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