BILL ANALYSIS Ó AB 2652 Page 1 Date of Hearing: May 11, 2016 ASSEMBLY COMMITTEE ON APPROPRIATIONS Lorena Gonzalez, Chair AB 2652 (Eggman) - As Amended April 21, 2016 ----------------------------------------------------------------- |Policy |Higher Education |Vote:|10 - 3 | |Committee: | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: NoReimbursable: No SUMMARY: This bill requires, from July 1, 2017, to July 1, 2020, to the extent authorized by federal law, for a private distance education provider with no physical presence in this state, if the entity was geographically located in this state and would be subject to the requirements of the Private Postsecondary Education Act of 2009, to: a) Register with Bureau for Private Postsecondary Education (BPPE); and, AB 2652 Page 2 b) Contribute to the Student Tuition Recovery Fund for its California students. FISCAL EFFECT: Administrative costs for the bureau should be minor, assuming the bureau would simply contact out-of-state distance education providers, inform those with California-based students of their requirement to register with the bureau and to collect and remit STRF assessments from these students. (There is currently no STRF assessment because the fund balance exceeds a $25 million statutory cap.) Regardless of whether an out-of-state online institution complies with the STRF requirements, its California-based students would be eligible to recover from STRF for losses suffered due to their institution's closure. By bringing more students under the protections provided by STRF, this bill increases potential liabilities on the fund. As a result, a future payout from the fund could exceed $150,000. Based on actual data from fall 2013, there are about 900,000 students currently enrolled exclusively in distance education courses offered by private, for-profit schools nationwide. Assuming 13% of these students are in California yields a total of 117,000 students. The number of these student taking online courses at in-state versus out-of-state institutions is unknown, but given the universal accessibility of distance education, the number served by out-of-state institutions could easily exceed 10%. COMMENTS: 1)Purpose. According to the author, "this bill is seeking to establish consumer protections for Californian students enrolled in distance education. Many students are enrolled in AB 2652 Page 3 online education programs and the number is only going to continue to increase?As online education continues to grow, California should ensure that we are protecting students as they are protected in brick and mortar institutions." 2)Background. The STRF, administered by the BPPE, is intended 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). Institutions are required to assess students an amount established in regulation by the BPPE and remit funds to the BPPE for STRF. 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. 3)SARA. In response to concerns over the complexity and cost of navigating differing requirements in multiple states, a group AB 2652 Page 4 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 author decided to hold the bill in the Senate Education Committee due to concerns that SARA did not provide adequate student protections similar to the Act. 4)Temporary Solution. This bill, as currently drafted, proposes a three-year temporary solution to require institutions with no physical presence to participate in STRF. 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 current California law, which from 2010 through 2016 requires non-WASC regionally accredited institutions (including the California campuses of the University of Phoenix) to participate in STRF but not follow all other provisions of the Act. Analysis Prepared by:Chuck Nicol / APPR. / (916) 319-2081 AB 2652 Page 5