BILL ANALYSIS
AB 71
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 71 (Wright)
As Amended July 17, 1997
Majority vote
ASSEMBLY: 41-34 (May 22, 1997) SENATE: 29-4 (July 17, 1997)
COMMITTEE VOTE : 11-0 (July 17, 1997) RECOMMENDATION : concur
Original Committee Reference: Higher Ed.
SUMMARY : Makes numerous substantive and technical amendments to
the Private Postsecondary and Vocational Education Reform Act of
1989 (Reform Act).
The Senate amendments :
1) Transfer administration of the Reform Act from the Council for
Private Postsecondary and Vocational Education (Council) to a
Bureau for Private Postsecondary and Vocational Education
created within the Department of Consumer Affairs (DCA).
2) Provide for exemptions from all or portions of the Reform Act
law for certain institutions (see Comment 3,(b)).
3) Include the following provisions concerning pro rata refund
policies:
a) Unless exempt, all institutions are required to provide a
pro rata refund to students who withdraw from a course;
b) An institution's non-degree programs would be subject to a
100% pro rata refund rule, unless the institution meets
specified criteria to completion and placement; and
c) An institution would be required to disclose their refund
policy, but could not state that DCA had endorsed the
program.
4) Change the methodology for calculating student placement.
5) Maintain provisions that require schools subject to Article 7
to comply with the mandatory completion (60%) and placement (70%)
standards.
6) Establish a new registration category of institutions that
offer certificates and diplomas upon filing, but which are not
reviewed by the state.
7) Establish a new fee schedule for both application and annual
fees: a) for institutions whose gross revenues are more than $1
million the reduction in fees shall be 5% of the baseline annual
fee schedule; b) for institutions with gross revenues more than
$100,000 but less than $1 million the fees shall be reduced by
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10%; and c) for institutions whose gross revenues are less than
$100,000 the reduction shall be 15%.
8) Include contingency language linking SB 819 and this bill.
EXISTING LAW (Reform Act):
1) Establishes, until July 18, 1997, various requirements and
standards for the approval of private postsecondary educational
institutions to operate in California and to award degrees and
diplomas.
2) Creates the Council and designates it the lead agency for
administering regulations and enforcing the law.
AS PASSED BY THE ASSEMBLY , this bill:
1) Made substantive changes to the Reform Act that are intended
to bring
about greater flexibility and efficiency, while also reducing
paperwork,
administrative costs, fees and administrative requirements.
Some of the
changes include the following: a) allows the schools to use a
less costly
process to appeal an administrative action to the Council for
Private
Postsecondary and Vocational Education (CPPVE) in lieu of an
expensive and
lengthy CPPVE administrative hearing; b) reduces costly and
time-consuming
administrative reporting requirements; c) increases the
maximum length for
approvals of non-degree schools, and simplifies the process
for filing
renewal applications resulting in fee reductions; and d)
provides
additional exemptions both from the Reform Act and from
specified sections
of the Reform Act.
2) Exempted Intensive English Language Instruction Programs
(IEPs) from
Article 7 that meet the following criteria: a) exclusively
enroll
international students who are not immigrants, refugees or
permanent
residents; b) prepare students for entrance exams at
accredited or
approved postsecondary institutions; c) accept no federal or
state
financial aid; and d) are not offered to lead to occupational
employment.
These programs would continue to be subject to the less
rigorous
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requirements of the Reform Act.
3) Limited CPPVE regulation and student protections to the type
of program, as opposed to the entire institution, so that
schools offering a variety of programs from certificates
through doctoral degrees are not required to
meet the more restrictive CPPVE vocational program
requirements.
4) Required the California Postsecondary Education Commission
(CPEC) to
review and evaluate the effectiveness of these acts and report
its
findings to the Legislature by January 1, 2001 and every five
years
thereafter.
5) Revised and specified the scope and contents of an annual
report that
CPPVE is required to submit to the Legislature by January 1 of
each year
to include such items as: a) data on scope and operation of
California
private postsecondary and vocational schools; b) information
on consumer
complaints received and action taken; c) number of license
appeals; and d)
enforcement action.
6) Changed the composition of the Council to include all public
members, the
majority of whom would be appointed by the Governor.
7) Eliminated the renewal application process for schools exempt
from Article 7. Once approved, these exempt schools are
approved continuously unless
CPPVE finds, after notice and an opportunity for hearing, that
the
institution has violated this chapter and determines permanent
revocation
of approval is not appropriate. Requires the license to be
restricted to
no more than three years when a renewal application will be
required and a
formal visitation scheduled.
8) Separated license and examination preparation courses into a
new section
with a significantly reduced application procedure and
eliminates portions
of the renewal applications and reviews.
9) Required that CPPVE accept the approval of the California
Committee of Bar
Examiners for all law programs offering the baccalaureate,
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masters, and
doctoral degrees.
10) Removed the fifty mile restriction on branches and satellites
from
vocational schools subject to Article 7 providing the
institution
demonstrates compliance with standards of completion and
placement, and
default rates are lower than 25%.
11) Established a separate fund called the Student Tuition
Recovery Fund
(STRF) for small schools enrolling under 100 students a year
or charging
less than $1,000 in tuition. The assessment fee will be set
at $1.00 per
student as opposed to the current $2.50 per student with a
maximum cap of less than $1,000 in tuition. When the cap
is reached, only new schools will pay into the fund. All
claims originating from enrollments prior to the establishment
of this new fund will be paid from the current vocational
STRF.
12) Exempted from Article 7 the educational services costing
$1,000 or less and that have no part of their total charge
paid for from proceeds of a loan or grant subject to the
federal financial aid programs. This figure of $1,000 will be
adjusted every five years based on the CPI.
13) Exempted from Article 7 those institutions that continuously
operate for at least five years as a nonprofit public benefit
corporation or as a
nonprofit religious corporation that are not managed or
administered by an
entity for profit.
14) Made other minor, technical, non-substantive and conforming
changes.
FISCAL EFFECT : Unknown
COMMENTS :
1) Supporters of this legislation are a representative group of
school industry and consumer advocates whose intent was to
mitigate remaining concerns and produce a consensus document.
However, while the amended version of this bill is intended to
ameliorate concerns with the bill, not all parties had an
opportunity to review and comment on the proposed amendments, or
see a bill in print prior to the preparation of this analysis.
2) CONTROVERSIAL POLICY ISSUES
Two major developments have occurred since the Assembly passed
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this bill in April: a) Governor Wilson expressed
dissatisfaction with the current Council; and b) this bill has
undergone numerous amendments, many of them quite substantive,
as a consequence of negotiations between major stakeholders,
the Governor's Office and key legislative staff. Together,
these developments have generated a variety of major policy
concerns in both houses of the legislature. They are summarized
below:
i) TRANSFER OF THE COUNCIL TO DCA
In June, representatives from the Governor's Office
indicated that Governor Wilson was insisting on
transferring the administration of the Reform Act to DCA as
a condition of signing the bill. The committee is
concerned that this is an inappropriate rationale for
transfer of administrative responsibility. While DCA may
prove effective in regulating trade schools, the Committee
is concerned that the State's authority to sanction the
issuance of academic degrees by private degree granting
institutions is placed with a business regulating agency
and not with an education entity.
At least two options exist for responding to the DCA
transfer: (1) The Council could be reconstituted as a new
agency; and (2) the responsibility for implementing the
Reform Act could be transferred to an existing state agency
whose primary focus is education. The committee is
concerned that there have been no substantive policy
discussion of the feasibility of these options.
Current and proposed law require the administering agency
to conduct qualitative reviews of degree-granting
institutions and to serve as the primary advocate and
spokesperson. The committee is concerned that DCA has
little experience in these roles.
No other state in the nation has placed oversight of
private postsecondary and vocational education with a
consumer affairs agency. The rationale for this fact is
the necessity to have experienced personnel reviewing
curricula, educational programs and support materials, and
assessing educational outcomes as a means of protecting the
integrity of educational credentials, particularly academic
degrees. This rationale is seemingly ignored in the
current version of this bill.
ii) EXEMPTIONS FROM ALL OR PORTIONS OF THE REFORM ACT
Article 3 continues and broadens a tailored exemption for
non-profit schools that are accredited by a national body
recognized by the U.S. Department of Education and
exclusively offer degrees after a course of study two years
or longer in duration. It would exclusively offer degrees
after a course of study two years or longer in duration.
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It would raise allowable student cohort default rates on
federal loans (over three most recent years) from 10% to
either: (1) 12% over the life of the institution; or (2)
15% over the three most recent years. The committee is
concerned that higher cohort default rates correlate with
higher risk, that no policy rationale seems to justify this
exemption, and that more institutions are likely to qualify
for exemption to this Reform Act under this amendment.
The committee is also concerned that looking at cohort
default rates over the life of an institution has little or
no bearing on the integrity of their current operation.
iii) CHANGES TO PRO RATA REFUND
Section 94870 defines how pro rata refunds are to be
calculated for purposes of reimbursement to students who
fail to complete 60% or more of the course or program of
instruction. In addition, it specifies conditions that, if
met, would reduce the obligation of an institution from
100% to 60% pro rata refund to students, known as the "good
schools" exemption. Current law requires institutions
subject to Article 7 to achieve 60% completion of each
enrolled student cohort and placement of 70% of those who
successfully complete the program. The "good schools"
exemption to 100% refund would require: (1) 70% completion
and 80% placement for the two immediately preceding years
(or any combination totaling 56% or greater); (2)
independently certified compliance with applicable
provisions of the Act; and (3) documented financial
viability. The committee is concerned that this exemption
rewards schools meeting the specified criteria by reducing
student protections against paying for services they do not
receive.
iv) COMPLETION AND PLACEMENT CALCULATIONS
Section 94854 loosens the definition for calculating
student placement rates: (1) the formula to calculate
student placement excludes students who decide not to work
in favor of continuing their education and students who are
in possession of a valid I-20 form upon program completion;
(2) the formula is modified to accommodate placement in
part-time employment if that is the student's objective;
and (3) the formula is modified to accommodate students who
complete 75% of their program and obtain employment in
their chosen field. The committee is concerned that with
respect to a student choosing to continue their education,
this bill does not require the additional education to be
related to the skills and training obtained in the first
program.
v) CREATION OF NEW REGISTRATION CATEGORIES
Article 9.5 creates a new category of institutions that are
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registered with DCA but which have not undergone a site
visit or qualitative review and have not been approved to
operate within the state. Nonetheless, registered
institutions may offer certificates or diplomas upon
registration. The Higher Education Committee is concerned
that this provision introduces additional complexity to
administration of the Reform Act, gives registered schools
a competitive advantage over approved schools, and may
usher in a return of "diploma mills" which current law has
effectively discouraged from operating in the state.
This article would also require schools and programs
exempted from the Reform Act in the Assembly-passed version
of this bill (e.g., exam preparation, continuing education,
short-term seminars, etc.) to register with DCA. The Higher
Education Committee is concerned that this provision
restores excessive paperwork requirements and generates
additional workload for the administering agency and may
well add costs to the operation of these schools.
Registered trade schools would not be required to meet pro
rata refund requirements comparable to that of approved
institutions or be required to contribute to STRF, provided
they disclose what their refund policy is. The Higher
Education Committee is concerned that
unsophisticated consumers, particularly those seeking training to
discontinue welfare participation, will not make a distinction
between registered and approved schools. As a consequence, many
consumers may well select short-term training programs, registered
with DCA, in an effort to move quickly into employment and find
they do not receive the skills they paid for, are not entitled to
pro rata refunds, and have no access to STRF fund to recover their
losses.
3) GENERAL ISSUES AND STAFF RECOMMENDATIONS
In addition to the substantive policy issues summarized above,
the current version of this bill contains numerous technical
changes and requirements that will make the Act more complex to
administer. These additional changes have justifiably caused
concerns among DCA staff as to whether sufficient revenue will
be available to administer the Reform Act without General Fund
assistance. They also appear to reduce responsiveness to the
Governor's desire to reduce paperwork and financial burdens to
schools subject to the Reform Act. Additionally:
a) At no time has this bill been in print with all agreed upon
amendments while being reviewed by relevant committees of
either house.
b) This Committee has not had an opportunity to thoroughly
review an discuss the changes that have been made in this bill
since passage by the Assembly to understand the policy
foundation for those changes.
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c) There is no requirement for an education entity to review
the performance of DCA in implementing the Reform Act,
particularly in reference to degree-granting institutions.
d) The placement of administrative authority for the Reform
Act with DCA will further complicate efforts to better
articulate academic coursework with that offered by the state's
public and independent colleges and universities, a goal of
current law.
e) Welfare recipients represent a significant pool of demand
for short-term job training programs and should receive at
least as much protection and assurance of high quality
training under the proposed law as current law now provides,
including the right to full pro rata refund should they fail to
successfully complete their program of instruction.
Analysis prepared by : Rosa de Anda / ahed / (916) 324-4655
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