BILL ANALYSIS �
SB 1247
Page 1
Date of Hearing: June 10, 2014
ASSEMBLY COMMITTEE ON HIGHER EDUCATION
Das Williams, Chair
SB 1247 (Lieu) - As Amended: June 5, 2014
SENATE VOTE : 33-3
SUBJECT : California Private Postsecondary Education Act of
2009.
SUMMARY : Extends the sunset date for the California Private
Postsecondary Education Act of 2009 (Act) from January 1, 2015
until January 1, 2017; and, provides for an array of statutory
changes to the governance structure, the protections provided to
students, and the requirements placed on private postsecondary
educational institutions (institutions). Specifically, this
bill :
1)Reestablishes the Bureau for Private Postsecondary Education
(BPPE) as the Board for Private Postsecondary Education
(Board) and provides for transition to the Board.
a) Provides that the Board consists of 11 members,
appointed as follows:
i) Three with a record of advocacy on behalf of
consumers, one appointed by the Governor, one by the
Senate Rules Committee, and one by the Assembly Speaker;
ii) Two current or former students of institutions,
appointed by the Governor;
iii) Three representatives of institutions, appointed by
the Governor;
iv) Two public members with experience or expertise in
postsecondary education, appointed by the Governor;
v) One public member with knowledge or expertise in
emerging fields of employment, appointed by the Governor.
b) Provides that a member of the BPPE Advisory Committee,
which is deleted in this bill, is eligible to be appointed
to the Board.
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c) Provides for a transition period from the BPPE to the
Board until July 1, 2015.
d) Provides that the executive officer of the Board shall
be appointed by the Governor and subject to confirmation by
the Senate Committee on Rules.
2)Makes the following changes to institutions exempt from the
Act:
a) Prohibits an institution, as specified, that receives
federal veteran aid funding, as specified, from claiming an
exemption from the Act.
b) Clarifies that an exempt flight school may not accept
prepayment of more than $2,500.
3)Requires the Board to contract with the Office of the Attorney
General to establish training that ensures staff can
investigate complaints.
4)Requires the Board, by January 1, 2016, to initiate the
procedures governing approval or denial of all applications
that are pending as of January 1, 2015.
5)Requires the Board to post a list of all institutions denied
an approval to operate, and describe the reasons for the
denial, on the Board internet website. Requires a disclosure
on the website informing students that the institutions were
denied approval to operate, are not in compliance with the
law, and that students are discouraged from enrolling in
unapproved institutions.
6)Requires the Board to establish a task force to identify
standards for educational and training programs specializing
in innovative subject matter and instructing students in high
demand technology fields and report to the Legislature, by
January 1, 2016, regarding appropriate levels of oversight of
these institutions. Allows the Board to delay application
processing until January 1, 2016.
7)Requires an unaccredited institution offering a degree that is
approved by BPPE as of January 1, 2015 to obtain and provide
evidence of accreditation by January 1, 2017.
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8)Requires the Board to adopt regulations that ensure the
following students, and any other students deemed appropriate,
are eligible for payment from the Student Tuition Recovery
Fund (STRF):
a) In the event of a school closure, a student who attended
the institution within 120 days;
b) A student to whom an institution has been ordered to pay
refunds by the board but has failed to do so;
c) Students who have been awarded restitution, refunds or
monetary awards by an arbitrator or court, but who have
been unable to collect the award from the institution;
d) Students whose programs have been discontinued at the
campus they attended before they were able to complete the
program; and,
e) Students who suffered losses due to an institution's
violation of this act.
9)Requires the Board to report to the Legislature by October 1,
2015 regarding efforts to streamline the Board's approval
process for institutions while ensuring the same or similar
data information is reported to students in a clear and
conspicuous manner.
10)Removes authority for the Board to adjust annual fees for
individual institutions based on cost of providing oversight
of individual institutions.
11)Requires announced and unannounced compliance inspections to
be conducted at least every five years, rather than every two
years, and requires the Board to adopt regulations that set
forth inspection policies to ensure that student protections
are the highest priority and that inspections are conducted
based on risk and potential harm to students.
12)Requires the Board to establish a timeline by which
complaints are processed, and to establish procedures to
prioritize complaints as urgent, high-priority, and routine.
13)Provides that if the Board has reason to believe that an
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institution's noncompliance with the provisions of the Act
significantly transcends the interests of the individual
complainant or the Board has determined that the complexity of
the case requires additional expertise and resources, the
Board shall contract with the Attorney General for
investigative and prosecutorial services.
14)Requires the Board to contract for an independent review of
staffing resources and provide the Legislature, within 30 days
of the review, a copy of this review along with an overview of
how the board intends to ensure staff is sufficiently
qualified for purposes of implementing the Act.
15)Provides for various clean-up, technical, and non-substantive
changes to the Act.
16)Extends the sunset date of the Act to January 1, 2017.
EXISTING LAW provides for, until January 1, 2015, student
protections and regulatory oversight of institutions in the
state pursuant to the Act. The Act is enforced by BPPE within
the Department of Consumer Affairs (DCA). (Education Code
�94800 et seq.)
FISCAL EFFECT : Unknown. According to the Senate Appropriations
Committee, the Governor's proposed 2014-15 budget would
appropriate approximately $11 million in state operations
funding to the BPPE (Special Fund). This proposal increases BPPE
funding by $1.6 million (for 11 new positions) above the 2013-14
level; the 2013-14 Budget Act appropriation was approximately
$1.4 million more than the previous year.
COMMENTS : Double-referral . This bill is double-referred to the
Assembly Business, Professions and Consumer Protection
Committee.
Need for oversight . California's Master Plan for Higher
Education provides for recognition and establishes the missions
of the state's public and "independent" (non-profit,
degree-granting, accredited) segments of higher education. In
1960, at the Master Plan adoption, for-profit postsecondary
education primarily existed as small, local certificate
programs.
Today, however, for-profit colleges are the fastest growing
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postsecondary schools in the nation. According to the Center
for Analysis of Postsecondary Education and Employment (CAPSEE),
for-profit colleges enroll a disproportionately high share of
Black and Latino students, students from low-income households,
single parents, older/return students, and first-generation
college students. CAPSEE notes that these colleges offer
baccalaureate and graduate-level degrees, in addition to
certificate and diploma programs. CAPSEE notes that accredited
for-profit institutions receive most of their revenue from
taxpayer-funded sources; during the 2009-10 academic year,
for-profit institutions received $32 billion in federal grants
and loans. According to the Veterans Legal Clinic, in 2011,
eight of the 10 largest recipients of GI Bill money disbursed
were for-profit colleges.
According to the National Conference of State Legislatures
(NCSL), the over 12% of students that choose for-profit
institutions (an increase of 225% since 2000-01) often do so
because local community colleges have exceeded enrollment
capacities, and for-profit colleges offer flexible scheduling,
year-round enrollment, online options, small class sizes and
convenient locations. Additionally, according to the federal
Government Accountability Office (GAO), for-profit colleges
focus on recruitment and enrollment activities; among 30
companies investigated, 41.8% of revenue went to marketing,
recruiting and profits, while only 17.7% to instruction
activities. According to the a United States Senate analysis,
"in 2010, the for-profit colleges examined employed 35,202
recruiters compared with 3,512 career services staff and 12,452
support services staff, more than two and a half recruiters for
each support services employee."
The United States Department of Education (USDE) data shows
students from for-profit colleges are twice as likely to default
on student loans as students from public or private non-profit
schools. Students at for-profit colleges also tend to borrow
more, sometimes as much as $60,000 for two-year associate
degrees. USDE data also shows graduates of for-profits often
have a tougher time finding employment compared to other sectors
of higher education.
Concerns over the significant growth and questionable student
outcomes at many for-profit and career colleges have led many
and federal policymakers to seek to enact stronger oversight of
these colleges and universities. At the federal level, rules
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ensuring students are "gainfully employed" upon graduation are
in the process of being enacted; and, July 1, 2014, federal
rules take effect to require all institutions that receive
public student aid funds to (1) be "authorized" by the state in
which they operate, and (2) to have a state-level student
complaint process. Public institutions in California are
authorized by, and complaints are investigated by, their system
offices; independent institutions appear to be authorized by the
California Student Aid Commission and complaints handled by the
Office of the Attorney General. For-profit institutions can
meet the authorization rules through regulation and oversight by
the BPPE (under a voluntary pathway established in the 2013-14
Budget Act).
At the state level, reforms to protect students and public
expenditures have also been enacted in recent years. Reforms to
the Cal Grant Program link an institution's participation to the
percentage of students borrowing federal loans and the number of
students defaulting on those federal loans and the number of
students graduating within 150% of the scheduled program length.
In the 2014-15 academic year, 122 institutions (primarily
for-profit colleges) are ineligible to participate in the Cal
Grant Program; students at ineligible institutions are required
to transfer to an eligible institution in order to receive their
Cal Grant award.
California early regulatory efforts . Independent institutions
have operated in California for hundreds of years, largely under
the rules and requirements governing non-profit entities.
For-profit colleges and non-profit certificate programs entered
the regulatory structure in the early 1990's. In response to a
lack of meaningful state-level oversight, and a growing
reputation as the diploma mill capitol of the world, California
established the Private Postsecondary and Vocational Education
Council (Council), an independent 20-member body, to oversee the
sector.
According to the California Postsecondary Education Commission
(CPEC) review of the Council in 1995, the Council adequately
protected consumers while reflecting a balanced recognition of
institutional rights. CPEC recommended a repeal of the sunset
date, allowing the law to operate indefinitely, and
strengthening the law to ensure appropriate enforcement powers
and punitive measures to address violations.
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However, in 1996, in response to concerns raised by the
institutional trade association that fees were too high and
regulation too burdensome, Governor Pete Wilson vetoed
legislation to extend the sunset date of the Council (AB 2960,
Firestone and Campbell), noting that despite the Council having
done much to rid California of its prior diploma mill status,
the Council's activities were negatively impacting institutional
owners livelihood.
In 1997, AB 71 (Wright) and AB 1286 (Calderon) were introduced.
Initially, AB 71 extended the sunset date for the Council while
AB 1286 transferred the responsibilities of the Council to the
Bureau for Private Postsecondary and Vocational Education
(BPPVE) within the DCA. It was reported that the Governor's
Office supported moving the functions of the Council to the DCA.
Ultimately, AB 71 was amended to transfer Council functions to
the BPPVE within the DCA, and was subsequently signed into law
by Governor Wilson.
Regulatory efforts at DCA by BPPVE . The BPPVE operated at DCA
from 1998 through 2007. In 2000, the California State Auditor
found that DCA was not fulfilling its oversight
responsibilities. In 2002, an internal DCA audit made a number
of recommendations to BPPVE to improve operations and during the
2002 Legislative sunset review hearings, BPPVE committed to,
among other activities, simplify and streamline procedures and
adopt regulations that ensured comprehensive and effective
application of the law. In 2005, an Operations Monitor report
found that BPPVE had not addressed many of the fundamental
problems with oversight and enforcement; finding that the BPPVE
both inadequately protected consumers and impeded the expansion
of quality postsecondary and vocational educational
opportunities. In 2007, the BPPVE was allowed to sunset. At
the time of its sunset, the BPPVE had not addressed many of its
fundamental problems with oversight and enforcement. However,
as the Monitor's report identifies, many of the root causes of
enforcement and oversight failures can be traced back to lack of
funding, insufficient staffing, and confusing and conflicting
provisions of law.
Establishment of the BPPE . On January 1, 2010, AB 48
(Portantino), Chapter 310, Statutes of 2009, created the Act;
the bill established new minimum standards and disclosure
requirements for institutions and provided the BPPE an array of
enforcement tools to ensure institutions comply with the new
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law. Specifically, BPPE:
1)Licenses approximately 1,200 non-exempt private postsecondary
educational institutions, serving over 300,000 students,
operating in California. The Licensing process is designed to
ensure that institutions meet minimum operating standards.
Accredited institutions are provided approval by means of
their accreditation (meaning BPPE does not review these
institutions at the point of licensure).
2)Conducts announced and unannounced compliance inspections of
licensed/approved institutions on a two-year cycle.
Inspections are designed to ensure institutions are in
compliance with minimum operating requirements. If a
compliance inspection uncovers a minor violation, the
institution is provided a notice and the opportunity to
correct. If a compliance inspection uncovers a material
(major) violation, the compliance inspector makes a referral
for an investigation of the violation.
3)Investigates complaints received by the general public and
internal investigative referrals. Most investigations are
handled internally by BPPE staff; however, BPPE does have
authority (and has utilized) the DCA Division of
Investigations for complaints that require undercover
investigations and/or the presence of a sworn peace officer.
4)Disciplines institutions that have been found in violation of
law through citations (handled by BPPE staff) and formal
actions (BPPE is represented by the Office of the Attorney
General).
5)Administers the Student Tuition Recovery Fund (STRF) to
provide refund to students affected by the closure of an
institution.
6)Collects data through Annual Reports provided by
licensed/approved institutions.
It should be noted that the Act provides a significant amount of
discretion to the BPPE/DCA in regards to the use of oversight
and enforcement powers. As outlined in the committee analysis
of AB 48, "The degree to which the student protections outlined
in this bill will result in greater protection for students will
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depend largely on the degree to which the Bureau takes action to
ensure institutional compliance with this Act."
The Bureau's ability to enforce the Act appears to have been
significantly impacted by delays in staffing and overall
understaffing. The Act became effective on January 1, but it
wasn't until the passage of the 2010-11 Budget Act, on October
8, 2010, that BPPE was appropriated funding to support
operations. At that time, a statewide hiring freeze impacted
BPPEs ability to fill positions in a timely manner. It wasn't
until May 2012 that BPPE had filled all 57 authorized positions.
Of note, BPPE was initially provided 71 positions to support
operations; subsequent statewide personnel reductions (required
of the Administration despite the BPPE operating fund having
more than adequate revenue to support 71 positions) reduced
positions to 57. Significant backlogs in the processing of
licensing applications led to the authorization of 9 additional
limited-term positions in the 2013-14 Budget Act. Currently,
the 2014-15 Budget Act proposes an additional 11 positions to
support enforcement activities.
BSA review of the BPPE . In March 2014, the California State
Auditor released an audit report, as required by AB 48, which
reviewed the effectiveness and efficiency of BPPE operations.
The report found that BPPE has consistently failed to meet
responsibilities to protect the public's interest.
Specifically, the report notes that BPPE failed to conduct
compliance inspections, failed to identify and sanction
unlicensed institutions, failed to appropriately respond to
complaints against institutions, and failed to ensure students
were provided with accurate disclosures prior to enrollment.
The Auditor made a number of recommendations to BPPE/DCA;
generally BPPE/DCA agreed with the auditor's assessment and
recommendations. Since release of the audit report, the BPPE
Bureau Chief has worked to identify solutions and take
corrective actions.
Major issues addressed in this bill . The major changes to the
Act proposed in this bill were discussed on April 21, 2014, at a
Joint Oversight Hearing that included the Senate Business,
Professions and Economic Development Committee, the Senate
Education Committee, the Assembly Business, Professions and
Consumer Protection Committee, and the Assembly Committee on
Higher Education (Sunset Hearing). These changes include:
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1)Bureau to Board . This bill would reconstitute BPPE as a board
comprised of members from specified categories with experience
and expertise in postsecondary education. As discussed at the
Sunset Hearing, after numerous audits and analyses by internal
and outside agencies, multiple legislative investigations and
significant public comment, "it has become abundantly clear
that the bureau structure at DCA for oversight of private
postsecondary institutions does not work." The author
believes that an independent board structure would allow for
increased public accountability and could provide clear
direction to a regulatory entity about its functions,
operations, priorities and organization, providing inherent
leadership and a clear path to fulfill its mission through the
transparent decision making process undertaken by board
members, in compliance with public meeting requirements.
The California Coalition of Accredited Career Schools (CCACS)
argues that transitioning the BPPE to a Board would be
disruptive and impact ongoing BPPE responsibilities. CCACS
also argues that there has not been proper analysis as to why
a board would function better to protect the interests of
students and the public.
The Center for Public Interest Law (CPIL) argues that a Board
will ensure meaningful and sensible sunset review through the
ability to hold board members responsible for Board actions,
and transparency and accountability through Bagley-Keene Open
Meeting requirements. CPIL notes that "the seemingly
intractable administrative and operational problems that have
afflicted this government agency warrant trying a different
accountability structure. A board may not be better but we
know that the BPPE has recently been insufficient, as
repeatedly documented by outside monitors, most recently the
Bureau of State Audits. It is time to try something new."
To address board transition and management, ensure sufficient
postsecondary education expertise, and provide ongoing support
to the Board and Executive Officer, Committee staff recommends
establishing between three and five deputy positions.
Committee staff also recommends providing statutory guidance
to carry over existing BPPE regulations in Education Code
section 94877, but providing the Board clear authority to
amend those regulations, or promulgate new regulations, as
necessary.
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Committee staff notes that, according to CPIL, "over the past
four decades, owing to pressure from the Legislature mindful
of the problem of regulatory capture, the composition of the
state's regulatory boards has changed, such that non-health
boards consist of a majority of public members. In SB 1247,
there needs to be a clearer majority of those who do not
directly or indirectly have ties to the entities being
regulated. The author may wish to review this matter in the
Assembly Business, Professions and Consumer Protection
Committee.
2)Licensing backlog . According to the California State Auditor,
BPPE faces a significant backlog in licensing applications.
BPPE has established internal timelines for application
review, but these timelines have not been met in large part
due to the existing application backlog. In the 2013-14
Budget Act, BPPE was appropriated funding to support 8
additional licensing analysts. These positions have been
filled and, according to the Chief, BPPE is working to clear
the licensing backlog. This bill would require all
applications pending on January 1, 2015 to be acted on by
January 1, 2016.
To address ongoing licensing timelines, Committee staff
recommends enacting statutory guidance on appropriate
timelines for accredited and unaccredited application
processing; appropriate timelines can be taken from BPPE
current goals.
3)Unlicensed activity . BPPE is required under the Act to
proactively identify unlicensed institutions. However,
according to the State Auditor, as of January 2014, BPPE did
not have a program, nor the dedicated staff and resources, to
identify and take action against institutions operating
without a license. BPPE's goals related to unlicensed
activity are to bring the institution into compliance with the
law and have them seek approval, but in some instances
compliance may not be the best option and BPPE may need to
take stronger steps to ensure that students are not taken
advantage of or deceived. Some schools operating without
approval would never be able to obtain approval and swift
action, according to due process, may need to be taken. This
bill would allow the Bureau to post institutional denials on
the Web site, with a specified consumer disclosure, to make
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consumers aware when an institution is operating without a
license and is unable to meet minimum operational standards.
Committee staff recommends an amendment to clarify that
institutional denial information shall be posted on the
website once the decision has been made final.
4)Coding academies. A number of online programs, as well as
brick and mortar schools, provide technology-related skills
and training opportunities in an attempt to meet the need for
employees with a background in these specialized areas. These
"coding boot-camps" are not accredited and do not accept Title
IV money; however, many students borrow significant sums of
money through private loans, credit cards, or friends and
family, to pay for the program and the time away from work.
In January, BPPE issued cease and desist letters to a number
of coding boot-camps, with the intention of bringing them into
compliance with the Act by becoming licensed. Some of these
institutions have initiated the application process while
others have contacted the Legislature seeking an exemption
from state-level oversight. This bill would require the Board
to establish a task force to review whether these types of
education and training programs should be provided special
consideration under the Act. Committee staff notes that it is
unclear why institutions offering programs in technology
should be treated any differently than institutions offering
programs in other high demand fields, and suggests that the
author consider removing.
The bill would also authorize the Board to delay processing
applications for these institutions until the work of the task
force is completed (January 1, 2016). However, Committee
staff recommends removing this provision; institutions that
have sought Bureau approval should not have their applications
delayed at the discretion of the Board.
5)Veterans serving institutions . This bill would require that
for-profit institutions and non-degree granting non-profit
institutions receiving veteran benefits be approved by the
Board and subject to the Act. This change is largely
consistent with the policy approved in AB 2099 (Frazier),
heard earlier this year; except that AB 2099 authorizes
for-profit institutions that meet the Cal Grant standard
(cohort default rate and graduation rate) to continue to be
exempt from the Act.
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According to a recent report by the Legislative Analyst's
Office (LAO), cohort default rates are susceptible to
manipulation by larger institutions. According to LAO, many
large for-profit institutions employ "default management"
strategies to keep their rates below thresholds. Strategies
include forbearance and deferment, with most students
ultimately increasing their total debt, and combining campuses
of multi-site institutions in ways that minimize the aggregate
default rate. Some institutions encourage use of private
loans, which have less favorable terms for students but are
not included in default rate calculations.
According to information provided by the author, for-profit
schools have come under particular scrutiny for practices used
to recruit military veterans. Recently, Attorney General
Kamala Harris filed suit against Corinthian Colleges, Inc.
(CCI) for false and predatory advertising, intentional
misrepresentations to students, securities fraud and unlawful
use of military seals in advertisements. According to the
complaint, CCI included official Army, Navy, Air Force, Marine
Corps and Coast Guard seals in mailings and on Web sites.
The for-profit trade association (California Association of
Private Postsecondary Schools, CAPPS) opposes this change,
arguing it is unfair and punishes an otherwise exempt
institution. CAPPS argues there is no policy justification
for this change.
The Veterans Legal Clinic supports this proposal and argues
that " If a business elects to enroll veterans, ensuring the
business has at least been subject to some kind of
pre-screening for its quality, is required to provide the
veteran overall school performance information required by
California law prior to the veteran enrolling, and offering
the veteran a place to file a complaint and get it resolved
short of litigation, these are the least things we can do to
protect them and their one-time benefits."
The Veterans Legal Clinic has also recommended altering the
definition of "default" to include forbearance on repayment of
student loans - as an attempt to address cohort default rate
manipulation. However, this change appears unnecessary based
on the requirement that all for-profit colleges that accept
Title 38 funds be approved by the Board. Should this
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requirement be amended, the author may wish to reconsider this
recommendation.
6)Unaccredited degrees . This bill would require unaccredited
institutions offering degrees to obtain accreditation by
January 1, 2017. According to the author, unaccredited
degrees can limit a student's career options. Some career
fields and employers 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. The author believes students
will be better served, and the Bureau's workload decreased, by
amending the Act to require that degree granting programs be
accredited. Unaccredited programs would still be able to
operate in the state and receive approval, but instead could
offer certificates or other types of completion awards other
than a degree.
CAPPS opposes this requirement, arguing that "the legislature
has no expertise or reason to eliminate non-accredited degrees
other than an opinion (not factually proved) that these
degrees would be better as accredited. Many existing
non-accredited degrees are specialty degrees that are not
included in the scope of accreditation of any National
Accreditor or WASC." Committee staff notes that this
requirement would not prohibit instruction in these areas, but
would require institutions that are unable to obtain
accreditation to refer to these educational attainments as
"degrees".
CAPPS notes that an accreditation cycle may take longer than
two years. Committee staff understands that accreditation,
depending on the type of institution and the rigorousness of
the accreditor, may require a timeline beyond two years. It
is not the intent of the author to discourage institutions
from seeking accreditation from accreditors with high quality
standards. Therefore, Committee staff recommends an amendment
authorizing the Board to extend the two-year timeline for an
individual institution upon satisfactory evidence provided by
the institution that progress toward accreditation is being
made.
7)Student Tuition Recovery Fund . One important tool to assist
students is the Student Tuition Recovery Fund (STRF). The
STRF is designed to relieve or mitigate losses suffered by
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students; the Bureau has regulations that limit student claim
eligibility to cases when an institution has closed abruptly.
These restrictions may be the result of insufficient funding
in the former-Bureau recovery fund. Currently, STRF has over
$25 million; there appears no reason to strictly restrict
student eligibility for STRF claims. This bill would expand
the uses of STRF to include all students who have suffered a
loss due to an institution's violation of the Act.
Committee staff recommends clarifying language to specify that
STRF awards cannot exceed the student tuition/attendance
costs; to clarify that judgments must be based on a violation
of law and reviewed by the Board prior to claims processing;
and to provide the Board authority to seek repayment to STRF
from the institution found violating the law.
8)Disclosures to students . Many schools regulated by BPPE are
subject to multiple requirements for disclosures from multiple
entities; these institutions may be subject to duplicate and
conflicting data submissions by these multiple regulatory
bodies. For example, an institution may be required to report
student outcome data by BPPE, USDE, the California Student Aid
Commission (CSAC), and the institutional accrediting agency.
A cursory review shows that there may be a number of
disclosure requirements that can be simplified and streamlined
to better provide students the real-time data they need to
make informed decisions about enrolling in a particular
educational program. This bill would require the Board to
report to the Legislature on or before October 1, 2015
regarding streamlining reporting.
To clarify the author's intent, committee staff recommends the
following amendments:
94929.9. (a) The board shall report to the Legislature on or
before October 1, 2015 on whether data reporting and
disclosure requirements under the Act efforts to streamline
could be appropriately consolidated with reporting required by
other regulatory bodies, including, but not limited to,
reporting required by the United States Department of
Education, the California Student Aid Commission, or
accrediting agencies. T he board's approval process for
institutions while ensuring It is the intent of the
Legislature that the same or similar data information, as is
required to be reported to the board pursuant to this article,
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is being reported to students in a clear and conspicuous
manner.
(b) (1) A report to be submitted to the Legislature pursuant
to subdivision (a) shall be submitted in compliance with
Section 9795 of the Government Code.
(2) Pursuant to Section 10231.5 of the Government Code, this
section is repealed January 1, 2019.
9)Individual institutional fee adjustment . BPPE is currently
granted broad authority to reduce an institution's fees if it
determines that the annual cost of providing oversight and
review of an institution is less than the amount of money the
institution pays. This provision leaves BPPE in the
uncomfortable position of having a large pot of unspent money
and negotiating with unhappy licensees who use that factor to
try to require the Bureau to reduce their fees. The former
BPPVE faced a number of criticisms for regulatory functions
being potentially left to staff and this provision has the
potential to create a haphazard system of fee collection, and
leaving what should be a consistent approach to the discretion
of staff. If this provision were used by schools on a regular
basis, the current BPPE, facing its many regulatory
challenges, could very well be asked to reduce fees for the
bulk of its licensee population. This bill deletes the
provision authorizing BPPE staff to decrease fees if it
determines that the cost of regulation of an institution is
less than the cost of fees.
10)Compliance inspections . BPPE is currently mandated to
perform at least one announced and one unannounced compliance
inspection on each approved institution during each two-year
cycle. BPPE is not meeting its statutory mandate. While
staffing and organizational challenges have played a part,
BPPE also lacks any necessary prioritization processes or
standards by which to allocate its limited staff to first
inspect the schools that may need the most attention. This
bill would require compliance inspections to occur on a five
year cycle and grant the Board flexibility in determining when
to conduct announced and unannounced inspections based on an
evaluation of risk to students.
11)Complaint processing . Accepting, processing and acting on
complaints from students is one of the key mechanisms by which
BPPE can ensure that licensees are in compliance with the Act
and that students have options for action in the event that
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they are the victims of fraud or taken advantage of by
schools. The timely processing of complaints provides BPPE
with critical information about their licensees and could
assist in prioritizing workloads. BPPE faces significant
delays in the time is takes to process complaints which could
result in necessary action being taken against institutions or
the activation of necessary steps to assist students. This
bill would require the Board to establish a timeline by which
complaints must be processed, and establish procedures to
prioritize complaints based on potential harm to students and
consumers.
Committee staff recommends an amendment authorizing the Board
to contract with the Attorney General, or other appropriate
agency, to provide necessary staff training. Committee staff
also recommends specific training focused on checking the
accuracy of the data contained in consumer disclosures.
This bill would also require the Board to contract with the
Attorney General for investigative/prosecutorial services if
noncompliance transcends the individual complainant (reaches
"class action" status) or the complexity of an investigation
requires additional expertise. CPIL supports this amendment,
noting " BPPE has neither the resources nor litigation
expertise of the Consumer Rights Division of the Attorney
General's office; the division currently suing Corinthian.
This explicit referral is therefore a welcome channeling of
complaints to the law enforcement agency best and most
appropriate for them, leaving the BPPE as the appropriate and
primary location for addressing individual student
complaints." The accredited institutional trade association,
CCACS is requesting removal of this provision, arguing "this
provision is unnecessary and further diminishes the agency's
ability to conduct the regulatory program it is authorized to
implement."
12)Staffing resources . According to BPPE, even with recent
increases to staffing levels, additional positions may be
necessary to meet current mandates because of backlogs created
during the budget and hiring delays. The BPPE notes that a
current review of the BPPE workload and process improvements
began on May 13, 2014, and is expected to take approximately
five months to complete. This information is intended to
inform future BPPE staffing and process improvements. This
bill, consistent with BPPE current plans, would require the
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Board to contract for an independent review of staffing
resources and provide the Legislature, within 30 days of the
review, a copy of this review along with an overview of how
the board intends to move forward.
Committee staff recommends an amendment clarifying that
submission of the independent review currently underway at
BPPE will satisfy the requirements in this section.
To address concerns raised by institutions regarding fee
amounts, Committee staff recommends requiring this report to
include a review by the Board regarding estimated costs of
full implementation of Board activities and estimated fee
revenues with existing fee levels. The Legislature can use
this information to review appropriate fee amounts.
The committee may wish to establish a deadline for the report
required under this provision; Committee staff recommends
March 1, 2015.
13)Sunset extension . This bill would extend the sunset date for
the act by two years, until January 1, 2017, at which time the
Board would come back before the Legislature for review of the
Board's implementation of the law and interpretation of
Legislative intent.
The Committee may wish to consider establishing a five year
sunset to provide the new Board adequate time to bring itself
up and running. The Legislature retains the authority to
propose legislation regarding the Act at any time, regardless
of sunset date. To ensure the Board is meeting Legislative
intent and mandates, periodic reporting requirements could be
established and/or enhanced.
Major issues not addressed in this bill . A number of issues
were raised during the Sunset Hearing which are not addressed in
this bill, including:
1)Exemptions . Existing law provides exemptions from the Act for
all regionally accredited institutions. At the time of
passage of AB 48, consumer groups raised serious concerns
about the lack of protections provided for students attending
for-profit, regionally accredited institutions due to these
exemptions. As passed by the Assembly, AB 48 provided an
exemption for WASC-accredited institutions, but not
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institutions accredited by other regional accrediting
agencies. At the time of drafting AB 48, there were no
verifiable criteria to differentiate between regional
accreditors and, as a result of concerns over
constitutionality of the provision; AB 48 was amended by the
Senate to grant an exemption to all regionally accredited
institutions. In December 2013, the LAO noted that the
business practices of regionally accredited institutions are
the least well monitored, and that the Bureau has better
recourse for student complaints than accrediting agencies.
Specifically, among other recommendations, the LAO recommended
that the Legislature establish criteria to distinguish
low-risk from high-risk regionally accredited institutions and
target business practice oversight to high-risk institutions.
If the author and committee are interested in pursuing the LAO
recommendation, low- and high-risk institutions could be
identified by:
a) Accrediting agency transparency. While at the time of
passage of AB 48, there were no discernable differences
between regional accrediting agencies, one important
difference exists today in regards to public accountability
and transparency; in 2012, WASC became the only accrediting
agency to require public disclosure of accrediting
documents.
b) School ownership. As previously indicated,
"independent" institutions have operated in California
under general non-profit corporation requirements for many
years. The legislature could focus Board business practice
and consumer protection oversight on for-profit
institutions.
c) Track record or performance criteria. As previously
indicated, California has established performance criteria
(cohort default rate and graduation rate) for institutions
that participate in the Cal Grant program. The Legislature
could establish similar criteria for institutions deemed
"high-risk".
2)Fees . Numerous licensees have raised concerns regarding BPPE
fee levels; in particular institutions have highlighted the
BPPE Administrative Fund reserve as evidence of excessive fee
levels. However, much of the BPPE reserve can be traced to
delays in spending authority and hiring of staff. Considering
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that the BPPE is currently failing to fulfill its statutory
mandates and there remain questions regarding the adequacy of
current staffing levels, reducing fee levels is probably
premature at this point. Committee staff recommends the
Committee consider re-evaluating fees following receipt of the
independent staffing review.
3)BreEZe . DCA is in the process of establishing a new
integrated licensing and enforcement system, BreEZe, which
would also allow for licensure and renewal to be submitted via
the internet. BreEZe will replace the existing outdated
legacy systems and multiple "work around" systems with an
integrated solution based on updated technology. BPPE
currently utilizes a different database than the majority of
DCA entities; Schools Automated Information Link, or SAIL, is
a flawed system to manage all of the data, licensing,
complaints and enforcement tools necessary for BPPE to fulfill
its mission and statutory mandates, as it is unable to
manipulate data and does not track basic information like
enforcement actions and timelines. The State Auditor
highlighted numerous instances where the inadequacies of SAIL
prevent BPPE from having key information and performing key
functions. According to DCA a complete assessment of the
Bureau's data needs, and plans for conversion to BreEZe will
take place in spring of 2015, a full year from now and five
years after the BPPE was reconstituted.
Committee staff recommends an amendment to require DCA to
report to the Legislature by March 1, 2015, an update of
anticipated timelines for BreEZe conversion and any
intermediate efforts underway intended to improve information
collection and tracking.
4)Private Right of Action . The prior law contained a private
right of action for students. A private right of action was
not included in AB 48 as it was argued that the BPPE would
have sufficient authority to protect students. It is true
that BPPE has a number of options to enforce the Act and take
action against institutions in violation of the Act. However,
given the previously discussed struggles, BPPE has failed to
meet its enforcement mandates, protect students who have been
harmed by schools, and investigate complaints in a timely
manner. Students in California may not fully be receiving the
benefits of a robust regulatory structure. Consumer advocates
have requested that the Legislature consider re-establishing a
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private right of action to ensure, in the absence of full
implementation of the Act by the BPPE, students are protected.
Clarifying amendments . There are several areas in this bill
where clarifying amendments may be necessary, including the
following:
1)Transition provisions. Corrections to references to the prior
law need to be updated and corrected to reflect this bill.
2)Education Code (EDC) �94816 redefines applicant to specify
that an applicant is the owner of the institution and that
approvals to operate are issued to an applicant. This change
is intended to ensure the Board has sufficient oversight of
those operating the institution. Committee staff suggests
language be added to define "owner" as well as a
clarification, to ensure compliance with federal regulations,
specifying that an institution is approved to operate when an
owner's application is approved.
3)Ability to benefit examinations. Given that these
examinations are no longer approved by the federal government,
statutory clarification on Board authority may be necessary.
4)EDC �94837 defines an educational program to mean courses or
modules that provide education or training and experience
leading to the award of a recognized educational credential,
such as a degree or diploma. As many current educational
programs provide training intended to lead to career
enhancement or marketability, and award a certificate of
completion, this definition should be amended accordingly.
The committee may wish to direct Committee and author staff to
draft and incorporate any necessary technical and clarifying
amendments.
REGISTERED SUPPORT / OPPOSITION :
Support
The Children's Advocacy Institute
Center for Public Interest Law
Veteran's Legal Clinic
Young Invincibles
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Opposition
California Coalition of Accredited Career Schools
Analysis Prepared by : Laura Metune / HIGHER ED. / (916)
319-3960