BILL ANALYSIS �
SB 1247
Page 1
Date of Hearing: June 24, 2014
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Susan A. Bonilla, Chair
SB 1247 (Lieu) - As Amended: June 18, 2014
SENATE VOTE : 33-3
SUBJECT : Private postsecondary education: 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 Bureau for Private Postsecondary Education 's
(BPPE) governance structure, including recreating the BPPE as
the Board for Private Postsecondary Education (Board), amending
protections provided to students, and revising requirements
placed on private postsecondary educational institutions
(institutions). Specifically, this bill :
Governance and administration
1)Reestablishes the BPPE as the Board and provides for a
six-month transition to a board structure.
a) Provides that the Board shall consist 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; and,
v) One public member with knowledge or expertise in
emerging fields of employment, appointed by the Governor.
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b) Provides that a member of the BPPE Advisory Committee,
which is deleted in this bill, is eligible to be appointed
to the Board.
c) 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)Extends the sunset date of the Act to January 1, 2017.
Board's jurisdiction and schools within its jurisdiction
3)Prohibits an institution, as defined, that receives federal
veteran aid funding, as specified, from claiming an exemption
from the Act.
4)Requires an unaccredited institution offering a degree that is
approved by BPPE as of January 1, 2015 to obtain and provide
evidence of preaccreditation by January 1, 2016, and evidence
of accreditation by January 1, 2017. Authorizes the Board to
extend that timeline upon submission of sufficient evidence
that an unaccredited institution is making strong progress
toward obtaining accreditation.
5)Requires the Board to establish a task force to determine
standards for educational and training programs specializing
in innovative subject matters and instructing students in high
demand technology fields for which there is a shortage of
skilled employees and report to the Legislature, by January 1,
2016, regarding appropriate levels of oversight of these
institutions.
6)Authorizes the board to publish its own list of required
passing scores if the United States Department of Education
does not have a list of relevant examinations that pertain to
the intended occupational training.
Licensing
7)Requires the Board, by January 1, 2016, to initiate the
creation of the process and procedures governing its approval
or denial of all applications that are pending as of January
1, 2015.
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8)Requires the Board to establish application processing goals
and timelines to ensure an institution that has submitted a
complete application for approval to operate has their
application promptly reviewed for compliance within 30 days of
receipt, or within an appropriate timeline as determined by
the Board.
9)Requires the Board to ensure that an institution that has
submitted a complete and compliant application receives
approval within 30 days of the application being deemed
compliant, or within an appropriate timeline as determined by
the Board.
10)Authorizes an institution that has filed an appeal to
continue to operate during the appeal process but must
disclose in a written statement approved by the board, to the
public and all current and prospective students, that the
institution's application for approval to operate was denied
by the board because the board has determined the application
did not satisfy minimum requirements for educational capacity,
that the institution is appealing the board's decision, and
that the loss of the appeal may result in the institution's
closure. If the board determines that the continued operation
of an institution poses a significant risk of harm to
students, the board shall make an emergency decision, as
specified.
11)Requires that an applicant be the owner of an institution,
and that approvals to operate be issued to applicants, and
those approvals mean that the recipient institutions are
authorized or licensed by the board to operate in California
through the expiration date of the approval.
Enforcement
12)Requires the Board to contract with the Office of the
Attorney General, or other appropriate state agency, to
establish training that ensures staff can investigate
complaints.
13)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 of inspections and that inspections
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are conducted based on risk and potential harm to students.
14)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.
15)Provides that if the Board has reason to believe that an
institution's noncompliance with the provisions of the Act or
any other applicable law 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.
Increasing student protections
16)Requires the Board to post on its Internet Web site pending
or final civil cases, in addition to criminal cases, and to
post cases filed in any state by a state attorney general, a
city attorney, a district attorney, or federal regulatory or
prosecutorial agency, of which the Board has notice, and a
list of all institutions denied an approval to operate, after
the denial is final, and describe the reasons for the denial,
on the Board's Internet Web site.
17)Authorizes an institution that is denied renewal of an
approval to operate to continue to operate during the appeal
process, but requires the institution to disclose in a written
statement to the public and all current prospective students
that the institution's application for renewal was denied by
the Board because the Board determined the application did not
satisfy minimum requirements for educational capacity, that
the school is appealing the Board's decision, and that the
loss of the appeal may result in the institution's closure.
18)Specifies the Student Tuition Recovery Fund (STRF) relieves
or mitigates economic loss, as defined, suffered by a student
while enrolled in a nonexempt institution, as specified, as a
result of that institution's violation of law, and requires
the Board to adopt regulations that ensure the following
students, and any other students deemed appropriate, are
eligible for payment from STRF:
a) In the event of a school closure, a student who attended
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the institution within 120 days of the closure, or within a
different period prior to the closure, as determined by the
Board;
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, based on a
violation of law, but who have been unable to collect the
award from the institution. Requires the Board to review
the judgment to verify a violation of law and to ensure the
amount of the award does not exceed the student's economic
loss.
d) Students whose programs have been discontinued at the
campus they attended before they were able to complete the
program;
e) Students who suffered losses due to an institution's
violation of the Act;
19)Authorizes the Board to seek repayment to STRF from an
institution found in violation of the law for which the
student was paid.
Streamlining and improving operations
20)Requires the Board to report to the Legislature by October 1,
2015, on whether data reporting and disclosure requirements
under the Act are appropriately consolidated with reporting
required by other regulatory bodies, including the US
Department of Education, the Student Aid Commission, or
accrediting agencies, and states that it is the Legislature's
intent that the same or similar data information is reported
to students in a clear and conspicuous manner.
21)Requires the Board to provide to the Legislature a copy of an
independent review of its staffing resources, along with an
overview of how the Board intends to ensure staff is
sufficiently qualified for purposes of implementing the Act,
the estimated costs of meeting staffing and other requirements
to implement the Act, and the estimated fee revenue generated
by the fee structure, as specified, within 30 days of
completion of the independent review, but no later than March
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15, 2015.
22)Provides for various clean-up, technical, and non-substantive
changes to the Act.
23)Makes Legislative findings and declarations.
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
Section 94800 et seq.)
FISCAL EFFECT : Unknown
COMMENTS :
1)Purpose of this bill . This bill extends the sunset date for
the Act until January 1, 2017, and makes numerous changes to
the Act to expand student protections, promote student
success, and address concerns regarding the prior
implementation of the Act. In addition to extending the life
of the Act, this bill would establish BPPE as an independent
Board, which the author hopes will increase public
accountability. This bill also provides clear direction to
the new Board as to its functions, priorities, and
organization. This bill is author sponsored.
2)Author's statement . According to the author, "this bill is
necessary to extend the sunset date of BPPE 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."
3)Private postsecondary education in California and the need for
oversight . California has almost 150 public colleges, about
200 private nonprofit colleges, and over 1,000 private
for-profit colleges. The private sector serves nearly 1 in 5
college students, and for-profit institutions serve half of
that population, or roughly 400,000 students. Today,
for-profit colleges are the fastest growing postsecondary
schools in the nation. BPPE has oversight of all non-exempt,
private postsecondary institutions located in California,
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which include accredited and nonaccredited institutions, and
degree-granting and nondegree granting programs, such as
vocational programs.
Only accredited institutions are eligible to participate in
federal and state financial aid programs. For-profit
institutions play an important role in providing access and
education to underserved students, and educate many
nontraditional students that would otherwise not have access
to postsecondary education. However, data shows that students
from for-profit colleges are twice as likely to default on
student loans as students from public or private non-profit
schools, tend to borrow more for their education, and that
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
policymakers to seek stronger oversight of these colleges and
universities. At the federal level, measures ensuring
students are "gainfully employed" upon graduation are in the
rulemaking process, and on July 1, 2014, federal rules take
effect that would 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, and
complaints are investigated, by their system offices;
independent institutions are 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.
There is no question about the need for effective oversight of
the sector. According to the National Consumer Law Center,
"[a]lthough the federal government's continued efforts to
enact minimum gainful employment standards are an important
development, these standards will not be sufficient to prevent
the abuses of the for-profit school industry. The state
oversight role is critically important to ensuring that all
students who invest in and work hard at a postsecondary
education will end up with the skills and knowledge they need
to improve their lives and the futures of their families. When
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the federal government recently enacted state authorization
regulations, it recognized this critical state role and
reemphasized that states are primarily responsible for school
oversight and student protection."
Additionally, Public Advocates contends that "[o]versight
hearings, whistle-blower lawsuits, and reports and
testimonials from students who did not receive the education
they were promised by for-profit colleges underscore the
importance of ensuring that 1) students have more than access
to postsecondary education, but access to a quality education
with a pathway to a career or further education; and 2) the
public's interest in protecting consumers, increasing its
workforce and getting the best return on scarce public
resources ([including] CalGrants) are being served."
4)The troubled history of the BPPE . In 1977, the Legislature
charged the Superintendent of Public Instruction with
regulating private postsecondary schools under the Private
Postsecondary Education Act. Despite this directive, there
was poor oversight and lax enforcement, and by the late 1980s,
California was said to be known as the "diploma mill capitol
of the world." In response, the Legislature passed a
comprehensive reform bill, the Private Postsecondary and
Vocational Education Reform Act of 1989 (Reform Act), and
transferred responsibility to the new Council for Private
Postsecondary and Vocational Education (Council).
Concurrently, the Maxine Waters School Reform and Student
Protection Act was enacted in California as well, and these
two acts were merged in statute, creating an unwieldy and
fragmented framework for the regulation of California's
private postsecondary and vocational education institutions.
Problems persisted, and in 1997, the Bureau for Private
Postsecondary and Vocational Education (BPPVE) was created
within DCA, which transferred responsibility from the Council
to BPPVE and extended the sunset date of the Reform Act to
2005.
In 2000, the Bureau of State Audits (BSA) audited DCA and BPPVE,
and found that DCA was not fulfilling its oversight
responsibilities, and was allowing ongoing weaknesses in
licensing and complaint processing. In 2002, DCA's Internal
Audit Office completed a review of BPPVE's programs and
operations, and made recommendations for BPPVE to modify and
improve its operations. In 2002, BPPVE also completed its
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first Sunset Review before the Joint Legislative Sunset Review
Committee (JLSRC), and committed to take actions to address
deficiencies noted in the BSA audit. In 2004, the Legislature
enacted SB 1544 (Figueroa), Chapter 740, Statutes of 2004,
which required the appointment of an Enforcement Monitor
(Monitor) to provide an in-depth and impartial examination of
BPPVE's operations. The Monitor's report outlined a
"twenty-year record of repeatedly identified, fundamental
problems in every one of BPPE's key operations." In 2007, the
1989 laws expired and left the state without any regulatory
authority to oversee private postsecondary schools at all. In
2009, AB 48 (Portantino), Chapter 310, Statutes of 2009,
created the Act and established the current BPPE.
5)The creation of BPPE . AB 48 imbued BPPE with the authority to
regulate private postsecondary institutions and enforce the
provisions of the new Act. The Act requires all unaccredited
colleges in California to be approved by BPPE and all
nationally accredited colleges to comply with numerous student
protections. It also establishes prohibitions on false
advertising and inappropriate recruiting. The Act required
disclosure of critical information to students, such as
program outlines, graduation and job placement rates, and
license examination information, and required colleges to
justify those figures. The Act also required BPPE to
actively investigate and combat unlicensed activity,
administer the Student Tuition Recovery Fund (STRF), and
conduct outreach and education activities for private
postsecondary educational institutions and students within the
state.
6)California State Auditor's report on BPPE . In March 2014, the
California State Auditor (CSA) 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 its responsibilities to protect
the public's interest, and had great deficiencies in nearly
all of its operations. Specifically, the report notes that
BPPE had large backlogs for approval, 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.
CSA made a number of recommendations to BPPE and to DCA, which
both generally agreed with the auditor's assessment and
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recommendations. Since release of the audit report, the Chief
of BPPE has worked to identify solutions and take corrective
actions.
It is worth noting, however, that regulation of private
postsecondary education has not only had a troubled past, but
BPPE itself also had a troubled start. Although the Act
became effective January 1, 2010, BPPE did not receive any
staffing authorizations until the Budget Act was signed in
October 2010. Of the 71 staff positions requested, BPPE was
allocated 63 positions, which were further reduced to 57 as a
result of statewide reductions. When BPPE first hired
licensing staff in November 2010, it already had a backlog of
1,200 applications accumulated over two years. By summer of
2011, BPPE had filled roughly half of its positions, and by
December 2011, it reached 49 staff.
To put this in perspective, when CSA conducted its audit in
the fall of 2013, BPPE had been moderately staffed and
operational for less than two years. While the BSA audit
identified many problems with BPPE that do not depend on the
number of available staff, such as inadequate processes and
failure to track appropriate information, the lack of adequate
staff, both in number and in expertise, plays a large role in
each of the Bureau's deficiencies, with regards to licensing,
enforcement, and STRF implementation.
In addition, the audit revealed that some of BPPE's issues
can, in part, be attributed to a lack of appropriate
leadership. As the audit, states, "We believe that the
State's ongoing struggle to regulate these institutions
effectively may be due, in part, to [DCA's] failure to take a
more proactive role in helping the bureau meet its
responsibilities." The audit points out that DCA was aware of
the longstanding difficulty in regulating private
postsecondary schools and yet it did not use this knowledge to
ensure that BPPE succeeded.
In light of these issues, this bill seeks to make
comprehensive changes to the Act. The changes 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
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Higher Education (Sunset Hearing) and were raised in BPPE's
Sunset Background Paper.
7)Shifting from a Bureau to Board . A June 2014 report,
"Ensuring Educational Integrity," released by the National
Consumer Law Center, found that one of the most effective
steps a state could take to oversee private postsecondary
schools was to "establish an oversight board to increase
public accountability." Specifically, the report found that,
"Because a public board is in a position to constantly
pressure an agency's staff to perform its statutory
obligations, the creation of a board may lead to a more
effective oversight agency as long as it is not dominated by
institutional representatives."
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.
University of Phoenix, Bridgepoint Education, California
Coalition of Accredited Career Schools (CCACS), and California
Association of Private Postsecondary Schools (CAPPS) all
oppose transitioning the Bureau to a Board, and believe that a
transition would be disruptive and impact ongoing Bureau
responsibilities, and that there has not been proper analysis
as to why a Board would function better to protect the
interests of students and the public. In addition, these
institutions believe that the proposed membership should more
accurately reflect the diversity of postsecondary
institutions, and require more institutional representatives
that have expertise in private postsecondary education.
Conversely, DeVry Education Group finds that, "Although we see
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opportunity to expand the Board's composition to include more
voices from within the private sector colleges and
universities, a Board offers a more accountable and
transparent means of understanding and regulating covered
institutions. We also see the Board as potentially offering
additional opportunity to collaborate across all sectors of
postsecondary education in California."
In addition, 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."
This bill establishes 11 board members, of which nine are
appointed by the Governor. To maximize collaboration between
the Administration and the Legislature, the author may wish to
specify that the Governor's appointees are subject to
confirmation by the Senate Rules Committee. The author may
also wish to clarify that an individual may not be appointed
as a public member if that individual possesses the
qualifications to serve on that board under a different
qualification, and specify what constitutes a quorum. Lastly,
the author may wish to consider replacing some of this
membership with ex officio members representing the Employment
Development Department or the California Student Aid
Commission.
To address board transition and management, ensure sufficient
postsecondary education expertise, and provide ongoing support
to the Board and Executive Officer, the author may consider
establishing three to five additional deputy positions. The
author may also consider giving the Board some authority over
who is appointed as its Executive Officer.
On page 18, lines 24, 26, 28, and 30, after "Governor"
insert ", subject to confirmation by the Senate Committee
on Rules."
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On page 18, line 36, insert, "(c) A public member shall not
be affiliated with an institution.
(d) A majority of the board constitutes a quorum for the
transaction of any business, for the performance of any
duty, or for the exercise of any power of the board. A
vacancy in the board does not impair the right of the
remaining members to exercise all the powers of the board.
On page 19, line 25, insert, "(c) The executive officer
shall be selected from a list of five candidates generated
by the board.
(d) To assist the executive officer in the discharge of
his or her duties, the board shall appoint three to five
deputies, as deemed necessary by the board."
8)Staffing resources and fees . 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. Also, a
recurring theme identified in the audit was the need to
reevaluate and reconfigure all of its internal processes in
order to improve its operations. Across all of BPPE's
operations, there was a failure to have appropriate processes
in place to be able to capture necessary information, such as
what pieces of information were missing from an incomplete
complaint, to establish time frames and benchmarks to see
where there were pressure points in the process and why delays
were occurring.
In response to these issues, 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
staffing and process improvements.
This bill, consistent with current plans, would require the
Board to contract for an independent review of staffing
resources and provide the Legislature a copy of this review,
along with an overview of how the board intends to move
forward. This bill would also require the 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, to address concerns regarding high
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fees and a large reserve fund.
However, CAPPS also contends that the current fee structure is
unfair, and results in some institutions paying over $100,000
per year in fees, despite having less revenue and fewer
students than other schools.
In order to address this concern, the author may consider
having the fee analysis also look at the annual fee structure.
On page 58, line 14, insert new (b) "This overview shall
also include an examination of the annual fee structure,
and whether the total fees paid by an institution should be
subject to a maximum cap, or whether there are more
equitable ways to assess annual fees to an institution."
9)Approval of institutions serving veterans . 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. 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.
Fashion Institute of Design & Merchandising (FIDM), MTI College,
and CAPPS all oppose this change. FIDM contends that this
requirement would "require any for-profit institution,
regardless of its educational quality or outcomes, to be
regulated by the [Bureau] if it wishes to participate in
programs serving veterans?If the bill is enacted in its
current form, FIDM would be in the untenable position of
either being unnecessarily regulated by the Bureau or
maintaining its commitment to its veterans' educational
programs." FIDM and MTI College both contend that schools
meeting higher educational standards should not be required to
come under the Board under this amendment. CAPPS argues there
is no policy justification for this change.
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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 [with] 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." In addition, the
Center for Responsible Lending, finds that while this
provision is taking a step in the right direction, "it is
clear from recent enforcement investigations?that
accreditation does not serve to sufficiently prevent consumer
abuses from occurring. All for-profit institutions should be
subject to the full approval and oversight powers of the
Board."
10)Unaccredited degrees . This bill would require unaccredited
institutions offering degrees to obtain accreditation by
January 1, 2017, and would authorize the Board to extend that
timeline upon satisfactory evidence that progress toward
accreditation is being made. 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 Board'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." However, 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."
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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
they are the victims of fraud or taken advantage of by
schools. To work towards this purpose, the 2014-15 Budget Act
proposes an additional 11 limited-term positions to support
enforcement activities. With more staff, the timely
processing of complaints could provide BPPE with critical
information about its licensees and could assist in
prioritizing workloads. BPPE faces significant delays in the
time is takes to process complaints, which further delays
necessary action being taken against institutions or the
activation of necessary steps to assist students.
This bill would require the Board, by January 1, 2016, to
establish a timeline by which complaints must be processed,
and establish procedures to prioritize complaints based on
potential harm to students and consumers. Specifically,
complaints would be categorized as "urgent," "high-priority,"
and routine, depending on the extent to which the subject of
the complaint represent an "immediate danger" or "could
potentially pose a danger " or "do not pose any significant
risk of harm" to "public health, safety, or welfare."
12)Compliance inspections . BPPE is required to perform at least
one announced and one unannounced compliance inspection on
each approved institution during each two-year cycle, and is
not meeting its 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 "risk and potential harm to
students."
According to the University of Phoenix, "Legislators have
attempted to single out the for-profit sector by using
different and arbitrary percentages or rates for CDR,
graduation rates, percentage of students receiving Title IV
financial aid or VA benefits? Presumably a school will be
designated "high risk" based on these types of arbitrary
standards which have nothing to do with the institutions
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actual track record of operation and compliance," and such
standards should not be used to designate a school as "high
risk."
According to the Bureau, "If the Committees wish to delineate
prioritization criteria in the law, the Bureau would encourage
them to consider as many distinguishing criteria as possible."
Currently, the Bureau, via its regulations, looks to size of
the institution, number and types of programs, time elapsed
since last inspection, history of its approval to operate,
number and type of complaints, and enforcement history. As a
result, the author may wish to specify that the Board that it
continue to draw upon a number of criteria to determine risk
of harm to students, in order to ensure maximum flexibility.
13)Contracting with the Attorney General . This bill would
require the Board to contract with the Attorney General or
other appropriate agency to provide necessary staff training,
including specific training on checking the accuracy of data
contained in consumer disclosures. This bill would also
require the Board to contract with the Attorney General for
investigative or prosecutorial services if noncompliance
transcends the individual complainant (i.e., 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."
CCACS and Bridgepoint oppose this provision, and CCACS argues
that "this provision is unnecessary and further diminishes the
agency's ability to conduct the regulatory program it is
authorized to implement."
The author may wish to clarify this language to apply only to
those instances when a school's noncompliance may have
far-reaching implications.
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On page 57, strike lines 22-28, and insert, "If the board
has reason to believe that an institution is engaged in a
pattern or practice of violating the provisions of this
chapter or any other applicable law and these patterns and
practices raise an issue of general public importance, the
board shall refer the institution to the Attorney General
and contract with the Attorney General for investigative
and prosecutorial services, as necessary."
Some advocates, such as Public Advocates, request that this
bill be amended to go even further and provide a private right
of action for all students harmed. They write, "[i]t is true
that BPPE has a number of options to enforce the Act and take
action against institutions in violation of the Act.
However?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 and their families?are not receiving the benefits
of a robust regulatory structure." As a result, the Committee
may wish to continue monitoring improvements in enforcement,
to ensure that consumers have access to a robust regulatory
structure.
14)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
students, and BPPE 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, and there appears to be 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 an "economic loss," as defined, due to an
institution's violation of the Act, including in the event of
a school closure.
According to University of Phoenix, there may be circumstances
under which a school remains in operation in the state but may
close one location, and that a BPPE-approved teach-out plan
may provide for completion of the student's program at another
approved location.
As a result, the author may wish to clarify such circumstances
would not lead to a violation of the Act and not give rise to
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payment under STRF.
On page 41, line 38, after "board" insert, ", unless the
student chose to participate in a teach-out plan approved
by the board"
15)Unlicensed activity and notice requirements . This bill would
allow the Board to post final institutional denials on its
Internet Web site, with a specified consumer disclosure, to
make consumers aware when an institution is operating without
a license and is unable to meet minimum operational standards.
This bill would also authorize the Board to post civil cases,
and cases filed in any state by a state attorney general, city
attorney, district attorney, or federal regulatory or
prosecutorial agency, "of which the Board received notice."
According to DeVry Education Group, "given that the means of
communicating such matters is entirely determined on if/when
the Board is advised, clear and accurate communication from
other states could be problematic. We therefore posit that the
Committee consider limiting the scope to final or
substantiated complaints or cases and limit the scope to
California." In addition, cases filed in other states may not
be relevant due to differences in the bodies of law that
apply.
As a result, the author may wish to consider clarifying that
this posting requirement only apply to cases filed in this
state, unless the case would be actionable under California or
federal law.
This bill would also require an institution that was operating
during the Bureau's initial transition period but was denied
an approval, and an institution that was denied a renewal to
operate, to disclose in a written statement provided by the
Board, to the public and all current and prospective students
that the "approval to operate was denied by the board because
the board has determined the application did not satisfy
minimum requirements for educational capacity, that the
institution is appealing the board's decision, and that the
loss of the appeal may result in the institution's closure."
According to University of Phoenix and CAPPS, this disclosure is
premature, and it is "unfair and inappropriate to alarm
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students of a pending action" and "the school's reputation and
financial status will be unfairly harmed prior to the full
vetting of the schools application and appeal."
Because this disclosure would occur before the denial is final,
the author may wish to consider the following amendments to
narrow the scope of the disclosure but still ensure that it
reaches the population most affected.
Amend Section 94878(a)(2)(B)(III) as follows: "Pending or
final civil or criminal cases filed by the Attorney
General, a city attorney, or a district attorney in this
state, or filed by an attorney general or federal
regulatory or prosecutorial agency in any state only if the
case could be actionable under California or federal law,
of which the board has received notice."
On page 10, line 9, delete "the public and" and on lines
12-13, delete "satisfy minimum for educational capacity"
and insert "meet the requirements to operate in California
"
On page 26 line 40 and page 27 line 1, delete "the public
and" and on lines 3-4 delete "satisfy minimum requirements
for educational capacity" and insert " meet the
requirements to operate in California "
16)Disclosures to students . Many schools regulated by BPPE are
subject to multiple requirements for disclosures from multiple
entities, and 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,
and may also be subject to additional reporting requirements
under state law.
Many schools find these reporting requirements onerous. In
addition, some schools, like Bridgepoint, contend that they
should be exempt from employment and other reporting
requirements under AB 2296 because they were initially exempt
from those requirements before they came under the Bureau and
because it is more difficult to report employment information
for a degree-granting institutions, which does not work to
place students in jobs like vocational or technical schools
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might. 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,
with the intent to reduce repotting burdens, to eliminate
duplication, and to make disclosures more consumer-friendly.
17)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 Center for Responsible Lending argues that the sunset
provision should be eliminated, and that this bill "could
maintain a rigorous review of the Board's progress without
mandating the sunset of its regulatory authority. It is time
for a permanent authorization for this critical agency."
Young Invincibles also requests a longer sunset date and finds
that, "A two-year period is unlikely to be enough time for the
Board to being to demonstrate effectiveness at their new
charges - a five-year sunset period is far more reasonable and
will provide students and institutions with greater stability
and consistency in oversight and more incentive for bad acting
institutions to focus on quality improvements, rather than
efforts to lobby for more lax regulations."
18)Issues not addressed in this bill . Additional issues were
raised during Sunset Review that were not addressed in this
bill, including:
a) State Reciprocity Agreement . The LAO points out that
recent action by USDE on regulations governing Title IV
financial aid would require out-of-state schools enrolling
California students to receive approval in California and
also create a structure whereby California schools
enrolling students in other states would need to be
authorized by each of those states. LAO states that such
state-by-state approval can be a barrier for institutions
offering distance education because of the considerable
complexity and cost of navigating differing requirements in
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multiple states.
In response to these issues, a group of institutions, states,
and policy organizations is developing the State
Authorization Reciprocity Agreement (SARA) whereby
accredited, degree-granting institutions approved by an
oversight body in one participating state will be deemed
automatically to have met approval requirements in other
participating states. This agreement will facilitate
multistate approval for institutions while providing each
state assurance that participating colleges meet common
standards and have meaningful accountability and
complaint-resolution procedures in place.
Bridgepoint has raised concerns regarding the ability to
comply with federal regulations without such a reciprocity
agreement in place, and requests that the Bureau be
authorized to enter into SARA.
While it may be premature to grant this authorization without
further examining these reciprocity agreements or other
options and avenues that may be available, the Committee
and the author should continue to monitor these
developments and efforts to achieve reciprocity.
b) BreEZe . Another issue identified during Sunset Review
and in CSA's audit was the lack of a proper computer system
to manage all of the data, licensing, complaints and
enforcement tools necessary for BPPE to fulfill its
mission. This has contributed to BPPE's deficiencies as it
was unable to manipulate data and does not track basic
information like enforcement actions and timelines. 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.
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. The author may wish to require
DCA and BPPE to report to the Legislature by March 1, 2015
with an update of anticipated timelines for BreEZe
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conversion and any intermediate efforts underway intended
to improve information collection and tracking, whether via
statute or by other legislative action.
19)Related legislation . AB 2099 (Frazier) of 2014 would
establish minimum student outcome requirements for
postsecondary institutions approved by the California State
Approving Agency for Veterans Education (CSAAVE) to
participate in federal veteran's education benefits. This
bill is in the Senate Education Committee.
SB 1069 (Torres) of 2014 would require BPPE to adopt
regulations to make students who utilize a Cal Grant, a Pell
Grant, or both, eligible to apply for payment from the STRF.
This bill is in the Senate Rules Committee.
AB 330 (Chau) of 2013 would require postsecondary educational
institutions to provide their net price calculators and
average student debt per graduate to the California Student
Aid Commission (CSAC) as a condition of eligibility for the
Cal Grant Program, and requires a for-profit institution to
include this information in its School Performance Fact
Sheet. This bill is in the Senate Business, Professions, and
Economic Development Committee.
AB 834 (Williams) of 2013 would provide an alternate means
for a law school accredited by the American Bar Association
and owned by an institution operating under BPPE to satisfy
the current disclosure requirements of the School Performance
Fact Sheet. This bill is on the Assembly Floor.
20)Prior legislation . AB 2296 (Block), Chapter 585, Statutes of
2012, expanded the disclosure requirements for institutions
under the Bureau related to unaccredited programs; expanded
disclosure requirements for all regulated institutions;
established more stringent criteria for determining gainful
employment and calculating job placement rates; and increased
institutional documentation and reporting requirements around
completion rates, job placement/license exam passage rates,
and salary/wage information for graduates.
SB 498 (Liu) of 2011 would have abolished BPPE and
transferred BPPE's powers and duties under the Act to the
California Postsecondary Education Commission. This bill was
held by the Senate Committee on Business, Professions and
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Economic Development.
AB 611 (Gordon), Chapter 103, Statutes of 2011, set forth
certain disclosure requirements pertaining to accreditation
status, licensure, and related limitations for unaccredited
doctoral programs.
AB 773 (Block) of 2011 would have allowed BPPE to revoke an
exemption of an institution which was exempt based on
accreditation, but still required to comply with the Student
Tuition Recovery Fund requirements, if it determined that the
institution had not in fact complied with those requirements.
This bill was held in the Assembly Higher Education
Committee.
AB 48 (Portantino), Chapter 310, Statutes of 2009,
established the California Private Postsecondary Education
Act of 2009.
REGISTERED SUPPORT / OPPOSITION :
Support
App Academy
Center for Responsible Lending
Center for Public Interest Law
Children's Advocacy Institute
DeVry Education Group
Hack Reactor
Maker Square
Public Advocates
Veteran's Legal Clinic
Young Invincibles
Zipfan Academy
Opposition
Bridgepoint Education
California Coalition of Accredited Career Schools (CCACS)
Fashion Institute of Design and Merchandising (FIDM)
MTI College
University of Phoenix
One individual
Analysis Prepared by : Eunie Linden / B.,P. & C.P. / (916)
SB 1247
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319-3301