Right Column

Private Postsecondary Overview

Background

During the late 1980's, regulation of private postsecondary and vocational schools was provided by the Private Postsecondary and Vocational Education Division within the State Department of Education. In response to concerns about the integrity and value of the degrees and diplomas issued, widely varying standards, the lack of enforcement, and exemptions from state oversight, the Legislature enacted the Private Postsecondary and Vocational Education Reform Act (Reform Act), which transferred responsibility for the program to a 20-member Council for Private Postsecondary and Vocational Education. In 1997, amid concerns that many financial, technical and administrative functions were not being performed, AB 71 (Wright, Chapter 78, Statutes of 1997) created the Bureau for Private Postsecondary and Vocational Education (BPPVE) within the Department of Consumer Affairs, transferred responsibility for administration of the Reform Act to the BPPVE, and extended the Reform Act's sunset date to January 1, 2005.

During 2002, the BPPVE completed its first sunset review before the Joint Legislative Sunset Review Committee (Joint Committee). In its 2003 report, the Joint Committee concluded that the statutes under which the BPPVE operates appeared complex, vague, and contradictory, the time period for final approval was often extremely long, and there was no clear rationale for the varied exemptions and differing reporting requirements among institutions. After a series of hearings on this issue, the Legislature enacted SB 1544 (Figueroa, Chapter 740, Statutes of 2004) which required the Director of the Department to appoint an Operations and Administrative Monitor (Monitor) to assess the BPPVE's administrative operations and provisions of the Reform Act and submit a report to the Legislature by October 2005.

Operations and Administrative Monitor Report

The Monitor's report was released in September 2005. This report highlighted several deficiencies within the BPPVE and Reform Act. The report found that the BPPVE could not effectively implement its mandated responsibilities without major changes to the Reform Act. In response to the Monitor's report, the Department worked with the State and Consumer Services Agency and the Joint Committee on a bill to completely overhaul the Reform Act. This bill (SB 1473, Figueroa) would have continued the BPPVE as the entity responsible for administration of the Reform Act and addressed the problems highlighted by the Monitor's report. SB 1473 was intended to provide for higher quality educational programs and improved student protections by streamlining the BPPVE's approval process. By relying on the resources and review of state approved accrediting agencies, the BPPVE would be able to focus its resources on conducting site visits of new institutions, and enforcement of standards and student protections.

The report found that the multiple and fragmented regulatory structures was one of the most significant deficiencies with the Reform Act. Specifically, the report found that:

1. A key contributor to the complexity of the Reform Act is the existence of different sets of standards and requirements for different categories of institutions…The current fragmented regulatory structure needs to be overhauled, and replaced with a consolidated system that is applicable to all non-degree and degree-granting institutions that require a full review and approval process, irrespective of whether the institutions offer non-degree or degree programs, or both.

Additionally, the report noted that a report from the California Postsecondary Education Commission, released in 1995, recommended that the Reform Act be amended to establish consistent standards for all programs, "…regardless of whether they award a degree, certificate, or a diploma, and regardless of whether they are offered by a profit or non-profit institution."

The Monitor's Report included 77 recommendations, the first of which was on overhaul of the Reform Act. Additionally, the report provided a history of the state's efforts to regulate this sector over the last twenty years, summarized by the Joint Committee as follows:

According to the Monitor, "[t]he state's program for regulation of private postsecondary and vocational education institutions has been plagued by problems for the past 20 years."

In the late 1980s, the state developed a reputation as the "diploma mill capital of the world." As a result, regulation of the industry was moved from a Division in the State Department of Education to a 20-member Council for Private Postsecondary and Vocational Education (Council).

In 1995 the California Postsecondary Education Commission found the governing statutes difficult to interpret and implement. Likewise, the Commission found that the Council's school approval process for non-degree granting institutions consisted of nothing more than a checklist; no in-depth review was done and the Council assumed that the quality of the school's program was sufficient if the school self-reported completion rates of 60% or better and a 70% placement rate.

In 1996, the Governor vetoed legislation that would have extended the 1997 sunset date of the Council.

In August 1997, anticipating the creation of the Bureau within its jurisdiction, the Department retained Price Waterhouse to perform a diagnostic review of the Council's accounting procedures. The 1997 report documented significant problems in fee collection, collection of Student Tuition Recovery Fund (STRF) fees, the reporting done by schools to the Council about their job placement successes, and accounting internal controls.

This report prompted reform legislation in late 1997, including the requirement that transformed the Council into a Bureau under the direction of the Department.

Since 1998, the program has been a "bureau;" meaning it is directly under the responsibility of and accountable to the Department.

In 2000 the Bureau of State Audits completed an audit of the Bureau. The audit found that the Department was not fulfilling its basic oversight duties and was allowing known weaknesses in operations to endure. In 2002, the Department completed its own internal audit. That audit in part recommended that the Bureau abide by laws governing the payment of STRF funds, verify that the correct STRF funds were being paid, monitor workloads to ensure that statutory time frames are met for approving schools, develop written guidelines for handling complaints, and ensure compliance with annual reporting requirements, including those that require schools to report placement success rates to the Bureau.

In 2002, the Joint Committee completed its first sunset review of the Bureau, and the Bureau committed to various reforms, including sponsoring reform legislation and identifying actions to protect students in the context of Internet-based education. SB 364 of 2003 was enacted after the review and it required the Bureau to identify legislative reforms and study its fee structure to ensure solvency and sufficient resources.

In August of 2004, The Sacramento Bee published an article that revealed the Bureau to be a passive regulator, leading one public interest lawyer to say that the Bureau "is totally worthless."

As the Monitor writes, "[n]early all of the problems identified by the Bureau of State Audits and the [Department's audit] continue to persist." Likewise, the Monitor observes: "[n]early all of the problems identified by the [Joint Committee] continue to persist.

Recent Legislative Efforts

SB 1473 and AB 2810 (Liu) each presented a proposal for a comprehensive reform and revision of the Reform Act; however neither proposal had the support to move forward in the Senate. As a result, AB 2810 was amended to extend the Reform Act's sunset date to July 1, 2008 and establish a Working Group on this issue and develop a new legislative proposal for consideration in the 2007 legislative session. This bill was vetoed by Governor Schwarzenegger, who stated that "simply extending the existing governing statute … does nothing to enhance protections for students, allows problems that have been well documented to continue to exist and merely allows mediocrity for California's students." The Governor also stated in his veto message that the Administration would develop a draft legislative proposal to overhaul the Reform Act.

Since late 2006, the Department and the State and Consumer Services Agency have been working with the Legislature and various interested parties on a complete overhaul of the Reform Act. The main vehicle for this effort has been SB 823 (Perata). The Department also sponsored a temporary measure, AB 1525 (Cook, Chapter 67, Statutes of 2007), which was an urgency statute to address problems associated with the sunset of the former BPPVE on July 1, 2007. Despite ongoing efforts, no consensus was reached on SB 823.

In 2007, the Governor signed AB 1525 (Cook, Chapter 67, Statutes of 2007) enacted temporary measures to establish minimal oversight of private postsecondary institutions between July 1, 2007 and February 1, 2008. This bill provided that matters pending before the former BPPVE on June 30, 2007 are considered pending before a successor body, allowed for the payment of already-approved Student Tuition Recovery Fund (STRF) claims by the Director of the Department, and permitted the Director to enter into voluntary agreements with institutions to comply with the inoperative Reform Act. He also signed SB 45 (Perata) which essentially extended provisions of AB 1525 until July 1, 2008.

Administration's Proposal – AB 1182 (Niello)

This bill:

• Creates a Bureau for Private Postsecondary Education under the Department of Consumer Affairs with a five-year sunset.
• Provides general statutory direction for program administration with increased reliance on regulations.
• Establishes fair business practices; provides consumer protections including admission policies, consumer loan practices, cancellations, withdrawals and refunds, completion and placement reporting and private right of action where there is student harm. These standards would apply to all regulated institutions.
• Provides for an enforcement program that the Bureau will be able to effectively implement to provide meaningful regulation of institutions.