BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 2652


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          Date of Hearing:  April 19, 2016 


                       ASSEMBLY COMMITTEE ON HIGHER EDUCATION


                                 Jose Medina, Chair


          AB 2652  
          (Eggman) - As Introduced February 19, 2016


          SUBJECT:  California Private Postsecondary Education Act of  
          2009:  applicability


          SUMMARY:  Requires a private distance education provider to  
          register with the Bureau for Private Postsecondary Education  
          (BPPE) and participate in the Student Tuition Recovery Fund  
          (STRF).  Specifically, this bill:  


          1)Establishes that it is the intent of the Legislature that  
            appropriate stakeholders work collaboratively to address how  
            best to regulate educational programs offered to the public by  
            means of distance education by institutions with no physical  
            presence in California.


          2)Requires, effective July 1, 2017, to the extent authorized by  
            federal law, a private entity with no physical presence in  
            this state that, if the entity was geographically located in  
            this state, would be subject to the requirements of this act  
            to do both of the following:


             a)   Register with BPPE; and, 









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             b)   Participate in STRF for its California students.


          3)Provides that these provisions shall remain in effect only  
            until July 1, 2018.


          EXISTING LAW:  


          1)Establishes the BPPE within the Department of Consumer Affairs  
            with the primary function of providing protection of  
            students/consumers through the regulation and oversight of  
            private postsecondary educational institutions.  BPPE  
            oversight activities are funded by licensing fees paid by  
            regulated institutions.  (Education Code Sec. 94800 et seq.)



          2)Establishes the STRF, administered by the BPPE, to relieve or  
            mitigate economic loss suffered by students enrolled at a  
            non-exempt private postsecondary education institution due to  
            the institutions' closure, the institutions' failure to pay  
            refunds or reimburse loan proceeds, or the institutions'  
            failure to pay students' restitution award for a violation of  
            the Private Postsecondary Education Act (Act).  STRF is capped  
            in statute at $25 million.  Institutions are required to  
            assess students an amount established in regulation by the  
            BPPE and remit fund to the BPPE for STRF.  In 2010, that  
            amount was established at $2.50 per $1000 of tuition charged.   
            In 2013, that amount was reduced to $0.50 per $1000.  In 2015,  
            this amount was reduced to $0.00, as the STRF had exceeded the  
            statutory cap (STRF is currently at approximately $28  
            million).  (EC Sec. 94923 - 94925)
          


          FISCAL EFFECT:  Unknown.








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          COMMENTS:  Purpose of this bill.  According to the author, "this  
          bill is seeking to establish consumer protections for  
          Californian students enrolled in distance education. Many  
          students are enrolled in online education programs and the  
          number is only going to continue to increase. As a state,  
          Governor Brown has declared he is supportive of online education  
          and views it as a tool to increase access to higher education.  
          As online education continues to grow, California should ensure  
          that we are protecting students as they are protected in brick  
          and mortar institutions."





          Background.  The Act defines private postsecondary educational  
          institutions as private entities with a physical presence in  
          California offering postsecondary education programs to the  
          public for a charge.  California students enrolled in  
          distance/online programs offered by institutions located outside  
          of California do not benefit from the oversight provided by the  
          Act, including access to the STRF.  Additionally, some  
          institutional owners maintain physical campuses in California as  
          well as online campuses housed in other states.  For example,  
          the recently closed Anthem College Online and Corinthian  
          Colleges, Inc.'s Everest Online Campus enrolled California  
          students in online courses through campuses accredited in other  
          states.  Unlike their counterparts attending physical campuses  
          in California, online students, despite being California  
          residents, were not provided BPPE protections or tuition  
          reimbursement under STRF when their campuses abruptly closed.











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          Recognizing the need for oversight of the growing online  
          education field, the initial federal Title IV "program  
          integrity" regulations by the United States Department of  
          Education (USDE) issued in 2010 required distance education  
          programs to have authorization in the student's state of  
          residence.  The USDE regulations specific to distance education  
          were subsequently vacated by federal court ruling.   
          Institutions, however, are still required to comply with the  
          laws and regulations of the states in which they operate.   





          In response to concerns over the complexity and cost of  
          navigating differing requirements in multiple states, a group of  
          institutions, states, and policy organizations developed the  
          State Authorization Reciprocity Agreement (SARA).  SARA provides  
          that 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.  The institution's "home" state is  
          required to respond to student complaints only after the student  
          has worked through the institution's standard complaint process.  
           As of January 2016, 36 states agreed to participate in SARA.  





          In California, SB 634 (Block, 2015) would have authorized state  
          participation in SARA through the BPPE.  The bill was supported  
          by public and private higher education institutions, but was  
          ultimately held without hearing in the Senate Education  
          Committee at the request of the author.  Several organizations  
          representing students, veterans and consumers raised concerns  
          that California participation in SARA would undermine the  








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          state's authority to regulate risky online for-profit colleges,  
          and that SARA's provisions largely focused on decreasing  
          regulation for institutions rather than providing adequate  
          protections for students.





          Legislative options.  It is clear that by limiting BPPE's  
          authority to only those institutions with a physical presence in  
          this state, some California students are not properly protected.  
           As discussed in the Committee Background Paper of the Sunset  
          Review of BPPE, there are several possible approaches to  
          rectifying this deficiency:





          1)The Legislature could amend the Act to remove the physical  
            presence requirement and task the BPPE with full regulatory  
            powers over out-of-state private distance education providers  
            enrolling California students.  This would enhance the student  
            protections and recourse for students in the event of a school  
            closure.  However, there may be BPPE staffing and workload  
            issues associated with full oversight of out-of-state  
            institutions.   



          2)The Legislature could amend the Act to provide some oversight  
            of out-of-state distance education providers, such as  
            disclosures to students, participation in STRF, and BPPE  
            student complaint procedures and enforcement powers.  The BPPE  
            would not be responsible for conducting compliance  
            inspections, for example.       










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          3)The Legislature could participate in SARA.  However, relying  
            on other states' laws, regulations and enforcement may not  
            provide these students the same protections as those attending  
            brick and mortar schools.  As such, if the BPPE is granted  
            authority at some point in the future to enter into  
            reciprocity agreements for purposes of regulating distance  
            education programs, it may be necessary to clarify that the  
            other states' regulatory structure is comparable to California  
            and provides the same opportunities for students as the Act. 



          Temporary solution.  This bill, as currently drafted, proposes a  
          one-year temporary solution to require institutions with no  
          physical presence to participate in STRF.  Committee staff  
          understands that this is intended to provide stakeholders  
          sufficient time to identify a permanent solution to ensure  
          students are protected in the event of a school's illegal  
          practices and/or school closure.  This model is based on  
          previous California law. From 2010 through 2016, non-WASC  
          regionally accredited institutions (including the California  
          campuses of the University of Phoenix) were required to  
          participate in STRF but not follow all other provisions of the  
          Act.  





          Suggested amendment.  Committee staff recommends adding language  
          to clarify that this requirement is notwithstanding the  
          definition of private postsecondary educational institution  
          contained in ED Code Section 94858.  Additionally, Committee  
          staff recommends extending the sunset of this bill from  
          18-months to 3 years to allow additional time for stakeholders  
          to discuss and recommend an alternative approach to regulating  
          online colleges and universities.









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          BPPE Sunset Review.  BPPE is currently undergoing the Sunset  
          Review process.  The issue of ensuring protection for students  
          not covered by STRF and the possibility of a surety bond and/or  
          STRF coverage is raised in the BPPE Sunset Review report,  
          prepared by Committee staff.  The author and Committee may wish  
          to raise this issue through the 2016 Sunset Review process. 



          REGISTERED SUPPORT / OPPOSITION:




          Support


          Center for Public Interest Law


          Children's Advocacy Institute


          Consumer Federation of California


          Consumers Union


          Housing and Economic Rights Advocates


          Public Advocates Inc.










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          Public Law Center


          SEIU California


          Veterans Legal Clinic




          Opposition


          University of Phoenix




          Analysis Prepared by:Laura Metune / HIGHER ED. / (916) 319-3960