BILL ANALYSIS
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|Hearing Date:June 28, 2010 |Bill No:AB |
| |1889 |
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SENATE COMMITTEE ON BUSINESS, PROFESSIONS
AND ECONOMIC DEVELOPMENT
Senator Gloria Negrete McLeod, Chair
Bill No: AB 1889Author:Portantino
As Amended:June 22, 2010 Fiscal: Yes
SUBJECT: Private postsecondary education: California Private
Postsecondary Education Act of 2009.
SUMMARY: Enacts several changes to the California Private
Postsecondary Education Act (Act) and the related oversight provided
by the Bureau for Private Postsecondary Education (Bureau).
Existing law:
1)Establishes the Bureau within the Department of Consumer Affairs
(DCA) and provides for Bureau oversight and regulation of California
private postsecondary institutions.
2)Specifies that, notwithstanding the inoperative status or repeal of
the former Private Postsecondary and Vocational Education Reform Act
of 1989 (Former Act) on or after July 1, 2007, any claim or cause of
action in any manner based on the act that was commenced on or
before June 30, 2007, whether or not reduced to a final judgment,
shall be preserved, and any remedy that was or could have been
ordered to redress a violation of the act on or before June 30,
2007, may be ordered or maintained thereafter.
3)Defines "Ability-to-benefit student" (ATB) as a student who does not
have a certificate of graduation from a school providing secondary
education, or a recognized equivalent of that certificate. Provides
that before an ATB student may execute an enrollment agreement, the
institution shall have the student take an independently
administered examination from the list of examinations prescribed by
the United States Department of Education (USDE). Specifies that
the student may not enroll unless he or she achieves a score
demonstrating that the student may benefit from the education and
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training being offered.
4) Exempts the following from oversight by the Bureau:
a) An institution that offers solely avocational or recreational
educational programs.
b) An institution offering educational programs sponsored by a
bona fide trade, business, professional, or fraternal
organization, solely for that organization's membership.
c) A postsecondary educational institution established, operated,
and governed by the federal government or by this state or its
political subdivisions.
d) An institution offering test preparation for examinations
required for admission to a postsecondary educational institution
or continuing education or license examination preparation, if
the institution or the program is approved, certified, or
sponsored by:
i) A government agency, other than the Bureau, that licenses
persons in a particular profession, occupation, trade, or career
field.
ii) A state-recognized professional licensing body, such as the
State Bar of California, that licenses persons in a particular
profession, occupation, trade, or career field.
iii) A bona fide trade, business, or professional organization.
1)Establishes numerous fair business practices for institutions
covered by Act, including prohibiting an institution from promising
employment or otherwise overstating the availability of jobs or
making untrue or misleading statements regarding student completion,
placement or expected salary rates.
2)Specifies certain requirements pertaining to cancellations, refunds
and withdrawals for an institution that does not participate in the
federal student financial aid programs, including one that provides
for a refund of 100 percent of the amount paid for institutional
charges, less a reasonable deposit or application fee not to exceed
two hundred fifty dollars ($250), if notice of cancellation is made
through attendance at the first class session, or the seventh class
day after enrollment, whichever is later.
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3)Sets forth certain disclosure requirements pertaining to completion,
placement, licensure, and salary. Provides that, for the purposes
of determining placement rates, "graduates employed in the field"
means graduates who are gainfully employed within six months of
graduation in a position for which the skills obtained through the
education and training provided by the institution are required or
provided a significant advantage to the graduate in obtaining the
position.
4)Requires the Bureau to provide annual progress updates to the
Legislature, as specified, in the form of oversight hearings by
appropriate policy and fiscal committees.
5)Requires the Legislative Analyst's Office, by October 1, 2013, to
report to the Legislature and the Governor on the appropriateness of
the exemptions provided by the bill.
6)Requires the Bureau to contract with the Bureau of State Audits
(BSA), by August 1, 2013, to conduct a performance audit to evaluate
the effectiveness and efficiency of the Bureau operations.
Specifies that BSA is required to report the results of the audit to
the Legislature and the Governor.
7)Appropriates $580,000 from the Private Postsecondary and Vocational
Education Administration Fund (Fund) to for the purpose of funding
five private postsecondary education specialist and senior
specialist positions. Includes these positions in the annual budget
for the Bureau.
This bill:
1)Clarifies that remedies available under the Former Act are available
to students filing legal claims after June 30, 2007, for violations
that occurred while the Former Act was in place.
2)Provides for a one year delay in implementation of the Act,
beginning July 1, 2010, for institutions certified to offer
educational programs in flight instruction and aircraft maintenance
by the Federal Aviation Administration (FAA) and requires the
Legislature to hold public informational hearings for the purpose of
reviewing the appropriateness of regulating these programs.
3)Specifies that an institution offering an unaccredited doctoral
degree program must disclose to prospective students that the degree
program is unaccredited, and any known limitations of the
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unaccredited degree including whether the degree is recognized for
licensure or certification in other states.
4)Allows the Bureau to publish a list of eligible examinations for
ability-to-benefit (ATB) students, if the USDE does not have an
approved examination relevant to the specific occupational training
program.
5)Ensures students are provided until the first class day or the
seventh day after enrollment, whichever is later, to cancel a
program and receive a refund.
6)Alters the definition of "graduates employed in the field" to
require that graduates be gainfully employed within six months of
graduation in a position for which the skills obtained through the
education and training provided by the institution are required or
are utilized to perform the purpose or objective of the position or
the major responsibilities of the position.
7)Clarifies that the education specialist and senior specialist
positions established within the Bureau are full-time, permanent
positions based in the Sacramento office of the Bureau.
FISCAL EFFECT: According to the Assembly Appropriations Committee
analysis dated April 28, 2010, this bill may result in ongoing special
fund, fee-supported costs of around $200,000 in travel expenses for
the Sacramento-based specialist positions. DCA indicates that,
because most of the schools to be regulated by the Bureau are located
in southern California, four of the five specialist positions would
spend the majority of their time in that region and mandating these
positions be based in Sacramento will result in weekly travel-related
costs.
COMMENTS:
1.Purpose. This bill is sponsored by the Author. According to the
Author, the bill is intended to make necessary, technical changes to
the Act established in AB 48 (Portantino, Chapter 310, Statutes of
2009), as well as important substantive changes to ensure the Bureau
operates effectively in promoting consumer protection. The Author
provides rationale for these changes as follows:
a) Legal remedies: The Author notes that the Act extended the
time period for students to file legal claims against
institutions that violated the Former Act, allowing legal claims
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to continue to be filed through a normal statute of limitations.
The Author believes that the clarification in this bill would
ensure that the legal remedies provided under the Former Act are
also available to these students.
b) Delay in implementation for flight schools: The Author
believes that there may have been oversight on the part of the
Legislature in not reviewing past precedence regarding FAA
regulated flight schools as AB 48 was moving through the process.
The Author wants to afford the Legislature time to make an
informed decision about regulating these schools and flight
instructors, while at the same time preventing a significant
economic impact to this industry that may result from having to
meet standards of state oversight and regulation.
c) Doctoral degrees: The Author believes that ensuring
unaccredited doctoral degree programs disclose certain
information, including any known limitations of the unaccredited
degree and whether the degree is recognized for licensure or
certification in other states will further protect consumers who
decide to participate in these programs.
d) ATB tests: According to the Author, some non-English based
training programs do not have relevant USDE-approved tests so
this clarification will allow the Bureau to publish a list of
eligible examinations if the USDE does not have a relevant
examination.
e) Cancellation policies: The Author notes that this is a
technical change to the Act.
f) Employment statistics: The Author argues that the change in
the definition of "graduates employed in the field" is necessary
to ensure accurate job placement reporting.
g) Bureau staffing: The Author contends that the intent of the
language in AB 48 appropriating money for education specialist
positions was to ensure that employees of the former Bureau, with
expertise in regulation and oversight of private institutions,
would have the opportunity to be placed within the new Bureau.
This bill would clarify that the education specialist and senior
specialist positions described in AB 48 are to be full-time,
permanent positions housed in the Sacramento office of the
Bureau.
1.Background.
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a) Enactment of AB 48. After numerous legislative attempts to
remedy the laws and structure governing regulation of private
postsecondary institutions, AB 48 was enacted in January 1, 2010,
to make many substantive changes that both created a new, solid
foundation for oversight and responded to the major problems with
the Former Act. The Act as created by AB 48 requires all
unaccredited colleges in California to be approved by the new
Bureau, and all nationally accredited colleges to comply with
numerous student protections. It also establishes prohibitions
on false advertising and inappropriate recruiting. The Act
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 guarantees students can complete their
educational objectives if their institution closes its doors,
and, most importantly, it gives the Bureau an array of
enforcement tools to ensure colleges comply with the law.
Prior to the enactment of AB 48, California was without a
regulatory body for private postsecondary institutions. The
previous Bureau for Private Postsecondary Institutions (BPPVE)
sunset in July 2008, leaving approximately 1,500 private
postsecondary institutions that had been previously approved by
BPPVE to operate in California without state oversight. The
former BPPVE registered approximately 700 private institutions
providing short-term career/seminar training, continuing
education, intensive English language programs, and license exam
preparation courses. Those schools had an estimated student
enrollment of approximately 400,000. Of those students,
approximately 280,000 students attended non-degree-granting
institutions and the remaining 120,000 attended degree-granting
institutions. BPPVE approved institutions served a significant
portion of students seeking postsecondary educational and
vocational training services. In 2006, BPPVE approved
institutions served as many students as were served by the entire
California State University system. It is generally believed that
BPPVE institutions, especially the vocational schools, tend to
serve segments of the population that are underserved by the
traditional public and private postsecondary education
institutions.
b) Concerns About Private Postsecondary Schools. Media outlets
and efforts at the Federal level have recently highlighted unease
about the operations and functions of private postsecondary
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schools. This Committee, at its March 2009 hearing entitled "The
Role of Private Education Institutions in Preparing California's
Diverse Workforce: Meeting the Challenges of our Workforce and
Job Training Needs." examined the ability of private
postsecondary institutions to fill the career preparation needs
of California's workforce and evaluate policy options that allow
them to expand their workforce development programs with the
requisite amount of oversight required to protect students.
While the sector serves upwards of ten percent of postsecondary
students and provides a path to higher education that may not
always be available for all students, there are increased
questions about these institutions' accurate representation of
what they are able to offer students. There are also concerns
that schools provide training at a steep cost that does not
balance the earnable income an individual may be eligible for,
based on that training or upon completion of a program. Recent
budgetary and capacity issues in California's public
postsecondary schools, coupled with the current economic crisis
may lead to a worsening of the current situation, as employees
are increasingly out of work and more inclined to enter training
programs in the hopes of obtaining gainful employment, at a cost
they may not be able to make up once they are employed.
A recent New York Times article and piece that aired on Frontline
explored complaints against these schools, particularly the
practice of reliance on federal loans and grants and questionable
recruiting practices. Advocates believe that tuition at private
postsecondary institutions is extremely high, forcing students to
take out private loans to supplement the limitations of those
offered by the Federal government. The rising debt to income
ratio has led to U.S. Department of Education action, including
proposed stricter rules and oversight to protect students from
debt resulting from high student loans. The private
postsecondary school sector responds that career colleges are an
essential part of the solution for restoring this country's
global educational and economic standing, citing the role these
schools play in helping lower unemployment, boost global
competitiveness, fill jobs in key industries, and increase the
number of college graduates by 2020.
2.Flight Schools.
a) Exemptions and Requirements for Flight Schools under the
Former Act. Section 94930 of the Education Code of the Former
Act specifically referenced the regulation of flight training
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providers in California and provided certain exemptions. It
specified that all institutions that were certified to offer
flight instruction by the FAA and that operated in California on
December 31, 1990, receive approval from the BPPVE for a period
not to exceed three years. It also required that on or before
June 30, 1999, the BPPVE work in cooperation with the FAA to
review each of these institutions to determine whether the
institution is in compliance with the requirements of the Act.
It provided that it is the intent of the Legislature that all
institutions whose cumulative gross student loan default rate is
above 40 percent, as determined by the Student Aid Commission, be
reviewed by the FAA and the BPPVE to determine if these
institutions are in compliance with the requirements of the Act
and should continue to be approved to offer educational programs
in California. It was further stated that it is the intent of
the Legislature that the BPPVE develop a Memorandum of
Understanding (MOU) with the FAA to delineate the
responsibilities of each agency for the approval and monitoring
of these institutions that were operating on December 31, 1990,
under the prior authority of the Act.
Section 94930 further provided that institutions certified to
offer flight instruction by the FAA, or its successor agency,
shall comply with certain specified student protection
requirements of the Act, but shall not be required to file any
materials with the BPPVE that are not required by the FAA or its
successor agency, except those minimally necessary to administer
the student Tuition Recovery Fund as determined by the BPPVE.
The responsibility for monitoring and enforcing institutional
compliance for these instructions was the responsibility of the
BPPVE.
While the Former Act provided Legislative intent for the BPPVE to
enter into a MOU with the FAA to "delineate the responsibilities
of each agency for the approval and monitoring of these
institutions," the statute did make clear that flight schools
would be subject to the following requirements :
Operations and maintenance standards (financially
capable, issues some type of degree or certificate upon
completion, and provides instruction as part of the
educational program.)
Specified requirements for written contract.
Catalog or brochure requirements.
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School performance fact sheet.
60% pro rata refund policy.
Alternate refund policy.
Tuition refund upon cancellation prior to first day of
instruction.
Written refund policy.
Timely refunds.
Schedule of charges.
Alternative refund calculation.
Right to withhold transcript for non payment.
Maintenance of student records.
b) The Memorandum of Understanding with the FAA has expired. .
The most recent MOU between the Western-Pacific Region of the FAA
and Former Bureau, signed in 2000, established that the FAA would
"assume full responsibility for oversight, regulation and
consumer protection authority for nondegree-granting private
postsecondary institutions operating under Federal Aviation
Regulations (FAR) parts 141, 142, 65 and 147 of the FAA". The
MOU went on to clarify that:
The FAA would be the entity with the exclusive authority
to certificate institutions to provide approved pilot training
courses.
Certification by the FAA constituted the approval and
requirement to engage in education and training.
The FAA would maintain exclusive jurisdiction over
approval and renewal.
FAA certified private institutions were not required to
comply with the requirements and standards of the Act but shall
endeavor to use those requirements and standards as guidance in
their operations.
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Reimbursement of tuition in the event of early termination
or training or closure of an institution would not be
guaranteed by the FAA or the Former Bureau.
With the sunset of the Former Bureau in 2008, the MOU expired .
a) Problems with Flight Schools: Silver State Helicopters .
Silver State Helicopters was a helicopter flight training, sight
seeing tours and charter air operator that at one time had flight
schools located in 34 cities around the nation. In most
instances, students paid upwards of $70,000 in advance for the
Silver State program. Silver State was known throughout the
industry for using aggressive sales tactics to recruit students
to the program. Silver State also experienced a number of
crashes throughout the nation. On February 3, 2008, the
company's owner and founder notified employees that company would
be out of business effective at 5:00 P.M. that same day and that
jobs would be terminated at that time. Two days later came the
announcement that Silver State had filed for protection from its
creditors under Chapter 7 bankruptcy laws. That action, in
effect, left more than 800 employees without jobs and more than
2,500 flight students with millions in debt. There are currently
a number of lawsuits pending against the company's owner, as well
as Federal investigations into the company's structure and
practices.
The experience of Silver State was the primary force behind the
Legislature's inclusion of flight training institutions for
regulation by the Bureau under AB 48. However, these
institutions did not take part in negotiations on that measure,
nor were they aware of the new policy requiring Bureau oversight
of schools. The first indication for schools that they were
subject to new regulations came in the form of letters from the
Bureau earlier this year detailing requirements for application
for approval. According to the National Air Transportation
Association (NATA,) "under FAA regulations, flight training can
occur under two separate regulatory environments established by
Title 14 of the Code of Federal Regulations Part 61 and 141 (14
CFR Part 61 & 14 CFR Part 141). Known as Part 61 and Part 141
flight training, these separate environments address the varying
needs of flight training students. The basic requirements for
pilot certification, including training topics, hour requirements
and licensing test requirements, are found in 14 CFR Part 61. The
regulatory structure of Part 61 allows for training to occur in a
variety of structures. These structures include instruction
provided by an individual CFI to individual students, as well as
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training provided by small and larger facilities employing or
contracting CFIs to provide instruction. These differing training
structures usually involve payment for services on a per-flight
basis (usually due after the training flight occurs), where the
student is charged an hourly rate for aircraft rental and
instruction."
b) Response to Flight Schools Concerns . The flight instruction
community in California has expressed serious concerns and dismay
that they would now be subject to Bureau oversight after years of
exemption through the Former Bureau's MOU with the FAA. Flight
school owners and flight instructors appeared en masse at a
recent Bureau Advisory Committee meeting, presenting the
tremendous burden placed on them by having to meet requirements
of Bureau oversight, specifically a costly application fee and a
requirement to submit audited financial statements. Flight
schools argue that Bureau regulation, as contained in AB 48, will
force them to shut down their operations, leading to the demise
of the industry in this state and negative economic impact that
will result from firing their employees, no longer purchasing jet
fuel with taxes to local government and the potential closure of
small airports in the state. According to these individuals,
many offer flight training as a hobby and means of furthering
their passion for flying. Most do not charge fees up front and
operate on a pay-as-you-go basis. Flight schools have also
reached out to members of the Legislature and Governor's Office,
attempting to amend this bill to include an exemption to the
requirements of AB 48.
In response to the Flight Schools, the Author recently amended this
bill to provide a one year delay in implementation of the Act for
flight schools certified by the FAA, with a requirement for the
Legislature to hold public informational hearings for the
purposes of reviewing the appropriateness of regulating these
programs .
1.Similar Legislation This Session. AB 2393 (Ammiano) alters the
definition of "graduates employed in the field" for apprenticeship
and nursing programs. That bill is set for a hearing in this
Committee on June 28, 2010.
2.Previous Related Legislation. AB 2746 (Niello) was similar to AB
48, but it specifically exempted "an institution certified to offer
educational programs in flight instruction and aircraft maintenance
by the FAA" from regulation. That measure was held in the Assembly
Committee on Appropriations.
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3.Arguments in Support. The California Nurses Association and
National Nurses Organizing Committee believe that this bill would
stop an unfair business practice by ensuring that the skills
obtained through the education or training provided be required for
the position.
4.Arguments in Opposition. The California Association of Private
Postsecondary Schools (CAPPS) writes in opposition to this measure,
primarily surrounding the provisions relating to remedies. CAPPS
believes that by adding new claims during the sunset period and
allowing retroactive new lawsuits, the bill unfairly creates
liability for institutions that had no legal responsibility to
comply with expired laws.
The Department of Consumer Affairs (DCA) does not believe that this
bill should specify how staff should be hired and where staff
should be located.
5.Policy Issues :
a) Should students be able to seek remedies under the Former Act?
This bill was amended out of the Assembly Committee on
Appropriations with the language now included to allow students
filing claims against schools under the Former Act to collect
remedies available to them under the Former Act. As stated
above, the Author believes this was a technical oversight by the
Legislature and it was never the intention of this body to
provide an allowance for claims with no remedies. Some schools,
including Career Education Corporation (CEC), which is currently
the subject of pending litigation, do not believe that the
Legislature should be involved in amending this provision at this
time. They assert that the clarification for remedies is
intended to influence the outcome of judicial proceedings, and in
fact the plaintiffs' attorneys filed judicial notice upon
learning of the new language in this bill. CEC also cites
Government Code Section 9607 as evidence that reviving previous
statute that has been repealed or chaptered out is not allowable,
specifically noting that once the repeal date passes, there
cannot be a revival of the repealed law.
b) Is it appropriate for the Legislature to mandate staffing
decisions for the Bureau and Department? It may not be
appropriate for the Legislature to mandate the location of Bureau
staff. Specifically, the requirement for the five education
specialist and senior specialist positions described in AB 48 to
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be statutorily full-time, permanent positions housed in the
Sacramento office of the Bureau which removes the flexibility of
DCA and the Bureau to organize its staff. Data from the Bureau
shows that many of the private postsecondary institutions that
opened during the time in which the Bureau and Act were
inoperative are in Southern California and there exists a
preponderance of institutions in that part of the state. The
Bureau, as earlier indicated, does not yet have a budget and when
the recent DCA Budget Change Proposal (BCP) came before the
Budget Conference Committee, a decision was made not to specify
the location of staff in approval of the budget.
c) Should the Board of Barbering and Cosmetology be granted the
authority to approve schools rather than the Bureau, as requested
by the Board and the Profession? Based on the experience of
approving schools and programs during the sunset of the Former
Act, the Board of Barbering and Cosmetology (BBC) in particular
believes that there are outstanding questions about the
jurisdiction of the BBC board versus that of the Bureau regarding
student complaints. BBC also notes that current law specifies
conditions schools must comply with and this has historically
resulted in an issue of dual oversight with the Bureau. BBC
approached the Author seeking an amendment to AB 48 and submitted
a subsequent request for an amendment to this measure that would
provide for BBC, and only BBC, oversight and regulation of all
schools and programs attended by its eventual licensees. BBC and
the Professional Beauty Federation of California (PBFC) now cite
instances where student complaints are not being investigated by
either BBC or the Bureau. BBC argues that "we can better protect
students who are our eventual licensees. Currently all schools
must have their curriculum approved by our Board. Our Board must
approve the schools space, equipment and textbooks; we are
required to conduct inspections. There is a significant problem
in our industry of schools "selling hours" and falsifying proof
of training. A completed proof of training must be submitted in
order to sit for our licensing exam. Our Board is the entity
responsible for verification of proof of training, and yet we
have no authority to take action."
Nine boards within DCA have a direct connection to the Bureau.
While some are required to review the curriculum and often
institutions offering programs, others require Bureau approval in
order to meet educational requirements for licensure,
certification or registration. The Board of Barbering and
Cosmetology (BBC) for example, approves curriculum, facilities,
equipment and textbooks for schools offering training programs
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for eventual licensees. The Board of Vocational Nursing and
Psychiatric Technicians (BVNPT) staff grants approval and
ultimately accreditation of Vocational Nursing and Psychiatric
Technician programs but does not have oversight of institutions
offering these programs. The Board of Registered Nursing (BRN)
approves all nursing school programs in the state.
This Committee plans to hold an Informational Hearing to
comprehensively review the role that the DCA boards and the BPPE
play in the accreditation and approval of schools and programs,
and to also evaluate whether there is any duplication in the
requirements for approval or oversight of these schools, and
examine the possibilities for improving the availability of
private career and education training while ensuring quality
education and appropriate consumer protections for students.
Staff recommends that no changes to the authority of boards
regarding private postsecondary schools be made at this time.
NOTE : Double-referral to Education Committee (second.)
SUPPORT AND OPPOSITION:
Support:
Association for Private Postsecondary Education in California (APPEC)
California Nurses Association
National Nurses Organizing Committee
Service Employees International Union (SEIU)
Opposition:
California Association of Private Postsecondary Schools (CAPPS)
Career Education College (CEC)
Consultant:Sarah Mason