(1)Existing federal law requires a postsecondary educational institution that offers distance education to students located in a state in which the postsecondary educational institution is not physically located to meet any of that states requirements for it to offer distance education in that state. Existing federal law authorizes a state to participate in an interstate reciprocity agreement to comply with this requirement.

This bill would authorize the Governor Governor, on or before January 1, 2028, to enter into one or more interstate reciprocity agreements for distance education through a compact on behalf of the state upon issuing certain written findings and after certain committees of the Legislature hold a joint hearing on the agreement, as provided. This bill would require the Governor to designate a state agency, department, or office for the implementation of an interstate reciprocity agreement for distance education if the Governor enters into such an agreement, as provided. The bill would authorize postsecondary educational institutions to apply to the designated entity for approval to operate under an interstate reciprocity agreement, as specified.

(2)The California Private Postsecondary Education Act of 2009 provides, among other things, for student protections and regulatory oversight of private postsecondary institutions in the state. The act is enforced by the Bureau for Private Postsecondary Education within the Department of Consumer Affairs. The act requires an out-of-state private postsecondary educational institution to register with the bureau, pay a fee, and comply with additional delineated requirements. Existing law provides exemptions from the act for, among others, accredited, degree-granting, nonprofit, higher education institutions and degree-granting public higher education institutions.

If the Governor enters into an interstate reciprocity agreement, this bill would subject any public or private entity without a physical presence in this state that offers a degree program through distance education to California students accredited, degree-granting, nonprofit, higher education institutions and degree-granting public higher education institutions to the act unless the entity is approved pursuant to an interstate reciprocity agreement.

This bill would authorize the Governor to enter into one or more interstate reciprocity agreements for distance education through a compact on behalf of the state upon issuing certain written findings and after certain committees of the Legislature hold a joint hearing on the agreement, as provided. This bill would eliminate CPEC and instead would require the Governor to designate a state agency, department, or office as the principal state operating and coordinating entity for postsecondary education with duties including implementation, coordination, and evaluation of the Master Plan for Career Education, coordination and evaluation of postsecondary implementation of intersegmental state policies and initiatives, and for the implementation of an interstate reciprocity agreement for distance education if the Governor enters into such an agreement, as provided. The bill would authorize the Governor to enter into one or more interstate reciprocity agreements through a compact on behalf of the state upon issuing certain written findings and after certain committees of the Legislature hold a joint hearing on the agreement, as provided. The bill would authorize postsecondary educational institutions to apply to the designated coordinating entity for approval to operate under an interstate reciprocity agreement, as specified.

(2)The California Private Postsecondary Education Act of 2009 provides, among other things, for student protections and regulatory oversight of private postsecondary institutions in the state. The act is enforced by the Bureau for Private Postsecondary Education within the Department of Consumer Affairs. The act requires an out-of-state private postsecondary educational institution to register with the bureau, pay a fee, and comply with additional delineated requirements. Existing law provides exemptions from the act for, among others, accredited, degree-granting, nonprofit, higher education institutions and degree-granting public higher education institutions.

Beginning January 1, 2028, this bill would subject any public or private entity without a physical presence in this state that offers a degree program through distance education to California students to the act unless the entity is approved pursuant to an interstate reciprocity agreement.

(1)Existing law establishes the California Postsecondary Education Commission (CPEC) to be responsible for coordinating public, independent, and private postsecondary education in this state and to provide independent policy analyses and recommendations to the Legislature and the Governor on postsecondary education issues. The Budget Act of 2011 deleted funding and personnel from CPEC.

This bill would eliminate CPEC and instead would require the Governor to designate a state agency, department, or office as the principal state operating and coordinating entity for postsecondary education with duties including implementation, coordination, and evaluation of the Master Plan for Career Education, coordination and evaluation of postsecondary implementation of intersegmental state policies and initiatives, and implementation of an interstate reciprocity agreement for distance education if the Governor enters into such agreement, as provided. The bill would authorize the Governor to enter into one or more interstate reciprocity agreements through a compact on behalf of the state upon issuing certain written findings. findings and after certain committees of the Legislature hold a joint hearing on the agreement, as provided. The bill would authorize postsecondary educational institutions to apply to the designated coordinating entity for approval to operate under an interstate reciprocity agreement, as specified.

(2)The California Private Postsecondary Education Act of 2009 provides, among other things, for student protections and regulatory oversight of private postsecondary institutions in the state. The act is enforced by the Bureau for Private Postsecondary Education within the Department of Consumer Affairs. The act requires an out-of-state private postsecondary educational institution to register with the bureau, pay a fee, and comply with additional delineated requirements. Existing law provides exemptions from the act for, among others, accredited, degree-granting, nonprofit, higher education institutions and degree-granting public higher education institutions.

Beginning January 1, 2028, this bill would subject any public or private entity without a physical presence in this state that offers a degree program through distance education to California students to the act unless the entity is approved pursuant to an interstate reciprocity agreement.

(1)Existing law establishes the California Postsecondary Education Commission (CPEC) to be responsible for coordinating public, independent, and private postsecondary education in this state and to provide independent policy analyses and recommendations to the Legislature and the Governor on postsecondary education issues. The Budget Act of 2011 deleted funding and personnel from CPEC.

This bill would eliminate CPEC and instead would require the Governor to designate a state agency, department, or office as the principal state operating and coordinating entity for postsecondary education with duties including implementation, coordination, and evaluation of the Master Plan for Career Education, coordination and evaluation of postsecondary implementation of intersegmental state policies and initiatives, and implementation of an interstate reciprocity agreement for distance education if the Governor enters into such agreement, as provided. The bill would authorize the Governor to enter into one or more interstate reciprocity agreements through a compact on behalf of the state upon issuing certain written findings. The bill would authorize postsecondary educational institutions to apply to the designated coordinating entity for approval to operate under an interstate reciprocity agreement, as specified.

(2)The California Private Postsecondary Education Act of 2009 provides, among other things, for student protections and regulatory oversight of private postsecondary institutions in the state. The act is enforced by the Bureau for Private Postsecondary Education within the Department of Consumer Affairs. The act requires an out-of-state private postsecondary educational institution to register with the bureau, pay a fee, and comply with additional delineated requirements unless the institution is exempt from complying with these requirements. Existing law provides exemptions from the act for, among others, accredited, degree-granting, nonprofit, higher education institutions and degree-granting public higher education institutions.

Beginning January 1, 2028, this bill would subject any public or private entity without a physical presence in this state that offers a degree program through distance education to California students to the act unless the entity is approved pursuant to an interstate reciprocity agreement.

(1)Existing law establishes the California Postsecondary Education Commission (CPEC) to be responsible for coordinating public, independent, and private postsecondary education in this state and to provide independent policy analyses and recommendations to the Legislature and the Governor on postsecondary education issues. The Budget Act of 2011 deleted funding and personnel from CPEC.

This bill would eliminate CPEC and instead would require the Governor to designate a state agency, department, or office as the principal state operating and coordinating entity for postsecondary education with duties including implementation, coordination, and evaluation of the Master Plan for Career Education, coordination and evaluation of postsecondary implementation of intersegmental state policies and initiatives, and implementation of an interstate reciprocity agreement for distance education if the Governor enters into such agreement, as provided. The bill would authorize the Governor to enter into one or more interstate reciprocity agreements through a compact on behalf of the state upon issuing certain written findings. The bill would authorize postsecondary educational institutions to apply to the designated coordinating entity for approval to operate under an interstate reciprocity agreement, as specified.

(2)The California Private Postsecondary Education Act of 2009 provides, among other things, for student protections and regulatory oversight of private postsecondary institutions in the state. The act is enforced by the Bureau for Private Postsecondary Education within the Department of Consumer Affairs. The act requires an out-of-state private postsecondary educational institution to register with the bureau, pay a fee, and comply with delineated requirements unless the institution is exempt from complying with these requirements.

This bill would exempt a higher education institution approved pursuant to an interstate reciprocity agreement to which the state is a party from these requirements, except as specified.

For purposes of the act, existing law defines a 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.

This bill would expand that definition to also include an accredited private entity with no physical presence in the state that offers and awards degrees to the public in this state by means of distance education for an institutional charge if the institution is not approved pursuant to an interstate reciprocity agreement to which the state is a party, thereby subjecting those institutions to the requirements of the act.

The act establishes the Student Tuition Recovery Fund as a continuously appropriated fund to relieve or mitigate economic loss suffered by a student while enrolled in an institution who, at the time of the students enrollment, was a California resident or was enrolled in a California residency program, prepaid tuition, and suffered economic loss, as defined. Existing law limits the amount of moneys in the fund from exceeding $25,000,000 at any time.

This bill would authorize the bureau, if the fund has a balance of $25,000,000, to extend coverage to a California resident student who suffers economic loss while enrolled in an institution that is approved pursuant to an interstate reciprocity agreement to which the state is a party. By expanding the scope of a continuously appropriated fund, the bill would make an appropriation.

Date of Hearing: August 20, 2025

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Buffy Wicks, Chair

SBPCA Bill Id:SB 790

Author:(Cabaldon) – As Amended Ver:July 9, 2025

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

SUMMARY:

This bill authorizes the Governor to enter into an interstate reciprocity agreement for the authorization and oversight of distance education and requires the Governor to designate a portal entity to administer the interstate reciprocity agreement.

Specifically, the bill requires, beginning January 1, 2028, a public and accredited nonprofit postsecondary institution to register with the Bureau for Private Postsecondary Education (BPPE) unless the institution already has approval to operate in California pursuant to an interstate reciprocity agreement. The bill also prohibits out-of-state postsecondary institutions from engaging in specified deceptive business practices.

FISCAL EFFECT:

1. Ongoing General Fund costs of an unknown amount, but likely $1 million to $2 million, for the portal entity designated by the Governor to administer the interstate reciprocity agreement. The bill doesn’t specify an entity to fill this role but previous committee analyses have suggested the BPPE is the most likely entity given BPPE’s mission. Alternatively, the Budget Act of 2025 appropriated $1.5 million for the Education and Workforce Development Coordinating Council, which may also be appropriate for this role.
2. Ongoing Private Postsecondary Education Administration Fund costs of approximately $1 million for the BPPE to process additional applications and investigate complaints. The BPPE notes this fund faces a substantial structural deficit.
3. One-time Proposition 98 General Fund cost pressures of an unknown but potentially significant amount, likely in the hundreds of thousands to low millions of dollars, for the California Community Colleges (CCCs), collectively statewide, that decide to pursue State Authorization Reciprocity Agreement (SARA) approval. If half of all CCC districts (37) decide to participate in SARA costs would range between $550,000 and $1.1 million.
4. Ongoing cost savings in the low millions of dollars for the UC and CSU campuses, collectively statewide, since the bill removes the need for individual campuses to enter into interstate agreements with other individual states, a process the currently costs in the low hundreds of thousands of dollars per campus per year.

COMMENTS:

1. Purpose. According to the author:

Tens of thousands of Californians study online through institutions in other states. However, California is the only state not participating in the State Authorization Reciprocity Agreement, which gives students in member states protection, institutional oversight, and rights even when the educational institution is approved in another state. Instead, out-of-state schools must register with California’s Bureau of Private Postsecondary Education, where they are subject to limited regulation. Meanwhile, California institutions face major disadvantages. They must apply and pay fees for every single online program they offer to out-of-state students. At times, it only takes a few out-of-state students enrolling in a CSU or community college class to help meet class minimums, so excluding out-of-state students can mean that courses are not available for California students.

SB 790 requires the Governor to designate a new state entity to oversee postsecondary education policy and authorizes the Governor to join an interstate reciprocity agreement for distance education if the agreement meets specific consumer protection standards. Joining an interstate reciprocity agreement would promote educational access, regulatory efficiency, and economic growth while allowing California to better safeguard its students enrolled online in out-of-state schools.

1. Background. SARA. Formed in 2013, SARA functions as an interstate reciprocity agreement compact among member states, governed by the National Council for SARA (NC-SARA), authorizing participating institutions to enroll students from other states who are also operating under the compact in distance learning programs without individually applying for each state’s authorization. Therefore, states wishing to participate in SARA must accept that their own students may enroll in distance education programs in other states that may lack consumer and student protection requirements and oversight. This potential lack of protection and oversight is largely why California is the only state in the country not participating in SARA. This bill authorizes California’s participation in SARA or potentially another reciprocity agreement only if certain conditions are met, including confirmation that California’s participation will not preclude it from enforcing consumer protection laws or stopping any entity operating under the compact from operating in California. However, opponents of the bill, such as the California Association of Private Postsecondary Schools claim that the increased regulatory framework established by the bill is both incompatible with and counter to the intent of NC-SARA.

Once a state applies and receives approval to join SARA, institutions within that state must apply to become SARA-participating members through their state’s designated portal entity, responsible for verifying eligibility, approving or denying applications, and overseeing compliance with SARA standards. This bill requires the Governor to designate a state agency, department, or office to serve as the portal entity.

Bureau for Private Postsecondary Education. While the bill does not name a specific entity as the portal entity, the Bureau for Private Postsecondary Education (BPPE) is the entity responsible for overseeing the operation of postsecondary institutions with a physical presence in California as well as out-of-state institutions that enroll California students in online distance learning programs. The BPPE oversees any private postsecondary educational institution that has a physical presence in California and enforces the California Private Postsecondary Education Act, which seeks to protect students from predatory, substandard, or other institutions that do not ultimately provide students with a meaningful degree. Specifically, the Act directs the BPPE, in part, to oversee review and approval of institutions, establish minimum standards, provide a complaint resolution process for students, and enforce compliance. The BPPE also investigates and combats unlicensed activity, conducts research and outreach to students and postsecondary educational institutions, and administers the Student Tuition Recovery Fund, which provides relief to students financially harmed by an institution under the bureau’s oversight via closure or discontinuation of educational programs.

Analysis Prepared by: Aaron Heredia / APPR. / (916) 319-2081

Date of Hearing: June 24, 2025

ASSEMBLY COMMITTEE ON HIGHER EDUCATION

Mike Fong, Chair

SBPCA Bill Id:SB 790

Author:(Cabaldon) – As Amended Ver:May 6, 2025

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

SENATE VOTE: 34-0

SUBJECT: Postsecondary education: postsecondary education coordinating entity: interstate reciprocity agreements for distance education: out-of-state postsecondary educational institutions

SUMMARY: Requires the Governor to designate a state agency, department, or office as the principal state operating and coordinating entity for postsecondary education, with specified duties, including, but not limited to, implementation of an interstate reciprocity agreement for reciprocity agreement for the authorization and oversight of distance education, as the portal entity, if the Governor enters into an interstate reciprocity agreement. Specifically, this bill:

Higher Education Coordinating Body

1. Strikes the California Postsecondary Education Commission (CPEC) from the Education Code.
2. Requires the Governor to designate a state agency, department, or office as the principal state operating and coordinating entity for postsecondary education, with all of the following duties:
   1. Implementation, coordination, and evaluation of the Master Plan for Career Education;
   2. Coordination and evaluation of postsecondary implementation of intersegmental state policies and initiatives, including, but not limited to, College and Career Access Pathways and other dual enrollment programs, the Golden State Pathways Program, the Regional K-16 Education Collaborative Grant program, and the California Cradle-to- Career Data System; and,
   3. Implementation of an interstate reciprocity agreement for distance education as the portal entity if the Governor enters into an interstate reciprocity agreement, as specified.
3. States Legislative intent that the portal entity adopt as many of the duties and responsibilities of the former CPEC, created in current law, as it read on December 31, 2025.

State Authorization Reciprocity Agreement for Distance Education

1. Authorizes the Governor to enter into one or more interstate reciprocity agreements through a compact on behalf of the state, upon issuing a written finding of all the following:
   1. The interstate reciprocity agreement and its implementation will not interfere with, and does not affect, the authority of the Attorney General (AG) or any other state or local agency to enforce any statutes or regulations prohibiting consumer fraud and unfair or deceptive business practices or the authority of the state to suspend or terminate the operation in the state of any entity subject to the interstate reciprocity agreement provided in state law;
   2. The interstate reciprocity agreement does not prevent the AG or any other state or local agency from applying and enforcing state law with respect to out-of-state postsecondary educational institutions that participate in the reciprocity agreement;
   3. The interstate reciprocity agreement allows the state, despite any reciprocal authorization, to require an out-of-state postsecondary educational institution, upon providing notice of at least six months, to register, pay fees, and be subject to the related state law to protect students, prevent misrepresentation to the public, or prevent the loss of funds paid from public resources or student tuition;
   4. The interstate reciprocity agreement does not apply to a course offered onsite to students at a military installation in the state, even if the course at the physical location is offered to students at other locations;
   5. The commission and national coordinating council are committed to preserving standards and protections that have been promulgated by the federal government and are the basis of the interstate reciprocity agreement, even if those standards or protections are subsequently diminished or withdrawn by the federal law or action of the United States Department of Education (USDE), and the commission is committed to developing meaningful performance metrics and frameworks for best practices with regard to individual state authorization activities;
   6. Within one year of the effective date of the state’s entry into the interstate reciprocity agreement, the Bureau for Private Postsecondary Education (Bureau) will establish a process to ensure that postsecondary educational institutions exempt from the Act can participate in the interstate reciprocity agreement without impacting the postsecondary educational institution’s exempt status;
   7. Participating states have the necessary authority and resources to investigate complaints and take appropriate action;
   8. The reciprocity agreement does not prohibit the state from accepting complaints from California students that have not first been submitted to the institution that is the subject of the complaint;
   9. The interstate reciprocity agreement does not delegate independent legal authority over the state or its participating postsecondary educational institutions to any other entity or otherwise authorize assumption of that legal authority by any other entity other than the state or its subdivisions, including by providing any nonstate entity with the authority to reverse or veto a decision by the state to suspend or terminate an in-state’s institution’s certification to participate in a reciprocity agreement; and,
   10. The interstate reciprocity agreement may be modified by the commission only with the approval of the Governor.
2. Requires, following issuing the findings required by 4) above, a joint hearing on the agreement held by the Assembly Committee on Business and Professions, the Assembly Committee on Higher Education, the Senate Committee on Business, Professions and Economic Development, and the Senate Committee on Education at which a representative from the commission will testify and members of the public shall be encouraged to testify on the agreement and the Governor’s written findings.

Approval to operate under the reciprocity agreement

1. Authorizes a postsecondary educational institution to apply to the portal entity for approval to operate under an interstate reciprocity agreement using a standard application developed in accordance to the interstate reciprocity agreement.
2. Authorizes the portal entity to establish a reasonable fee as specified to be paid by a participating postsecondary educational institution.
3. Requires the portal entity to enter into a memorandum of understanding (MOU) with the University of California (UC) President upon resolution by the UC Regents, California State University (CSU) Chancellor, the California Community College (CCC) Board of Governors, the presidents of the independent California colleges and universities as represented by the state association representing the largest number of those members, and, if appropriate, the Bureau. It requires each entity to promptly report a complaint or concern to the postsecondary educational institution, the portal entity, and, where appropriate, the accrediting agency.
4. Requires that the MOU executed by the portal entity delegate functions and responsibilities among the parties and provide for reimbursement of expenses. It further prohibits the MOU from weakening existing student privacy and confidentiality protections.
5. Requires the CCC Board of Governors to investigate and resolve complaints involving participating community colleges that may arise pursuant to the interstate reciprocity agreement, as specified.
6. Requires the Bureau to investigate and resolve complaints that may arise pursuant to the interstate reciprocity agreement involving participating private postsecondary educational institutions that are either approved to operate or exempt from the Act but elect to participate in the interstate reciprocity agreement pursuant to terms and conditions established by the Bureau, as specified.
7. Requires the portal entity to ensure that it and participating postsecondary educational institutions have clear and well-documented policies for addressing catastrophic events in a manner that protects students as consumers including the protection of student records. The bill states that the Act and related regulations, constitutes those policies for participating private postsecondary educational institutions approved to operate by the Bureau.
8. Requires the portal entity to work cooperatively with other states in the interstate reciprocity agreement and the commission to enable the success of the interstate reciprocity agreement, as specified.

Changes to the California Private Postsecondary Education Act

1. Authorizes the Bureau, after receipt of any of the notifications required of an out-of-state institution registering with the Bureau that enrolls a California student or after determining that such notifications should have been provided, to seek additional information and notify the institution regarding whether it should suspend enrolling new students, and whether other actions are needed to protect California residents while the Bureau continues to investigate.
2. Strikes “private” from the type of postsecondary educational institution required to register with the Bureau but specifies that before January 1, 2028, the requirement shall not apply to a higher education institution that grants undergraduate degrees, graduate degrees, or both, and that is either formed as a nonprofit corporation and is accredited by an agency recognized by the USDE, or is a public institution of higher education. Beginning January 1, 2028, specifies that the registration requirement shall not apply to a public or nonprofit higher education institution approved pursuant to an interstate reciprocity agreement to which the state is a party.
3. Makes out-of-state public institutions subject to provisions that prohibit an institution from deceptive practices including using California’s state seal on a diploma or false advertisement, as specified.

EXISTING LAW:

1. Establishes the California Postsecondary Education Commission (CPEC) composed of 17 members representing the higher education segments, the State Board of Education, and nine representatives appointed by the Governor, Senate Rules Committee, and Assembly Speaker to coordinate public, independent, and private postsecondary education in California (Education Code Section 66900, et seq.).
2. Establishes California Private Postsecondary Education Act of 2009 (the Act) until January 1, 2027, and requires the Bureau for Private Postsecondary Education (Bureau) to, among other things, review, investigate and approve private postsecondary institutions, programs and courses of instruction pursuant to the Act and authorizes the Bureau 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 USDE. The Act also provides for specified disclosures and enrollment agreements for students, requirements for cancellations, withdrawals and refunds, and that the Bureau shall administer the Student Tuition Recovery Fund (STRF) to provide refunds to students affected by the possible closure of an institution/school. (Education Code (EDC) Section 94800 et seq.)
3. Provides numerous exemptions from the Act and oversight by the Bureau, including, but not limited to schools that are 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, and Western Association of Schools and Colleges (WASC). Requires an independent institution of higher education that is otherwise exempt from the Act to comply with all applicable state and federal laws, including laws relating to fraud, abuse, and false advertising and authorizes these types of institutions to execute a contract with the Bureau for the Bureau to review and, as appropriate, act on complaints concerning the institution, according to specified requirements and subject to a fee of $1,076. Requires the Bureau to establish a process through which an institution exempt from the Act may request and obtain verification that the institution is exempt. Specifies that the verification is valid for a period of up to two years, as long as the institution maintains full compliance with the requirements of the exemption. (EDC Sections 94874 (i), 94874.9, and 94874.7)
4. 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. (EDC Section 94850.5)
5. Requires an out-of-state private postsecondary educational institution (other than a nonpublic higher education institution that grants undergraduate degrees, graduate degrees, or both, formed as nonprofit corporation and accredited by an agency recognized by the USDE to register with the Bureau, pay a fee and provide evidence of accreditation; evidence that the institution is approved to operate in the state where the institution maintains its main administrative location; and a copy of the institution’s catalog and sample enrollment agreement. Requires these institutions to comply with STRF requirements and disclosures. Prohibits an institution from operating in California for failure to comply with the registration requirements. Establishes the validity of a Bureau registration for two years. (EDC Section 94801.5)
6. Authorizes the Bureau to establish thresholds of California-based activity that constitute limited physical presence, with those institutions subject to registration requirements defined through regulation, and minimal levels of California-based activity that do not require institutional approval by, nor registration with, the Bureau. Specifies that an institution is considered to have a physical presence in the state if it offers instruction or core academic support services from a physical location owned, operated, or rented by or on behalf of the institution in California. (EDC Section 94801.7)
7. Requires the Bureau to adopt regulations establishing minimum operating standards to ensure that the content of each educational program reach its stated objective; maintain specific written standards for student admissions for each educational program; ensure the facilities, instructional equipment and materials are sufficient to meet the educational program’s goals; maintain a withdrawal policy and provide refunds; provide qualified personnel; provide upon successful completion of an educational program a degree or diploma; maintain and disburse adequate records and transcripts to students; and follow all other applicable ordinances and laws. (EDC Section 94885 (a)(1-9)).
8. Establishes an Office of Student Assistance and Relief (Office or OSAR) for the purpose of advancing and promoting the rights of prospective students, current students, or past students of private postsecondary educational institutions. Tasks the Office with: conducting outreach and providing information and assistance to students who have been affected by the unlawful activities or closure of an institution; serving as a primary point of contact to address the needs of private postsecondary education students and working in consultation with state and federal agencies, including, but not limited to, California Student Aid Commission, the Office of the Chancellor of the California Community Colleges, the Department of Veterans Affairs, the federal Consumer Financial Protection Bureau, and the USDE. Authorizes the Office to provide outreach to students and prospective students to provide them with, among other information, information on making informed decisions in selecting postsecondary educational institutions, student rights regarding school performance disclosures, enrollment agreements, and cancellation and refund policies, how to contact the office and the Bureau for assistance, student loan rights and assistance, and free nonprofit community based resources. (EDC Sections 94949.7 - 94949.73)

FISCAL EFFECT: According to the Senate Committee on Appropriations:

There is the potential for unknown ongoing significant costs to the agency, department, or office the Governor designates as the portal entity. They note that if the Bureau were to be designated as the portal entity, it would incur significant costs that may exacerbate the bureau’s main fund, the Private Postsecondary Education Administration Fund, which faces a substantial structural deficit.

The Senate Committee on Appropriations also notes unknown costs or potential savings for the UC, CSU, and CCC to join and enter into memoranda of understandings (MOUs) with the designated portal entity. Total costs would depend on, among other things, how often the body would meet and the level of support staff or other resources required by the UC, CSU, and CCC to support their participation.

COMMENTS: Purpose. According to the author, “enrollment in online higher education courses surged during the pandemic and today remains above pre-2020 levels. Most college students now take some classes online, with one-third enrolling in out-of-state programs.”

“Tens of thousands of Californians study online through institutions in other states. However, California is the only state not participating in the State Authorization Reciprocity Agreement, which gives students in member states protection, institutional oversight, and rights even when the educational institution is approved in another state. Instead, out-of-state schools must register with California’s Bureau of Private Postsecondary Education, where they are subject to limited regulation. Meanwhile, California institutions face major disadvantages. They must apply and pay fees for every single online program they offer to out-of-state students. At times, it only takes a few out-of-state students enrolling in a CSU or community college class to help meet class minimums, so excluding out-of-state students can mean that courses are not available for California students.”

“[SB] 790 requires the Governor to designate a new state entity to oversee postsecondary education policy and authorizes the Governor to join an interstate reciprocity agreement for distance education if the agreement meets specific consumer protection standards. Joining an interstate reciprocity agreement would promote educational access, regulatory efficiency, and economic growth while allowing California to better safeguard its students enrolled online in out-of-state schools.”

Background on CPEC. As specified in the “Existing Law” section of this analysis, CPEC was established to coordinate postsecondary education in California and to provide independent policy analyses and recommendations to the Legislature and the Governor on postsecondary education issues. However, CPEC's budget and responsibilities were reduced over time, casting doubt on its effectiveness and triggering calls for its restructuring. In the 2011-12 Budget Act, Governor Brown vetoed funding for CPEC citing the agency’s ineffectiveness in higher education oversight. In his veto message, the Governor acknowledged the well-established need for coordinating and guiding state higher education policy and requested that stakeholders explore alternative ways these functions could be fulfilled.

CPEC shut down in the fall of 2011, transferring its federal Teacher Quality Improvement grant program to the California Department of Education (CDE) and extensive data resources to the CCC Chancellor's Office. Currently no coordinating entity for higher education in California exists.

This bill proposes to delete CPEC from the Education Code and states legislative intent that the portal entity designated by the Governor adopt as many of its duties and responsibilities as possible and be the principal state operating and coordinating entity for postsecondary education.

Staff notes that several legislative proposals introduced in 2025 attempt to establish educational coordinating entities including, AB 95 (Fong, 2025) and SB 638 (Padilla, 2025). Additionally, the topic was included in the Governor’s January 2025 budget proposal, and budget discussions remain ongoing following the May budget revision. Unlike the related legislation, this measure stops short of identifying or forming a coordinating body, rather it calls on the Governor to assign coordinating responsibilities to any entity of the Governor’s choosing.

State Authorization Reciprocity Agreement (SARA). In response to concerns over the complexity and cost of navigating differing requirements for state authorization in multiple states, a group of institutions, states, and policy organizations came together in 2013 to develop the SARA. SARA provides that accredited, degree-granting private and public institutions approved by an oversight body in one participating state will be deemed automatically to have met approval requirements in other participating states.

General concerns remain about online programs that are offered by some institutions perceived as providing fraud and debt rather than knowledge and skills. In some states, institutions offering distance education programs to California students have entered into settlements with those states after being accused of undertaking misleading online recruiting practices, including deceiving prospective students by leading them to believe that online education degrees would allow them to become licensed professionals. A number of institutions that have been the focus of complaints by state and federal agencies continue to have robust distance education programs and are actively enrolling students.

Institutions that participate in SARA are approved for participation by their home state, and states that join SARA must accept that approval – regardless of the effectiveness of the home state’s oversight. Once a state enters SARA, it does not retain authority to enforce its applicable laws. Concerns about the practical impacts of ceding authority to a third-party have been at the root of failed efforts in the past to require California to join SARA, particularly the fact that the state would no longer be able to impose some of the important student protections contained in the Act. SARA would still allow the AG to take action based on general laws (fraud, deception, etc.), but provisions in the Act would not be applicable. Once a state is approved to join SARA, institutions that are operating under the compact are able to enroll students in their distance education programs.

This bill authorizes California’s participation in a reciprocity agreement like SARA only if certain conditions are met, including if it is confirmed that joining will not interfere with California’s ability to enforce consumer protection laws or stop any entity involved from operating in this state.

Background on the Bureau of Private Postsecondary Education. The Bureau regulates private postsecondary educational institutions operating in California. The Bureau’s roles and responsibilities are outlined in the Act established by AB 48 (Portantino), Chapter 310, Statutes of 2009. Its role is to protect consumers and students from fraud, misrepresentation, or other business practices at private postsecondary institutions that may lead to the loss of students’ tuition and related educational funds. It also sets and enforces minimum standards for ethical business practices and the health, safety, and fiscal integrity of postsecondary education institutions. Finally, it establishes and enforces minimum standards for instructional quality and institutional stability for all students in any private postsecondary educational and vocational institutions.

The Bureau has traditionally regulated only those institutions with a “physical presence” in California. As a growing number of public and private institutions organized or incorporated outside California serve California students through online and hybrid instruction, the need for Bureau oversight increased. The Legislature expanded some areas of oversight, providing a registration process for out-of-state private institutions, requiring their participation in STRF, and compliance with other requirements.

Out-of-state accredited private nonprofit institutions without a physical presence in California, however, remain outside of the Bureau’s purview, and increasingly, private nonprofit and public institutions are adopting methods of program delivery modeled after for-profit institutions. Under this bill, out-of-state for-profit institutions would continue to register with the Bureau, while out-of-state nonprofit and public institutions could be authorized through the reciprocity agreement. It further specifies that California would retain its ability to require an out-of-state institution to register directly with the Bureau with the appropriate notice.

Arguments in support. The UC wrote in support, noting that “In 2013, [SARA] was established to streamline regulations around distance education programs. Institutions in states that have legislated SARA membership may participate and thereby receive reciprocity rights to provide online courses and programs to students located in other SARA-member states. California remains the only state in the country that is not a part of SARA. Instead, in order to enroll students from other states into UC’s online education courses or programs, campuses must undertake state-by-state compliance with these regulations. Compliance with multiple and varied state authorization requirements and fee schedules is time-intensive and costly.

In addition to online education, state authorization regulations apply to out-of-state clinical placements for students in health sciences programs. These pose significant hurdles to making out-of-state clinical placements at the seven UC campuses that offer health sciences instruction.”

UC continues that, “out-of-state clinical placements and externships are a routine and essential part of clinical education. For medical students, participating in clinical rotations outside of California is essential to placement for their residency training, and expands their understanding of medical treatment and disease management since some institutions are experts in specific fields. The benefits of out-of-state clinical placements apply to other professional health fields as well, including nursing, physical therapy, and public health. Clinical placements and externships are essential to students gaining more knowledge and experience and are routinely undertaken in other states so that the student can gain exposure to different conditions, populations, and issues.

Since all states except California have joined SARA, UC and other California colleges and universities are at an extreme disadvantage in offering online courses, degrees, and clinical placements to residents of other states. States that had previously exempted online educational offerings from California have established more stringent requirements for institutions in states that are not part of SARA. UC has already had to withdraw from clinical placements in some states because California is not a SARA member.”

The California State University Chancellor’s Office wrote that “there are a number of benefits for why California should join SARA, including the streamlined authorization process. At present, CSU universities must enter into separate authorization agreements with each state, making it burdensome and costly, while limiting student access. Should California join SARA, the CSU would be well positioned to expand educational opportunities for students, allowing them to enroll in online programs with greater ease…participation in SARA helps institutions avoid the financial and administrative burdens associated with obtaining multiple state authorizations. CSU universities spend approximately $350,000 per year to maintain state authorization with various states. With the CSU currently facing fiscal challenges at the state and federal level, SB 790 would provide some relief to our universities and expand education opportunities for our students.”

The Association of Independent California Colleges and Universities (AICCU) also wrote in support, stating that “the implementation of SB 790 will facilitate a more streamlined process for our institutions to offer distance education programs to out-of-state students by participating in interstate reciprocity agreements. This will reduce redundant regulatory burdens, allowing our member institutions to allocate resources more effectively toward enhancing educational quality and student support services. Moreover, it will simplify the ability of institutions to continue serving students who move outside the state and will broaden educational access to students seeking high-quality programs across the country. By creating a pathway for California to streamline this process, the state can expand the opportunities for California’s colleges and universities, public and private nonprofit alike, to compete in the national marketplace and offer their programs to more students. This provides an opportunity to help supplement and increase enrollment at California’s institutions of higher education, which will help fuel program and faculty growth.”

AICCU continues that “importantly, SB 790 maintains California's strong commitment to consumer protections in higher education. The bill ensures that participating institutions adhere to stringent standards that safeguard student interests, uphold academic integrity, and provide mechanisms for addressing student complaints. Recent amendments also provide legislative policy committees an opportunity to review the agreement and for the public to provide testimony. By balancing the facilitation of interstate educational opportunities with robust consumer protections, this legislation exemplifies a thoughtful approach to modernizing higher education policy.”

Arguments in opposition. The University of Phoenix wrote in opposition, noting that “SB 790 would prevent out-of-state private for-profit institutions from participating in any reciprocity agreement that California joins absent any stated justification and with no consideration of the actual qualifications of these schools. Moreover, these qualified schools have been participating in SARA without incident for over a decade offering distance education in full compliance in all other 49 states and territories. In addition, many of these same qualified institutions, like University of Phoenix, have already been providing distance education to California students for years through the Out-of-State Institution Registration process with the [Bureau] without incident. As such, there is no legitimate basis to out-of-hand prevent qualified private for­ profit schools from being members of a reciprocity agreement that California joins.”

The University of Phoenix continues, writing that, “any interstate reciprocity agreement that California either joins or creates must not discriminate against out-of-state schools if it expects its California schools to be treated fairly and without discriminatory restrictions as an out-of-state school offering distance education to residents of other member states. As noted by the author in the Senate Business and Professions Committee, if California decides not to join SARA in its current form California would have to develop a reciprocity agreement from scratch and try and convince any of the 49 SARA member states to jettison SARA and join California. The premise of creating a separate reciprocity agreement that is based on a discriminatory structure AND the removal of uniform requirements for entry and regulation amongst the member states is likely to fail as interstate reciprocity inherently requires equal and uniform entry and operation standards that all states will agree to so states are assured that all participating institutions are meeting all the standards. A reciprocity agreement cannot work otherwise, and states would be left to individually regulate every school offering distance education to their residents - something that is prohibitively expensive and unworkable and was the reason that a different approach for the regulation of distance education was created over a decade ago.”

The Institute for College Access and Success (TICAS), the California Federation of Teachers (CFT), and the Consumer Federation of California also wrote expressing concerns. They note that “from 2021-2023, twenty-two state Attorneys General have sounded the alarm about SARA’s limitations, especially regarding states' abilities to enforce their own higher education-specific consumer protection laws. Furthermore, the State of Washington is actively exploring alternatives to SARA that provide stronger safeguards for students via House Bill 1279—clearly signaling that California should not consider SARA a turnkey solution without first ensuring it retains the power to enforce critical protections…currently, California sets the gold standard in the economic relief it provides students and factors for eligibility to STRF when compared to the more than 20 states that have a STRF-like fund. Under current law, out-of-state for-profit and certain nonprofit schools without a physical presence in California must register with the Bureau and contribute to STRF. This requirement ensures that if a school shuts down, California students can receive compensation. This bill would take away that assurance by eliminating the requirement for these online institutions and their students to participate in STRF—leaving only California-based schools and students to pay in. If an out-of-state school approved under a reciprocity agreement were to suddenly close, affected California students would have to rely on the school’s home state for relief, which often means no relief at all. We recommend an amendment to require any out-of-state online institution operating in California to contribute to and provide STRF as a student recourse, or at minimum a STRF-equivalent coverage for California students.”

Committee comments. The Committee recommends, and the author has accepted, amendments that remove all language in Section one and Section two of SB 790 pertaining to the designation of a coordinating body and the removal of CPEC from existing law. Amendments would also remove references to a coordinating body in Section three, and instead requires the Governor to “designate a state agency, department, or office for the implementation of an interstate reciprocity agreement for distance education, to serve as the portal entity if the Governor enters into an interstate reciprocity agreement.”

This would effectively remove references to existing law regarding CPEC, and the designation of principal state operating and coordinating entity.

Prior legislation. SB 634 (Block, 2015) would have authorized the Department of Consumer Affairs to enter into a regional state authorization reciprocity agreement with other states through a compact on behalf of this state. SB 634 was pulled from a hearing in the Senate Committee on Education at the request of the author.

REGISTERED SUPPORT / OPPOSITION:

Support

Association of Independent California Colleges & Universities (AICCU)

Biola University

California Baptist University

California College of the Arts

California State University, Office of the Chancellor

Concordia University Irvine

Dominican University of California

Golden Gate University

Loma Linda University Adventist Health Sciences Center and its Affiliated Entities

Loma Linda University Health

Los Angeles Pacific University

Point Loma Nazarene University

Santa Clara University

Saybrook University

Stanford University

UMass Global

University of California

University of La Verne

University of Redlands

University of San Diego

University of San Francisco

University of Southern California (USC)

University of the Pacific

Vanguard University of Southern California

Westmont College

Opposition

University of Phoenix, INC.

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

 THIRD READING  

Bill No: SB 790

Author: Cabaldon (D)

Amended: 5/6/25

Vote: 21

SENATE BUS., PROF. & ECON. DEV. COMMITTEE: 11-0, 4/21/25

AYES: Ashby, Choi, Archuleta, Arreguín, Grayson, Niello, Richardson, Smallwood-Cuevas, Strickland, Umberg, Weber Pierson

SENATE EDUCATION COMMITTEE: 6-0, 4/30/25

AYES: Pérez, Ochoa Bogh, Cabaldon, Choi, Cortese, Laird

NO VOTE RECORDED: Gonzalez

SENATE APPROPRIATIONS COMMITTEE: 6-0, 5/23/25

AYES: Caballero, Seyarto, Cabaldon, Grayson, Richardson, Wahab

NO VOTE RECORDED: Dahle

SUBJECT: Postsecondary education: postsecondary education coordinating entity: interstate reciprocity agreements for distance education: out-of-state postsecondary educational institutions

SOURCE: Author

DIGEST:

This bill requires the Governor to designate a state agency, department, or office as the principal state operating and coordinating entity for postsecondary education, with specified duties, including, but not limited to, implementation of an interstate reciprocity agreement for reciprocity agreement for the authorization and oversight of distance education, as the portal entity, if the Governor enters into an interstate reciprocity agreement.

ANALYSIS:

Existing law:

1. Establishes California Private Postsecondary Education Act of 2009 (the Act) until January 1, 2027, and requires the Bureau for Private Postsecondary Education (BPPE) to, among other things, review, investigate and approve private postsecondary 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 United States Department of Education (USDE). 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 Student Tuition Recovery Fund (STRF) to provide refunds to students affected by the possible closure of an institution/school. (Education Code (EC) § 94800 et seq.)
2. Requires an out-of-state private postsecondary educational institution (other than a nonpublic higher education institution that grants undergraduate degrees, graduate degrees, or both, formed as nonprofit corporation and accredited by an agency recognized by the USDE) to register with the BPPE, pay a fee and provide evidence of accreditation; evidence that the institution is approved to operate in the state where the institution maintains its main administrative location; and a copy of the institution’s catalog and sample enrollment agreement. Requires these institutions to comply with STRF requirements and disclosures. Prohibits an institution from operating in California for failure to comply with the registration requirements. Establishes the validity of a BPPE registration for two years. (EC § 94801.5)
3. Requires BPPE to adopt regulations establishing minimum operating standards to ensure that the content of each educational program reach its stated objective; maintain specific written standards for student admissions for each educational program; ensure the facilities, instructional equipment and materials are sufficient to meet the educational program’s goals; maintain a withdrawal policy and provide refunds; provide qualified personnel; provide upon successful completion of an educational program a degree or diploma; maintain and disburse adequate records and transcripts to students; and follow all other applicable ordinances and laws. (EC §94885 (a)(1-9)).

This bill:

1. Requires the Governor to designate a state agency, department, or office as the principal state operating and coordinating entity for postsecondary education, with specified duties, including, but not limited to, implementation of an interstate reciprocity agreement for reciprocity agreement for the authorization and oversight of distance education, as the portal entity, if the Governor enters into an interstate reciprocity agreement. States Legislative intent that the portal entity adopt as many of the duties and responsibilities of the former California Postsecondary Education Commission and that the Governor consider submitting a reorganization plan to accomplish this purpose.
2. Requires BPPE, after receiving a report about specified actions related to a registered institution, or after determining that such notification should have been provided, to seek additional information and notify the institution whether it is required to suspend enrolling new students, and whether other actions are needed to protect California residents while BPPE continues to investigate.
3. Authorizes the Governor to enter into one or more interstate reciprocity agreements upon issuing a written finding of specified information and facets of the reciprocity agreement, and after a joint hearing held by the Assembly Committee on Business and Professions, the Assembly Committee on Higher Education, the Senate Committee on Business, Professions and Economic Development, and the Senate Committee on Education at which a representative from the commission shall testify on the reciprocity agreement.

1. Authorizes a postsecondary educational institution to apply to the portal entity for approval to operate under an interstate reciprocity agreement and authorizes a reasonable fee. Requires the portal entity to enter into a memorandum of understanding (MOU) with the Chancellor of the California State University, the Chancellor of the California Community Colleges, the presidents of the independent California colleges and universities as represented by the state association representing the largest number of those members, and, if appropriate, BPPE. Specifies that the MOU shall not weaken existing student privacy and confidentiality protections.
2. Requires BPPE to investigate and resolve complaints that may arise pursuant to the interstate reciprocity agreement involving participating private postsecondary educational institutions that are approved to operate or exempt from the Act but elect to participate in the interstate reciprocity agreement pursuant to terms and conditions established by BPPE.

Background

The BBPE and the Act were established by Assembly Bill 48 (Portantino, Chapter 310, Statutes of 2009) after several failed legislative attempts to remedy the structural challenges of the former Bureau for Private Postsecondary and Vocational Education. While the Legislature has amended the Act several times since the initial passage of AB 48, it has consistently directed BPPE to make protection of the public the highest priority in performing duties and exercising powers. BPPE actively investigates and combats unlicensed activity, administers the STRF, and conducts outreach and education activities for students and private postsecondary educational institutions within the state. Within BPPE is the Office of Student Assistance and Relief, established by SB 1192 (Hill, Chapter 593, Statutes of 2016), which exists to advance the rights of students at private postsecondary educational institutions and assist students who have suffered economic loss due to unlawful activities or the closure of an institution.

Action taken by the USDE in 2010 aimed at improving the integrity of programs authorized under Title IV of the Higher Education Act requires, among other things, that to remain eligible for Title IV, postsecondary education institutions must be authorized to operate in the state they are located and must ensure access to a complaint process that will permit student consumers to address alleged violations of state consumer protection laws. In 2019, USDE announced new federal regulations regarding financial aid, requiring schools to document a complaint process for distance education students. A number of institutions previously verified as exempt under the Act have now sought voluntary approval by BPPE in order to comply with Title IV requirements.

State Authorization Reciprocity Agreements (SARA). In response to concerns over the complexity and cost of navigating differing requirements in multiple states, a group of institutions, states, and policy organizations came together in 2013 to develop the 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.

General concerns remain about online programs that are offered by some institutions perceived as providing fraud and debt rather than knowledge and skills. In some states, institutions offering distance education programs to California students have entered into settlements with those states after being accused of undertaking misleading online recruiting practices, including deceiving prospective students by leading them to believe that online education degrees would allow them to become licensed professionals. A number of institutions which have been the focus of complaints by state and federal agencies continue to have robust distance education programs and are actively enrolling students.

Institutions that participate in SARA are approved for participation by their home state, and states that join SARA must accept that approval – regardless of the effectiveness of the home state’s oversight. Once a state enters SARA, it does not retain authority to enforce its applicable laws. Concerns about the practical impacts of ceding authority to a third-party have been at the root of failed efforts in the past to require the state to join SARA, particularly the fact that California would no longer be able to impose some of the important student protections contained in the Act. SARA would still allow the AG to take action based on general laws (fraud, deception, etc) but provisions in the Act would not be applicable. Once a state is approved to join SARA, institutions that are operating under the compact are able to enroll students in their distance education programs.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

SUPPORT: (Verified 5/23/25)

American Jewish University
Antioch University
Association of Independent California Colleges & Universities
Biola University
California Baptist University
California College of the Arts
California Indian Nations College
Claremont Lincoln University

California State University
Concordia University Irvine
Dominican University of California
Edvance College
Golden Gate University
John Paul the Great Catholic University
Keck Graduate Institute
Life Pacific University
Loma Linda University
Los Angeles Pacific University
Loyola Marymount University
Minerva University
National University
Otis College of Art and Design
Palo Alto University
Pepperdine University
Point Loma Nazarene University
Reach University
Saint Mary's College of California
Samuel Merritt University
Santa Clara University
Saybrook University
Southern California University of Health Sciences
Stanford University
The Chicago School
University of California
University of Redlands
University of San Diego
University of San Francisco
University of Southern California; the
University of the Pacific
Vanguard University of Southern California
Western University of Health Sciences
Westmont College
William Jessup University

OPPOSITION: (Verified 5/23/25)

California Federation of Teachers

Consumer Federation of California

National Consumer Law Center, Inc.

The Institute for College Access and Success
University of Phoenix

ARGUMENTS IN SUPPORT: Supporters believe that this bill, “maintains California’s strong commitment to consumer protections in higher education. The bill ensures that participating institutions adhere to stringent standards that safeguard student interests, uphold academic integrity, and provide mechanisms for addressing student complaints. By balancing the facilitation of interstate educational opportunities with robust consumer protections, this legislation exemplifies a thoughtful approach to modernizing higher education policy.”

The Association of Independent California Colleges and Universities writes that the state’s “lack of participation in interstate reciprocity for distance education creates significant burdens and barriers. Currently, if an institution wishes to offer an online academic program in another state, it must submit extensive paperwork, pay thousands of dollars in fees, respond to sometimes lengthy questionnaires and supplemental requests for information. …The implementation of SB 790 will facilitate a more streamlined process for our institutions to offer distance education programs to out-of-state students by participating in interstate reciprocity agreements. This will reduce redundant regulatory burdens, allowing our member institutions to allocate resources more effectively toward enhancing educational quality and student support services.”

The University of California notes that, “In addition to online education, state authorization regulations apply to out-of-state clinical placements for students in health sciences programs. These pose significant hurdles to making out-of-state clinical placements at the seven UC campuses that offer health sciences instruction…Since all states except California have joined SARA, UC and other California colleges and universities are at an extreme disadvantage in offering online courses, degrees, and clinical placements to residents of other states. States that had previously exempted online educational offerings from California have established more stringent requirements for institutions in states that are not part of SARA. UC has already had to withdraw from clinical placements in some states because California is not a SARA member.”

ARGUMENTS IN OPPOSITION: According to the National Consumer Law Center, “California is the only state that has not joined SARA for an important reason. Although there is no evidence that fraud is less likely to be committed by online schools than by brick-and-mortar schools, SARA prohibits member distant states from imposing their higher education specific consumer protection laws to protect their residents attending online schools…This means that if California joins SARA, the state will waive its right to use the [Act] to protect California students from fraud committed by out-of-state for-profit SARA schools. California would only be allowed to enforce general purpose laws, such as the Unfair Competition Law and common law fraud…neither general purpose laws nor SARA policies are sufficient to prevent fraud and protect students from predatory school conduct… California should not join SARA, despite the minimal consumer protections proposed by SB 790.”

The Institute for College Access and Success, among other significant concerns, notes that “this bill completely removes one of California’s strongest student protections, access to STRF. Currently, California sets the gold standard in the economic relief it provides students and factors for eligibility to STRF when compared to the more than 20 states that have a STRF-like fund. Under current law, out-of-state for-profit and certain nonprofit schools without a physical presence in California must register with the Bureau and contribute to STRF. This requirement ensures that if a school shuts down, California students can receive compensation. This bill would take away that assurance by eliminating the requirement for these online institutions and their students to participate in STRF—leaving only California-based schools and students to pay in. If an out-of-state school approved under a reciprocity agreement were to suddenly close, affected California students would have to rely on the school’s home state for relief, which often means no relief at all… while this bill has made some progress, it remains fundamentally flawed.”

The University of Phoenix writes that this bill “would prevent out-of-state ‘private and for-profit’ institutions from participating in any reciprocity agreement that California joins by the simple whim of the Governor. This discriminatory and arbitrary scheme would, without basis or reason, prevent otherwise qualified institutions, many of which are already approved and providing distance education to California students through the Out-of- State Institution Registration process with the [BPPE]…If California decides to join a reciprocity agreement for its institutions to offer distance education in other participating states, the structure of that agreement must include all qualified institutions of other states under the same equal terms and conditions of participation. University of Phoenix further writes that “this bill would allow California to rescind an out-of-state institution's approval under the agreement ‘without cause.’ This is a shocking and a fundamental denial of due process. Without just cause, and with no adjudicatory process at all, any institution could have its authority to offer distance education removed at any time for no reason whatsoever.”

Prepared by: Sarah Mason / B., P. & E.D. /

5/26/25 13:55:04

**** END ****

SENATE COMMITTEE ON APPROPRIATIONS

Senator Anna Caballero, Chair

2025 - 2026 Regular Session

SB 790 (Cabaldon) - Postsecondary education: postsecondary education coordinating entity: interstate reciprocity agreements for distance education: out-of-state postsecondary educational institutions

Bill Summary:

SB 790 eliminates the California Postsecondary Education Commission (CPEC) and instead requires the Governor to designate a state agency, department, or office as the principal state operating and coordinating entity (portal entity) for postsecondary education, with specified duties, including, implementation of an interstate reciprocity agreement (IRA) for the authorization and oversight of distance education, as specified.

Fiscal Impact:

• Unknown ongoing significant costs to the agency, department, or office the Governor designates as the portal entity. The bill states legislative intent for the portal entity to adopt as many of the duties and responsibilities of the former CPEC. For comparison, the 2011-12 Governor’s Budget proposed approximately $1.9 million to support CPEC’s operations at that time before funding for the commission was ultimately vetoed. The designated portal entity will likely require similar resources, but total costs will depend on, among other things, the extent additional workload to implement an IRA and oversee distance education may be absorbed within the entity’s current resources. Fees from participating educational institutions will offset the portal entity’s regulatory costs to some extent; however, initial costs will likely be borne from the General Fund (GF) until sufficient revenue is collected to support ongoing operations.

While the bill does not specify what state agency may be designated as the portal entity, the Bureau for Private Postsecondary Education (BPPE) is most similar in related mission to the stated intent of the proposed portal entity. If BPPE were to be designated as the portal entity, it would incur significant costs that may exacerbate the bureau’s main fund, the Private Postsecondary Education Administration Fund (Fund), which faces a substantial structural deficit.

• The BPPE reports total administrative and enforcement costs of approximately $1,002,000 beginning in Fiscal Year (FY) 2027-28 and $954,000 ongoing (Fund) to process additional applications and investigate complaints from both private and public out-of-state institutions. Initial application revenue may offset BPPE’s administrative workload to some extent, however costs for any significant increase in registrations and ongoing enforcement workload cannot be supported by BPPE’s Fund (see staff comments).

The bill does not specify that BPPE be designated as the portal entity, but does require all out-of-state postsecondary educational institutions that are not part of an IRA by January 1, 2028 to register with the BPPE. BPPE estimates up to 599 institutions would be required to register with the bureau if IRA requirements are not met; however, it is unknown how many of these institutions would actually meet IRA requirements and become members. BPPE’s estimate assumes all 599 institutions would be required to register with the bureau. To the extent this number is lower, BPPE’s administrative and enforcement costs will likely decrease accordingly.

• Unknown costs for the UC, CSU, and CCC to join and enter into memoranda of understandings (MOUs) with the designated portal entity. Total costs would depend on, among other things, how often the body would meet and the level of support staff or other resources required by the UC, CSU, and CCC to support their participation.
• Unknown total potential cost savings for all participating institutions (University of California (UC), California State University (CSU), California Community Colleges (CCCs), and independent colleges and universities) to participate in an IRA through the portal entity. For example, the UC estimates $1 million in ongoing savings once an IRA is made. The UC currently pays a total of approximately $1.3 million in fees to individual states’ postsecondary education programs that it enters into agreements with. Under an IRA, UC notes that it could join the National Council for State Authorization Reciprocity Agreement (NC-SARA), which has a participation fee of $217,000.

Background:

CPEC. The 1960 Master Plan for Higher Education in California articulated basic state policies on higher education, such as assigning missions to the different higher education segments, specifying eligibility targets, and expressing the state’s intent that higher education remain accessible, affordable, high-quality, and accountable. In addition, the Master Plan created an oversight body, the CPEC, tasked with providing fiscal and policy recommendations to the Governor and Legislature; monitoring and coordinating public institutions; and ensuring comprehensive statewide planning for higher education and effective use of resources.

Although Governor Brown vetoed funding for CPEC in the 2011-12 budget, his veto message acknowledged the well-established need for coordinating and guiding state higher education policy and requested that stakeholders explore alternative ways that these functions could be fulfilled. This bill proposes to delete CPEC from the Education Code and states legislative intent that the portal entity designated by the Governor adopt as many of its duties and responsibilities as possible and be the principal state operating and coordinating entity for postsecondary education.

Oversight of distance education. In response to concerns over the complexity and cost of navigating differing requirements for state authorization in multiple states, a group of institutions, states, and policy organizations came together in 2013 to develop the NC-SARA. NC-SARA provides that accredited, degree-granting private and public institutions approved by an oversight body in one participating state will be deemed automatically to have met approval requirements in other participating states.

General concerns remain about online programs that are offered by some institutions perceived as providing fraud and debt rather than knowledge and skills. In some states, institutions offering distance education programs to California students have entered into settlements with those states after being accused of undertaking misleading online recruiting practices, including deceiving prospective students by leading them to believe that online education degrees would allow them to become licensed professionals. A number of institutions that have been the focus of complaints by state and federal agencies continue to have robust distance education programs and are actively enrolling students.

Institutions that participate in NC-SARA are approved for participation by their home state, and states that join NC-SARA must accept that approval – regardless of the effectiveness of the home state’s oversight. Once a state enters NC-SARA, it does not retain authority to enforce its applicable laws. Concerns about the practical impacts of ceding authority to a third-party have been at the root of failed efforts in the past to require California to join NC-SARA, particularly the fact that the state would no longer be able to impose some of the important student protections contained in the Act. NC-SARA would still allow the Attorney General to take action based on general laws (fraud, deception, etc.), but provisions in the California Private Postsecondary Education Act would not be applicable. Once a state is approved to join NC-SARA, institutions that are operating under the compact are able to enroll students in their distance education programs.

This bill authorizes California’s participation in a reciprocity agreement like NC-SARA only if certain conditions are met, including if it is confirmed that joining will not interfere with California’s ability to enforce consumer protection laws or stop any entity involved from operating in this state.

Proposed Law:

• Eliminates provisions related to the establishment of CPEC and its duties in the Education Code.
• Requires the Governor to designate a state agency, department, or office as the principal state operating and coordinating entity for postsecondary education with all of the following duties:
  • Implementation, coordination, and evaluation of the Master Plan for Career Education.
  • Coordination and evaluation of postsecondary implementation of intersegmental state policies and initiatives, including, but not limited to, College and Career Access Pathways and other dual enrollment programs, the Golden State Pathways Program, the Regional K–16 Education Collaboratives Grant Program, and the California Cradle-to-Career Data System.
  • Implementation of an IRA for distance education as the portal entity if the Governor enters into an IRA.
• Authorizes the Governor to enter into one or more IRAs through a compact on behalf of the state after issuing written findings and the completion of a joint hearing by the appropriate policy committees of the Assembly and Senate, as specified.
• Authorizes a postsecondary educational institution to apply to the portal entity for approval to operate under an IRA using a standard application developed pursuant to the IRA.
• Authorizes the portal entity to establish a fee to be paid by the participating institution in an amount limited to the reasonable regulatory costs incurred by the portal entity.
• Requires the portal entity to enter into a MOU with the Chancellor of the CSU, the Chancellor of the CCC, the presidents of the independent California colleges and universities as represented by the state association representing the largest number of those members, and the BPPE, if appropriate.
• Upon resolution by the Regents of the UC, requires the portal entity to enter into a MOU with the President of the UC.
• Specifies a MOU executed for the purpose of an IRA delegate functions and responsibilities among the parties and provide for reimbursement of expenses, and may not weaken existing student privacy and confidentiality protections.
• Requires the Board of Governors of the CCC and the BPPE to investigate and resolve complaints that may arise pursuant to an IRA, as specified.
• Requires the portal entity to ensure that it and participating institutions have clear and well-documented policies for addressing catastrophic events in a manner that protects students as consumers, including the protection of student records.
• Requires the portal entity to work cooperatively with other states in the interstate reciprocity agreement and the commission to enable the success of the IRA.
• Requires entities included in a MOU with the portal entity to document all formal complaints received, complaint notifications provided to participating postsecondary educational institutions and accrediting agencies, actions taken that are commensurate with the severity of the violations, and complaint resolutions.
• Authorize the BPPE after receipt of any of the notifications required of an out-of-state institution registering with the BPPE that enrolls a California student or after determining that such notifications should have been provided, to seek additional information and notify the institution regarding whether it should suspend enrolling new students, and whether other actions are needed to protect California residents while the BPPE continues to investigate.
• Strikes “private” from the type of postsecondary educational institution required to register with the BPPE but specifies that before January 1, 2028, the requirement shall not apply to a higher education institution that grants undergraduate degrees, graduate degrees, or both, and that is either formed as a nonprofit corporation and is accredited by an agency recognized by the USDE, or is a public institution of higher education. Beginning January 1, 2028, specifies that the registration requirement shall not apply to a public or nonprofit higher education institution approved pursuant to an interstate reciprocity agreement to which the state is a party.
• Makes out-of-state public institutions subject to provisions that prohibit an institution from deceptive practices including using California’s state seal on a diploma or false advertisement, as specified.
• States codified legislative intent that the portal entity adopt as many of the duties and responsibilities of the former CPEC and that the Governor consider submitting a reorganization plan to accomplish this purpose.
• States legislative findings and declarations.
• Makes other conforming changes.

Staff Comments:

The BPPE’s Fund faces a substantial structural deficit. The 2022 Budget Act provided BPPE with $24 million GF over three years ($14 million in FY 2022-23, $6 million in FY 2023-24, and $4 million in FY 2024-25) to stabilize its funding while the bureau developed a proposal for a new fee structure to support its operations on an ongoing basis. The 2022 Budget Act also specified that BPPE submit the proposal no later than January 30, 2024 and prohibited the bureau from spending any GF made available to the bureau during the 2024-25 FY until a report on the proposal was provided to the Legislature.

BPPE submitted the report to the Legislature on its fee recommendations in February 2024. The report, among other things, noted that by FY 2028-29, at current revenue levels and with projected routine growth in expenditures, the projected size of BPPE’s structural deficit may be up to $11 million. The report goes on to detail several recommendations to generate sufficient revenue to cover BPPE expenditures beyond just fee increases. However, the report does not identify alternative funding approaches sufficient to avoid fee increases entirely. The 2025-26 May Revision to the Governor’s Budget indicates the Fund continues to have a significant structural deficit.

Staff notes the 2025-26 Governor’s Budget proposed $5 million GF for the Government Operations Agency to establish state planning and coordinating body for TK-12 education, higher education, and state economic and labor agencies, to improve forecasting of needed skills and coordination of resources and initiatives across state government in alignment with recommendations from the Master Plan for Career Education. It is unknown how or to what extent this proposal may have overlapped with the requirements and intent of this bill. The 2025-26 May Revision has withdrawn this proposed GF allocation.

-- END --

SENATE COMMITTEE ON EDUCATION

Senator Sasha Renée Pérez, Chair

2025 - 2026 Regular

Bill No: SB 790 Hearing Date: April 30, 2025

Subject: Postsecondary education: postsecondary education coordinating entity: interstate reciprocity agreements for distance education: out-of-state postsecondary educational institutions.

SUMMARY

This bill requires the Governor to designate a state agency, department, or office as the principal state operating and coordinating entity for postsecondary education, with specified duties, including, implementation of an interstate reciprocity agreement for the authorization and oversight of distance education, as the portal entity, if the Governor enters into an interstate reciprocity agreement. Additionally, the bill strikes provisions that establish the California Postsecondary Education Commission (CPEC) and its duties from the Education Code. It further states Legislative intent that the portal entity adopt as many of CPEC’s duties and responsibilities.

BACKGROUND

Existing law:

1. Establishes California Private Postsecondary Education Act of 2009 (the Act) until January 1, 2027, and requires the Bureau for Private Postsecondary Education (Bureau) to, among other things, review, investigate and approve private postsecondary institutions, programs and courses of instruction pursuant to the Act and authorizes the Bureau 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 United States Department of Education (USDE). The Act also provides for specified disclosures and enrollment agreements for students, requirements for cancellations, withdrawals and refunds, and that the Bureau shall administer the Student Tuition Recovery Fund (STRF) to provide refunds to students affected by the possible closure of an institution/school. (Education Code (EC) § 94800 et seq.)
2. Provides numerous exemptions from the Act and oversight by the Bureau, including, but not limited to schools that are 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, and Western Association of Schools and Colleges (WASC). Requires an independent institution of higher education that is otherwise exempt from the Act to comply with all applicable state and federal laws, including laws relating to fraud, abuse, and false advertising and authorizes these types of institutions to execute a contract with the Bureau for the Bureau to review and, as appropriate, act on complaints concerning the institution, according to specified requirements and subject to a fee of $1,076. Requires the Bureau to establish a process through which an institution exempt from the Act may request and obtain verification that the institution is exempt. Specifies that the verification is valid for a period of up to two years, as long as the institution maintains full compliance with the requirements of the exemption. (EC §§ 94874 (i), 94874.9, and 94874.7)
3. 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. (EC § 94850.5)
4. Requires an out-of-state private postsecondary educational institution (other than a nonpublic higher education institution that grants undergraduate degrees, graduate degrees, or both, formed as nonprofit corporation and accredited by an agency recognized by the USDE to register with the Bureau, pay a fee and provide evidence of accreditation; evidence that the institution is approved to operate in the state where the institution maintains its main administrative location; and a copy of the institution’s catalog and sample enrollment agreement. Requires these institutions to comply with STRF requirements and disclosures. Prohibits an institution from operating in California for failure to comply with the registration requirements. Establishes the validity of a Bureau registration for two years. (EC § 94801.5)
5. Authorizes the Bureau to establish thresholds of California-based activity that constitute limited physical presence, with those institutions subject to registration requirements defined through regulation, and minimal levels of California-based activity that do not require institutional approval by, nor registration with, the Bureau. Specifies that an institution is considered to have a physical presence in the state if it offers instruction or core academic support services from a physical location owned, operated, or rented by or on behalf of the institution in California. (EC § 94801.7)
6. Requires the Bureau to adopt regulations establishing minimum operating standards to ensure that the content of each educational program reach its stated objective; maintain specific written standards for student admissions for each educational program; ensure the facilities, instructional equipment and materials are sufficient to meet the educational program’s goals; maintain a withdrawal policy and provide refunds; provide qualified personnel; provide upon successful completion of an educational program a degree or diploma; maintain and disburse adequate records and transcripts to students; and follow all other applicable ordinances and laws. (EC §94885 (a)(1-9)).
7. Establishes an Office of Student Assistance and Relief (Office or OSAR) for the purpose of advancing and promoting the rights of prospective students, current students, or past students of private postsecondary educational institutions. Tasks the Office with: conducting outreach and providing information and assistance to students who have been affected by the unlawful activities or closure of an institution; serving as a primary point of contact to address the needs of private postsecondary education students and working in consultation with state and federal agencies, including, but not limited to, California Student Aid Commission, the Office of the Chancellor of the California Community Colleges, the Department of Veterans Affairs, the federal Consumer Financial Protection Bureau, and the USDE. Authorizes the Office to provide outreach to students and prospective students to provide them with, among other information, information on making informed decisions in selecting postsecondary educational institutions, student rights regarding school performance disclosures, enrollment agreements, and cancellation and refund policies, how to contact the office and the Bureau for assistance, student loan rights and assistance, and free nonprofit community based resources. (EC §§ 94949.7 - 94949.73)

ANALYSIS

This bill:

Higher Education Coordinating Body

1. Strikes CPEC from the Education Code.
2. Requires the Governor to designate a state agency, department, or office as the principal state operating and coordinating entity for postsecondary education, with all of the following duties:
   1. Implementation, coordination, and evaluation of the Master Plan for

Career Education.

• 1. Coordination and evaluation of postsecondary implementation of

intersegmental state policies and initiatives, including, but not limited to, College and Career Access Pathways and other dual enrollment programs, the Golden State Pathways Program, the Regional K-16 Education Collaborative Grant program, and the California Cradle-to-Career Data System.

• 1. Implementation of an interstate reciprocity agreement for distance

education as the portal entity if the Governor enters into an interstate reciprocity agreement, as specified.

1. States that Legislative intent that the portal entity adopt as many of the duties and responsibilities of the former CPEC, created in current law, as it read on December 31, 2025.

State Authorization Reciprocity Agreement for Distance Education

1. Authorizes the Governor to enter into one or more interstate reciprocity agreements through a compact on behalf of the state, upon issuing a written finding of all the following:
   1. The interstate reciprocity agreement and its implementation will not

interfere with, and does not affect, the authority of the Attorney General (AG) or any other state or local agency to enforce any statutes or regulations prohibiting consumer fraud and unfair or deceptive business practices or the authority of the state to suspend or terminate the operation in the state of any entity subject to the interstate reciprocity agreement provided in state law.

• 1. The interstate reciprocity agreement does not prevent the AG or any other

state or local agency from applying and enforcing state law with respect to out-of-state postsecondary educational institutions that participate in the reciprocity agreement.

• 1. The interstate reciprocity agreement allows the state, despite any

reciprocal authorization, to require an out-of-state postsecondary educational institution, upon providing notice of at least six months, to register, pay fees, and be subject to the related state law to protect students, prevent misrepresentation to the public, or prevent the loss of funds paid from public resources or student tuition.

• 1. The interstate reciprocity agreement does not apply to a course offered

onsite to students at a military installation in the state, even if the course at the physical location is offered to students at other locations.

• 1. The commission and national coordinating council are committed to

preserving standards and protections that have been promulgated by the federal government and are the basis of the interstate reciprocity agreement, even if those standards or protections are subsequently diminished or withdrawn by the federal law or action of the USDE, and the commission is committed to developing meaningful performance metrics and frameworks for best practices with regard to individual state authorization activities.

• 1. Within one year of the effective date of the state’s entry into the interstate

reciprocity agreement, the Bureau will establish a process to ensure that postsecondary educational institutions exempt from the Act can participate in the interstate reciprocity agreement without impacting the postsecondary educational institution’s exempt status.

• 1. Participating states have the necessary authority and resources to

investigate complaints and take appropriate action.

• 1. The reciprocity agreement does not prohibit the state from accepting

complaints from California students that have not first been submitted to the institution that is the subject of the complaint.

• 1. The interstate reciprocity agreement does not delegate independent legal

authority over the state or its participating postsecondary educational institutions to any other entity or otherwise authorize assumption of that have not first been submitted to the institution that is the subject of the complaint.

• 1. The interstate reciprocity agreement does not delegate independent legal

authority over the state or its participating postsecondary educational institutions to any other entity or otherwise authorize assumption of that legal authority by any other entity other than the state or its subdivisions, including by providing any non-state entity with the authority to reverse or veto a decision by the state to suspend or terminate an in-state’s institution’s certification to participate in a reciprocity agreement.

• 1. The interstate reciprocity agreement may be modified by the commission

only with the approval of the Governor.

Approval to operate under the reciprocity agreement

1. Authorizes a postsecondary educational institution to apply to the portal entity for approval to operate under an interstate reciprocity agreement using a standard application developed in accordance to the interstate reciprocity agreement.
2. Authorizes the portal entity to establish a reasonable fee as specified to be paid by a participating postsecondary educational institution.
3. Requires the portal entity to enter into a memorandum of understanding (MOU) with the University of California (UC) President upon resolution by the UC Regents, California State University (CSU) Chancellor, the California Community College (CCC) Board of Governors, the presidents of the independent California colleges and universities as represented by the state association representing the largest number of those members, and, if appropriate, the Bureau. It requires each entity to promptly report a complaint or concern to the postsecondary educational institution, the portal entity, and, where appropriate, the accrediting agency.
4. Requires that the MOU executed by the portal entity delegate functions and responsibilities among the parities and provide for reimbursement of expenses. It further prohibits the MOU from weakening existing student privacy and confidentiality protections.
5. Requires the CCC Board of Governors to investigate and resolve complaints involving participating community colleges that may arise pursuant to the interstate reciprocity agreement, as specified.
6. Requires the Bureau to investigate and resolve complaints that may arise pursuant to the interstate reciprocity agreement involving participating private postsecondary educational institutions that are either approved to operate or exempt from the Act but elect to participate in the interstate reciprocity agreement pursuant to terms and conditions established by the Bureau, as specified.
7. Requires the portal entity to ensure that it and participating postsecondary educational institutions have clear and well-documented policies for addressing catastrophic events in a manner that protects students as consumers including the protection of student records. The bill states that the Act and related regulations, constitutes those policies for participating private postsecondary educational institutions approved to operate by the Bureau.

Changes to the California Private Postsecondary Education Act

1. Authorize the Bureau after receipt of any of the notifications required of an out-of-state institution registering with the Bureau that enrolls a California student or after determining that such notifications should have been provided, to seek additional information and notify the institution regarding whether it should suspend enrolling new students, and whether other actions are needed to protect California residents while the Bureau continues to investigate.
2. Strikes “private” from the type of postsecondary educational institution required to register with the Bureau but specifies that before January 1, 2028, the requirement shall not apply to a higher education institution that grants undergraduate degrees, graduate degrees, or both, and that is either formed as a nonprofit corporation and is accredited by an agency recognized by the USDE, or is a public institution of higher education. Beginning January 1, 2028, specifies that the registration requirement shall not apply to a public or nonprofit higher education institution approved pursuant to an interstate reciprocity agreement to which the state is a party.
3. Makes out-of-state public institutions subject to provisions that prohibit an institution from deceptive practices including using California’s state seal on a diploma or false advertisement, as specified.

STAFF COMMENTS

1. Need for the bill. According to the author, “Enrollment in online higher education courses surged during the pandemic and today remains above pre-2020 levels. Most college students now take some classes online, with one-third enrolling in out-of-state programs.

“Tens of thousands of Californians study online through institutions in other states. However, California is the only state not participating in the State Authorization Reciprocity Agreement, which gives students in member states protection, institutional oversight, and rights even when the educational institution is approved in another state. Instead, out-of-state schools must register with California’s Bureau of Private Postsecondary Education, where they are subject to limited regulation.

“Meanwhile, California institutions face major disadvantages. They must apply and pay fees in every single online program they offer to out-of-state students. At times, it only takes a few out-of-state students enrolling in a CSU or community college class to help meet class minimums, so excluding out-of-state students can mean that courses are not available for California students.

Senate Bill 790 requires the Governor to designate a new state entity to oversee postsecondary education policy and authorizes the Governor to join an interstate reciprocity agreement for distance education if the agreement meets specific consumer protection standards.

Joining an interstate reciprocity agreement would promote educational access, regulatory efficiency, and economic growth while allowing California to better safeguard its students enrolled online in out-of-state schools.”

1. CPEC. The 1960 Master Plan for Higher Education in California articulated basic state policies on higher education, such as assigning missions to the different higher education segments, specifying eligibility targets, and expressing the state’s intent that higher education remain accessible, affordable, high-quality, and accountable. In addition, the Master Plan created an oversight body, the CPEC, tasked with providing fiscal and policy recommendations to the Governor and Legislature; monitoring and coordinating public institutions; and ensuring comprehensive statewide planning for higher education and effective use of resources.

Although Governor Brown vetoed funding for CPEC in the 2011-12 budget, his veto message acknowledged the well-established need for coordinating and guiding state higher education policy and requested that stakeholders explore alternative ways that these functions could be fulfilled. This bill proposes to delete CPEC from the Education Code and states legislative intent that the portal entity designated by the Governor adopt as many of its duties and responsibilities as possible and be the principal state operating and coordinating entity for postsecondary education. Staff notes that several legislative proposals introduced in 2025 attempt to establish educational coordinating entities including, AB 95 (Fong, 2025), SB 638 (Padilla, 2025), and the budget trailer bill establishing the California Education Interagency Council under the Government Operations Agency. Unlike the related legislation, this measure stops short of identifying or forming a coordinating body, rather it calls on the Governor to assign coordinating responsibilities to any entity of the Governor’s choosing. It is unclear how the various educational coordinating proposals are to be reconciled moving forward.

1. Participation in federal aid programs requires public or private colleges to be legally authorized in each state in which instruction is provided. Under Title IV of the Higher Education Act of 1965, an institution may be eligible to receive federal financial aid programs such as Pell Grants and federal loan programs provided they meet certain standards. The federal Higher Education Act establishes three eligibility criteria that institutions must fulfill. To ensure the quality and integrity of Title IV financial aid programs at eligible public and private institutions, the three requirements that must be met are: 1) state authorization, 2) certification by the USDE; and 3) accreditation by an accrediting agency association recognized by the USDE. The states are responsible for providing primary protection for consumers and students, while the federal government oversees compliance to ensure the administrative and fiscal integrity of Title IV financial aid programs at higher education institutions. Accrediting agencies, on the other hand, focus on providing quality assurance for the education or training offered by these institutions.
2. The role of California's Bureau of Private Postsecondary Education. In this state, the Bureau regulates private postsecondary educational institutions operating in California. The Bureau’s roles and responsibilities are outlined in the Act established by AB 48 (Portantino, Chapter 310, Statutes of 2009). Its role is to protect consumers and students from fraud, misrepresentation, or other business practices at private postsecondary institutions that may lead to the loss of students’ tuition and related educational funds. It also sets and enforces minimum standards for ethical business practices and the health, safety, and fiscal integrity of postsecondary education institutions. Finally, it establishes and enforces minimum standards for instructional quality and institutional stability for all students in any private postsecondary educational and vocational institutions.
3. Out-of-state institutions. The Bureau has traditionally regulated only those institutions with a “physical presence” in California. As a growing number of public and private institutions organized or incorporated outside California serve California students through online and hybrid instruction, the need for Bureau oversight increased. The Legislature expanded some areas of oversight, providing a registration process for out-of-state private institutions, requiring their participation in STRF, and compliance with other requirements. Out-of-state accredited private nonprofit institutions without a physical presence in California, however, remain outside of the Bureau’s purview, and increasingly, private nonprofit and public institutions are adopting methods of program delivery modeled after for-profit institutions. Under this bill, out-of-state for-profit institutions would continue to register with the Bureau, while out-of-state nonprofit and public institutions could be authorized through the reciprocity agreement. It further specifies that California would retain its ability to require an out-of-state institution to register directly with the Bureau with the appropriate notice.
4. State Authorization Reciprocity Agreement (SARA). In response to concerns over the complexity and cost of navigating differing requirements for state authorization in multiple states, a group of institutions, states, and policy organizations came together in 2013 to develop the SARA. SARA provides that accredited, degree-granting private and public institutions approved by an oversight body in one participating state will be deemed automatically to have met approval requirements in other participating states.

General concerns remain about online programs that are offered by some institutions perceived as providing fraud and debt rather than knowledge and skills. In some states, institutions offering distance education programs to California students have entered into settlements with those states after being accused of undertaking misleading online recruiting practices, including deceiving prospective students by leading them to believe that online education degrees would allow them to become licensed professionals. A number of institutions that have been the focus of complaints by state and federal agencies continue to have robust distance education programs and are actively enrolling students.

Institutions that participate in SARA are approved for participation by their home state, and states that join SARA must accept that approval – regardless of the effectiveness of the home state’s oversight. Once a state enters SARA, it does not retain authority to enforce its applicable laws. Concerns about the practical impacts of ceding authority to a third-party have been at the root of failed efforts in the past to require California to join SARA, particularly the fact that the state would no longer be able to impose some of the important student protections contained in the Act. SARA would still allow the AG to take action based on general laws (fraud, deception, etc.), but provisions in the Act would not be applicable. Once a state is approved to join SARA, institutions that are operating under the compact are able to enroll students in their distance education programs.

This bill authorizes California’s participation in a reciprocity agreement like SARA only if certain conditions are met, including if it is confirmed that joining will not interfere with California’s ability to enforce consumer protection laws or stop any entity involved from operating in this state. Opponents of the measure argue that, despite the consumer protections proposed by SB 970, the bill does not go far enough to ensure that California students who attend out-of-state schools online receive the strongest protections.

1. Includes California public colleges and universities. Under this measure, California’s public colleges and universities may submit an application to participate in the reciprocity agreement entered into by the Governor. It essentially streamlines the process for California’s public colleges and universities to offer online instruction across state lines. The bill would further authorize the portal entity to enter into an agreement with the UC, CSU, and CCC Chancellor to delegate functions and responsibilities related to the reciprocity agreement. It further requires each segment to document and report complaints related to the reciprocity agreement where appropriate. This bill further charges the CCC Board of Governors to investigate and resolve complaints involving participating community colleges that may merge.
2. Joint legislative hearing to review and include public input. This bill grants the Governor sole responsibility for viewing and determining whether to enter into a reciprocity agreement. This approach raises questions about whether the public or Legislature will have an opportunity to review the agreement prior to its execution. For this reason, staff recommends that the bill be amended to do the following:

• The Governor shall not enter into an agreement until the appropriate policy committees of the Legislature have held a joint hearing on the agreement at which a representative from the commission shall testify and members of the public shall be encouraged to testify on the agreement and the Governor’s written findings.
• The policy committees shall hold the joint hearing upon completion of the Governor’s written findings.
• Define appropriate policy committees to include the Senate Business, Professions, and Economic Development, Senate Education, Assembly Business and Professions, and Assembly Higher Education Committees.

1. Prior and related legislation.

SB 638 (Padilla, 2025) creates the Career Technical Education and Career Pathways Grant Program, administered by the Superintendent of Public Instruction, to support local educational agencies (LEAs) serving high-need areas. This bill also establishes the California Education and Workforce Development Coordinating Entity within the Government Operations Agency to serve as the statewide planning and coordinating body for career technical education (CTE), career pathways, and workforce development. SB 638 is set to be heard in this Committee April 30.

AB 95 (Fong, 2025) subject to an appropriation, establishes in the Government Operations Agency the California Education Interagency Council, composed of specified state officers for purposes of evaluating workforce and economic changes in the state, integrating and aligning education and employment systems, maximizing funding impact, supporting adult skill development, coordinating regional education and workforce needs, and serving as a forum for discussions of intersegmental and cross-sector policy issues. It further requires the council, among other duties, to adopt a strategic plan, report to the Governor and the Legislature on the outcome of its work and recommendations to advance intersegmental student pathway efforts aligned to careers, establish a faculty and employer advisory committee, and provide advice and recommend tools designed to support students across their educational careers. The bill, establishes the Office of the California Education Interagency Council in the Government Operations Agency as a neutral administrative body tasked with supporting the California Education Interagency Council. AB 95 is pending hearing in the Assembly Higher Education Committee.

SB 634 (Block, 2015) would have authorized the Department of Consumer Affairs to enter into a regional state authorization reciprocity agreement with other states through a compact on behalf of this state. SB 634 was pulled from hearing at the request of the author.

SUPPORT

American Jewish University

Antioch University

Association of Independent California Colleges & Universities

Azusa Pacific University

Biola University

California Baptist University

California College of the Arts

California Indian Nations College

California State University, Office of the Chancellor

Claremont Lincoln University

Concordia University Irvine

Dominican University of California

EDvance College

Golden Gate University

John Paul the Great Catholic University

Keck Graduate Institute

Life Pacific University

Loma Linda University

Los Angeles Pacific University

Loyola Marymount University

Mattos & Associates

Minerva University

National University

Notre Dame de Namur University

Otis College of Art and Design

Palo Alto University

Pepperdine University

Point Loma Nazarene University

Reach University

Saint Mary’s College of California

Samuel Merritt University

Santa Clara University

Saybrook University

Southern California University of Health Sciences

Stanford University

The Chicago School

University of California

University of Redlands

University of San Diego

University of San Francisco

University of Southern California

University of the Pacific

Vanguard University of Southern California

Western University of Health Sciences

Westmont College

William Jessup University

4 Individuals

OPPOSITION

University of Phoenix

-- END --

SENATE COMMITTEE ON

BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT

Senator Angelique Ashby, Chair

2025 - 2026 Regular

Bill No: SB 790 Hearing Date: April 21, 2025

Subject: Postsecondary education: postsecondary education coordinating entity: interstate reciprocity agreements for distance education: out-of-state postsecondary educational institutions

SUMMARY: Requires the Governor to designate a state agency, department, or office as the principal state operating and coordinating entity for postsecondary education, with specified duties, including, but not limited to, implementation of an interstate reciprocity agreement for reciprocity agreement for the authorization and oversight of distance education, as the portal entity, if the Governor enters into an interstate reciprocity agreement.

NOTE: This bill is double-referred to the Senate Committee on Education, second.

Existing law:

1. Establishes California Private Postsecondary Education Act of 2009 (the Act) until January 1, 2027, and requires the Bureau for Private Postsecondary Education (BPPE) to, among other things, review, investigate and approve private postsecondary 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 United States Department of Education (USDE). 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 Student Tuition Recovery Fund (STRF) to provide refunds to students affected by the possible closure of an institution/school. (Education Code (EC) § 94800 et seq.)
2. Provides numerous exemptions from the Act and oversight by BPPE, including, but not limited to schools that are 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. Requires an independent institution of higher education that is otherwise exempt from the Act to comply with all applicable state and federal laws, including laws relating to fraud, abuse, and false advertising and authorizes these types of institutions to execute a contract with BPPE for BPPE to review and, as appropriate, act on complaints concerning the institution, according to specified requirements and subject to a fee of $1,076. Requires BPPE to establish a process through which an institution exempt from the Act may request and obtain verification that the institution is exempt. Specifies that the verification is valid for a period of up to two years, as long as the institution maintains full compliance with the requirements of the exemption. (EC §§ 94874 (i), 94874.9, and 94874.7)
3. 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. (EC § 94850.5)
4. Requires an out-of-state private postsecondary educational institution (other than a nonpublic higher education institution that grants undergraduate degrees, graduate degrees, or both, formed as nonprofit corporation and accredited by an agency recognized by the USDE) to register with the BPPE, pay a fee and provide evidence of accreditation; evidence that the institution is approved to operate in the state where the institution maintains its main administrative location; and a copy of the institution’s catalog and sample enrollment agreement. Requires these institutions to comply with STRF requirements and disclosures. Prohibits an institution from operating in California for failure to comply with the registration requirements. Establishes the validity of a BPPE registration for two years. (EC § 94801.5)
5. Authorizes BPPE to establish thresholds of California-based activity that constitute limited physical presence, with those institutions subject to registration requirements defined through regulation, and minimal levels of California-based activity that do not require institutional approval by, nor registration with, the Bureau. Specifies that an institution is considered to have a physical presence in the state if it offers instruction or core academic support services from a physical location owned, operated, or rented by or on behalf of the institution in California (EC § 94801.7)
6. Requires BPPE to adopt regulations establishing minimum operating standards to ensure that the content of each educational program reach its stated objective; maintain specific written standards for student admissions for each educational program; ensure the facilities, instructional equipment and materials are sufficient to meet the educational program’s goals; maintain a withdrawal policy and provide refunds; provide qualified personnel; provide upon successful completion of an educational program a degree or diploma; maintain and disburse adequate records and transcripts to students; and follow all other applicable ordinances and laws. (EC §94885 (a)(1-9)).
7. Establishes an Office of Student Assistance and Relief (Office or OSAR) for the purpose of advancing and promoting the rights of prospective students, current students, or past students of private postsecondary educational institutions. Tasks the Office with: conducting outreach and providing information and assistance to students who have been affected by the unlawful activities or closure of an institution; serving as a primary point of contact to address the needs of private postsecondary education students and working in consultation with state and federal agencies, including, but not limited to, California Student Aid Commission, the Office of the Chancellor of the California Community Colleges, the Department of Veterans Affairs, the federal Consumer Financial Protection Bureau, and the USDE. Authorizes the Office to provide outreach to students and prospective students to provide them with, among other information, information on making informed decisions in selecting postsecondary educational institutions, student rights regarding school performance disclosures, enrollment agreements, and cancellation and refund policies, how to contact the office and the bureau for assistance, student loan rights and assistance, and free nonprofit community based resources. (EC §§ 94949.7 - 94949.73)

This bill:

1. Requires the Governor to designate a state agency, department, or office as the principal state operating and coordinating entity for postsecondary education, with specified duties, including, but not limited to, implementation of an interstate reciprocity agreement for reciprocity agreement for the authorization and oversight of distance education, as the portal entity, if the Governor enters into an interstate reciprocity agreement. States Legislative intent that the portal entity adopt as many of the duties and responsibilities of the former California Postsecondary Education Commission and that the Governor consider submitting a reorganization plan to accomplish this purpose.
2. Strikes “private” from the type of postsecondary educational institution required to register with BPPE but specifies that before January 1, 2028, the requirement shall not apply to a higher education institution that grants undergraduate degrees, graduate degrees, or both, and that is either formed as a nonprofit corporation and is accredited by an agency recognized by the USDE, or is a public institution of higher education. Beginning January 1, 2028, specifies that the registration requirement shall not apply to a public or nonprofit higher education institution approved pursuant to an interstate reciprocity agreement to which the state is a party.
3. Requires BPPE, after receiving a report about specified actions related to a registered institution, or after determining that such notification should have been provided, to seek additional information and notify the institution whether it is required to suspend enrolling new students, and whether other actions are needed to protect California residents while BPPE continues to investigate.
4. Authorizes the Governor to enter into one or more interstate reciprocity agreements upon issuing a written finding of all of the following:
5. The interstate reciprocity agreement and its implementation will not interfere with, and does not affect, the authority of the Attorney General (AG) or any other state or local agency to enforce any statutes or regulations prohibiting consumer fraud and unfair or deceptive business practices or the authority of the state to suspend or terminate the operation of any entity subject to the interstate reciprocity agreement pursuant to state law.
6. The interstate reciprocity agreement does not prevent the AG or any other state or local agency from applying and enforcing the fair business practices outlined in the Act with respect to out-of-state postsecondary educational institutions that participate in the reciprocity agreement.
7. The interstate reciprocity agreement allows the state, notwithstanding any reciprocal authorization, to require an out-of-state postsecondary educational institution, upon providing notice of at least six months, to register and be subject to registration requirements, in order to protect students, prevent misrepresentation to the public, or prevent the loss of funds paid from public resources or student tuition.
8. The interstate reciprocity agreement does not apply to a course offered onsite to students at a military installation in the state, even if the course at that physical location is offered to students in other locations.
9. The entities organized in an interstate reciprocity agreement are committed to preserving standards and protections that have been promulgated by the federal government and are the basis of the interstate reciprocity agreement, even if those standards or protections are subsequently diminished or withdrawn by federal law or USDE action, and the entities are committed to developing meaningful performance metrics and frameworks for best practices with regard to individual state authorization activities.
10. Within one year of the effective date of the state’s entry into a interstate reciprocity agreement, BPPE ensures that postsecondary educational institutions exempt from the Act may participate in the interstate reciprocity agreement without impacting the postsecondary educational institution’s exempt status.
11. Participating states have the necessary authority and resources to investigate complaints and take appropriate action.
12. The reciprocity agreement does not prohibit the state from accepting complaints from California students that have not first been submitted to the institution that is the subject of the complaint.
13. The interstate reciprocity agreement does not delegate independent legal authority over the state or its participating postsecondary educational institutions to any other entity, including by providing any nonstate entity with the authority to reverse or veto a decision by the state to suspend or terminate an in-state’s institution’s certification to participate in a reciprocity agreement.
14. The interstate reciprocity agreement may be modified by the entity only with the approval of the Governor.
15. Authorizes a postsecondary educational institution to apply to the portal entity for approval to operate under an interstate reciprocity agreement and authorizes a reasonable fee. Requires the portal entity to enter into a memorandum of understanding (MOU) with the Chancellor of the California State University, the Chancellor of the California Community Colleges, the presidents of the independent California colleges and universities as represented by the state association representing the largest number of those members, and, if appropriate, BPPE. Specifies that the MOU shall not weaken existing student privacy and confidentiality protections. Requires the portal entity to ensure that policies are in place for addressing catastrophic events in a manner that protects students as consumers, including the protection of student records.
16. Requires BPPE to investigate and resolve complaints that may arise pursuant to the interstate reciprocity agreement involving participating private postsecondary educational institutions that are approved to operate or exempt from the Act but elect to participate in the interstate reciprocity agreement pursuant to terms and conditions established by BPPE.

FISCAL EFFECT:

Unknown. This bill is keyed fiscal by Legislative Counsel.

COMMENTS:

1. Purpose. The Author is the Sponsor of this bill. According to the Author, “Enrollment in online higher education courses surged during the pandemic and today remains above pre-2020 levels. Most college students now take some classes online, with one-third enrolling in out-of-state programs.

Tens of thousands of Californians study online through institutions in other states. However, California is the only state not participating in the State Authorization Reciprocity Agreement, which gives students in member states protection, institutional oversight, and rights even when the educational institution is approved in another state. Instead, out-of-state schools must register with California's Bureau of Private Postsecondary Education, where they are subject to limited regulation.

Meanwhile, California institutions face major disadvantages. They must apply and pay fees in every single online program they offer to out-of-state students. At times, it only takes a few out-of-state students enrolling in a CSU or community college class to help meet class minimums, so excluding out-of-state students can mean that courses are not available for California students.

Senate Bill 790 requires the Governor to designate a new state entity to oversee postsecondary education policy and authorizes the Governor to join an interstate reciprocity agreement for distance education if the agreement meets specific consumer protection standards.

Joining an interstate reciprocity agreement would promote educational access, regulatory efficiency, and economic growth while allowing California to better safeguard its students enrolled online in out-of-state schools.”

The Author adds that “The state's inability to join an interstate reciprocity agreement means any university in California that offers online programs must obtain authorization from every state and territory in which they plan to enroll students. Thus, universities often seek more than 50 individual authorizations - an onerous task that consumes significant time and funds.

If a university is applying for a particular state's authorization, it must go through that state's application process, which includes application fees of up to $8000 per program, and additional renewal fees.

We need the Governor to appoint an agency that can serve as a coordinating entity and a portal agency for a reciprocity agreement.

In addition, with the future of the U.S. Department of Education in question, the interstate compact is an essential safeguard. The new secretary is widely expected to substantially weaken standards for student protections and accreditation. The other 49 states and territories are already members of the state authorization compact, which was developed with leadership from California. The compact uses and enforces standards which have been developed, and which evolve, with influence of states like Oregon, Washington, and Massachusetts, which share California's commitment to effective oversight, consumer protection, and accountability.”

1. Background. The BBPE and the Act were established by Assembly Bill 48 (Portantino, Chapter 310, Statutes of 2009) after several failed legislative attempts to remedy the structural challenges of the former Bureau for Private Postsecondary and Vocational Education (BPPVE). AB 48 took effect January 1, 2010, and provided the BPPE responsibility for oversight of private postsecondary educational institutions operating with a physical presence in California. While the Legislature has amended the Act several times since the initial passage of AB 48, it has consistently directed BPPE to make protection of the public the highest priority in performing duties and exercising powers. Today, the Act expresses Legislative intent that BPPE:

• Ensure minimum educational quality standards and opportunities for success for California students attending private postsecondary schools in California;
• Provide meaningful student protections through essential avenues of recourse for students;
• Establish a regulatory structure that provides an appropriate level of oversight;
• Provide a regulatory structure that ensures all stakeholders have a voice and are heard in policymaking by the Bureau;
• Ensure accountability and oversight by the Legislature through program monitoring and periodic reports; and
• Prevent harm to students and the deception of the public that results from fraudulent or substandard educational programs and degrees.

BPPE also actively investigates and combats unlicensed activity, administers the STRF, and conducts outreach and education activities for students and private postsecondary educational institutions within the state. Within BPPE is the OSAR, established by SB 1192 (Hill, Chapter 593, Statutes of 2016), which exists to advance the rights of students at private postsecondary educational institutions and assist students who have suffered economic loss due to unlawful activities or the closure of an institution.

Exemptions. Independent institutions have operated in California for hundreds of years, largely under the rules and requirements governing non-profit entities. For-profit colleges and non-profit certificate programs entered the regulatory structure in the early 1990’s in response to a lack of state-level oversight. Despite attempts at meaningful reform and the establishment of laws governing the regulation of institutions, the fragmented regulatory and oversight structure of the former acts were the heart of the rationale behind the eventual elimination of the laws guiding the former BPPVE and the sunset of that bureau.

AB 48, while establishing a foundation for regulation of private postsecondary educational institutions, contained numerous exemptions to state-level regulation, which have since been expanded and added to. The following are some of the types of institutions currently exempt from the Act and oversight by BPPE:

• A postsecondary educational institution established, operated, and governed by the federal government or by this state or its political subdivisions.
• An institution that does not award degrees and that solely provides educational programs for total charges of two thousand five hundred dollars ($2,500) or less when no part of the total charges is paid from state or federal student financial aid programs.
• Schools accredited by certain accrediting agencies.

The Act was also amended in 2015 to prohibit an institution, beginning January 1, 2016, from claiming an exemption from the Act if the institution is approved to participate in Title 38 veterans’ benefits programs. There were serious concerns stemming from multiple reports and hearings focusing on the experience of veterans at private for-profit institutions, about false and predatory advertising to veterans, and about the potential lack of accountability for the millions of dollars administered by the federal Veterans Administration (VA) and Department of Defense (DOD) spent at private postsecondary education institutions in California if schools are not regulated.

Action taken by the USDE in 2010 aimed at improving the integrity of programs authorized under Title IV of the Higher Education Act requires, among other things, that to remain eligible for Title IV, postsecondary education institutions must be authorized to operate in the state they are located and must ensure access to a complaint process that will permit student consumers to address alleged violations of state consumer protection laws. These changes rendered independent institutions of higher education, exempt from Bureau oversight and regulation under the Act by virtue of being accredited by a regional accrediting agency, potentially unable to meet the state authorization and complaints process requirements for Title IV. In response, the Department of Finance issued a Spring Finance Letter in May 2015 that proposed statutory changes allowing independent institutions of higher education located in California to be recognized by the state and to enter into a contract with BPPE to establish a state-level student complaint process. The Bureau subsequently entered into contracts with over 100 institutions in 2015.

A number of institutions previously verified as exempt under the Act have now sought voluntary approval by BPPE in order to comply with Title IV requirements.

The Act, as created by AB 48, attempted to correct many of the prior laws’ structural problems, most especially the former act’s different standards and requirements for different categories of institutions that created legal and regulatory complexities. The Act has one single category of institution and establishes the same standards and requirements for all of the institutions under the Bureau’s oversight. Yet many of the institutions supportive of exemptions were exempt under the prior BPPVE regulatory framework and sought, or even still seek, to continue operating as they always have: subject to oversight by accreditors and state and federal oversight agencies responsible for approving the expenditure of public monies, but not the BPPE.

In 2019, USDE announced new federal regulations regarding financial aid, requiring schools to document a complaint process for distance education students. An institution must disclose at least one point of contact for filing student complaints—the location of the student or the home state of the institution or a third party identified by a state or state reciprocity agreement. In response to USDE’s announcement that Californians enrolled in online programs at out-of-state colleges and universities would be ineligible to use federal financial aid because California did not have a complaint process in place, the DCA issued a press release in July 2019 announcing that they developed a complaint process for Californians enrolled in online programs at public or private nonprofit colleges and universities that are physically located in other states. DCA’s release noted that BPPE would “assist DCA in handling complaints.” DCA advised that it would evaluate complaints, identify the appropriate accrediting agency or governmental entity to handle the complaint, and request a response from the entity regarding the final disposition of the complaint. If no response is received, DCA will follow up with the agency to which the complaint was referred to determine the resolution and, if necessary, determine whether additional referrals are warranted.

Out-of-state registration. As noted in the January 2024 Bureau for Private Postsecondary Education Funding Study (Study) prepared for the Department of Consumer Affairs by the Foundation for California Community Colleges:

“When the current version of the Bureau was created in 2009, policymakers were trying to solve for the emerging problem of the time: The proliferation of a new type of school in the marketplace, mainly large publicly traded for-profit institutions offering academic and vocational degrees. Previously, the state’s regulatory role had been focused primarily on smaller vocational and trade schools (e.g., barbering and cosmetology; truck driving, medical assisting) because this new spate of schools had yet to exist at the scale they do now.

While the basic framework for the Bureau has remained largely unchanged, the industry it regulates is constantly changing. Perhaps with the exception of financial institutions, no other regulated industry has changed as much and as fast as private postsecondary education. The presumption in 2009 was, if California could put in place an approval process for schools to operate in the state, that process would be enough to provide students with the protections they need and deserve.

While the current framework put some enforcement provisions in place, that does not appear to have been policymaker’s primary focus. Colleges are increasingly owned by corporations that merge, buy and sell schools, convert from profit to not-for-profit, and move out-of-state, all while continuing to enroll Californians. The state has seen an influx of out-of-state colleges operating online-only education programs for students within its borders, something that could not have been foreseen in 2009. Additionally, schools' access to federal student aid dollars, and more importantly, students’ access to student loans, have become drivers of the federal government’s accountability and student protection policies… When colleges change their legal structures and/or move out-of-state while continuing to enroll Californians, fewer schools end up paying BPPE’s annual fees…

BPPE currently has very little authority to monitor or follow up with schools, whether that be to assess citations or penalties for problematic school activities at registered institutions, or to pursue actions against unregistered online institutions enrolling California students. Lack of authority in this area is a significant limitation to BPPE’s ability to enforce California law…”

State Authorization Reciprocity Agreements (SARA). In response to concerns over the complexity and cost of navigating differing requirements in multiple states, a group of institutions, states, and policy organizations came together in 2013 to develop the 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.

General concerns remain about online programs that are offered by some institutions perceived as providing fraud and debt rather than knowledge and skills. In some states, institutions offering distance education programs to California students have entered into settlements with those states after being accused of undertaking misleading online recruiting practices, including deceiving prospective students by leading them to believe that online education degrees would allow them to become licensed professionals. A number of institutions which have been the focus of complaints by state and federal agencies continue to have robust distance education programs and are actively enrolling students.

Institutions that participate in SARA are approved for participation by their home state, and states that join SARA must accept that approval – regardless of the effectiveness of the home state’s oversight. Once a state enters SARA, it does not retain authority to enforce its applicable laws. Concerns about the practical impacts of ceding authority to a third-party have been at the root of failed efforts in the past to require the state to join SARA, particularly the fact that California would no longer be able to impose some of the important student protections contained in the Act. SARA would still allow the AG to take action based on general laws (fraud, deception, etc) but provisions in the Act would not be applicable. Once a state is approved to join SARA, institutions that are operating under the compact are able to enroll students in their distance education programs.

1. Arguments in Support. Supporters believe that this bill, “maintains California's strong commitment to consumer protections in higher education. The bill ensures that participating institutions adhere to stringent standards that safeguard student interests, uphold academic integrity, and provide mechanisms for addressing student complaints. By balancing the facilitation of interstate educational opportunities with robust consumer protections, this legislation exemplifies a thoughtful approach to modernizing higher education policy.”
   
   The Association of Independent California Colleges and Universities writes that the state’s “lack of participation in interstate reciprocity for distance education creates significant burdens and barriers. Currently, if an institution wishes to offer an online academic program in another state, it must submit extensive paperwork, pay thousands of dollars in fees, respond to sometimes lengthy questionnaires and supplemental requests for information. This process must currently be completed for any program an institution wants to offer outside California and must be completed for every state in which they want to offer it…The implementation of SB 790 will facilitate a more streamlined process for our institutions to offer distance education programs to out-of-state students by participating in interstate reciprocity agreements. This will reduce redundant regulatory burdens, allowing our member institutions to allocate resources more effectively toward enhancing educational quality and student support services.”

Reach University writes, “Senate Bill 790 will provide a much-needed framework for allowing California-based institutions like SMU to serve out-of-state students through online education, without facing an overly burdensome and duplicative patchwork of state regulations. Participation in SARA will provide regulatory consistency, reduce barriers to innovation, and make it easier for California-based colleges and universities to serve students in other states. It will also allow students outside California to access high-quality programs, like those offered by Reach University, without facing unnecessary red tape or financial burdens. SB 790 represents a long-overdue step toward aligning California with National best practices in distance education.”

Samuel Merritt University writes, “SB 790 strikes an appropriate balance by enabling greater access and efficiency while upholding California’s strong commitment to consumer protection. The bill ensures that out-of-state institutions operating under reciprocity agreements continue to meet robust standards, safeguarding students and the integrity of their educational experience.”

The University of California notes that, “In addition to online education, state authorization regulations apply to out-of-state clinical placements for students in health sciences programs. These pose significant hurdles to making out-of-state clinical placements at the seven UC campuses that offer health sciences instruction. Out-of-state clinical placements and externships are a routine and essential part of clinical education. For medical students, participating in clinical rotations outside of California is essential to placement for their residency training, and expands their understanding of medical treatment and disease management since some institutions are experts in specific fields. The benefits of out-of-state clinical placements apply to other professional health fields as well, including nursing, physical therapy, and public health. Clinical placements and externships are essential to students gaining more knowledge and experience and are routinely undertaken in other states so that the student can gain exposure to different conditions, populations, and issues. Since all states except California have joined SARA, UC and other California colleges and universities are at an extreme disadvantage in offering online courses, degrees, and clinical placements to residents of other states. States that had previously exempted online educational offerings from California have established more stringent requirements for institutions in states that are not part of SARA. UC has already had to withdraw from clinical placements in some states because California is not a SARA member.”

Westmont College states, “We believe this legislation ensures that California will continue to provide strong consumer protections to residents in the state while also allowing colleges and universities to operate on a level playing field with other organizations across the US. Essentially, the bill ensures the public and policymakers that California’s strong commitment to consumer protections will continue under any future interstate reciprocity agreement.”

1. Arguments in Opposition. According to the National Consumer Law Center, “SB 790 would allow California to join SARA even though it would continue to prohibit states from enforcing higher education specific consumer protection laws to protect vulnerable students from the aggressive recruitment and deceptive business practices engaged in by many for-profit schools. With the federal government poised to significantly weaken federal consumer protections against exploitative forprofit schools, this is not the time for California to give up its power to protect its residents. Instead, California should leverage its market power (derived from its large population of students seeking to enroll in higher education) and position as the sole state that has not signed onto SARA to demand a fairer, student-centered interstate reciprocity agreement. SB 790 would thus not only put California students at risk of exploitation, it would also forgo this unique opportunity to ensure strong consumer protection for all California students and to raise the bar for students (and their states) throughout the country.

According to NCLC, “Online education is a particularly risky investment for for-profit school students, who are disproportionately people of color, first-generation students, and from low-income families. For profit schools play an outsized role in online education: in 2021, 58% of undergraduate students enrolled in exclusively online programs attended for-profit schools. These students in particular face risk of fraud, given the well-documented history of deceptive practices in the for-profit education sector.”

The organization writes that “California is the only state that has not joined SARA for an important reason. Although there is no evidence that fraud is less likely to be committed by online schools than by brick-and-mortar schools, SARA prohibits member distant states from imposing their higher education specific consumer protection laws to protect their residents attending online schools. It only allows distant member states to enforce weak SARA policies and “general-purpose laws” against out-of state SARA schools. This means that if California joins SARA, the state will waive its right to use the PPEA to protect California students from fraud committed by out-of-state for-profit SARA schools. California would only be allowed to enforce general purpose laws, such as the Unfair Competition Law and common law fraud…neither general purpose laws nor SARA policies are sufficient to prevent fraud and protect students from predatory school conduct… California should not join SARA, despite the minimal consumer protections proposed by SB

790.”

The University of Phoenix writes that this bill “would prevent out-of-state ‘private and for-profit’ institutions from participating in any reciprocity agreement that California joins by the simple whim of the Governor. This discriminatory and arbitrary scheme would, without basis or reason, prevent otherwise qualified institutions, many of which are already approved and providing distance education to California students through the Outof- State Institution Registration process with the [BPPE]. This is problematic for a host of reasons. First, there is no legitimate basis to out-of-hand prevent qualified private schools from being members of a California reciprocity agreement. Specifically, this discriminates against those private and for-profit schools that have already been vetted and approved through a rigorous process with the BPPE and the California Attorney General to offer distance education to California residents through the Outof- State Institution Registration process…University of Phoenix has held such a registration with the BPPE since 2017, and most recently renewed as of 2023 under the further expanded and exacting standards of that process. There is simply no legitimate basis of concern for any schools that have gone through this process and hold a current registration from joining a reciprocity agreement. Second, any interstate reciprocity agreement that California either joins or creates must not discriminate against out-of-state schools if it expects its California schools to be treated fairly and without discriminatory restrictions as an out-of-state school offering distance education to residents of other member states. This equal treatment is axiomatic for any interstate member agreement. A basic tenant of interstate commerce through reciprocity is that entities operating in member states are permitted admission and operation under the same terms. One state cannot discriminate or burden institutions of another state while expecting that its institutions receive the full benefits of the agreement. Such treatment would violate aspects of the commerce clause and call into question the legality of any agreement California would attempt to join as the bill is currently written. If California decides to join a reciprocity agreement for its institutions to offer distance education in other participating states, the structure of that agreement must include all qualified institutions of other states under the same equal terms and conditions of participation. Without this parity, such an agreement will not legally stand as other states will not agree to permit California schools to offer distance education to their residents if their qualified institutions engaging in the offering interstate distance education to California residents is not on the same footing. The discriminatory structure of this bill must be removed.”

University of Phoenix further writes that “this bill would allow California to rescind an out-of-state institution's approval under the agreement ‘without cause.’ This is a shocking and a fundamental denial of due process. Without just cause, and with no adjudicatory process at all, any institution could have its authority to offer distance education removed at any time for no reason whatsoever. This violates the California Constitution, Section 7 which provides in relevant part that "(a) A person (defined as any individual, association, or business entity) may not be deprived of life, liberty, or property without due process of law or denied equal protection of the laws ... “

“This measure also attempts to modify the definition of "operating in California" in the Private Postsecondary Act to include an out-of-state institution without a physical presence offering distance education to be subject to the Act in its entirety. This change is not necessary, disturbs a certain regulatory structure currently under the BPPE for one that is internally inconsistent and contrary, has absolutely nothing to do with a reciprocity agreement, and should be left to the sunset review process which will occur in 2026, prior to the Private Postsecondary Act sunsetting in 2027.”

SUPPORT AND OPPOSITION:

Support:

American Jewish University
Antioch University
Association of Independent California Colleges & Universities
Biola University
California Baptist University
California College of the Arts
California Indian Nations College
Claremont Lincoln University

California State University
Concordia University Irvine
Dominican University of California
Edvance College
Golden Gate University
John Paul the Great Catholic University
Keck Graduate Institute
Life Pacific University
Loma Linda University
Los Angeles Pacific University
Loyola Marymount University
Minerva University
National University
Otis College of Art and Design
Palo Alto University
Pepperdine University
Point Loma Nazarene University
Reach University
Saint Mary's College of California
Samuel Merritt University
Santa Clara University
Saybrook University
Southern California University of Health Sciences
Stanford University
The Chicago School
University of California
University of Redlands
University of San Diego
University of San Francisco
University of Southern California; the
University of the Pacific
Vanguard University of Southern California
Western University of Health Sciences
Westmont College
William Jessup University

Opposition:

National Consumer Law Center, Inc.
University of Phoenix

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