BILL ANALYSIS �
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|Hearing Date:August 28, 2014 |Bill No:SB |
| |1247 |
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SENATE COMMITTEE ON BUSINESS, PROFESSIONS
AND ECONOMIC DEVELOPMENT
Senator Ted W. Lieu, Chair
Bill No: SB 1247Author:Lieu
As Amended:August 22, 2014 Fiscal: Yes
SUBJECT: Private postsecondary education: California Private
Postsecondary Education Act of 2009.
SUMMARY: Extends the sunset date for the Bureau for Private
Postsecondary Education (BPPE), under the California Private
Postsecondary Education Act (Act), from January 1, 2015, until January
1, 2017; and, provides for statutory changes to the protections
provided to students and the requirements placed on private
postsecondary educational institutions.
NOTE : The Assembly amendments create a new bill and this measure has
been referred to the Committee pursuant to Senate Rule 29.10 (d) for
consideration. The Committee may, by a vote of the majority, either:
(1) hold the bill, or (2) return the bill to the Senate floor for
consideration of the bill as amended in the Assembly.
Existing law: Establishes the California Private Postsecondary
Education Act of 2009 until January 1, 2015, and requires the BPPE
within the Department of Consumer Affairs (DCA) to, among other
things, to review, investigate and approve private postsecondary
institutions, programs and courses of instruction pursuant to the Act
and authorizes BPPE to take formal actions against an
institution/school to ensure compliance with the Act and even seek
closure of an institution/school if determined necessary. The Act
also provides for specified disclosures and enrollment agreements for
students, requirements for cancellations, withdrawals and refunds, and
that the BPPE shall administer the Student Tuition Recovery Fund
(STRF) to provide refunds to students affected by the possible closure
of an institution/school.
(Education Code � 94800 et seq.)
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This bill:
1)Reestablishes the BPPE until January 1, 2017 and provides for
various clarifying and technical changes throughout the Act.
2)Authorizes a currently operating institution, as specified, that has
had their application to operate denied, as specified, to continue
operating during the appeal process. Requires an institution to
disclose to current and prospective students that the application
was denied and that the loss of appeal may result in the
institution's closure. Requires the BPPE to make an emergency
decision if the BPPE determines that the continued operation of the
institution poses a significant risk of harm to students.
3)Changes exemptions to the Act as follows:
a) Prohibits an institution, beginning January 1, 2016, from
claiming an exemption from the Act if the institution is approved
to participate in federal veterans' financial aid programs,
except that an institution, as specified, that meets outlined
requirements and student performance standards may continue to
claim an exemption.
b) Clarifies that an exempt flight school may not accept
prepayment of more than $2,500.
4)Clarifies that the Director of DCA is responsible for the
implementation of the Act.
5)Requires the BPPE to contract with the Office of the Attorney
General (OAG) to establish training that ensures staff is able to
fully investigate complaints.
6)Requires the BPPE to institute training to ensure staff is equipped
to review and verify accuracy of data contained in consumer
disclosures.
7)Requires the BPPE to post specified final civil or criminal cases on
the BPPE Web site and requires the BPPE to post a list of all
institutions denied an approval to operate, describe the reasons for
the denial, and include a specified disclosure that the institution
is not compliant with law and that students are discouraged from
enrolling in unapproved institutions.
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8)Makes several changes to the BPPE Advisory Committee:
a) Adds the following ex-officio members:
i) The chair of the policy committee of the Assembly with
jurisdiction over legislation relating to the bureau, or
designee, appointed by the Speaker of the Assembly;
ii) The chair of the policy committee of the Senate with
jurisdiction over legislation relating to the bureau, or
designee, appointed by the Senate Committee on Rules;
b) Prohibits a public member of the Advisory Committee from
having an interest in any institutions regulated by the BPPE, as
specified.
c) Expands the Advisory Committee functions to include the
examination of the oversight functions and operational policies
of the BPPE, specifically, the fee schedule and the equity of the
schedule relative to the way institutions are structured, and the
licensing provisions of this Act. Requires the Advisory
Committee to make recommendations with respect to policies,
practices, and regulations relating to private postsecondary
education, and provide any assistance as may be requested by the
BPPE.
d) Requires the BPPE to seek input from the Advisory Committee
prior to the adoption, amendment, or repeal of its regulations
and take comments into consideration and provide feedback to
Advisory Committee members.
e) Requires the BPPE Chief to attend all Advisory Committee
meetings and designate ongoing support staff.
f) Requires the DCA Director to personally attend, and testify
and answer questions at each meeting of the Advisory Committee.
g) Requires the Advisory Committee to have the same access to
records within the DCA related to the operation and
administration of the Act as do members of constituent boards of
the DCA in regard to records related to their functions.
h) Requires Advisory Committee meetings to be subject to the
Bagley-Keene Open Meetings Act and for meeting materials to be
posted on the Internet.
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i) Requires the Advisory Committee to meet at least quarterly and
to appoint a member of the committee to represent the committee
for purposes of communicating with the Legislature.
j) Requires the DCA to review, and revise if necessary, the
conflicts of interest regulations to ensure that each Advisory
Committee member is required to disclose conflicts of interest to
the public.
9)Requires the BPPE 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 July 1, 2016, regarding
appropriate levels of oversight of these institutions.
10)Requires an institution seeking an approval to operate and to offer
a degree to either:
a) Be accredited by an accrediting agency recognized by the
United States Department of Education (USDE) to offer the
degree(s); or
b) Have an accreditation plan, approved by the BPPE, for the
institution to become fully accredited within five years of the
BPPE issuance of a provisional approval to operate. An
institution in this category must comply with specified student
disclosure, visiting committee review and degree limitation
requirements.
11)Requires an unaccredited institution that is approved to operate
and to offer degree programs by the BPPE prior to January 1, 2015,
to submit an accreditation plan to the BPPE, to obtain
pre-accreditation by July 1, 2017, to obtain accreditation by July
1, 2020, and to comply with various student disclosure and visiting
committee review requirements.
12)Requires the BPPE to adopt licensing application processing goals
and timelines, as specified.
13)Removes the requirement that an accredited institution provide a
School Performance Fact Sheet (SPFS) to a non-California prospective
student and removes the requirement that the SPFS include data
regarding non-California students.
14)Provides that the STRF exists to relieve or mitigate economic loss
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suffered by students in educational programs at non-exempt
institutions who at the time of enrollment was a California resident
or was enrolled in a California residency program, prepaid tuition,
and suffered economic loss.
15)Requires the BPPE to adopt regulations that ensure specified
students, and any other students deemed appropriate, are eligible
for payment from STRF.
16)Authorizes the BPPE to seek repayment to the STRF from an
institution found in violation of the Act for which a STRF claim was
paid. Provides that an institution may not renew its approval to
operate with the BPPE if the repayment is not made as requested.
17)Requires the BPPE to define "economic loss" in regulation and
provides the BPPE guidance on the definition.
18)Provides that if the BPPE has temporarily stopped collecting STRF
assessments because the fund has approached the $25 million limit,
the BPPE shall resume collecting assessments when the fund falls
below $20 million.
19)Provides that an otherwise eligible student who enrolled during a
period when institutions were not required to collect STRF
assessments is eligible for STRF payments despite not having paid
any STRF assessment.
20)Requires the BPPE to report to the Legislature by December 31,
2016, regarding how reporting requirements under the Act should be
altered to ensure accurate, useful, and consistent reporting by
private postsecondary institutions to the bureau and students.
21)Removes authority for the BPPE to adjust annual fees for individual
institutions based on cost of providing oversight of individual
institutions.
22)Requires announced and unannounced compliance inspections to be
conducted at least every five years, rather than every two years,
and requires the BPPE 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.
23)Requires the BPPE to, in consultation with the Advisory Committee,
establish priorities for enforcement resources and complaints
processing. Provides that institutions and complaints of specified
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characteristics should be prioritized.
24)Provides that if the BPPE has reason to believe that an institution
has engaged in a pattern or practice of violating the provisions of
the Act or any other applicable law that involves multiple students
or other claimants, the BPPE shall contract with the OAG for
investigative and prosecutorial services, as necessary.
25)Requires the DCA Director to provide written updates to the
Legislature every six months and participate in oversight hearings
as requested.
26)Requires the DCA Director to provide the Legislature with a copy of
the independent review of staffing resources within 30 days of the
review, along with an overview of how the Director intends to ensure
staffing is sufficient for purposes of implementing the Act.
27)Appropriates $130,000 from the Private Postsecondary Education
Administration Fund for purposes of hiring one permanent attorney
position to assist in regulatory activities and one permanent
analyst position to provide support to the Advisory Committee.
FISCAL EFFECT: This bill is keyed "fiscal" by Legislative Counsel.
According to the Assembly Committee on Appropriations analysis dated
August 6, 2014, extension of the Act's sunset by two years will
continue expenditures to implement the Act over this period. The
analysis states that BPPE's operating budget for 2014-15 is $11.1
million for 76 positions and the BPPE's operating fund is projected to
have a fiscal year-end balance of $10.8 million. In addition, $2
million is estimated in payments from the STRF, which is projected to
have a balance of $31.4 million as of July 1, 2015.
COMMENTS:
1. Purpose. This bill is sponsored by the Author , and is one of six
"sunset bills" the Author is sponsoring this Session. According to
the Author, this bill is necessary to extend the sunset date of the
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. At a time when California's public
institutions have reduced enrollments due to major budget cuts,
private postsecondary education institutions are in a position to
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play a role in providing access and education for otherwise
underserved students. According to the Author, "we have a primary
responsibility to the millions of students and consumers attending
these schools, attempting to better their lives and employment
opportunities and as such, this bill seeks modest but important
improvements in the way schools are regulated in California." The
bill aims to ensure that there is appropriate and fair government
oversight and that at the same time provide that money spent by
students at these institutions is truly a quality investment for
the future with an important return - the ability to be hired in a
high paying, quality job.
2. Oversight Hearings and Sunset Review of Licensing Boards and
Programs. In 2014, the Senate Business and Professions Committee
and the Assembly Business, Professions and Consumer Protection
Committee (Committees) conducted joint oversight hearings to review
9 regulatory entities: Bureau of Automotive Repair; Bureau of Home
Furnishings and Thermal Insulation; Bureau for Private
Postsecondary Education (BPPE); California Massage Therapy
Certification program; California Board of Acupuncture; California
Tax Preparers Program; Dental Hygiene Committee of California;
Professional Fiduciaries Bureau; and Structural Pest Control Board.
This Committee also reviewed the performance and effectiveness of
the Community Interest Development Manager's Certification Program.
The Committees began their review of the aforementioned licensing
agencies in March and conducted two days of hearings and then more
recently held a hearing on the BPPE. This bill, and the
accompanying sunset bills, are intended to implement legislative
changes as recommended by staff of the Committee's and which are
reflected in the Background Papers prepared by Committee staff for
each agency and program reviewed by the Committees for this year.
3. Background on the Bureau for Private Postsecondary Education
(BPPE). The BPPE is responsible for oversight of private
postsecondary educational institutions operating with a physical
presence in California. Established by Assembly Bill 48
(Portantino, Chapter 310, Statutes of 2009), after numerous
legislative attempts to remedy the laws and structure governing
regulation of private postsecondary institutions, the bill took
effect January 1, 2010, and made many substantive changes that
created a new, solid foundation for oversight and gave the new BPPE
an array of enforcement tools to ensure schools comply with the
law.
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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. The state's program for regulation of private
postsecondary and vocational education institutions has
historically been plagued by problems. During the late 1980's, the
state developed a reputation as the "diploma mill capital of the
world." During this period, the State Department of Education
regulated the private postsecondary education industry. SB 190
(Morgan) created the Private Postsecondary and Vocational Education
Reform Act of 1989 (Reform Act) to overhaul the state's regulatory
program and transferred oversight responsibility for the program to
the 20-member Private Postsecondary and Vocational Council
(Council). Concurrently, the Maxine Waters School Reform and
Student Protection Act (Waters Act) was enacted.
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.
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, extending the Reform Act's sunset date to 2005, and was
subsequently signed into law by Governor Wilson.
The BPPVE operated at DCA from 1998 through 2007. In 2000, the
California State Auditor found that DCA was not fulfilling its
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oversight responsibilities. In 2002, an internal DCA audit made a
number of recommendations to the BPPVE to improve operations and
during the 2002 Legislative sunset review hearings, the BPPVE
committed to, among other activities, simplify and streamline
procedures and adopt regulations that ensured comprehensive and
effective application of the law. In 2004, the Joint Committee on
Boards, Commissions and Consumer Protection (Joint Committee) held
a special hearing regarding the BPPVE and recommended that the
Reform Act be revised and that the Administration and the DCA
should consider restoring, at least temporarily, the Bureau's
staffing resources to clear out existing backlogs. 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 the BPPVE's
operations. The Monitor's report, presented to the Joint Committee
on December 7, 2005, outlined a "twenty-year record of repeatedly
identified, fundamental problems in every one of the Bureau's key
operations." The Report found that the BPPVE both inadequately
protected consumers and impeded the expansion of quality
postsecondary and vocational educational opportunities. Because
agreement could not be reached on a legislative fix to the law, the
BPPVE was allowed to Sunset on January 1, 2008.
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.
AB 48 established a new BPPE with the authority to regulate private
postsecondary institutions and enforce the provisions of the new
California Private Postsecondary Education Act (Act) and responded
to the major problems with the former laws governing the industry
in California. 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 requires disclosure of critical information to
students such as program outlines, graduation and job placement
rates, and license examination information, and ensures colleges
justify those figures. The Act also guarantees students can
complete their educational objectives if their institution closes
its doors while providing BPPE with enforcement powers necessary to
protect consumers. The Act directs BPPE to:
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Create a structure that provides an appropriate level of
oversight, including approval of private postsecondary
educational institutions and programs;
Establish minimum operating standards for California
private postsecondary educational institutions to ensure
quality education for students;
Provide students a meaningful opportunity to have their
complaints resolved;
Ensure that private postsecondary educational
institutions offer accurate information to prospective
students on school and student performance, thereby promoting
competition between institutions that rewards educational
quality and employment success; and,
Ensure that all stakeholders have a voice and are heard
in the operations and rulemaking process of BPPE.
The BPPE also actively investigates and combats unlicensed
activity, administers the Student Tuition Recovery Fund (STRF), and
conducts outreach and education activities for private
postsecondary educational institutions and students within the
state.
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 Assembly Committee on Higher Education analysis of
AB 48 in 2009, "The degree to which the student protections
outlined in this bill will result in greater protection for
students will 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 the 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, the 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
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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.
1. Review of the BPPE - Issues Identified and Recommended Changes. As
the number of students served by private postsecondary institutions
has increased, so has the focus on fraudulent practices and low
academic standards. There have been numerous high-profile federal
investigations into the practices of for-profit institutions in
recent years. Among the most notable are the United States
Government Accountability Office (GAO) series of investigations
raising concerns regarding the amount of federal student aid
dollars directed to for-profit institutions, the misleading and
deceptive recruitment practices at certain institutions, and
substandard academic performance expectations in some for-profit
programs. The challenge for the Legislature is to ensure the
continuance of an oversight structure that supports innovative
programs while also preventing predatory practices, which this bill
aims to do by extending the operative date for the Act.
The following are some of the major issues pertaining to the Bureau
along with background information concerning the particular issue.
Recommendations were made by Committee staff and within the Bureau
of State Audits (BSA) report issued earlier this year, Bureau for
Private Postsecondary Education: It Has Consistently Failed to
Meet Its Responsibility
To Protect the Public's Interests, regarding the particular issue
areas which needed to be addressed.
a) Issue : Veterans Educational Benefits Oversight.
Background : Millions of dollars in funding administered by the
federal Veterans Administration (VA) and Department of Defense
(DOD) go to private postsecondary education institutions in
California. There have been multiple reports and hearings
focused on the experience of veterans at private for-profit
institutions. According to a 2010 report issued by the U.S.
Senate Health, Education, Labor and Pensions (HELP) Committee,
between 2009 and 2010, revenue from military educational benefits
at 20 for-profit education companies increased 211 percent. The
report also noted that because neither DOD nor VA benefits
originate through Title IV, money that institutions received
through these programs was not counted as federal financial aid,
thus not subject to a key regulatory requirement governing
for-profit schools that no more than 90 percent of revenues come
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from federal financial aid. This so-called "90/10" rule
essentially considers DOD and Veterans funds as non-federal aid
by allowing these funds to be counted in the 10 percent of the
calculation, despite the fact that the money comes from federal
taxpayers. The report found that four of the five for-profit
schools receiving the most Post-9/11 GI Bill funding in the first
year had loan repayment rates of only 31 to 37 percent. The
report further found that the same four of five schools receiving
the most Post-9/11 GI funding had at least one campus with a
student default rate above 24 percent over three years.
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. 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 former BPPVE used to serve as the approval agency for
California institutions attended by veterans using Title 38
monies under a contract with the VA. When the BPPVE expired,
these duties were transferred to the California Department of
Veterans Affairs (Cal-Vets) which now provides limited oversight
of postsecondary education programs through its role as the state
approving agency for veterans' education benefits (CSAAVE).
CSAAVE is federally funded and operates under an annual
reimbursement contract with the VA. In its role as the approval
agency, the primary function of CSAAVE is to review, evaluate and
approve quality educational and training programs for veteran's
benefits. CSAAVE is intended to approve colleges and
universities, vocational schools, business schools, professional
schools, and licensing and certification training and tests, all
of which must lead to an educational, professional or vocational
objective. There is no current requirement for CSAAVE to provide
recourse for students attending approved institutions and in the
event that a student was mislead or unable to become employed
following enrollment at a program not approved by the BPPE, there
is no ability for the Bureau to take action and no requirement
that protections under the Act are upheld.
Recommendation and Proposed Statutory Change : The Committees may
wish to require that any school in California receiving benefits
administered by the VA and/or DOD must be approved by the Bureau
and subject to the Act. The Committees may wish to specify that
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institutions accepting benefits administered by the VA and/or DOD
provide students their associated money for living expenses and
other costs within the timeframe established under federal law.
This bill makes the following changes to the Act related to
veterans' educational benefits:
Prohibits an institution, beginning January 1, 2016,
from claiming an exemption from the Act if the institution
is approved to participate in federal veterans' financial
aid programs, except that an institution, as specified, that
meets outlined requirements and student performance
standards may continue to claim an exemption.
a) Issue : Unaccredited Degree Granting Institutions.
Background : Accreditation provides a basis for determining
educational quality and as such, may be an important measure for
assessing the value of degree granting programs. 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. While California licensure requirements in the
health care field vary; physicians, dentists, clinical social
workers, optometrists, and chiropractors must obtain their
required degrees from accredited institutions or institutions
approved by their respective licensing boards.
Students may be better served, and the Bureau's workload
decreased, by amending the Act to require that degree granting
programs be accredited. Unaccredited programs may still be able
to operate in the state and receive approval from the BPPE, but
instead could offer certificates or other types of completion
awards than a degree.
Recommendation and Proposed Statutory Change : The Committees may
wish to amend the Act to increase the quality of educational
programs in California by requiring institutions offering a
degree to be accredited in order to obtain BPPE approval to
operate. The Committees may wish to provide a phase-in period
for this requirement to allow unaccredited degree programs time
to meet the accreditation requirement. The Committees may also
wish to require that currently unaccredited degree granting
programs either change their program to offer certificates or
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update the Bureau as to their plan for obtaining accreditation.
The Committees may also wish to require new institutions applying
to the Bureau as an unaccredited degree granting program to
provide a similar plan for accreditation with their initial
application for approval.
This bill makes the following changes related to unaccredited
institutions:
Requires an institution seeking an approval to
operate and to offer a degree to either be accredited by an
accrediting agency recognized by the United States
Department of Education (USDE) to offer the degree(s) or
have an accreditation plan, approved by BPPE, for the
institution to become fully accredited within five years of
the BPPE issuance of a provisional approval to operate. An
institution in this category must comply with specified
student disclosure, visiting committee review and degree
limitation requirements.
Requires an unaccredited institution that is
approved to operate and to offer degree programs by BPPE
prior to January 1, 2015, to submit an accreditation plan to
BPPE, to obtain pre-accreditation by July 1, 2017, to obtain
accreditation by July 1, 2020, and to comply with various
student disclosure and visiting committee review
requirements.
a) Issue : Student Tuition Recovery Fund.
Background : The Student Tuition Recovery Fund (STRF) exists to
relieve or mitigate economic losses suffered by students enrolled
in the BPPE approved programs or at non-WASC regionally
accredited institutions. Institutions are required to charge
students fifty cents ($.50) per one thousand dollars ($1,000) of
institutional charges, rounded to the nearest thousand dollars
which the institution then submits to BPPE as payment into the
STRF. STRF payments are most commonly made when a student has
made paid for or made payments toward an educational program and
a school closes. At the time of a school closure, students may
be eligible for tuition reimbursement by filing a claim with the
BPPE for a payout from STRF.
Currently, STRF is more than solvent, having met the statutory
cap of $25 million established in the Act over a year ago. The
BPPE has proposed regulations to significantly decrease the
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amount of money paid into the fund, as well as completely stop
collecting STRF for a period of four years to avoid being in
violation of the Act and the established maximum for the fund.
There is some concern that prohibiting the collection of STRF as
a means of avoiding conflict with the law does not take the same
consumer oriented approach as enhancing efforts to properly
utilize the funds in a timely manner or determining whether there
are other appropriate uses for the fund. There are currently
very narrow options for the use of STRF when an institution
closes that could be expanded beyond tuition repayment to, for
example, assist in the repayment of student loans for students
who have been subject to a school closure. STRF could also be
used to repay student loans for students attending institutions
found to be in violation of the Act (for example, if the school
is cited for failing to provide required disclosures, or for
providing false or misleading information on the School
Performance Fact Sheet).
BPPE is currently authorized in its regulations to negotiate with
a lender, holder, guarantee agency, or USDE for the full
compromise or write-off of student loan obligations to relieve
students of economic loss and, if possible, to reduce the
liability of the STRF for the payment of claims. The Bureau is
also authorized to pay a student's claim directly to the lender,
holder, guarantee agency or USDE. At its December 2013 Advisory
Committee meeting, regulations were considered to define
"third-party payers" as a person, business or agency who pays any
portion of an institutional charge on behalf of a student. The
proposal further would provide that for a student whose total or
partial charges are paid by a third-party payer who suffers a
loss of an educational opportunity, the portion paid by the third
party payer up to the amount of the economic losses may be paid
to a subsequent institution upon evidence that a student is
enrolled in a different institution.
Recommendation and Proposed Statutory Change : The Bureau should
continue to improve its administration of STRF and dedicate staff
to ensuring that monies are properly collected, claims are
swiftly processed and payouts are made in a timely fashion. The
Bureau should update the Committees on its current efforts
related to third-party payers and advise the Committees as to any
statutory changes that could enhance STRF. The Committees may
wish to expand the uses of STRF and evaluate the timelines under
which students have to file a claim.
This bill makes the following changes related to unaccredited
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institutions:
Provides that the Student Tuition Recovery Fund
(STRF) exists to relieve or mitigate economic loss suffered
by students in educational programs at non-exempt
institutions who, at the time of enrollment, was a
California resident or was enrolled in a California
residency program, prepaid tuition, and suffered economic
loss.
Requires BPPE to adopt regulations that ensure
specified students, and any other students deemed
appropriate, are eligible for payment from STRF.
Authorizes BPPE to seek repayment to the STRF from
an institution found in violation of the Act for which a
STRF claim was paid. Provides that an institution may not
renew its approval to operate with BPPE if the repayment is
not made as requested.
Requires BPPE to define "economic loss" in
regulation and provides BPPE guidance on the definition.
Provides that if BPPE has temporarily stopped
collecting STRF assessments because the fund has approached
the $25 million limit, BPPE shall resume collecting
assessments when the fund falls below $20 million.
Provides that an otherwise eligible student who
enrolled during a period when institutions were not required
to collect STRF assessments is eligible for STRF payments
despite not having paid any STRF assessment.
a) Issue : Underutilized Advisory Committee.
Background : Despite the expertise of Advisory Committee members
in issues such as the operation of institutions that BPPE
regulates, and the state and federal laws related to private
postsecondary education and student protections, the BPPE rarely
consults Advisory Committee members and the Committee appears to
have little impact on the priorities and operations of the
Bureau. The Advisory Committee has only met once annually,
following a series of meetings in 2010, while the initial
regulatory packages establishing the BPPE's authority were being
developed, and it does not appear that comments and advice of
Advisory Committee members is taken into account. The
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regulations governing much of the BPPE's work are substantive and
stem from a number of costly, lengthy processes, but suggested
amendments to regulations from Advisory Committee members do not
appear to be taken into consideration and may also not take into
account public comments, considering the only limited
opportunities for a very small number of public meetings offered.
While the BPPE may lack staff to dedicate the time and resources
necessary to conduct regular public meetings, the wide variety of
institutions the Bureau regulates, coupled with the large number
of students served at BPPE-approved institutions could benefit
from public dialogue and outcomes resulting from regular public
meetings. The Bureau struggles to prioritize its work and
implement workable systems and processes for licensing,
enforcement and student protections and may significantly benefit
from drawing on the work experience and history of Committee
members as it continues to move forward in organizing its
operations and addressing the many issues it faces.
Recommendation and Proposed Statutory Change : The Bureau may
consider consulting Advisory Committee members more frequently
and provide additional opportunities for Advisory Committee
meetings to better include public dialogue to assist the Bureau
in its work enforcing the Act and also as a means of solving some
of the operational problems the Bureau currently faces.
This bill makes the following changes to the Advisory Committee:
Adds the chair of the policy committee of the
Assembly with jurisdiction over legislation relating to the
bureau, or designee, appointed by the Speaker of the
Assembly and the chair of the policy committee of the Senate
with jurisdiction over legislation relating to the bureau,
or designee, appointed by the Senate Committee on Rules as
ex-officio, non-voting members of the Advisory Committee.
Prohibits a public member of the Advisory Committee
from having an interest in any institutions regulated by the
BPPE, as specified.
Expands the Advisory Committee functions to include
the examination of the oversight functions and operational
policies of the BPPE, specifically, the fee schedule and the
equity of the schedule relative to the way institutions are
structured, and the licensing provisions of this Act.
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Requires the Advisory Committee to make recommendations with
respect to policies, practices, and regulations relating to
private postsecondary education, and provide any assistance
as may be requested by the BPPE.
Requires the BPPE to seek input from the Advisory
Committee prior to the adoption, amendment, or repeal of its
regulations and take comments into consideration and provide
feedback to the Advisory Committee members.
Requires the BPPE Chief to attend all Advisory
Committee meetings and designate ongoing support staff.
Requires the DCA Director to personally attend, and
testify and answer questions at, each meeting of the
Advisory Committee.
Requires the Advisory Committee to have the same
access to records within the DCA related to the operation
and administration of the Act as do members of constituent
boards of the DCA in regard to records related to their
functions.
Requires Advisory Committee meetings to be subject
to the Bagley-Keene Open Meetings Act and for meeting
materials to be posted on the Internet.
Requires the Advisory Committee to meet at least
quarterly and to appoint a member of the committee to
represent the committee for purposes of communicating with
the Legislature.
Requires DCA to review, and revise if necessary, the
conflicts of interest regulations to ensure that each
Advisory Committee member is required to disclose conflicts
of interest to the public.
a) Issue : Continued Operation of the Bureau.
Background : The Bureau struggles to meet its statutory mandate for
consumer protection and robust oversight of private postsecondary
institutions. Yet its challenges related to providing oversight
of institutions do not appear to stem from problems with the law
or financial insolvency or staff bias, issues that consistently
arose with the Former Act and the BPPVE, but rather appear to be
directly related to the implementation of the Act by the BPPE at
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the DCA. From staffing, to implementing policies and procedures,
to data systems, to timelines, to processing student complaints,
to leadership, the Bureau, after almost 15 years of operation,
has not been able to properly evaluate and approve schools and
programs and adequately protect students. The BPPE collects
millions of dollars from institutions it licenses, but does not
have the infrastructure in place to do a good job of regulating
these institutions. The Bureau was not funded or operational
until well after it was established. The BPPE has had three
Bureau Chiefs in four years. The BPPE pays millions of dollars
of Pro Rata as a Bureau within the DCA, but does not receive near
the level of services, personnel or support it needs to
effectively do its job. Given the large amount of money it has
in its fund, the Bureau could easily afford to hire multiple
program quality experts, outside consultants, lawyers,
investigators and information technology personnel. The BPPE
also has an incredibly strong Advisory Committee comprised of
individuals familiar with many aspects of private postsecondary
regulation that it does not effectively utilize, and may be
limited in its ability to utilize given its structure as a Bureau
responsible for licensing educational institutions housed within
an agency where the majority of other programs are focused on
individual professional licensees. After numerous audits,
analyses by outside agencies like the LAO, an in-house monitor
for two years, 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.
This bill continues the operation of the Bureau for only two
years and makes the following enhancements:
Clarifies that the Director of the Department of
Consumer Affairs (DCA) is responsible for the implementation
of the Act.
Requires the BPPE to, in consultation with the
Advisory Committee, establish priorities for enforcement
resources and complaints processing. Provides that
institutions and complaints of specified characteristics
should be prioritized
Requires the BPPE to contract with the Office of the
Attorney General to establish training that ensures staff is
able to fully investigate complaints.
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Requires the BPPE to institute training to ensure
staff is equipped to review and verify accuracy of data
contained in consumer disclosures.
Requires the BPPE to adopt licensing application
processing goals and timelines.
Provides that if BPPE has reason to believe that an
institution has engaged in a pattern or practice of
violating the provisions of the Act, or any other applicable
law that involves multiple students or other claimants, the
BPPE shall contract with the Attorney General for
investigative and prosecutorial services, as necessary.
Requires the DCA director to provide written updates
to the Legislature every six months and participate in
oversight hearings as requested.
Requires the DCA Director to provide the Legislature
with a copy of the independent review of staffing resources
within 30 days of the review, along with an overview of how
the Director intends to ensure staffing is sufficient for
purposes of implementing the Act.
Appropriates $130,000 for purposes of hiring one
permanent attorney position at the Bureau to assist in
regulatory activities and one permanent analyst position to
provide support to the Advisory Committee.
1. Related Legislation This Session. SB 1242 (Lieu, Chapter 255,
Statutes of 2014) amended the Automotive Repair Act and updates the
sunset provisions for the Bureau of Automotive Repair.
SB 1243 (Lieu) of 2014 extends until January 1, 2017, the term of
the Veterinary Medical Board, which provides for the licensing and
registration of veterinarians and registered veterinary technicians
and the regulation of the practice of veterinary medicine by the
Veterinary Medical Board. The bill also extends the terms of the
executive officer of the Veterinary Medical Board. This bill also
extends to January 1, 2019, the law regulating the practice of
common interest development managers, and the law establishing the
California Tax Education Council, which provides for the Council to
register and regulate tax preparers. This bill also subjects the
Board and programs to be reviewed by the appropriate policy
committees of the Legislature. ( Status: This bill is pending in
the Senate.)
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SB 1244 (Lieu) of 2014 extends until January 1, 2019 the term of
the Structural Pest Control Board which provides for the licensing
and regulation of individuals and business involved in the
structural pest control industry in California. The bill also
extends the term of the Board's executive officer and subjects the
Board to be reviewed by the appropriate policy committees of the
Legislature. ( Status: This bill is pending in the Assembly.)
SB 1245 (Lieu) of 2014 extends until January 1, 2019 the term of
the Dental Hygiene Committee of California which provides for the
licensing and regulation of dental hygienists. The bill also
extends the term of the Committee's executive officer and subjects
the Committee to be reviewed by the appropriate policy committees
of the Legislature.
( Status: This bill is pending before the Governor.)
SB 1246 (Lieu) of 2014 extends until January 1, 2019 the term of
the Acupuncture Board which provides for the licensing and
regulation of doctors of acupuncture under the Acupuncture
Licensure Act and subjects the Board to be reviewed by the
appropriate policy committees of the Legislature. ( Status: This
bill is pending in the Assembly.)
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. ( Status: This bill
is pending in the Senate.)
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,
requires CSAC to provide this information on its website in a
searchable database, and requires a for-profit institution to
include this information in its School Performance Fact Sheet.
( Status: This bill is pending in the Senate.)
AB 423 (Brown) of 2013 was recently amended to mirror the contents
of SB 1069 above. ( Status: This bill is pending in the Senate.)
AB 634 (Gomez) of 2013 would have required BPPE to clarify the
definition of "avocational education" through regulations.
( Status: The bill was amended to deal with a different subject
matter.)
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AB 834 (Williams, Chapter 176, Statutes of 2014) authorized a law
school accredited by the American Bar Association, and owned by an
institution operating under the BPPE to satisfy the current
disclosure requirements of the School Performance Fact Sheet by
instead doing the following: complying with ABA disclosure
requirements; reporting to the National Association for Law
Placement; and making completion, Bar passage, placement, and
salary and wage data available to prospective students prior to
enrollment through the application process administered by the Law
School Admission Council.
2. Prior Related 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 the Bureau and
transferred the Bureau's powers and duties under the Act to the
California Postsecondary Education Commission.
( Status: The bill was held by the Senate Committee on Business,
Professions and Economic Development.)
SB 619 (Fuller, Chapter 309, Statutes of 2011) exempted from Bureau
regulation flight instructors or flight schools that do not require
the upfront payment of tuition or fees, and that do not require
students to enter into a contract of indebtedness in order to
receive training.
SB 675 (Wright) of 2011 would have required that private
postsecondary institutions subject to the Act administer a test of
English language proficiency to a nonnative speaker of English, as
defined, prior to enrolling the student. ( Status: The bill failed
passage in the Senate Committee on Business, Professions and
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.
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AB 773 (Block) of 2011 would have allowed the Bureau 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.
( Status: The bill was never heard in a policy committee.)
AB 797 (Conway) of 2011 would have exempted schools of cosmetology,
as defined, from the Act. ( Status: The bill was held in Assembly
Committee on Higher Education.)
AB 1013 (Assembly Committee on Higher Education, Chapter 167,
Statutes of 2011) made clarifying changes to the Act and related
Bureau oversight.
AB 1889 (Portantino) of 2010 contained provisions regarding
doctoral degrees offered by unaccredited institutions, the
calculation of placement rates, and Bureau employment requirements.
( Status: The bill was vetoed by the Governor due to concerns over
Bureau employment requirements.)
AB 2393 (Ammiano) of 2010 altered the definition of "graduates
employed in the field" for apprenticeship and nursing programs.
( Status: The bill was vetoed by the Governor, who indicated that
it put the state on the same path to overly confusing statutes and
guidelines that existed prior to the new Act.)
AB 48 (Portantino, Chapter 310, Statutes of 2009) established the
California Private Postsecondary Education Act of 2009.
3. Comments from Stakeholders on the Current Version of SB 1247. A
coalition of student and consumer advocates write in support of
this bill, urging reauthorization of the Act "so the Bureau has
sufficient resources, direction and oversight to effectively
monitor the industry and is transparent to the public it strives to
protect." The coalition notes that "in several key aspects, SB
1247 improves protections for students attending for-profit schools
in California," including protecting veterans by requiring
for-profit institutions that receive veteran benefits be approved
by the Bureau and subject to the Act, prioritizing Bureau oversight
to efficiently allocate state resources by focusing monitoring and
enforcement activities on those schools and complaints that appear
to pose the highest risk to students and increasing student access
to the STRF. The coalition remains concerned about certain
provisions, stating that: any exemption from state oversight
weakens the regulatory structure, sets bad precedent, and has the
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potential to harm students; approval by way of accreditation is not
a substitute for oversight and should be eliminated; schools must
not enroll students in programs from which there are known
impediments to employment; Students should have access to a private
right of action when they are harmed and; the Bureau should not
face extinction in two years.
American Career College/West Coast University (ACC/WCU) has a
neutral position on this bill. According to ACC/WCU, "although we
still believe there are many additional 'fixes' that would improve
the law and the functionality of the Bureau, it is in the sector's
and student's best interest to extend the sunset to extend the BPPE
and work towards improving the Bureau's operations."
The California Association of Private Postsecondary Schools (CAPPS)
also has a neutral position on this bill, echoing the sentiments
expressed by ACC/WCU above. CAPPS writes that it "does not agree
with a number of provisions in SB 1247 including many of the STRF
changes, the inspection/complaint priorities, requiring
accreditation for all degree granting schools, lack of fee reform,
to name a few" but appreciates "the overall direction to focus on
improving the current Bureau..."
SUPPORT AND OPPOSITION:
Support with Concerns:
California Competes: Higher Education for a Strong Economy
Center for Responsible Lending
Consumers Union
Consumer Federation of California
East Bay Community Law Center
Legal Aid Foundation of Los Angeles
Public Advocates Inc.
Public Law Center
University of San Diego Center for Public Interest Law
University of San Diego Children's Advocacy Institute
University of San Diego Veterans Legal Clinic
Veterans Education Success
Young Invincibles
Neutral:
American Career College/West Coast University
California Association of Private Postsecondary Schools (CAPPS)
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Opposition:
None on file as of August 26, 2014.
Consultant:Sarah Mason