Senate Standing Committee on Business, Professions and Economic Development

Good morning, everyone. Welcome to this morning's review oversight hearing, which is being held jointly by the Assembly Business and Professions Committee, the Assembly Higher Education Committee, the Senate Business Professions and Economic Development Committee, and the Senate Education Committee. I appreciate this opportunity to partner with my legislative colleagues in the higher education policy space and would like to once again thank staff for all the committees for their hard work during this process. Today, we'll be hearing from one entity under sensitive review, which is the bureau for private post secondary education. We will begin by hearing from representatives of the bureau and the Department of Consumer Affairs.

Next, we will open the discussion up for questions or comments from committee Members. Finally, we will invite other interested stakeholders here in the room to provide public comment. Speakers will be limited to a maximum of two minutes per organization. In the interest of time, additional speakers making substantially similar comments will be asked to simply provide their name and state their alignment with prior testimony. Before we begin, I will turn it to my fellow committee chairs for any introductory remarks.

Chair Mike Fong, Assembly Higher Education Committee, do you wanna make any introductory remarks?

Thank you so much, Chair, Chair Berman. And hello and good morning, everybody. It's a pleasure to be joining my colleagues for this joint sunset review hearing. I would like to begin by thanking the BPE for their excellent sunset review report and the staff of our select collective committees for their hard work and efforts of putting together this committee.

The Bureau for Post Secondary Education plays a critical role in overseeing and facilitating private post secondary higher education in California. Students rely on the bureau's regulatory work to ensure that the education they're receiving is of the highest quality and that our institutions are acting transparently and in public's best interest. The bureau's central report was comprehensive, offering a series of recommendations on the bureau's fiscal solvency and operations, institutional approvals, accreditation, discourses, exemptions, and reporting. These issues can be complex, and it's important that we take the time today to explore these recommendations.

I look forward to hearing from DCA, the bureau, and other stakeholders today as we examine the recommendations and assess the best ways to for the BPPE to continue their important work in the years ago. Thank you so much, Mister Chair.

Thank you, Mister Chair. And, Chair Wahab, Chair of the Senate Business Professions and Economic Development Committee.

Thank you. I I first just wanna highlight that, again, you know, our oversight hearing is largely so we can actually ask the questions, what's being done well, what's not being done well, where we actually want to see some of these departments go. And so I personally wanna just thank the chair, but I'd also like to thank miss Cochran for the tremendous amount of work that you put into your report into the state legislature. I will say some of the reports usually are very thin, but, I I do appreciate your report. We know that private post secondary educational institutions play a critical role in training and educating people of all ages throughout the state.

Bureau licensees and registrants can be nimble and work directly with employers. They can pivot and offer new training programs quickly, and many are small businesses in each of our districts. We have to be certain that we continue to prioritize the interests of students and ensure the public resources many of them utilize to support their educational pursuits remain a solid viable investment in their futures. The landscape of schools, and that means by which they provide education and training changes every day. That means what we expect of this bureau also changes regularly.

So I look forward to the conversations today and throughout this oversight process as we work collectively to balance the role of government in supporting students to provide the bureau the tools it needs to do its job and to support quality programs offered by these schools. I do just wanna say that many students across this nation are deeply saddened by some of the conversations around student loans. And so whatever we can do to support our students of all ages needs to be done. So, again, thank you. Looking forward to hearing from you.

Thank you, Chair Wahab. And with that, we're gonna begin today's hearing. Testifying today is Deborah Cochran, the Bureau Chief, and Christine Lally, Acting Director for the Department of Consumer Affairs, and we're ready whenever you are. Just hit that little button right there. Got it.

Good morning. I before we get started, I would be remiss. My dad, God rest his soul, would kill me if I didn't wish everybody a very happy Saint Patrick's Day and Aaron Goebraw.

Thank you.

Good morning, Chairs Wahab, Perez, Berman, Fong, and committee members. Thank you for the opportunity to be here today in support of the Bureau for Private Postsecondary Education. I would also like to thank your staff for the very well written background paper they prepared for today's hearing. In 2009, the Bureau for Private Post secondary Education was reestablished under the Department of Consumer Affairs to regulate private post secondary education institute institute institutions in California. The bureau's mission is to protect students and consumers in California and beyond by conducting qualitative reviews of educational programs and operating standards, proactively combating unlicensed activity, impartially resolving student and consumer complaints, and providing support and financial relief to harm students.

Under the extraordinary leadership of bureau chief Debbie Cochran, who was appointed in 2021, the bureau has made significant strides in the areas of modernizing its data systems, streamlining licensing practices, strengthening enforcement, and building capacity among other efforts. For example, the number of administrative actions taken by the bureau has risen significantly. Over the past four years, the number of citations issued more than doubled, reflecting a 124% increase. The sharp rise can be attributed to improved efficiencies in the bureau's investigation and inspection processes, as well as a 45% reduction in pending complaints. This upward trend illustrates the bureaus and chief Cochrane's resolute commitment to enhancing operations, consumer protection, and effective regulatory oversight.

With the federal higher education landscape in flux, the bureau's mission and valuable work is more critical than ever. It is my privilege to introduce BPPE bureau chief, Debbie Cochrane, who will speak about the bureau, detail its accomplishments, and answer questions. Thank you.

Thank you.

Good morning, Chairs and committee Members. I am incredibly proud of what our entire team has accomplished during the nearly five years that I have been at the bureau. I'd like to take just a moment to highlight a couple things that don't often show up in standardized reports and metrics. The bureau has become far more adept at promulgating regulations efficiently and effectively using the authority granted to us by the legislature to make progress where progress needs to be made. We've also made huge strides in using data to understand our understand our work as well as understanding industry trends.

Of our many data driven improvements, I am especially proud that the bureau is now meeting its mandates regarding inspections of approved institutions for the first time since the act was chapter in 2009. The bureau has never been more effective at protecting California consumers and students, and its work has also never been more essential given a rapidly shifting federal landscape. The future footprint of the US Department of Education remains uncertain, but we do know a few things. We know that the department's California based regional office the bureau relied on for enforcement, licensing, and administrative coordination was eliminated entirely in March 2025. Staffing reductions at federal student aid have extended processing times for loan relief applications and reduced visibility into students' federal loan status.

Policy changes to federal student aid, accountability rules, and accreditation may reshape higher education in ways that reduce protection for students. The bureau is, of course, monitoring these changes closely. Yet despite this federal uncertainty, the greatest threat to the bureau's ability to protect California consumers is its own financial instability. Its long term structural deficit has been a death addressed through debt in some years and temporary general fund infusions in others. Since its last sunset review, the bureau has reduced expenditures, eliminated positions, maximized revenue, and pursued trailer bill language to shift certain student focused expenditures to the student tuition recovery fund.

At this point, there are no additional steps the bureau can take without legislative action to increase fees or reduce mandates. Regarding fees, the bureau's full recommendations are detailed in our sunset report. Regarding mandates, the bureau believes that scope aligns with legislative intent and consumer protection needs. A mix of proactive and reactive enforcement through required inspections and targeted investigations forms the backbone of an effective monitoring scheme. Both educational efforts and disciplinary actions are increasingly effective at promoting compliance, and an integrated office of student assistance and relief is better supporting students while strengthening a broader consumer protection efforts.

Still, our report includes more than two dozen new issues, nearly all of which stem from real world implementation challenges faced by the bureau in implementing the law. The recommended fixes would improve clarity and efficiency, benefiting both students and institutions. I appreciate the opportunity to address the committees today. I also would like to echo the thanks given to the committee staff for their truly exemplary work on today's materials.

Thank you very much for your presentation. And with that, we're gonna turn it over to colleagues for any questions or comments that colleagues might have. Let's start with, chair Wehau.

Just a real quick question. What is the bureau doing to ensure students have access to their transcripts and records if a school closes? We get a lot of questions like that. And so what are the options? Is it, you know, redundant? What can we do?

Thank you for the question, chair. This is thorny problem that we've been spending a lot of time on. So current law and regulations require institutions themselves to permanently maintain copies of students' transcripts. They're actually supposed to do that in very specified ways, including at the institution's own expense permanently. That's a that's a very important protection for students to make sure that the education they've invested their time and money into will bear fruit, and they will be able to realize the labor market outcomes that they were hoping for.

We are very we are increasingly seeing and recognizing that this does not always work. Institutions go silent. The established so called custodian of records who's supposed to be the person to support students with acquiring transcripts becomes unresponsive. As a result of this, we have been talking with other state agencies, other private college regulators in other states to understand how they're handling this problem. And, you know, as we had outlined in our sunset report, looking at whether the bureau itself should take on a larger role in this process so that we can better ensure that students have access to their transcripts going forward.

So a lot of these schools are not seen as as great as some of our CSU slash UCs. And it's seen as also more costly. And there's a lot of individuals that want to get degrees, and there are, you know, government agencies that will also pay. For example, I think in Santa Clara County, one of the counties I represent, they will pay for people to get their master's degree from National University. Right?

What are we doing largely about, you know, just really holding bad actors accountable when they violate the law or just, you know, doing business and actually don't prioritize the student or that their degree may be rubbish. We have a lot of that in the press, in the news, people who owned universities, oversight. In my district alone, we have a lot of makeshift colleges that will want to do a money grab and have their, let's say, Diaspora Join that particular university to get some type of degree or some type of training, and it's not as robust, and it's seen as a money grab? Like, how are we accounting for all the new schools being, developed and just the oversight there?

This is this question, which I very much appreciate, gets at the heart of the mission and everything that the Bureau for Private Postsecondary Education does. The bureau exists to protect students and consumers and to make sure that the schools and that people are pouring their hearts, their dreams, and their money into are actually going to bear fruit for them. So, you know, in terms of what we're doing, I think those types of concerns are at the heart of all of the strides the bureau has made to ensure that its licensing application review processes are well targeted and that its enforcement is best positioned to, to address the bad actors when we see them. And that goes all the way back to, you know, processes that that staff at every level do in their work. So that way, we make sure that when we get to the point of holding a bad actor accountable, everything we've done is airtight, and we can actually deliver on that promise to protect students.

So the reason why I bring this up is because, in my district, especially in the Bay Area, there are a lot of schools that target, like I said, the immigrant diaspora that is, you know, obviously, relies on language support and just, you know, being culturally a little bit more in tune with them. But what we are seeing about oversight and and this is not a criticism of this particular department, but more across the board on literally every single department that I've seen, including even as an example, we have an audit in Alameda County on Department of Children and Family Services. And if you ask, okay, after, you know, there's these reveals of, hey. You you are not complying complying with, you know, section 12345 whatever, the, compliance issues are. If they fill out the paperwork and submit it, you know, the agency is satisfied.

The school says, okay. We did it, but it's on paper. What is the boots on the ground, site visit, spot check? What is it that you guys do that goes further to make sure that, one, corruption is not anywhere in our institutions? Number two, that these programs are actually robust and not a money grab by, private investors that are deeply interested in just absorbing cash from from desperate students. What are we doing there?

So I think I would like to highlight 22 particular strains of work. One is with relation to, you know, the fact that that I think all licensing bodies to some extent have to rely on paper. At the application process is a paper based process, and we need to look at what an institution is telling us that they're going to do. That said, when it comes to handling student complaints and the types of issues that you're concerned about or or or relating to, Alameda County, those are violations that actually happened. And that's where our enforcement team, really, I think, has the stronger hand in many ways.

It's not just about what a school is telling us that they will do or they have been doing, but us documenting whether what they have been doing is sufficient or compliant with with established rules and regulations. Excuse me. We've had over the last few years, we've had nearly total turnover in our enforcement team management structure, and that's given us a lot of opportunities to refine procedures, come up with new areas for improvement, excuse me, to make sure that we are handling cases as thoroughly as possible. I personally review a number of every week, a number of closed complaints to ensure that we are doing the maximum we can to support students.

But but the complaints have to come from the student?

No. The complaints do not have to come from students. The complaints can come for also from other agencies. We also do a lot of proactive monitoring. So we'll have, you know, internal complaints where we see something that is doesn't look right at a particular place, and we will and we'll investigate that. We also have a number of complaints that come from other government regulatory partners that we that we work with.

And, chair, I would just add just in terms of inspections to give credit where credit is due under, chief Cochran's leadership. Inspections have just been outstanding. So there's a requirement for two, within the five year period. And right now, the bureau is on track to, you know, make that requirement. But in years past and previous sunsets, unfortunately, the bureau was not meeting that mark. But under bureau chief Cochran's leadership, that has been a huge priority.

Okay. And so I'm I'm gonna say this in a different way then because, most agencies will not share their, information in this way. So let's let's let's ask it in this way. What do you guys feel slips through the cracks? Because what I see in my district, and I I just again, speaking from my my perspective, we have a lot of propped up quote, unquote colleges and institutes and, you know, teaching from medicine to, you know, a wide variety of things.

What it looks like is, again, a private investment into an opportunity to have hundreds of students take out these massive loans, right, free money, put them into these colleges, right, maybe not a 100% get the output that they wanted, right, and end up with a lot of debt. And what we also see is because a lot of these folks are either immigrants or whatever the case may be, there is a a a hook in it that also highlights immigration status, and we can help here, and we can do this. And, it it looks kind of predatory in a lot of ways. And I I I just want you guys to focus in on my district. You know, I drive on 880, and I see new schools popping up, college, institute.

And I don't know how many of them are legit. Right? And the students just navigating their school system, let alone their lives and livelihood, won't necessarily complain to you, won't know where to go, won't know how to say, like, this is legitimate, this is not, I got screwed. What is the case? Right?

So I I really just wanna understand how you guys do outreach, where you guys are weak on When we talk about enforcement, whether we're talking about the labor commissioner's office or the state auditor in my experience, enforcement tends to be very, very weak and without teeth. So can you elaborate a little bit there?

Absolutely. So the first thing I will just highlight is I myself live in Alameda as an Alameda County resident. If there's a billboard on 880, I've probably seen it and and may have personally submitted a a tip for looking into that institution myself. So that is the kind of things that we all have our eyes open for at the bureau at this point in time. We are always looking out to make sure that students are protected.

We do have with respect to enforcement capabilities, our enforcement authority broadly falls into two categories. We have a citation and fine program, and that's for more fixable types of violations. And then we can file accusations to revoke a license or put a school on probation. We have increased substantially the number of institutions that have either been cited or have for which we have pursued more significant discipline, whether it's the accusation and revocation of a license or a denial of a license. And we are incredibly successful in our appeals, including those that get to an administrative hearing.

So I think we are we regularly prioritize complaints that have that we are working on in our investigations based on risk to students. We did highlight in our sunset report one particular error where we have seen a very targeted exploitation of immigration's immigrant students in particular, and that's with respect to, unaccredited institutions that are offering degree programs. Most of the institutions that get approval to offer these unaccredited degrees, as the law allows them to do, do not succeed in their pursuits to get accreditation. But we have absolutely seen a pattern that many of them enroll high very high thresholds, even a 100% students who are here on student visas. And we are concerned that that creates a dynamic that puts the students at risk.

They're not able to vote with their feet in the same way that other students might be able to. We have seen institutions putting pressure on those students to not work with the bureau, not cooperate with bureau investigations, or not testify against the institution because of what it will mean for their immigration status. So I think that's I guess I will stop there and see if that answers some of your questions. I'm happy to elaborate more on any of these points.

And and I I really just wanna highlight this for the the the rest of this board. This is a serious issue. Right? And and any person and I'm not talking about the billboards. I'm talking about legitimate schools coming down into the drive a little further than Alameda.

Right? Down to the South Bay into Santa Clara County. You will see institutions that, you know, are really nice buildings, million dollar plus buildings, obviously, in the Bay Area, spending a lot of money specifically targeting immigrant students without citizenship status. Right? Usually, language barriers, usually, you know, two of their arrival. You talked about fines. Right? Can we get a range of what those fines look like?

Yes. So the law allows the bureau to cite to issue a fine of up to $5,000 for an approved institution that's per violation. I believe most of our citations do have multiple violations accounted for in them, and that our average citation fine is about $8,000. Overall, they can it's not uncommon to see citations with fines of upwards of 10 or $20,000. That's for approved institutions. If there is an institution that is operating without approval, but is subject to approval requirements, fines can be up to $100,000.

Okay. And then when you say that revoke of the license, right, is that all that you guys are able to do? So so for me, if somebody is being a predator and highlighting and targeting specific demographic that is vulnerable in multiple different ways, right, that is putting them in debt and harming their future lives for years to come, a $5,000 fine, and I've heard this even when we're talking about housing, right, and our landlord tenant, issues, it is cheaper to commit the crime, pay the fine, and continue with doing business. Right? As far as the license being revoked, they can create another LLC or business and start brand new.

That is how business operates in a lot of spaces when you have predators. Right? Is there any criminal, you know, pursuit? Do you guys refer them to the AG? Do you guys do anything even locally to the DA? Because there has to be after you have so many fines or you literally, exploited, I don't know how many people. Right? Especially from a institutional with what everyone assumes is the public good as, like, education. Right? What are we doing there?

And I highlight this because, for example, people have suffered under Trump University. Right? And they paid thousands upon thousands upon thousands of dollars, and literally obliterated their entire savings or future. So what are we really doing to actually go after this type of crime in a more serious way?

Well, I think one of the issues is that we we will pursue a revocation. And as part of that a part of a revocation, you know, we might also be ordering an institution to, to provide refunds. Institutions that close before students are able to complete their programs owe owe their students refunds for everything that they have paid up to that point. So, we are doing as everything we can to ensure students benefit from that. It is also the case that many closing schools, once they know that they need to close down, they no longer see an incentive to comply with the laws or or, regulations.

That's one of the biggest drivers behind the recommendation that the bureau put in its report to, allow the bureau to to deny applications for new school approvals to operate when we know that the school has, closed down, has harmed students, not provided refunds that were owed to the students so that we can stop that cycle. I think that's one of the most important recommendations.

You include the bad actors. So let's say, if John Smith and Jane Smith opened a school, they were a bad actor, you know, they opened up some, you know, Clark University, whatever that they wanna call it, you guys find them as bad actors. They shut down. They declare bankruptcy. They pretty much don't have to pay anything to the victims and move on, and then they open up instead of Clock University, Watch University.

Do you guys track the actual John Smith and Jane Smith and make sure that they can no longer if they are part of a board or an institution in any executive position or investment position, that they are completely just that that's not gonna get approved? Or how do you how do you really go deep?

So our data systems do do track ownership in those types of fields, so we have the ability to track that. Right now, the law does not give us the authority to deny watch university after Clark University was shut down or shut down improperly. So that's what we are asking for authority to do going forward. The other if I may just add one other point, and, and I know we're focused very much as as we are too as the at the bureau holding the bad actors and the individuals behind the institutions accountable. I do also just wanna mention that in the cases where a student has been harmed by a school closure and the school is not forthcoming with the refunds owed to the student, we do have a student tuition recovery fund.

Again, it might not it doesn't serve the purpose of holding the school accountable, but it is a critical resource to helping to make those students whole.

Okay. And I appreciate it. I know that you guys actually want more enforcement tools, which I'm very supportive of. I will say that one of the things that I I I wanna do is, I do think that a lot of these universities are propped up very quickly. I don't think it's as rigorous as a process, that I'd like to see, especially with them like, I'm in these circles where people are like, we can do this.

We can just grab money, make money, do this, and I don't agree with that. Right? And so I would like to see more robust schools. And if there is an opportunity to support, like, a good acting school that is very low tuition, supportive, and collaborative with even our CSUs and UCs, I think those are kind of the integrations I'd like to see versus the for profit, you know, private institutions that we are seeing propped up left and right, at least in the district that I represent. So I will defer to my chair or anybody else.

Thank you.

Thank you, chair Wahab. Any additional questions or comments from colleagues? Vice chair. Ready when you are. Yes, please. Absolutely.

Thank you, chair. Let me follow-up the previous questions. Obviously, the Bureau of Private Post Secondary Education is created for the consumer protection in many different ways. One of the issues so far, what I hear is that, first of all, quality issue, and secondly, what follow-up measures You can place upon the bad actors, try to create new institutions after committing so called wrongdoings and the harm harms for the students and the continuing their process. So that's what you are telling us that the new legislation may be needed to follow-up to prevent them to open up a new school.

So I think that's one action item that I hear from you. I wanna focus on the STRF. Is is that the student tuition recovery fund? Yes. For such cases, when school closes, students will have ability to recover the funding.

Can you tell us maybe recently, may in the last five years, how many schools, bad schools have been shut down, and the students had to seek for refund from this STRF. And what I read was that the the fund is not so great at a great amount. If the number of the schools shut down by force and the students will have to rely on recovering their tuitions from this r t with STRF, how much money have you paid out and that activity? And my understanding is that the STRF fund is instable, and you are trying to increase that amount, that the range of the, maximum amount you can collect. And, that's the fact finding that I wanna hear.

And if the other side the the letter I received from from the Northwestern University says that that gives the students are mandated to pay into that fund As much as $809,100 dollars, that's a a big burden for some students. So if there's any other method that you can come up with, that university suggests proposes a surety bond in lieu of STRF and what you would think about for me, initial impression of that is, like, buying an insurance. Just like I buy an auto insurance if that happens, and they will pay. So the likelihood of a school shutdown from bad operation and to the point that they have to bankrupt and to close down and the refund those, tuitions, that the k cases, I hope, that is a nice or high rate of percentage in in totality, but I don't know the the fact. So if that's the case, insurance method, whether that idea will and first of all, the premium can be paid should be paid by the institutions, the school itself, rather than giving the burden to the students so that that they would not be burdened to pay anywhere $500 to a thousand dollars or range depending upon the school situation that may be different.

And and that is also, the responsibility should be placed upon the institution, the school, so that they can operate their schools very well rather than risking closure. So so just just like I drive carefully not to rely on the insurance. Whereas when you expect the the fund that should be funded by the students, then the institution the schools would not have that kind of a pressure or responsibility. So what is your reaction to that kind of proposal, and have you ever done such a comparative study?

Thank you so much for the questions and comments. I I know you covered a lot of points, so and I took some notes. I'm gonna try to respond, but please feel free to remind me if I've left anything out. So the student tuition recovery fund does work like an insurance program. That's usually the analogy I I use as well.

Students, when they enroll in an institution, pay an assessment as part of their enrollment process. Institutions collect those assessments and then provide those assessments to the bureaus student tuition recovery fund on a quarterly basis. What that rate of assessment is varies. It is set by the bureau and through a process to manage the total amount that's in the fund. The fund under the statute currently is supposed to stay between 20 and $25,000,000.

The fund balance at this time is over $25,000,000, so assessments have been set at zero. No student in that's enrolling in a bureau approved institution is paying into the student tuition recovery fund at this time. I will say also the fund is actually very healthy. Our the funds, like I said, is well over $25,000,000 at this point. We do routine projections to determine, you know, how we manage that fund level.

And our current projections, at our current rates of STRF claim administration, we would not anticipate needing to even turn on the assessments again until at least 2029. So the fund is healthy. We did say we did include some recommendations to broaden that range as you referenced from 20 to 25 million to 15 to 25 million. And that was purely a way to try to simplify things administratively, both for the bureau and institutions. The process of starting and stopping those STRIP assessments is a detailed one.

Institutions have to evolve their enrollment procedures, change their catalogs and enrollment agreements, and it's just there's prone it can be prone to making mistakes and lots of detail very fine tooth issues in the details. So our our thinking behind that recommendation is that the fewer times we need to make those adjustments, the better. But, that that that doesn't have anything to do with the strength of the fund, which, again, is very healthy. You asked about the number of STRF claims by institution and dollar awarded. I don't have the number of dollars or the number of institutions for which we have paid STRF claims at this time.

I do know that we included the last four years of STRIF claims paid as well as dollars awarded in our sunset report. And if you'll forgive my quick math, I believe it's in the last four years. It's been about 1,100 claims that were approved and and somewhere around $17 million in dollars awarded. So again, that's the last four years, and that's across all institutions for which TRIP claims were paid. With respect to the surety bond piece, but I know other institute other states do often rely on a surety bond type of concept as opposed to a student tuition recovery fund.

Very few states have either. I know this was an issue that has been brought up in prior sunsets. And I think it's you know, it is an alternative way to go. I think from the bureau's perspective, the student tuition recovery fund is working well for students. Institutions generally understand what their obligations are.

It it is a pretty streamlined process in terms of those those assessments and the submittal of those assessments to the bureau. So at this point, we would not see the need to change course and develop a new structure for a surety bond in lieu of STRIF. But, of course, happy to happy to hear about any proposals that the legislature might want to consider.

Oh, you sound like a student recovery fund is working well. And my follow-up question is if if the fund has reached the maximum, which is $2 million, That means if that has reached that amount, that means the students are entering this year. Whenever that the maximum is reached, then the students entering private schools would not have to pay this day or share of fund into it?

That is correct. Okay. So the student and they would still get the benefit of protection from the student tuition recovery fund, but they're not needing to pay that assessment.

So right there, I see inequity for those who happen to enter during the period when the the fund was not the has not reached the maximum. And in the middle, they had to pay substantial amount of money depending upon the school. And then they are equally they are rightfully protected, whereas the other students are entering without having to pay the fund into into the fund will be equally protected. And when they graduate, the previous paid students, when they graduate, do they get the money back or does their contribution? More unlucky having entered the school in during that period.

They, they would not get the money back.

They would not.

That's their contribution to the STRIF Insurance Fund.

So that is, to me, very unfair practice.

We would be happy this is the way that the the STRF assessment process works per statute, we would be happy to look at whether there are alternatives worth considering.

Yeah. The merits of the assurity bond will be the the insurance premium, and the premium has been paid by by the institution. So regardless of when the students have entered the school, they will all get the benefits from it. So fairness issue won't be the problem under that system. So it may be worthwhile for you to study that.

How about the system of continuously charging to as, like, a insurance insurance measure. When students will when they finish it, that the amount that they have contributed can be refunded. And the new students, as they enter, they pay. When they graduate, they can get the money back. That may be another another way. Don't you think that that is worthwhile to study?

We're I mean, we were certainly happy to look at any options that the legislature would like us to look at. I think with respect to providing the money back, again, similar to an insurance program, it would be challenging to do that because each student on an individualized basis pays in a pretty small fraction of what they what of of their total costs put into the insurance fund. Their potential payout is much larger. So if every student were to potentially get back what they put in, it would mean that the amount that was left available for the students who were experiencing harm would similarly be quite little. Just to give you a sense because I know that I mentioned, that the assessments have been turned off right now, but so you have a sense of historical scale.

The assessments work based on $1,000 of tuition. So when assessments are on, there is an amount set by the bureau per $1,000 of tuition that must be allocated to STRF. That amount has been either 50 as low as 50¢and as high as $2.50 per 1,000 of tuition.

Yeah. I have one more issue that I'm gonna address to you. That is there are all different levels of quality private post secondary institutions are long established, and the historically, they are sound. The financially, they are very sound. And the various news schools are popping up just like senator Warhol described a while ago.

Those are very risky institutions. Why all the schools or students enrolled in those schools indiscriminately charged? There are strong financial reputation, historically proven accredited schools. Nobody will question their bad act, bad operation, bad teaching quality wise, or or a chance of depleting their financial resources and become bankrupt. And I think that this Assurant Tuition Recovery Fund was created to protect the just in case schools are shut down for whatever reason, they will have chance to recover their tuition.

But regardless of the school level quality, they are all charged same way. Right? So that is also very unfair for those already well established.

I think you know what? I while I mentioned before, I don't have at hand the number of institutions to for which the bureau has paid out SRIFT claims. What I can tell you is that it's a wide variety of institutions. Not all of them are unaccredited or and some of them are ones that were seemingly reputable before their sudden closures. So I think it it the the reality of which schools close and which which students ultimately end up needing STRIF as not as straightforward as it might otherwise seem.

Okay. Thank you.

Thank you, Vice Chair Choi. So I've got Assembly Member Hart and Addis, and then Senator Niello, Senator Cabaldon. Assembly Member Hart, please.

Thank you, Chair Berman. Continuing with the student tuition recovery fund, I'm interested on the amount of compensation that the students who are acting through the fund to get their tuition reimbursement recovered or their loan payments recovered. What are the limitations on that? Is there something that should be done to expand that, opportunity for them to get compensation since the fund is in such a good position and we're not collecting additional, charges? You know, the obvious question is, what about the benefits on the student side?

Are there things that you recommend that we ought to consider to expand that recovery for students?

Thank you for the question. So in terms of the, what is payable for a student who's claiming this who is filed a student tuition recovery fund claim, I believe the average claim amount is around $12,000, just to give a sense. What we what the fund pays for is economic loss. So the amount that a student has paid and no longer can benefit from for the education. Often, that is usually, that is tuition.

It might also be other things associated with going to school or any private loans is one of the elements that's paid out in the statute. To to confirm that that is lost, the bureaus STRIF claim adjudication procedures assess whether a student has gotten value from the education. So if a student has graduated or maybe wasn't able to graduate but ended up getting a job in the field, that might mean that that student didn't actually experience economic loss. Similarly, if a student left a program and then was able to transfer half of the their credits that they earned to a new program, the economic loss would be deducted per regulations to account for the value that was received by those credits. So I think as a I I think the way that the program is structured is broadly, so very supportive of students in this situation.

We do have a number of recommendations, of course, in this area that would streamline, both the adjudicate it would both streamline the adjudication of claims for at the bureau perspective, which would speed up claims. In particular, we're looking at you know, there's a lot of strip claim eligibility that closely mirrors federal the eligibility for federal student loan discharges. And we would like to tie those even more closely together to allow us to streamline relief to students and reduce duplicative, you know, the duplicative need for students to prove their case of economic harm to multiple government agencies. So that's, I think, an important factor for us. The other the other great thing about that is it would allow our team, both our student tuition recovery fund claim team, as well as our office of student assistance and relief to very clearly communicate with students about their eligibility.

As as you know that this is one of the challenging things with student outreach, to say, you know, you might be eligible for this program, but you're gonna have to submit a lot of information and we'll kinda throw it into the mix and we'll see what comes out. But by better aligning eligibility for state relief with federal relief, we can send a much more clearer message to students.

Are you confident given the changes in the Department of Education at the federal level that their consistency is predictable and reliable? It's building a system that, you know, is more dependent on the Department of Education at this moment in time sounds challenging.

Indeed. No. I would not be confident, in relying on the federal determinations if if that were to be students only path Mhmm. To STRIF claim eligibility, it would actually be very important that we not do that because so many of our institutions are not eligible for federal financial aid, the type of financial aid that that triggers that would trigger a student loan discharge application. But I think allowing for that to be one of the paths would allow the bureau to streamline where possible, but not close off opportunities for other students.

Do you keep track of the complaints from students who finish that process, the recovery tuition recovery process, to know what their feedback is and whether they feel as though had they have been properly compensated? Some kind of survey process at the end, you know, how were you satisfied with the result kind of question?

No. I am actually not sure if we survey our STRIF claimants, but I'm happy to follow-up with you.

Yeah.

I think that'd be a good thing to know. I mean, given where the fund is, you know, obviously, there's the strategy that is being used, which is to stop additional payments, but let's make sure that it's working to the satisfaction of the students that are that have already paid, before we decide that's the finish. Thank you.

Thank you. Thank you, mister Hart. Assemblymember Addis.

Thank you so much and thank you for all the information that you're sharing. It's really important. One thing occurred to me as we were talking about enforcement. I know the chair was asking a number of questions around enforcement and then around the student fund. Both of those things are on the reactive side.

So after a problem has occurred, how do you address it? And I'm wondering what you think are your greatest tools in terms of prevention, if any, and where do we have gaps on prevention, knowing that there's a lot of struggles in this space. And if we if we didn't get to these problems in the first place, we'd have much less need for the fund, much less need, to be imposing heavy fines if we were able to, you know, do better on the prevention side of these kinds of institutions taking advantage of students.

Thank you for the question. I I very much appreciate it. And, you know, I often describe the bureaus enforcement as both proactive and reactive. And so, obviously, we've we've talked about the reactive enforcement and and you would use that word as well. I what what I refer to as proactive enforcement would be our compliance inspections.

The bureau is required to conduct compliance inspections, one announced and one announced of every approved institution in the state of California every five years. And I'm this is one of the things I'm most proud about of my time here that we are meeting that mandate. We have also it's we're not just doing more. We're we have streamlined the way that inspections run in order to be sure that we are monitoring for the right things. We are and we are documenting what we're finding.

I think that's a very important component of this. The chair also had talked about potentially, sometimes there's these minor violations and and people get off with, you know, a a hand slap. One of the things that's become very important to us is making sure we're documenting everything that happens in an inspection. So that way we can keep track because maybe something's minor in one inspection. But when that same minor thing starts to add up because we see it the same thing in the next inspection, that's all of a sudden now a much more serious problem.

Right? Because that looks more willful than just an honest mistake. So we are increasingly tracking that and taking action when we see those things. The other thing I would point to is our workshops. We offer workshops for institutions on the licensure process, on how to handle a compliance inspection, and also on how to complete and stay, you know, stay up for your school performance fact sheets.

Those are important disclosure documents that students must sign before they enroll in a program to tell them, you know, how students typically fare after the fact. We do in those workshops monthly. We also are we began last year surveying some of the participants of all of those workshop types and routinely incorporating the feedback that we get from institutions. The final thing I would say is we are discussing whether or not, we should be looking at doing one of our compliance inspections very early on after a school is newly approved. We know that it take it's a lot of bureaucracy associated with running a school and many of the small actors, they might not necessarily be well equipped.

You know, not not intentionally trying to not be compliant, but maybe they need a little bit more support. So we're looking at potentially trying to get out to do the compliance inspection a little bit earlier, so that way we can better support them through that process.

And I would only add to your list of prevention tools, especially something that the bureau chief is very proficient at is her outreach and collaboration with other entities within the Department of Consumer Affairs. So a lot of communication with the other licensing boards has been extremely helpful in prevention.

That's really helpful. I think you almost so mentioned that there's some institutions that they look great. They look like they're doing great, and that's a surprise to everyone when they close and that leaves students in a very, very difficult place. And I'm wondering if you're seeing trends or you have prevention mechanisms in the you know, that you're starting to look at data around why that happens and what else could be done on the prevention side so that so that there's less of this, like, oh my gosh. Surprise that, you know, an institution that looks good ends up closing if there's factors that you're starting to see across institutions that are leading to that and if there's anything on the prevention side?

It's it's a great question. I don't know that I could say we're seeing trends. It's something we are routinely looking at with respect to our investigations. One of you know, we we routinely prioritize and reprioritize those based on student harm, and sometimes that is something that happens over time. So maybe, you know, when investigations started, it didn't necessarily look super high risk or super high priority.

But over time, we learn more about the institution. We've got more complaints that have come in or now we've received, information about the institution's financial health, and we can clearly see that that, the risk of that institution, the importance of that complaint needs to be escalated. Similar to, interim director Lolly, comments around partnering with other, licensing bodies, that's a a huge contributing factor to how we we look at that too. So I don't know that we can see trends, but it's something we're always on the lookout for, to to make sure that we can see the institution as a whole and not just be looking at one narrow lane.

Thank you, and thank you, Chairs.

Thank you, Assemblymember Addis. Senator Niello.

Thank you, Mister Chair. The Student Tuition Recovery Fund has really grabbed my attention here. I was a joint author of the bill that set the bureau up back in 2009, and that particular fund was left to the bureau to adopt regulations and maintenance. If I'd have known that it was going to be adopted as it has been, I would have worked to put much more detail into the legislation. You characterize it as an insurance plan, if you will, and I understand that kind of conceptually.

But what it really is is an insurance pool where everybody pays the same thing regardless of the individual risks that they may have depending upon the institution that they're attending, such as length of experience, relative capitalization. I suspect that there is a wide variance of those qualities among the educational institutions that would beg the issue as to why the exact same premium for every student regardless of what those risk profiles might be, number one. And number two, it seems fundamentally unfair that one student would pay in the full amount of assessments and never have a claim, and another student would never pay anything and could have quite a large claim. I don't blame that on the student. I blame it on the the system, the mechanism for maintaining this fund.

So I don't so much have a question, but I think that it that we here on this side of the dais should take a hard look at that because to look at it as insurance, I think, is a reasonable thing. But again, it's an insurance pool that assumes the exact same risk regardless of student and regardless of institution and the that fundamental unfairness that I cited. I I think we need to take a look at that.

Thank you, senator Niello. Senator Cabaldon.

Thank you, Mister Chair, and thank you, madam chair. I was impressed with mister Niello's history on this issue dating all the way back to 2009, except that as I was reading the excellent staffer staff background around this and the the six pages of the history of this issue, the first two pages were when I was working on it. I was the this was the very first issue that I ever wrote a bill analysis on as the Assembly Higher Education Committee. In the in the period in the most aggressive period on this topic in the in the prior century when the twin issues of regulation of diploma mills, that is degree granting institutions, and the regulation of of of trade schools was were being taken on by a Republican senator from Santa Clara and and Maxine Waters, the democratic assembly member from from Los Angeles. And and that was a bloody error trying to craft this this framework that ultimately had to be redone over and over and over again, partly because so many issues are are being blended into one.

I say that because the California has a storied history here of having, for much of its recent history, the strongest statutory and policy framework in the country, but we've lagged on an on enforcement. And that's why the work on the that these committees and the bureau have done has been so important in order to to move the ball down the field. I do wanna say, though, that I mean, the sector is it this this is a extremely diverse sector. And, you know, from barbering schools to institutions that that grant master's degrees, you know, the full the the full range. And I don't think and it's also a sector that graduates very few people into state public policy making.

And so state policymakers of you know, across the board tend to think of this sector as less than, because it's, you know, it's automotive, schools. It's other things that that don't lead usually, in our society, lead to service in the Senate or in the administration. And so I think it it can be very easy to caricature the the the the the the sector as a whole, and the sector is an important one in our economy and and and and opportunities for job placement. We look at at at at at several of the schools in in this in this field that have, you know, graduation rates using the federal definitions in the 50 to 60% range. That's the meet that's the median for the overall sector in California.

There are some that are higher that are some that are lower with with median wages after after school if they finish in the 40, 50, 60 up to 90 or over a $100,000, per year. So that's a pretty wide that's a pretty wide range. But there's some humility required of those of us in the public sector because the community college graduation rate measured by exactly the same way, on average, is about 25%. So half of this sector and, the starting, median wages, after community college in California is roughly the same as this sector. And so, we we haven't we we we never have a sunset review about the community colleges.

I'm a former community college vice chancellor. I have no suggestion that we do. But if if the community colleges were privately owned, we would be hauling them before judges and courts and prosecutors and grand juries all over the place because we're not delivering. And so a a lot of the the the concerns about what happens to people that sign up and who are recruited on a welfare line or on a bus to a program show up and don't get a degree or that degree doesn't pay off. Even though the school can't close, that those students have used all of their financial aid, eligibility, can never go back to college again, and get a different degree and actually finish it.

The consequences are real. So I say that only for some humility in the way that we are processing this, but I'm I'm a big fan of the bureau, and the and the work that the that the chief has undertaken. I have a lot of concerns about the fee, the proposed fee schedules. Like, we we we didn't take it up last year in the budget subcommittee that Senator Niello and I serve on for this reason, that the that the fees have been growing fast. Our the proposed fees would be among the highest in the country, if not the highest in the country, by a not trivial amount.

And and and particularly in the case of the out of state fee, which went from $300 to just over 1,000, the which is a registration fee, not a not a true licensure fee, that would go to 10,000, which would in addition to the the fee that many of those institutions pay under the the state authorization framework, which is also 8 you know, 6 to $8,000, that California is is uniquely aggressive in in its approach. And so I'm I'm curious both both now but also in follow-up as to why that why is that? Why is why does Oregon charge charge $5,700 for a non SARA licensure, and we're proposing to charge 10? Why why is it appropriate that the that the out of state registration fee for which we are not licensing is from 300 to $10,000? So it's more than the institution is paying for full licensure in their home state.

We would be charging more than that for the mere active registration and and verification of of what are supposed to be pretty basic conditions. And and so I we need to we need to make the bureau the bureau solvent, but it's not clear to me that the the particularly in those areas and given higher education's not so great history of trying to finance itself out of foreigners and out of state people constantly, I don't wanna make that mistake here. The fees need to match up with what the actual costs of enforcement and and administration are. So continue to have questions about about that aspect of it. You're but certainly welcome this Chief Cochran's response, but also just looking for more detail.

The what the the two the excellent staff report and the excellent report from DCA and the bureau didn't cover is matching up workload and the actual cost of each of the different categories of fees with the fees themselves. So they're able to see that it's that that no particular sector of the regulated community is bearing a disproportionate, share of those. And, certainly, if we're talking about, you know, over a period of three years, a 300 or 600 or 3000% increase in the fees, we need to make sure that those are justified. So thanks, miss, both chairs.

Senator Cabaldon, Chief Cochran, would you like to address any of the issues that were raised? Or

Sure.

There wasn't a specific question, but an overarching kinda concern raised.

Yes. I will appreciate that. And and, absolutely, senator, appreciate your deep history on this on this bureau in particular. I, you know, I think with respect to the fee analysis we've done, we have for all of the outlined fees in terms of application fees, all of those match very closely with workload analysis we did in late 2025. So so and we're happy to provide those to the committees to see more information on that.

So that's kind of where we get all of the institutional the application fees as well as the out of state registration. Just to confirm, the out of state registration fee currently, it's a five year registration for $1,500. So the $300 amount would be the annualized version of that. We would be raising that $1,500 to 10,000. So, again, if we're looking at annualized numbers, it would be fifth $300 to 2,000.

But but again, that matches the workload associated with that application and going through the monitoring process required in the statute. With respect to other agencies across the country, you know, I've become quite a student of other agencies, and I obviously can't speak to Oregon or any state in particular at this at this moment in time, but what I have learned is that compared to other private college regulator agencies across the country, this bureau is particularly there's there's more more expectations with respect to monitoring and proactive monitoring, those compliance inspections. There's a lot more expected of the bureau with respect to complaint handling. So for instance, most other state agencies akin to the bureau do not accept complaints that are anonymous, do not accept complaints that for which a student hasn't gone through the institutional processes. So they get, you know, single digit complaints per year, whereas we get over a thousand.

So there are ways in which the Bureau for Private Postsecondary Education is structured to be a much more robust regulator than than other, you know, peer agencies in in other states, which would would account for some of the differences.

Just a quick follow-up. So the the the workload based analysis, I I know we have and you provided again the sum of the the the report with the the analysis done collect collaboratively with foundation for the California Community College or Foundation CCC. I guess they go by now. Is that is that what you're referring to? Is there is there an an additional workload analysis that is that is kind of fee by fee?

There is an additional workload analysis that outlines for all the application fees. The work you know, the because the bureau can't charge more for a service than it needs to conduct that service, so we did a workload analysis for every one of our applications, which includes that registration, as well as the state authorization complaint contracts.

Okay.

I'd love

to see that. Thanks. Thank you, Senator. Assemblymember Closa.

Thank you so much, Sherry. Thanks for your responses. I'm sorry I missed most of your presentation. But I had a few follow-up questions as well. I had a chance to work on this, and everyone's sharing some of their experience on this issue.

When I worked in the Obama administration, worked in the office of career technical and adult education. So worked a lot with our private institutions. And I know that that was one of the priorities, during, the Obama administration when I was there. We worked a lot to really crack down on, the widespread fraud happening, and really impacting students. You know, we're talking about it, using different terms and nomenclature today, but ultimately for the students who are defrauded, you know, that is their entire livelihood.

You know, that is a generational trauma that could happen to them by being by thinking that they would be able to get a college degree at the end of this only to to leave with nothing and a lot of debt. One of the things one of the institutions that we were able to crack down on when I was there was, Corinthian Colleges. I don't know if you remember them. And so one of the questions that I had, for the agency was, what resources are you putting towards, this? I know you kind of answered it in different, ways through some of the questions that my colleagues asked.

But is there, like, a dedicated, like, task force or team, that you have specifically at your agency that is working on this actively?

Could you say a little bit when you say working on this actively?

Yeah. Working on on just really cracking down on some of the bad actors in the industry. You know, you mentioned right now that you had a a thousand complaints that you're handling. You know, are you seeing trends? Are they, specific to some colleges, some institutions?

Are you seeing trends? And do you have a specific team, like, a task force dedicated to that? That's one of the best practices that we had, in the Obama administration to really have dedicated resources so that we could continue to, you know, double down on this. When we find Corinthian Colleges, when I was there, I believe we fined them for $30,000,000, and that was a result of the staff work that was needed to be able to do that type of investigation.

So that's a it's a great question. I think that the real answer for your question, and I will say more for more specifics, is that that is at the heart of everything we do, is making sure that we are using our enforcement authority as well as our licensing application procedures to make sure that we are seeing the entirety of an institution and addressing problems when we see fit. We are we've worked very hard to break down silos to ensure that can happen. We don't have a dedicated response team in that sense, but we've embedded work along those lines into all operational units of the bureau. One thing I would point to in particular is I mentioned that in my opening comments about kind of getting smarter with data over time, Institutions report to the bureau on an annual basis a whole host of information about both their school operations as well as their program outcomes.

We partnered a couple years ago with the Office of Data and Innovation to develop a system for a streamlined comprehensive review of that data on a real time basis. So that way, we can quickly see when institutions are reporting to us information that should be red flags. And sometimes that information, the red flag might be, you know, very, very low graduation rates or placement rates. Sometimes it also might be very high graduation rates or placement rates. Right?

Because it's self reported. And sometimes an institution isn't just caught out for having bad outcomes, but rather lying about having good outcomes. So we're really on the lookout for both of those things. The other the last thing I would, point out is that, one of the biggest Obama era developments in the spaces, you well know, is the development of a gainful employment rule.

That was that was my next question.

Should I should I keep going or do any Yeah.

Go ahead.

So, of course, that that rule was first put into a place in 2011, reconstituted in 2014, and then rescinded by the first Trump administration during the his first administration. In part as a result of that, the bills to sort of shore up protections at the state level, including a b 1340 which related to making sure that if we weren't going to get this outcome information from the feds run through federal administrative data, we would be able to capture it, at the state level. That has not been the easiest of processes or the most, simple of processes to get the bureau up and running with that because we were it required us collecting data we didn't already have. We had to promulgate regulations. We had to update data systems to, to be able to collect that data, but we've now done that.

We've worked with state institutions to ensure, a level of data clarity, and quality. And we are very, very excited that we will be transferring that data over to the Cradle to Career data system later this month, in order to have that data matched with EDD data and really finally get some of the verified, labor market data that that we we and students desperately need, especially in the absence of a strong gainful employment rule.

And thank you for sharing that about EDD and working with them to figure out where there's overlap in that data. I'd love to follow-up with you on that. I also serve on the budget set that works closely with EDD. And for folks who don't know what gainful employment is, I don't know if you wanna take a moment to explain what that is. You know, but, essentially, it was something, as you mentioned, came out of the Obama administration that essentially puts a policy in place that, you know, make sure that graduates can actually afford their debt payments and that they're actually able to get employment.

And so that's a piece that I think we should really focus on. And, you know, I will follow-up with your agency after this because I wanna make sure that for the institutions that we are crediting that those students are actually able to have gainful employment to get jobs, to be able to pay off their debt. And I think the last comment that I'll just make is, you know, I really encourage the agency to, play a greater role in how we can think about your department and the work that you do. Because under, this Trump administration, as we know, he has been guiding the Department of Education. He's guided, I think, every, grant program and policy that I worked on when I was there, and that means that the work that you do to protect students and to protect consumers is that much greater.

And so, we'd love to work with you on that, and, thanks for your for your answers.

Thank you so much.

Thank you. Assemblymember Caloza for historical con context. I can't go back as far as senators, Niello and Cabaldon. But when I got elected in 2016 and and starting in the term that started in 2017, I worked closely with Assemblymember Chu and Chief Cochrane when she was in a different role and and other education advocates on on some of those gainful employment regulations and and efforts. And and for those who don't know, for some of my newer colleagues back then, the biggest, kind of, argument in opposition to all of those efforts was you can't possibly give the bureau more work to do.

They can't handle their current workload right now. And that was a really powerful, argument, to undermine a lot of those efforts. And it was true, at the time for the bureau. But chief Cochran, you know, who's been there since 02/2021. 2021.

So the last five years, and and her team have done a great job of really kind of riding the ship at the bureau to the point that they are now at a place where they can take on, you know, more more responsibilities and and are asking for more responsibilities today, which is a really it's a new opportunity to try to make sure that we have the systems in place to, you know, regulate bad actors and make sure that we give our our constituents, you know, California consumers, students, the consumer protections that they need, in this space. So it's a little context. Any additional questions or comments from colleagues? Did I miss anybody? Seeing none.

I wanna appreciate all my colleagues for the the the questions that they asked and the comments that they made and providing some of the nuance to the space that exists. It's not all, you know, good versus evil. You know, there's there's a lot of need for a lot of these institutions, but there's also bad actors that see opportunity and and, you know, try to take advantage of students, you know, kind of who who might be more vulnerable. And that's the whole purpose for the existence of BPPE and and, you know, the work that we're doing here. I just wanna dive a little bit deeper into the the fee increases, which I know there's a lot of consternation about with with some stakeholders in the space.

On the one hand, we definitely want to avoid increasing fees as much as possible, and and we have. It's been almost twenty years since application fees were increased and nearly a decade since annual fees were increased. On the other hand, the bureau needs sufficient resources to be an effective regulator, which we're all asking you to be, and we can't ask you to do that without the necessary resources to do that. The bureau's legislative mandate is to protect the nearly half a million students who attend bureau approved and registered schools. That's a critically important responsibility and an increasingly important one as has been discussed a lot today as the Federal Government's oversight to higher education diminishes.

Could you please explain how the bureau first off, how you've minimized the structural deficit, and you talked about this a little bit in your opening presentation, but some of the steps that you've taken to really get as lean and efficient as possible, and then also how you arrived at the current fee proposals. I'll stop there, but might have a follow-up.

Absolutely. So with respect to minimizing the structural deficit within the bureau, some of the key issues we've done is try to find ways, again, data driven ways that we can look at our workload and find efficiencies. We've talked about compliance inspections. We've actually been able to do more inspections with less because of streamlined procedures for scheduling them and and and monitoring all the documentation data. Our our work to both receive the data submitted by institutions and analyze that has been overhauled, is now much more efficient and able to be done both faster and more efficiently with with fewer staff.

So those are some of the ways in which we've made, improvements to reduce, the deficit. Another component of that is being as smart as possible with collecting on citations and fee recovery. Obviously, we have issued many, many more citations as referenced earlier in the hearing. That brings about more citation fines. While those aren't typically included sort of in the same way in in budget projections, it is another important factor for helping to reduce our structural deficit by bringing in more revenue.

Of course, last year, we, at the recommendation up from the foundation for California community colleges, We requested budget trailer bill language to allow us to shift certain student focused expenditures to be paid for from the student tuition recovery fund, and that was the claim adjudications, the team of people who are processing those applications, as well as our office of student assistance and relief. So that's another way where we still have those staff, but it reduced pressure on the main administrative fund. With respect to with respect to how we came up with the fees, the, you know, the first things first, workload analysis for the applications. Right? Because those should generally the the fee for a service shouldn't generally match what we are charging for that surface.

So we conducted those analyses to figure out what was feasible from application specifically. With the the remainder of the bureau's budget, I mean, 90% roughly of the bureau's revenues are generated from an annual fee paid for for by institutions. We looked back at prior analysis. Most notably, DCA and the bureau came up with a proposal in 2021 for how that shortfall might be met through a, updated version of a fee model that looks pretty similar to how fees are charged right now. So just to give a sense of what that is, the fee is broadly paid as a percentage of institutional revenue derived from California students.

But there's a minimum fee, so every institution well, even if you have no revenue or very little revenue pays that minimum, and there's a maximum. So no institution has to pay more than that maximum. We in 2021, we did quite a bit of shopping around with that that proposal, spoke with the legislative committees at the time and stakeholders. We presented it to our advisory committee. More recently, the Foundation for California Community Colleges, when they were tasked with looking at the bureaus financial situation, they basically said, yeah, that model looks good.

It it sort of balances the needs of small and larger institutions, and it seems a fair and appropriate way to go. So when it came to this analysis for the sunset report in that we were developing late last year, we we took that comment to heart and we updated it just to make just as much so that we would be covering the basis for for revenue.

And I would only add, Chair, the bureau, in addition to everything that the bureau chief, detailed, also eliminated six positions to increase, you know, the efficiencies. We've we've looked under those couch covers. And, this this fee proposal, we're very confident this is the way forward, and that's been detailed as was, included in the background paper since 2014.

Thank you very much for that. Some schools have expressed concerns, about increasing the maximum campus fee in particular. Can you share a little bit about whether or not increasing application fees, and or enforcement fines would raise sufficient revenue to resolve the bureau's fiscal deficit? So some of them are saying, no. Don't touch that. Instead, increase these other fees, increase these other fines. Would that be a viable approach?

In short, no. It would not be a viable approach.

I mentioned briefly earlier that

the bureau can't charge more for service than it costs to provide. Earlier that the bureau can't charge more for service than it cost to provide. So, we did align all of the application fees with the workload analysis analysis so that they are very closely matched at this point. I will say the one exception to that would be for the application for a what we call a full approval to operate. We have two paths towards issuing approvals to operate for private post secondary educational institutions.

One we call full and one's approval by means of accreditation. The workload analysis for that full approval came to about $12,000. Our proposal is 10, and that was really out of our consideration for not making it too high of a barrier to entry for for institutions wanting to open up. But if this was something the legislature wanted to consider, extending that to 12, that would be something we could we could look at. But, again, extending beyond that would not be feasible because that's our workload analysis for it.

I think with respect to disciplinary fees, again, you know, I think what we've we've captured a lot more revenue through citation fines and cost recovery in recent years. I think, generally speaking, you know, budget projections are pretty cautious on how to incorporate that into analysis because you don't know if they're gonna come to fruition in the same way that you know an application fee will come in or then an annual fee will likely be paid. We've also seen as we've increased fees, that our excuse me, citations and fines, that higher fines can lead to higher rates of appeal, which can have the unintended impact of actually raising costs even if it raises some revenue.

Makes sense. Thank you. Any additional questions? Any last questions or comments from colleagues? Seeing none, we're gonna open it up to stakeholders from the public. You have two minutes each. Please come up to the microphone here in the front. Just one Sec.

You good?

Give it a try.

There we go. Matt Back. Hello, Members. Matt Back representing California Association of Private Postsecondary Schools. We have about a 150 members.

All of them are certainly regulated by the bureau. The vast majority are all accredited as well, which is something we didn't talk a lot about today. So schools that are regulated by the bureau, again, most of them go through accreditation as well, which is another level of approval, certainly some security for folks, as we're looking at the quality of education. You know, and I should say and and come out quickly and say we support the bureau, and we want them to be extended. We understand their role.

It's important for our members. It's important for the sector in general. There there always is, and there was talk today about bad actors. Right? And and there are bad actors, but but, Senator Cabaldon, I appreciate your comments as well today.

This sector is not all bad actors. Right? There are over 200,000 students in our schools. You are seeing nurses, LVNs, people who are coming to your house to do repairs, folks who are driving trucks, cosmetology, you name it, nurse practitioners. We are teaching and educating California's workforce.

With all due respect to our traditional education, they're not filling this void, so we are. And without us, we would have a significant issue with our workforce, especially allied health care. So I think it's important to note that if there are bad actors, we fully support going after them. Right? That's what we end up talking more about, which is frustrating for our members.

There are so many good schools in your districts, every district in the state. So if we can focus on that too and not just the bad actors, would be great. This won't come as any surprise to anybody, but we do have concerns with the fees.

They're nearly a 40% increase. These are my members that are gonna be paying and subsidizing the bureau. There are a lot of small schools that pay so little, and they're tougher to regulate than our more sophisticated schools.

That's a kind of a frustrating, problem with the way that the fee structure is set up. So there's a lot in this report. I appreciate the staff report on both ends. It's very thorough. There were 38 new issues identified.

You know, some of those are efficiencies, but some of those would add workload to the bureau, which would put more pressure on fees. And they were increased twice to about 8, 9 years ago. So we had significant fee increases just shy of ten years ago.

It was back to back because there was a trigger. So a lot to go through. We look forward to working with everybody as this progresses. Thank you.

Thank you.

Happy Saint Patrick's Day, Chairs and Members. Steve Hansen from Lighthouse Public Affairs on behalf of Northeastern University. Thank you to the comments from the members of the committee this morning who received and read the letter.

Northeastern appreciates the role the important role of the BPPE in protecting students and ensuring accountability across California's higher education sector. We wanna thank Chief Cochrane and DCA Interim Director Lally, not only for Irish, but also for, bringing her father into the room this morning.

As the legislature considers renewal of the bureau, we encourage two targeted reforms. And some of those you heard about alright already this morning that would help modernize oversight while maintaining strong consumer protections.

First, the aligning of the BPP oversight to institutional risk. The sunset review report on page 44 addresses this very issue that high quality, low risk institutions are receiving as much attention as high risk, lower quality institutions, and that imbalance uses resources inefficiently.

And so we believe that that alone would help save the bureau some of its resources and help with their structural deficit, by using a risk based regulatory approach, instead of just a general broad brush. Second, the issue of the STRIF.

Page 57 of the report also looks at the surety bond issue, and I I thank Senator Niello and Senator Choi for raising this, issue. Our students, when the STRIF was open, in 2020, paid 11% of the STRIF that one year over $500,000 from a very small subset.

At the Oakland campus, there's 1,200 students in undergrad and graduate programs. In the San Jose campus, there's 800 students. Somehow, out of those 100,000 students, these 2,000 paid 11% because as Senator Neillo pointed out, it's based on tuition.

It's there's disparate rates that are assessed. And students who come to Northeastern may only come for one year in California, but they have to pay upfront their full four years.

They never get that back, and they don't benefit as an institution with, in an endowment over a billion dollars, high quality accredited institution. They don't benefit from the STRIF.

If you wrap up, that'd be great.

Yep. So we appreciate the legislature's attention to this, and we encourage you to look at these reforms that are common sense and reasonable.

Thank you.

Chair, Members, Dean Garfield with Capital Advocacy here on behalf of San Joaquin Valley College as well as Carrington College. We serve 7,500, students, throughout the state.

Our our institutions in the last five years alone have produced 1,500 degrees for nurses, 1,800 degrees for respiratory therapists 750 degrees for dental hygienists. We've submitted a letter responding to the bureau's report, and I'll underscore its main points here.

Applaud the legislature and the bureau for the great work as has been mentioned already. Being somewhat familiar with what goes into those reports, miss Lally, miss Cochrane, and miss Savoas, cheers and praise again. Again, we strongly agree with the majority of the report.

We do have reservations as mentioned previously specific to the proposed fee changes. Such changes we believe may perpetuate the bureaus insufficient finances.

We also have concerns with certain deadlines for new reporting requirements and the use of overly broad and undefined standards when evaluating prior institutional ownership, control, or management associated with improper school closures.

We look we look forward to working with all stakeholders as this goes through the process. Thank you.

Thank you.

Good morning. Sabrina Means with Capital Advisors speaking on behalf of the Institute for College Access and Success, also known as TCAS. As the legislature considers reauthorization of the bureau for private post secondary education, we encourage policymakers to focus on ensuring the bureau remains fiscally solvent and statutorily equipped to protect California, especially as federal higher education oversight continues to shift and weaken.

First and foremost, the bureau's financial stability must be addressed. The current fee structure has not been meaningfully updated since 2009. While the scope and complexity of the bureaus oversight responsibilities have grown significantly.

Without legislative action on this issue, California may weaken its first line of defense for students who enroll in private career and degree granting programs by impacting the bureau's ability to investigate complaints, monitor institutional complaints, and administer the student tuition recovery fund claims after school closures or misconduct.

Second, we support improvements to the institutional application process that allow the bureau to rely on institutional attestations rather than requiring staff to independently verify every application detail.

This will allow enforcement, resources to be directed towards high risk actors and compliance monitoring rather than administrative verification.

Third, we encourage a statutory clarification to strengthen safeguards around provisionally approved degree programs, including limits on repeated provisional approvals and a cooling off period before institutions can reapply after failing accreditation.

Finally, we support updates to student record protections and exemption oversight to ensure transcripts remain accessible when institutions close and the closing of loopholes which allow some entities to operate outside meaningful oversight even while they continue to enroll California students in programs that may not lead to intended employment outcomes. Thank you, and we look forward to working with you.

Thank you very much. Seeing no additional, comment from members of the public. That's a wrap. Alright. Thank you very much for the presentation, for taking the time to answer all the questions, obviously, for the very thorough report and, more conversations to come. Thanks, everybody. Meeting's adjourned.