ASSEMBLY THIRD READING

ATR Bill Id:AB 1343

Author:(Eggman, et al.)

As Amended Ver:May 16, 2019

Majority vote

SUMMARY:

Prohibits a private postsecondary educational institution, beginning January 1, 2023, from enrolling residents of California not already enrolled as of that date, unless the institution meets either the requirement that no more than 85% of the institution's tuition revenue, determined as specified, is derived from student financial aid and loans, or not less than 50% of the institution's tuition revenue is dedicated to student instruction, as defined in regulations adopted by the bureau no later than July 1, 2022, as specified.

Provides that submission to the Bureau for Private Postsecondary Education (BPPE) of an audit or audited financial statement, as specified, presumptively constitutes proof of compliance with this requirement. Exempts an institution with annual revenues of less than $2,500,000 in the most recent audited financial statement for a fiscal year within the prior 2 years. The bill would not apply to a cohort of students enrolled at an institution if the attendance of that cohort at the institution begins before the regulations defining "instruction" have been adopted.

Major Provisions

Please see the Committees on Higher Education and Business and Profession respective analyses for further detail.

COMMENTS:

Exemption of certain institutions. AB 1343 specifies that the provisions of this bill do not apply to an institution with annual revenues below $2.5 million dollars. The Legislative Analyst's Office provided an assessment of for-profit revenue based on reporting from the USDE Office of Federal Student Aid. The total annual revenue for for-profit institutions for the fiscal year ending July 2016-July 2017 is detailed below:

Nationally, 62% of for-profit schools have annual revenues of less than $2.5 million.

According to the Author:

The author indicated that the purpose of AB 1343 is to protect students from predatory school programs and to protect from wasteful spending on education using taxpayer money. The author contends that the federal 90/10 rule been weakened over time, and a loophole exists that allows predatory programs to target veterans and Servicemembers. AB 1343 will close this loophole in California by requiring no more than 85% of a for-profit institution's tuition revenue can be derived from student financial aid provided by a federal or state agency, and from loans arranged or guaranteed by a federal or state agency.

Arguments in Support:

A coalition of veterans and military service organizations wrote that "Veterans and military service organizations nationwide are calling for the closure of the 90/10 loophole. By exploiting this loophole, for-profit colleges count GI Bill benefits as private funds, offsetting the 90% cap they otherwise face on their access to federal student aid – an accounting practice that nearly two dozen state attorneys general have said 'violates the intent of the law.'"

"The impact on veterans is real: Thousands of veterans have filed complaints with the US Department of Veterans Affairs, including many from California. Taxpayers also suffer. According to the US Education Department, hundreds of for-profit schools are almost entirely dependent on federal revenue, and, if the 90/10 loophole were closed, they would be in violation of the federal cap. Taxpayers, in other words, are propping up otherwise failing schools."

Arguments in Opposition:

The University of Phoenix (UOPX) wrote that, "…student veterans have a right to utilize their earned benefits as they see fit and counting these benefits as financial aid mis-categorizes and, therefore, misappropriates the meaning of these earned benefits. Moreover, the proposed changes to the current 90/10 rule would harm veteran students, in that, not only will their school choices become fewer, in a scenario where 85/15…would render ceasing of UOPX operations in California the proposed changes to the current rule would eliminate an institution that has historically been a resource for veteran students and their families' specific educational and transitional needs. Not only would this measure severely curtail high-quality, accredited educational opportunities, but to the extent that there are not sufficient options available, these veterans would also lose critical living expenses."

FISCAL COMMENTS:

The Assembly Committee on Appropriations notes ongoing Special Fund costs in the mid hundreds of thousands annually to the BPPE.

VOTES:

ASM HIGHER EDUCATION: 9-1-2

YES: Medina, Gloria, Bloom, Gabriel, Irwin, Gonzalez, Low, Santiago, Weber

NO: Kiley

ABS, ABST OR NV: Choi, Patterson

ASM BUSINESS AND PROFESSIONS: 15-2-3

YES: Low, Bloom, Chiu, Cunningham, Eggman, Gipson, Gloria, Grayson, Holden, Irwin, McCarty, Medina, Mullin, Quirk-Silva, Ting

NO: Brough, Obernolte

ABS, ABST OR NV: Chen, Dahle, Fong

ASM APPROPRIATIONS: 13-4-1

YES: Gonzalez, Bloom, Bonta, Calderon, Carrillo, Chau, Eggman, Gabriel, Eduardo Garcia, Maienschein, Petrie-Norris, Quirk, Robert Rivas

NO: Bigelow, Brough, Diep, Obernolte

ABS, ABST OR NV: Fong

UPDATED:

VERSION: May 16, 2019

CONSULTANT: Kevin J. Powers / HIGHER ED. / (916) 319-3960 FN: 0000926

Date of Hearing: May 15, 2019

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

ABPCA Bill Id:AB 1343

Author:(Eggman) – As Amended Ver:May 1, 2019

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill authorizes a private postsecondary educational institution to enroll California students only if it meets one of the following requirements: (a) no more than 85% of the institution’s revenue is derived from state or federal financial aid or (b) no less than 50% of the institution’s tuition revenue is dedicated to student instruction. The bill exempts institutions with annual revenues under $2.5 million.

FISCAL EFFECT:

Ongoing Special Fund costs in the mid hundreds of thousands annually to the Bureau of Private Postsecondary Education (BPPE) to review institutions financial statements and other information to determine whether institutions are meeting this bill’s requirements.

COMMENTS:

1. Purpose. According to the author, this bill is intended to protect students from predatory school programs and to protect from wasteful spending on education using taxpayer money. The author indicates the “90/10 rule” (see below) has been weakened over time and a loophole exists that allows predatory programs to target veterans and service members.
2. Background. The BPPE was created in 2009 under the Department of Consumer Affairs to oversee most of the state’s private postsecondary schools, including nationally accredited schools, unaccredited schools and various specialized schools. The BPPE was charged with ensuring minimum educational quality standards, providing students with an effective complaint resolution process and preventing public deception associated with fraudulent or substandard degrees.

Currently, federal law requires a 90% cap on revenue at for-profit schools from federal Title IV student aid funds. This rule is known as the 90/10 rule, wherein 90% of a for-profit school’s revenue may come from federal student aid and at 10% must come from other sources, such as students paying tuition. The 90/10 rule was designed as a market viability test to ensure taxpayer money would not completely, or mostly, keep a for-profit school running. Prior to 1998, the cap was 85%.Veterans’ financial aid programs (such as GI education benefits) are not included in the federal 90/10 rule.

There is some evidence for-profit institutions use a significant amount of their revenue toward purposes other than student instruction, such as executive compensation and advertising.

The bill specifies the provisions of this bill do not apply to an institution with annual revenues below $2.5 million. According to the Legislative Analyst’s Office assessment of for-profit revenue based on reporting from the federal office of student aid, nationally, 62% of for-profit institutions would be exempt from this bill.

1. Private Postsecondary Bill Package. This bill is a part of an Assembly bill package designed to provide more accountability and state oversight of private postsecondary institutions.

AB 1340 (Chiu) recodifies in state law the federal gainful employment rule so the rule may be enforced by the BPPE. The bill is pending in this committee.

AB 1341 (Berman) clarifies that an institution of higher education is exempt only from the requirements imposed on out-of-state institutions if it meets the definition of a nonprofit corporation or public institution. The bill is pending in this committee.

AB 1342 (Low) requires the attorney general’s review and approval for any sale of a nonprofit educational institution to a for-profit entity. The bill is pending in this committee.

AB 1344 (Bauer-Kahan) increases the BPPE’s oversight over out-of-state private postsecondary educational institutions operating online. The bill is pending in this committee.

AB 1345 (McCarty) prohibits a private postsecondary school from providing financial incentives or compensation to their employees, directly or directly, for student recruitment, enrollment, admissions, attendance, financial aid or sales of educational materials. The bill passed out of this committee on May 1, 2019.

AB 1346 (Medina) expands the definition of economic loss, as it pertains to the Student Tuition Recovery Fund. The bill is pending in this committee.

Analysis Prepared by: Natasha Collins / APPR. / (916) 319-2081

Date of Hearing: April 23, 2019

ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS

Evan Low, Chair

ABPCA Bill Id:AB 1343

Author:(Eggman) – As Amended Ver:April 11, 2019

SUBJECT: Private postsecondary education: California Private Postsecondary Education Act of 2009.

SUMMARY: Authorizes a private postsecondary educational institution to enroll California students only if either no more than 85 percent of the institution’s tuition revenue is derived from student financial aid and loans provided, arranged, or guaranteed by a federal or state agency; or not less than 50 percent of the institution’s tuition revenue is dedicated to student instruction.

EXISTING LAW:

1. Enacts the California Private Postsecondary Education Act to provide for the regulation and oversight of private postsecondary schools. (Education Code (EDC) §§ 94800 et al.)
2. Establishes the Bureau for Private Postsecondary Education (BPPE) in the Department of Consumer Affairs to regulate private postsecondary educational institutions under the California Private Postsecondary Education Act. (EDC § 94820)
3. Exempts the following institutions from the California Private Postsecondary Education Act:
   1. An institution offering programs solely for the purpose of personal entertainment, pleasure, or enjoyment.
   2. An institution offering educational programs sponsored by a bona fide trade, business, professional, or fraternal organization, solely for that organization’s membership.
   3. A postsecondary educational institution established, operated, and governed by the federal government or by the government in California.
   4. An institution offering either test preparation for postsecondary education admissions examinations, or continuing education or license examination preparation.
   5. An institution owned, controlled, and operated and maintained by a religious organization lawfully operating as a nonprofit religious corporation, limited to education relevant to the beliefs and practices of the church, religious denomination, or religious organization.
   6. An institution that does not award degrees and that solely provides educational programs for total charges of $2,500 or less when no part of the total charges is paid from state or federal student financial aid programs.
   7. A law school that is accredited by the Council of the Section of Legal Education and Admissions to the Bar of the American Bar Association or that is subject to the approval, regulation, and oversight of the Committee of Bar Examiners.
   8. A nonprofit school organized specifically to provide workforce development or rehabilitation services that is accredited by the Department of Rehabilitation.
   9. An institution that is accredited by the Accrediting Commission for Senior Colleges and Universities, Western Association of Schools and Colleges, or the Accrediting Commission for Community and Junior Colleges, Western Association of Schools and Colleges.
   10. Flight instruction providers or programs that provide flight instruction pursuant to Federal Aviation Administration regulations.
   11. An institution owned by a nonprofit community-based organization that does not award degrees and does not offer educational programs designed to lead to licensure, and that would not have been subject to oversight if it did not receive funding under the federal Workforce Innovation and Opportunity Act.

(EDC §94874)

1. States that as of January 1, 2016, an institution that is approved to participate in veterans’ financial aid programs that is not an independent institution of higher education shall not be exempt from the California Private Postsecondary Education Act. (EDC § 94874.2)
2. Requires institutions exempt from the California Private Postsecondary Education Act to still comply with laws relating to school closure and laws relating to fraud, abuse, and false advertising. (EDC § 94874.9)
3. Makes various findings and declarations regarding private postsecondary schools, including a finding that numerous reports and studies have concluded that California’s regulation of private postsecondary schools has consistently failed to ensure student protections or provide effective oversight of private postsecondary schools. (EDC § 94801)
4. Defines “postsecondary education” as a formal institutional educational program whose curriculum is designed primarily for students who have completed or terminated their secondary education or are beyond the compulsory age of secondary education, including programs whose purpose is academic, vocational, or continuing professional education. (EDC § 94857)
5. Defines “private postsecondary educational institution” as a private entity with a physical presence in the state that offers postsecondary education to the public for an institutional charge. (EDC § 94858)
6. Defines “out-of-state private postsecondary educational institution” as a private entity without a physical presence in this state that offers distance education to California students for an institutional charge, regardless of whether the institution has affiliated institutions or institutional locations in California.
7. Includes in the definition of “public higher education” the California Community Colleges, the California State University, and the University of California; defines “independent institutions of higher education” as nonpublic higher education institutions that grant undergraduate degrees or graduate degrees and are accredited by an agency recognized by the United States Department of Education. (EDC § 66010)
8. Requires the BPPE to adopt regulations establishing minimum operating standards for a private postsecondary educational institution that ensures all of the following:
   1. The content of each educational program can achieve its stated objective.
   2. The institution maintains specific written standards for student admissions for each educational program and those standards are related to the particular program.
   3. The facilities, instructional equipment, and materials are sufficient to enable students to achieve the educational program’s goals.
   4. The institution maintains a withdrawal policy and provides refunds.
   5. The directors, administrators, and faculty are properly qualified.
   6. The institution is financially sound and capable of fulfilling its commitments to students.
   7. That, upon satisfactory completion of an educational program, the institution gives students a document signifying the degree or diploma awarded.
   8. Adequate records and standard transcripts are maintained and are available to students.
   9. The institution is maintained and operated in compliance with all applicable laws.

(EDC § 94885)

1. Authorizes the BPPE to grant approval to operate only after an applicant has presented sufficient evidence to the bureau, and the bureau has independently verified the information provided by the applicant through site visits or other methods deemed appropriate by the bureau, that the applicant has the capacity to satisfy the minimum operating standards; requires the BPPE to deny an application for an approval to operate if the application does not satisfy those standards. (EDC § 94887)
2. Provides that a standard approval to operate shall be valid for five years. (EDC § 94888)
3. Requires the BPPE to grant an institution that is accredited an approval to operate by means of its accreditation. (EDC § 94890)
4. Requires an institution to seek approval from the BPPE if it intends to make a substantive change to its approval to operate, such as changes in its education objectives, the addition of a new degree program, a change in ownership, or a change in name. (EDC § 94893)
5. States that an institution is prohibited from doing any of the following:
   1. Use of the Great Seal of the State of California on a diploma.
   2. Promise or guarantee employment, or overstate the availability of jobs upon graduation.
   3. Advertise concerning job availability, degree of skill, or length of time required to learn a trade or skill unless the information is accurate and not misleading.
   4. Advertise, or indicate in promotional material, without including the fact that the educational programs are delivered by means of distance education.
   5. Advertise, or indicate in promotional material, that the institution is accredited if it is not.
   6. Solicit students for enrollment by causing an advertisement to be published in “help wanted” columns in a magazine, newspaper, or publication, or use “blind” advertising that fails to identify the institution.
   7. Offer to compensate a student to act as an agent of the institution with regard to the solicitation, referral, or recruitment of any person for enrollment in the institution.
   8. Pay any consideration to a person to induce that person to sign an enrollment agreement.
   9. Use a name in any manner improperly implying that the school is affiliated with a government agency, is a public institution, or grants degrees if it does not.
   10. In any manner make an untrue or misleading statement related to a test score, grade or record of grades, attendance record, record indicating student completion, placement, employment, salaries, or financial information.
   11. Willfully falsify, destroy, or conceal any document of record.
   12. Use the terms such as “approval” without stating clearly and conspicuously that approval to operate means compliance with state standards.
   13. Direct any individual to perform an unlawful act, to refrain from reporting unlawful conduct to the BPPE, or to engage in any unfair act to persuade a student not to complain.
   14. Compensate an employee involved in recruitment, enrollment, admissions, student attendance, or sales of educational materials to students on the basis of a commission, commission draw, bonus, quota, or other similar method related to the recruitment, enrollment, admissions, student attendance, or sales of educational materials to students.
   15. Require a prospective student to provide personal contact information in order to obtain, from the institution’s website, educational program information that is required to be contained in the school catalog.
   16. Offer an associate, baccalaureate, master’s, or doctoral degree without disclosing to prospective students prior to enrollment whether the institution or the degree program is unaccredited and any known limitation of the degree.

(EDC § 94897)

1. Requires an institution that offers an educational program in a profession, occupation, trade, or career field that requires state licensure to have an educational program approval from the appropriate state licensing agency to conduct that educational program in order that a student who completes the educational program is eligible to sit for any required licensure examination. (EDC § 94899)
2. Requires an institution’s recruiters to be its employees. (EDC § 94901)
3. Requires an enrollment agreement to be written in language that is easily understood. (EDC § 94905)
4. Requires an institution to provide a prospective student with a school catalog containing various program information and policies. (EDC § 94909)
5. Requires an institution to provide a prospective student with a School Performance Fact Sheet containing information including but not limited to completion rates, placement rates for each program, license examination passage rates, starting salary or wage information, and information about how to contact the BPPE. (EDC § 94910)
6. Requires an institution to post its school catalog, School Performance Fact Sheet, and student brochures on its website. (EDC § 94913)
7. Establishes the Student Tuition Recovery Fund (STRF) to relieve or mitigate economic loss suffered by a student while enrolled in an institution at the time that institution, location, or program was closed or discontinued. (EDC § 94923)
8. Requires an institution to annually report to the BPPE, as part of an annual report, and publish in its School Performance Fact Sheet, all of the following:
   1. The job placement rate for each program that is either designed, or advertised, to lead to a particular career, or advertised or promoted with any claim regarding job placement.
   2. The license examination passage rates for the immediately preceding two years for programs leading to employment requiring passage of a state licensing examination.
   3. Salary and wage information, consisting of the total number of graduates employed in the field and the annual wages or salaries of those graduates stated in increments of $5,000.
   4. If applicable, the most recent official three-year cohort default rate reported by the United States Department of Education for the institution and the percentage of enrolled students receiving federal student loans.

(EDC § 94929.5)

1. Requires the Director of Consumer Affairs to provide written updates to the Legislature describing the BPPE’s progress in protecting consumers and enforcing the provisions of the California Private Postsecondary Education Act. (EDC § 94948)
2. Establishes the Office of Student Assistance and Relief for the purpose of advancing and promoting the rights of prospective students, current students, or past students of private postsecondary educational institutions. (EDC § 94949.7)
3. Subjects the BPPE to legislative oversight through the sunset review process, which provides for the California Private Postsecondary Education Act and the authority of the BPPE to be automatically repealed as of January 1, 2021 unless a later enacted statute deletes or extends that date. (EDC § 94950)

THIS BILL:

1. Makes various findings and declarations about the history of prohibiting for-profit educational institutions from receiving more than 85-90 percent of their revenue from government aid, and finds and declares that a loophole in federal law exempts certain benefits provided to military veterans, which creates an excessive incentive for exploitative institutions to enroll veterans in overpriced programs.
2. Defines “loans” and “tuition revenues” for purposes of the bill.
3. Prohibits an institution from enrolling residents of California, except those already enrolled on or before January 1, 2021, in any program unless the institution meets one of the following:
   1. No more than 85 percent of the institution’s tuition revenue, as documented in the most recent audited financial statement for a fiscal year within the prior 2 years, is derived from student financial aid provided by a federal or state agency, and from loans arranged or guaranteed by a federal or state agency.
   2. Not less than 50 percent of the institution’s tuition revenue is dedicated to student instruction.
4. Exempts from the bill’s requirements any institution with annual revenues, in the most recent audited financial statement for a fiscal year within the prior two years, of less than $2,500,000.
5. States that submission to the BPPE of an audit or audited financial statement by a certified public accountant that is lawfully permitted to practice in California attesting that an institution is in compliance with the provisions of the bill presumptively constitutes proof of compliance with the bill.
6. Expressly provides that the bill should not be construed as limiting the BPPE’s authority to investigate and take appropriate action if the BPPE concludes that an institution is not in compliance with the law.
7. Requires the BPPE to adopt regulations by January 1, 2021 that define “instruction” for purposes of the bill, taking into consideration the definition of “instruction” used by the federal Integrated Postsecondary Education Data System as of January 1, 2019, and the provisions of law regarding salaries of classroom instructors as of January 1, 2020.

FISCAL EFFECT: Unknown; this bill is keyed fiscal by the Legislative Counsel.

COMMENTS:

Purpose. This bill is sponsored by the author. According to the author:

AB 1343 would strengthen safeguards in place to protect students, especially our veterans, from predatory practices exercised by some for-profit schools. Government should not prop up bad actors, and this bill would ensure that institutions are not able to target veteran student benefits to cover a share of their revenue that taxpayers were never intended to pay for in the first place.

Background.

History of Regulation of Private Postsecondary Educational Institutions. The modern iteration of the BPPE was established on January 1, 2010 through AB 48 (Portantino, Chapter 310, Statutes of 2009). Prior to the current BPPE, the state made multiple other attempts to regulate for-profit colleges and other private postsecondary schools; many of these efforts are regarded as having been largely unsuccessful. In the BPPE’s 2014 sunset review, statute was enacted stating that “the Legislature advises future policymakers to continually and carefully evaluate” the BPPE and its regulatory authority.

Private postsecondary schools were previously regulated by a division within the California Department of Education; however, by the end of the 1980s, the state had purportedly become regarded as the “diploma mill capital of the world.” This led to the enactment of the Private Postsecondary and Vocational Education Reform Act of 1989 (Reform Act), which was intended to “promote the effective integration of private postsecondary education into all aspects of California's educational system and to foster and improve the educational programs and services of these institutions while protecting the citizens of the state from fraudulent or substandard operations.” That year, the Legislature also enacted Maxine Waters School Reform and Student Protection Act, which first set a threshold for minimum job placement and graduation rates.

These two reforms, which were ultimately merged, created a new regulatory entity established as the Council on Private Postsecondary and Vocational Education (CPPVE). The CPPVE was given authority to approve and disapprove private postsecondary schools, and it used this power aggressively and at times controversially. In 1996, Columbia Pacific University engaged in litigation against the CPPVE for denying its application for approval. The CPPVE ultimately prevailed in this litigation, but the CPPVE was left with a public perception that it was overly belligerent in its regulation of educational institutions.

A review by the California Postsecondary Education Commission recommended that both the CPPVE and the Reform Act be permanently extended beyond their June 30, 1997 sunset date. However, the bill to extend that sunset date by five years (AB 2960, Firestone and Campbell) was vetoed by Governor Pete Wilson. The Governor’s veto message stated that he believed “many of the bad operators have left the state or gone out of business” and that the remaining schools “have described a pattern of reprisals and vindictiveness in dealing with the Council staff.” Governor Wilson wrote that he “would like to have more assurances that we are not making it impossible or unreasonably difficult for many small businesses to operate before I extend the life of the Council.”

Urgency legislation was introduced in 1997 (AB 71, Wright) to extend the Reform Act and respond to the Governor’s veto message by making numerous changes to how its provisions were carried out. In support of the bill, the California Postsecondary Education Commission stated that the Reform Act had “become a model for federal standards and other states, its regulation of private postsecondary education is a major improvement over the conditions that existed prior to its creation.” The bill was opposed by numerous schools that had been regulated by the CPPVE and who believed the Reform Act simply resulted in “costly overregulation over private institutions” that “discourages new schools from investing in California.”

AB 71 was signed into law extending the provisions of the Reform Act; however, the bill allowed the CPPVE to be repealed on its sunset date. In its place, the bill established a new Bureau for Private Postsecondary and Vocational Education (BPPVE) created within the Department of Consumer Affairs. The extension of the Reform Act transferred all of the CPPVE’s responsibilities for its implementation to the new BPPVE.

The creation of a new bureau, however, did not rectify concerns that the state was not appropriately overseeing private postsecondary schools. A 2000 audit of the Department of Consumer Affairs found that the BPPVE’s licensing process was “not prompt or consistent” and that its complaint resolution procedures were inadequate. Following a review by the recently established Joint Legislative Sunset Review Committee in 2002, the BPPVE was tasked with streamlining the Reform Act, making its regulatory processes more efficient, and improving its data collection and reporting systems.

In 2004, SB 1544 (Figueroa) was enacted to provide the BPPVE with an Enforcement Monitor to examine the bureau’s operations. The Enforcement Monitor’s resulting report stated that there had been a “twenty-year record of repeatedly identified, fundamental problems in every one of the Bureau’s key operations.” That year, Governor Arnold Schwarzenegger vetoed AB 711 (Correa), which would have added additional exempted schools to the Reform Act; in his veto message, the Governor stated that it “fell short of its objective to streamline functions of the Bureau.” In 2006, SB 1473 (Figueroa) was introduced to replace the Reform Act with new provisions within the Business and Professions Code and to recast the BPPVE; however, this bill was subsequently held on suspense.

That same year, legislation to extend the sunset on the Reform Act and the BPPVE was once again vetoed by the Governor. In his veto message, Governor Arnold Schwarzenegger commented that he “supported meaningful protections for students of California’s private postsecondary and vocational institutions” but that because SB 1473 failed to pass the Legislature, extending the sunset date on the BPPVE “does nothing to enhance protections for students, allows problems that have been well documented to continue to exist, and merely allows mediocrity for California’s students.” A second bill to extend the state’s regulation of private postsecondary schools through a modernization of the Reform Act, SB 823 (Perata), was also vetoed, and the Governor directed the Department of Consumer Affairs to take on the bureau’s oversight responsibilities while a better replacement for the Reform Act was negotiated.

Following the Governor’s vetoes, the Reform Act became inoperative on July 1, 2007 and the bureau was subjected to repealed. AB 1525 (Cook) was chaptered in 2007 to provide for a transition plan for business still pending before the BPPVE, and to give the Director of Consumer Affairs clear authority to take on the bureau’s responsibilities. That bill also created the Student Tuition Recovery Fund. Later bills extended some of AB 1525’s provisions.

In the years following the sunsetting of the BPPVE and the Reform Act, private postsecondary schools were subject to little or no oversight by the state. Finally, AB 48 (Portantino) was chaptered in 2009 to revive the state’s regulation of private postsecondary institutions. That bill reinstated the authority of the BPPVE, rebranded and recast as the BPPE, and established the California Private Postsecondary Education Act of 2009. The bill sought to institute a more efficient and effective oversight entity to carry out implementation of a stronger consumer protection act. The BPPE was ultimately restored full funding in late 2010.

The BPPE continues to be subject to significant scrutiny by the Legislature and advocates. SB 1247 (Lieu) was chaptered in 2014 to provide the BPPE with only a two year sunset extension before further review while making a number of reforms to the California Private Postsecondary Education Act. In the BPPE’s 2016 sunset review, staff outlined a number of ongoing issues relating to the operation of the bureau, ultimately providing no immediate recommendation as to whether the BPPE’s sunset should be extended and stating that “the Bureau has faced significant difficulties in implementing the law. It is important that California’s approval and oversight of an institution assures minimum quality and student protections.”

In 2016, the BPPE’s sunset date was again extended until January 1, 2021, with numerous reforms made in response to recent high-profile litigation and school closures. SB 1192 (Hill) established an Office of Student Assistance and Relief “for the purpose of advancing and promoting the rights of prospective students, current students, or past students of private postsecondary educational institutions.” The bill also expanded the BPPE’s authority to oversee out-of-state private postsecondary schools serving students in California, requiring registration and basic approval standards. Finally, the bill required approved institutions under investigation by entities other than the BPPE to report that investigation and its nature within 30 days.

The BPPE will next undergo sunset review in 2020. It is anticipated that the success of the new Office of Student Assistance and Relief and the effects of recent changes in management will be discussed, and the BPPE will be expected to demonstrate how it has improved its operates sufficiently to be a strong regulator on behalf of California students. Until then, the framework that has been put into place through careful oversight by the Legislature is cause for optimism that the BPPE is well-equipped to exercise its current responsibilities and expand into new opportunities for safeguarding the interests of Californians.

Criticism of For-Profit Colleges. Many educational programs run by for-profit entities offer coursework preparing students for careers not well served by nonprofit or public institutions. However the inherent profit motive behind these institutions’ stewardship of the societal values of higher education has long resulted in concern. This general apprehension about the capacity for certain private postsecondary schools to profit through the exploitation of vulnerable students has been the root purpose for regulation by the BPPE and its predecessors. The public prosecution and closure of various high-profile “bad actor” schools over the years has contributed substantially to the cause for furthering regulatory vigilance.

In 2016, California Attorney General Kamala D. Harris announced that a $1.1 billion judgment had at last been obtained against the long-vilified Corinthian Colleges, Inc. – which by that time had long closed down its campuses and filed for bankruptcy. The Attorney General’s complaint publicized how Corinthian, through its Everest, Heald, and Wyotech campuses, had for years made fraudulent statements to prospective students about job placement rates, available programs, and affiliation with the United States military.

The Attorney General’s complaint revealed that Corinthian had described its target demographic as “isolated,” “impatient,” individuals with “low self-esteem,” who have “few people in their lives who care about them” and who are “stuck” and “unable to see and plan well for future.” The average the average tuition for an associate’s degree at a Corinthian school was $40,000. Following the closure of Corinthian’s campuses, thousands of students were left with crippling debt without having received a quality education.

Corinthian is not regarded as being a rare exception in the world of for-profit education. In 2015, Marinello Schools of Beauty abruptly closed down campuses throughout California after the United States Department of Education cut off the institution’s access to federal student aid for “knowingly requesting federal aid for students based on invalid high-school diplomas, underawarding Title IV aid to students, charging students for excessive overtime.” In late 2018, another abrupt closure was announced by the Education Corporation of America (ECA) and its Brightwood College campuses following federal student aid restrictions and a notice from its accreditor that recognition for its campuses would be suspended.

Rollback of Federal Protections. During President Barack Obama’s second term, the White House announced that it was taking bold steps to increase federal oversight of for-profit colleges and protect students from predatory institutions. One such rule was the Department of Education’s “Gainful Employment” rule, which required colleges to track their students’ performance in the workforce after graduation. Under the Gainful Employment rule, career training programs that fail to adequately place graduates in jobs would be cut off from federal funding. This rule was intended to prevent for-profit colleges from overpromising job opportunities to students in exchange for saddling them with debt that they are subsequently unable to pay back.

By the end of President Obama’s second term, the Department of Education was robustly exercising its oversight and enforcement authority over the for-profit college sector. The Gainful Employment rule was challenged in court and was ultimately upheld in 2015, and the Department of Education ramped up its investigations into potentially problematic educational programs. However, in 2017, the Trump Administration took over the White House, and almost immediately began to reverse the progress that the Obama Administration was considered to have made.

According to recent reporting by the New York Times, an active investigation by the Department of Education into a large chain of private postsecondary schools was essentially halted after President Trump’s Secretary of Education, Betsy DeVos, named a former dean of that school as supervisor of the investigation team. Other individuals with prior affiliations with for-profit schools have also been appointed to senior positions within the Department. Reports indicate that the for-profit college investigation team has been curtailed from approximately a dozen attorneys and investigators to just three.

In addition to scaling back of investigations, Secretary DeVos announced the Department of Education’s intention to roll back several Obama-era regulations impacting higher education. In October 2017, Attorney General Xavier Becerra signed onto a multistate against the Department of Education for illegally delaying the implementation of the Gainful Employment Rule, in violation of the Administrative Procedure Act. In August 2018, a Notice of Proposed Rulemaking was announced to formally rescind the Gainful Employment rule.

An October 2018 CalMatters article titled California’s for-profit college watchdog fails to police as feds back down stated that “as the Trump administration pulls back from regulating the sector, consumer advocates argue, the states’ role becomes even more critical.” The article identifies the BPPE as the entity best suited to take on the oversight responsibilities that Secretary DeVos has taken steps to abdicate. The article does recognize that BPPE’s historical shortcomings—including its complaint backlogs—represent a challenge to effectuating new requirements. However, recent displays of progress with the BPPE showcase a bureau whose leadership is up to the task of regulating institutions through a student-centered approach, and inheriting responsibility for the Obama Administration’s protections in California may be an ideal fit.

90/10 Rule. An 85 percent cap on revenue at for-profit schools from federal Title IV student aid funds was enacted in 1992 to address significant default rates by students attending such institutions. In 1998, the cap was raised to 90 percent, resulting in the so-called 90/10 rule. The idea behind the Title IV revenue cap was a market viability test: that taxpayers should not prop up low-quality schools that could not survive in the open market. Institutions offering a quality education at a competitive price should be able to attract at least 10 percent of their revenue from employers, scholarship providers, or students who are willing to pay the tuition.

In 2009, Congressional staff told Bloomberg News that GI Bill and DOD funds were not included by Congressional staff in the 1992 cap on Title IV revenue because there was no generous GI Bill at the time and, as a result, for-profit colleges were not yet aggressively targeting military students.

The 85 percent cap, which subsequently became a 90 percent cap, was modeled after the 85/15 requirement enacted by the 1952 Korean War era GI Bill. While the 1992 rule focused on revenue, the 85/15 rule requires the U.S. Veteran’s Administration (USVA) to stop the enrollment-approval process when more than 85 percent of the students enrolled in an approved program have all or part of their tuition, fees, or other charges paid for by the educational institution or the USVA. As chronicled in a recent Century Foundation report, USVA’s 85/15 rule was a response to the repeated targeting of veterans by proprietary schools using aggressive and deceptive recruiting tactics.

Following the enactment of the post-WWII GI Bill, “fly-by-night” proprietary schools proliferated. In a special message to Congress in 1950, President Truman noted that “[I]n a good many instances veterans have been trained for occupations for which they are not suited or for occupations in which they will be unable to find jobs when they finish their training.” Truman’s statement followed a 200-page report by VA which found “irregularity or questionable practices” at the majority of proprietary schools receiving GI Bill funds. Two other reports released in 1952 reached similar conclusions. First, the U.S. General Accounting Office found that proprietary schools were targeting veterans with “extensive advertising campaigns, which were often misleading and laden with extravagant, unjustifiable claims . . . conducted for the express purpose of attracting veterans.” Second, a House Select Committee report concluded that “exploitation by private schools has been widespread” and that there was “no doubt that hundreds of millions of dollars [had] been frittered away on worthless training.”

Because of the 90/10 loophole, many for-profit colleges target veterans and service members with aggressive and deceptive recruiting to collect as much GI Bill and DOD revenue as possible. For every dollar a for-profit school receives from the GI Bill or DOD, that school can receive $9 more from federal student aid funds. In 2011, Holly Petraeus, then the Assistant Director for Service Member Affairs at the Consumer Financial Protection Bureau (CFPB), wrote that this loophole “gives for-profit colleges an incentive to see service members as nothing more than dollar signs in uniform, and to use aggressive marketing to draw them in.”

Current Related Legislation. AB 1340 (Chiu) would recodify in state law the federal Gainful Employment rule so that it may be enforced by the BPPE. This bill is pending in the Assembly Business and Professions Committee.

AB 1341 (Berman) would clarify that an institution of higher education is only exempt from the requirements imposed on out-of-state institutions if it meets the definition of a nonprofit corporation or public institution. This bill is pending in the Assembly Business and Professions Committee.

AB 1342 (Low) would require the Attorney General’s review and approval for any sale of a nonprofit educational institution to a for-profit entity. This bill is pending in the Assembly Judiciary Committee.

AB 1344 (Bauer-Kahan) would increase the BPPE’s oversight over out-of-state private postsecondary educational institutions operating online. This bill is pending in the Assembly Business and Professions Committee.

AB 1345 (McCarty) would prohibit an institution from providing financial incentives to any person, including a student, involved in student recruitment, enrollment, continued enrollment, admission, or attendance, or involved in awarding of financial aid based on the enrollment of a student. This bill is pending in the Assembly Business and Professions Committee.

AB 1346 (Medina) would expand the definition of economic loss, as it pertains to the Student Tuition Recovery Fund. This bill is pending in the Assembly Appropriations Committee.

Prior Related Legislation. SB 1192 (Hill, Chapter 593, Statutes of 2016) extended the operation of the BPPE and established the Office of Student Assistance and Relief.

AB 1619 (Berman) of 2017 would have required the BPPE to prohibit institutions from enrolling new students in an educational program that receives a fail rating for two out of three consecutive years, or receives a combination of zone or fail ratings for four consecutive years, based on the federal debt-to-earnings rates. The provisions in this bill were ultimately replaced with provisions dealing with a different topic.

AB 1611 (McCarty) of 2017 would have required certain debt-dependent programs to submit information to the BPPE upon the repeal or suspension of specified federal regulations. This bill was held under submission on the Assembly Appropriations Committee’s suspense file.

ARGUMENTS IN SUPPORT:

Veterans Education Success (VES) supports the bill. According to the VES, the bill “would put an end to predatory for-profit schools targeting California veterans, and ensure that Californians pursuing higher education can safely enroll in any state-licensed school with the security of knowing that the program will meet basic quality standards, and put students’ needs above profit goals.” The VES states that “we are grateful that California is moving to hold for-profit colleges accountable to the students and taxpayers they have an obligation to serve. We fully support the For-Profit College Accountability Act, and we look forward to seeing it pass into law.”

ARGUMENTS IN OPPOSITION:

DeVry University has an “oppose unless amended” on the bill, specifically taking issue with the definition of “student financial aid.” DeVry argues that “as written, ‘student financial aid’ includes student financial aid or loans provided by a state agency, in addition to federal funds. This goes well beyond the spirit and precedent set by 1992 federal law, and would result in several unintended consequences.” DeVry states that “In the absence of clear evidence that mandating a minimum instructional spending level would increase the quality or quantity of instruction, or enhance student outcomes, we believe a more effective option is to require all institutions to report how revenue is used, which DeVry currently does on a voluntary basis as part of our Student Commitments.”

AMENDMENTS:

1. To provide the BPPE with more time to seek public input in its rulemaking and align the deadline for regulations promulgated pursuant to this bill with the timeline contained in other legislation currently being considered this year:

In subdivision (e) of Section 2 of the bill, strike out “January 1, 2021” and insert “July 1, 2021.”

REGISTERED SUPPORT:

Air Force Sergeants Association
Air Force Women Officers Associated
California Association of Veteran Service Agencies
American Legion, Department of California
Association of the U.S. Navy
Blue Star Families
California Association of Veteran Service Agencies
California Conference of the American Association of University Professors
California Low-Income Consumer Coalition
Center For Public Interest Law
The Century Foundation
Children’s Advocacy Institute
Consumer Federation
Consumer Reports Advocacy
High Ground Veterans Advocacy
Housing And Economic Rights Advocates
Iraq and Afghanistan Veterans of America
Military Child Education Coalition
National Military Family Association
Non Commissioned Officers Association of the United States of America
Public Advocates, Inc.
Public Counsel
Public Law Center
SEIU California
Student Veterans of America
Swords To Plowshares - Vets Helping Vets
The Institute for College Access and Success
The Retired Enlisted Association
U.S. Coast Guard Chief Petty Officers Association and Enlisted Association
Veterans Education Success
Veterans for Common Sense
Veterans Legal Clinic
Vietnam Veterans of America

REGISTERED OPPOSITION:

American Association of Cosmetology Schools
Apollo Education Group
California Association of Private Postsecondary Schools
DeVry University
Laureate Education, Inc.
Professional Beauty Federation of California

Analysis Prepared by: Robert Sumner / B. & P. / (916) 319-3301

Date of Hearing: April 9, 2019

ASSEMBLY COMMITTEE ON HIGHER EDUCATION

Jose Medina, Chair

ABPCA Bill Id:AB 1343 (

Author:Eggman) – As Amended Ver:April 1, 2019

[Note: This bill is doubled referred to the Assembly Committee on Business and Professions and will be heard by that Committee as it relates to issues under its jurisdiction.]

SUBJECT: Private postsecondary education: California Private Postsecondary Education Act of 2009

SUMMARY: Prohibits, beginning January 1, 2021, a private postsecondary educational institution from enrolling residents of California, unless the institution meets either the requirement that no more than 85% of the institution’s tuition revenue, determined as specified, is derived from student financial aid and loans, or not less than 50% of the institution’s revenue is dedicated to student instruction. Specifically, this bill:

1. Establishes that a private postsecondary educational institution shall not enroll residents of California, except those already enrolled on or before January 1, 2021, in any program unless the institution meets one of the following:
2. No more than 85 percent of the institution’s tuition revenue, as documented in the most recent audited financial statement for a fiscal year within the prior two years, is derived from student financial aid provided by a federal or state agency, and from loans arranged or guaranteed by a federal or state agency; or,
3. Not less than 50 percent of the institution’s revenue is dedicated to student instruction.
4. Establishes that the above requirements do not apply to an institution with annual revenues, in the most recent audited financial statement for a fiscal year within the prior two years, of less than $2.5 million.
5. Establishes that submission to the Bureau for Private Postsecondary Education (BPPE) of an audit or audited financial statement by a certified public accountant that is lawfully permitted to practice in California attesting that an institution is in compliance with the provision listed above presumptively constitutes proof of compliance with this section. This language shall not be construed as limiting the bureau’s authority to investigate and take appropriate action if the bureau concludes that an institution is not in compliance with this section, notwithstanding the attestation.
6. Establishes the following definitions:
7. “Loans” means any contract for future payment, whether or not conditioned on future income or other factors;
8. “Tuition revenues” means revenues from all tuition and fees assessed against students net refunds; and,
9. “Instruction” means the communication of knowledge or skills directly to students as described under the federal Integrated Postsecondary Education Data System (IPEDS) as it existed on January 1, 2019, established pursuant to the federal Higher Education Act of 1965 and any amendments to that act.
10. Make various findings and declarations.

EXISTING LAW:

1. Establishes the California Private Postsecondary Education Act of 2009 (Act) until January 1, 2021, and requires BPPE, within the Department of Consumer Affairs (DCA) to, in part, review, investigate and approve private postsecondary institutions (or 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 requires unaccredited degree granting institutions to be accredited by an accrediting agency recognized by the U.S. Department of Education (USDE) by 2020. 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 STRF to provide refunds to students affected by the possible closure of an institution/school. (Education Code (EDC) Section 94800 et. seq.)
2. Requires that 50% of each community college district’s current expense of education, as defined, be expended for payment of salaries of classroom instructors, as defined. (EDC Section 84362)
3. Specifies that, in the case of a proprietary institution of higher education, such institution will derive not less than 10 percent of such institution's revenues from sources other than funds provided, as defined. (20 U.S. Code Section 1094(a)(24))

FISCAL EFFECT: Unknown.

COMMENTS: Need for the bill. The author indicated that the purpose of AB 1343 is to protect students from predatory school programs and to protect from wasteful spending on education using taxpayer money. The author contends that the 90/10 rule (see below) been weakened over time, and a loophole exists that allows predatory programs to target veterans and Servicemembers. AB 1343 will close this loophole in California by requiring no more than 85 percent of a for-profit institution’s tuition revenue can be derived from student financial aid provided by a federal or state agency, and from loans arranged or guaranteed by a federal or state agency – eliminating revenue sources that are currently open for exploitation under federal law.

Background. An 85 percent cap on revenue at for-profit schools from federal Title IV student aid funds was enacted in 1992 to address significant default rates by students attending such institutions. In 1998, the cap was raised to 90 percent, resulting in the so-called 90/10 rule. The idea behind the Title IV revenue cap was a market viability test: that taxpayers should not prop up low-quality schools that could not survive in the open market. Institutions offering a quality education at a competitive price should be able to attract at least 10 percent of their revenue from employers, scholarship providers, or students who are willing to pay the tuition.

In 2009, Congressional staff told Bloomberg News that GI Bill and DOD funds were not included by Congressional staff in the 1992 cap on Title IV revenue because there was no generous GI Bill at the time and, as a result, for-profit colleges were not yet aggressively targeting military students.

The 85 percent cap, which subsequently became a 90 percent cap, was modeled after the 85/15 requirement enacted by the 1952 Korean War era GI Bill. While the 1992 rule focused on revenue, the 85/15 rule requires the U.S. Veteran’s Administration (USVA) to stop the enrollment-approval process when more than 85 percent of the students enrolled in an approved program have all or part of their tuition, fees, or other charges paid for by the educational institution or the USVA. As chronicled in a recent Century Foundation report, USVA’s 85/15 rule was a response to the repeated targeting of veterans by proprietary schools using aggressive and deceptive recruiting tactics.

Following the enactment of the post-WWII GI Bill, “fly-by-night” proprietary schools proliferated. In a special message to Congress in 1950, President Truman noted that “[I]n a good many instances veterans have been trained for occupations for which they are not suited or for occupations in which they will be unable to find jobs when they finish their training.” Truman’s statement followed a 200-page report by VA which found “irregularity or questionable practices” at the majority of proprietary schools receiving GI Bill funds. Two other reports released in 1952 reached similar conclusions. First, the U.S. General Accounting Office found that proprietary schools were targeting veterans with “extensive advertising campaigns, which were often misleading and laden with extravagant, unjustifiable claims . . . conducted for the express purpose of attracting veterans.” Second, a House Select Committee report concluded that “exploitation by private schools has been widespread” and that there was “no doubt that hundreds of millions of dollars [had] been frittered away on worthless training.”

Because of the 90/10 loophole, many for-profit colleges target veterans and service members with aggressive and deceptive recruiting to collect as much GI Bill and DOD revenue as possible. For every dollar a for-profit school receives from the GI Bill or DOD, that school can receive $9 more from federal student aid funds. In 2011, Holly Petraeus, then the Assistant Director for Service Member Affairs at the Consumer Financial Protection Bureau (CFPB), wrote that this loophole “gives for-profit colleges an incentive to see service members as nothing more than dollar signs in uniform, and to use aggressive marketing to draw them in.”

Arguments in support. A coalition of veterans and military service organizations wrote that “Veterans and military service organizations nationwide are calling for the closure of the 90/10 loophole. By exploiting this loophole, for-profit colleges count GI Bill benefits as private funds, offsetting the 90 percent cap they otherwise face on their access to federal student aid – an accounting practice that nearly two dozen state attorneys general have said ‘violates the intent of the law.’”

“The impact on veterans is real: Thousands of veterans have filed complaints with the US Department of Veterans Affairs, including many from California. Taxpayers also suffer. According to the US Education Department, hundreds of for-profit schools are almost entirely dependent on federal revenue, and, if the 90/10 loophole were closed, they would be in violation of the federal cap. Taxpayers, in other words, are propping up otherwise failing schools.”

The Century Foundation writes that “…hoarding financial aid and enrolling only federally-aided students is largely a for-profit phenomenon. According to new research from the Brookings Institution, more than 97 percent of public and nonprofit institutions would comply with a version of the 90/10 rule that included all types of federal aid, compared to only 82 percent of for-profit institutions. Further, legitimate nonprofit schools must commit all of their revenues to education, making aid hoarding less likely to result in poor value for the student.”

“Adopting a California 85/15 rule, as proposed by AB 1343, will help better align the actions of colleges with the needs of students: quality programs that prepare students for good jobs. While the 8/15 requirement would be a good policy on its own, AB 1343 takes the additional step of providing schools with a second option. If a school spends a bare majority of its tuition revenue on instruction of enrolled students, then the school does not need to meet the 15 percent requirement.”

“Spending on instruction is strongly linked to college completion, career success, and student loan repayment. The more resources spent per student, the more likely the student is to complete college within a shorter period of time. The 50 percent requirement would provide an incentive to colleges to reduce spending in other categories - those that fall outside of supporting student success - that contribute to overcharging students. Because instructional spending is a fairly clean measure that is currently tracked by the federal government, it serves a good basic indicator of how much of a student’s tuition funds go directly into the student’s education. In the future, California could consider a higher requirement that would incorporate student support services, a category that is currently not well tracked in federal data.”

Arguments in opposition. The Enlisted Association of the National Guard of the United States (EANGUS) wrote that, “…this legislation is detrimental to the members of EANGUS and the Soldiers and Airmen it represents. It restricts educational choice based on past performance of non-Veterans and is a step in the wrong direction. If enacted, the legislation would limit Student Veterans’ ability to use their benefits at a school of their choice, since schools that are approved by regional and nationally recognized accrediting bodies that meet all the necessary federal requirements would be forced to turn away Student Veterans. Legal analysis indicates that a reviewing court likely would view California’s legislation as undermining the purposes and objectives of Congress in offering educational benefits to veterans—which purposes include extending the benefits of higher education to men and women who otherwise might not be able to afford it, restoring lost educational opportunities to veterans, and aiding in the recruitment and retention of personnel for the All-Volunteer Force—a court would probably hold that California’s proposed legislation conflicts with federal law.”

The University of Phoenix (UOPX) wrote that, “…student veterans have a right to utilize their earned benefits as they see fit and counting these benefits as financial aid mis-categorizes and, therefore, misappropriates the meaning of these earned benefits. Moreover, the proposed changes to the current 90/10 rule would harm veteran students, in that, not only will their school choices become fewer, in a scenario where 85/15…would render ceasing of UOPX operations in California the proposed changes to the current rule would eliminate an institution that has historically been a resource for veteran students and their families’ specific educational and transitional needs. Not only would this measure severely curtail high-quality, accredited educational opportunities, but to the extent that there are not sufficient options available, these veterans would also lose critical living expenses.”

“Lastly, it must be noted that as drafted the bill would prohibit institutions that are in full compliance with federal law, as it exists today, from enrolling any additional students effective January 1, 2021, based on a retroactive application of the new 85/15 operating requirements. Specifically, AB 1343 would establish new requirements for private postsecondary institutions effective January 1, 2020 when the bill takes effect, but also provides that if said institutions did not meet those requirements effective January 1, 2019 when they were not in existence, then they must cease enrollment in 2021. Institutions of higher education cannot retroactively disenroll based on how they paid tuition.”

Committee comments. Committee staff recommends the following amendments to clarify the provisions of AB 1443:

1. Strike the current definition of “Instruction” detailed in 94918.5(a)(3).
2. Require the BPPE to promulgate regulations that define “Instruction” for the purposes of the provisions of this bill by January 1, 2021 that take into consideration the IPEDS definition as it existed on January 1, 2019 and the current provisions of EDC Section 84362.
3. Implement the provisions of this bill on a rolling timeline, where cohorts can only be assessed following the implementation of the regulations referenced above.
4. Amend 94918.5(b)(2) to read “Not less than 50 percent of the institution’s tuition revenue is dedicated to student instruction.”

Exemption of certain institutions. AB 1343 specifies that the provisions of this bill do not apply to an institution with annual revenues below $2.5 million dollars. The Legislative Analyst’s Office provided an assessment of for-profit revenue based on reporting from the USDE Office of Federal Student Aid. The total annual revenue for for-profit institutions for the fiscal year ending July 2016-July 2017 is detailed below:

Nationally, 62 percent of for-profit schools have annual revenues of less than $2.5 million.

REGISTERED SUPPORT / OPPOSITION:

Support

Air Force Sergeants Association
Air Force Women Officers Associated
American Legion, Department of California
Association of the U.S. Navy
Blue Star Families
California Association of Veteran Service Agencies
California Conference of the American Association of University Professors
California Low-Income Consumer Coalition
Center For Public Interest Law
Center for Public Interest Law/Children's Advocacy Institute/University of San Diego
Children's Advocacy Institute
Consumer Federation of California
Consumer Reports Advocacy
High Ground Veterans Advocacy
Housing And Economic Rights Advocates
Iraq and Afghanistan Veterans of America
Military Child Education Coalition
National Military Family Association
Non Commissioned Officers Association of the United States of America
Public Advocates, Inc.
Public Counsel
Public Law Center
SEIU California
Student Veterans of America
Swords To Plowshares - Vets Helping Vets
The Century Foundation
The Institute for College Access and Success
The Retired Enlisted Association
U.S. Coast Guard Chief Petty Officers Association and Enlisted Association
Veterans Education Success
Veterans for Common Sense
Veterans Legal Clinic
Vietnam Veterans of America

Opposition

Ashford University
Ember Education
Enlisted Association of the National Guard of the United States
Professional Beauty Federation of California
University of Phoenix
Walden University

Analysis Prepared by: Kevin J. Powers / HIGHER ED. / (916) 319-3960