still arise regarding  
failure to pay refunds, quality of education and misrepresentation  
in recruitment.  Many schools contend that consumer protection and  
minimum educational standards 
have helped improve quality within the private postsecondary  
vocational education sector, and they have benefited from a much  
improved reputation as the number of problem schools has been  

  Arguments In Opposition  :  Many schools argue that the Reform Act  
and the Council promote and enforce excessive and costly  
regulation over private institutions, and this discourages new  
schools from investing in California.



California Postsecondary Education Commission
Majors & Fox
Los Angeles Center for Law and Justice
Bet Tzedek Legal Services
McKinnon Institute
Legal Services of Northern California
University of California
Public Counsel Law Center
Proskauer, Rose, Goetz & Mendelson
William O'Hare, Attorney at Law
Beck, De Corso, Daly, Barrera & Oh
Jones, Day, Reavis & Pogue
Consumers Union
California Pacific University


                                                          AB 71  
                                                         Page 6

Maxine Waters, Member of the Congress of the United States
Katten, Muchin & Zavis
Body Mind College
Desert Resorts School of Somatherapy
Alive & Well
California Coast University
Mueller College
Oregon Office of Educational Policy and Planning
The Sturdevant Law Firm


American College of Law
California Career College
Independent Law School Association
The Wilson Group, LLC
Western Sierra Law School
The Educational Small Business Association

  Analysis prepared by  :  Rosa de Anda / ahed / (916) 324-4655