Bill Text: CA AB3167 | 2023-2024 | Regular Session | Amended

California Assembly Bill 3167

Bill Title: California Private Postsecondary Education Act of 2009: highly qualified private nonprofit institution.

Spectrum: Partisan Bill (Republican 1-0)

Status: (Engrossed) 2024-08-15 - In committee: Held under submission. [AB3167 Detail]

Download: California-2023-AB3167-Amended.html

Amended IN Senate June 27, 2024

Amended IN Assembly April 24, 2024

Amended IN Assembly March 21, 2024

CALIFORNIA LEGISLATURE— 2023–2024 REGULAR SESSION

Assembly Bill

No. 3167

Introduced by Assembly Member Chen

February 16, 2024

An act to amend Sections ~~94801.5 and 94930.5~~ 94801.5, 94874.9, and 94930.5 of, and to add Section 94842.5 to, the Education Code, relating to private postsecondary education.

LEGISLATIVE COUNSEL'S DIGEST

AB 3167, as amended, Chen. California Private Postsecondary Education Act of 2009: highly qualified private nonprofit institution.

The California Private Postsecondary Education Act of 2009 provides, among other things, for student protections and regulatory oversight of private postsecondary institutions in the state. The act is enforced by the Bureau for Private Postsecondary Education within the Department of Consumer Affairs. The act exempts specified private postsecondary educational institutions from all, or a portion of, its provisions, but requires those institutions that are subject to its provisions to apply for and obtain an approval to operate, including by means of accreditation, as specified. The act also requires an out-of-state private postsecondary educational institution to comply with specified requirements for registration, including providing the bureau evidence of the institution’s accreditation and complying with the requirements of the Student Tuition Recovery Fund and regulations adopted by the bureau related to the fund, as provided. ~~The act establishes the Student Tuition Recovery Fund to relieve or mitigate economic loss suffered by a student while enrolled in a private postsecondary educational institution, as specified.~~ The act requires an independent institution of higher education that is exempt from the act to comply with all applicable state and federal laws. Existing law repeals the act on January 1, 2027.

The bill would authorize a highly qualified private nonprofit institution, as defined, to register with the bureau by paying a registration fee and complying with specified requirements for registration, including providing the bureau evidence of the institution’s accreditation and complying with the requirements of the Student Tuition Recovery ~~Fund or receiving a waiver from those requirements if an approved surety bond, or other security in lieu of a bond, is placed on file with the bureau,~~ Fund, as provided. The bill would authorize a highly qualified private nonprofit institution, as defined, that received an approval to operate by means of accreditation before July 1, 2025, to instead register with the bureau under the bill’s provisions. The bill would specify that a highly qualified private nonprofit institution that registers with the bureau is required to comply with all applicable state and federal laws.

Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: NO

The people of the State of California do enact as follows:

SECTION 1.

Section 94801.5 of the Education Code is amended to read:

94801.5.

(a) An out-of-state private postsecondary educational institution shall, and beginning July 1, 2025, a highly qualified private nonprofit institution may, register with the bureau, pay a fee pursuant to Section 94930.5, and comply with all of the following:

(1) The institution shall provide the bureau with all of the following information, as applicable, for consideration of initial registration by the bureau pursuant to paragraph (2).

(A) Evidence of institutional accreditation.

(B) Evidence that the institution is approved to operate in the state where the institution maintains its main administrative location.

(D) A copy of the institution’s catalog and, if the institution uses enrollment agreements, a copy of a sample enrollment agreement.

(E) Whether or not the institution, or a predecessor institution under substantially the same control or ownership, had its authorization or approval revoked or suspended by a state or by the federal government, or, within five years before submission of the registration, was subject to an enforcement action by a state or by the federal government that resulted in the imposition of limits on enrollment or student aid, or is subject to such an action that is not final and that was ongoing at the time of submission of the registration.

(F) Whether or not the institution, or a controlling officer of, or a controlling interest or controlling investor in, the institution or in the parent entity of the institution, had been subject to any education, consumer protection, unfair business practice, fraud, or related enforcement action by a state or federal agency within five years before submitting the registration. If so, the institution shall provide the bureau a copy of the operative complaint with the registration.

(G) Whether or not the institution is currently on probation, show cause, or subject to other adverse action, or the equivalent thereof, by its accreditor or has had its accreditation revoked or suspended within the five years before submitting the registration.

(H) Whether or not the institution, within five years before submitting the registration, has settled, or been adjudged to have liability for, a civil complaint alleging the institution’s failure to provide educational services, including a complaint alleging a violation of Title IX of the federal Education Amendments of 1972 (Public Law 92-318) or a similar state law, or a complaint alleging a violation of a law concerning consumer protection, unfair business practice, or fraud, filed by a student or former student, an employee or former employee, or a public official, for more than two hundred fifty thousand dollars ($250,000). The institution shall provide the bureau a copy of the complaint filed by the plaintiff and a copy of the judgment or settlement agreement for any such judgment or settlement, and the bureau shall consider, pursuant to paragraph (2), all material terms and aspects of the settlement, including, for example, whether a student plaintiff remained enrolled or reenrolled at the institution.

(I) Any additional documentation the bureau deems necessary for consideration in the registration process.

(2) When considering whether to approve, deny, or condition initial registration based upon the information provided by an institution pursuant to paragraph (1), the bureau shall do all of the following:

(A) Not consider any individual submission made under paragraph (1) to be solely determinative of the institution’s eligibility for registration but, exercising its reasonable discretion, approve, reject, or condition registration based upon a review of all of the information provided to it under paragraph (1).

(B) Provide an institution with reasonable notice and opportunity to comment before the bureau regarding any determination to deny, condition, or reject initial registration before that determination becomes final. After the determination becomes final, the institution may seek review of the bureau’s decision through an action brought pursuant to Section 1085 of the Code of Civil Procedure.

(C) Require the initial registration, if approved, to memorialize that the institution agrees, as a condition of its registration, to be bound by this section and that its registration may be rejected, conditioned, or revoked for failure to comply with this section, as provided by subdivision (b). The agreement shall be signed by a responsible officer of the institution.

(3) An institution that is registered with the bureau and enrolls a student residing in California shall report in writing to the bureau, within 30 days, the occurrence of any of the following:

(A) The institution has its authorization or approval revoked or suspended by a state or by the federal government, or has been subject to an enforcement action by a state or by the federal government that resulted in the imposition of limits on enrollment or student aid.

(B) The institution or a controlling officer of, or a controlling interest or controlling investor in, the institution or in the parent entity of the institution is subject to any education, consumer protection, unfair business practice, fraud, or related enforcement action by a state or federal agency. If so, the institution shall provide the bureau a copy of the operative complaint.

(C) The institution is currently on probation, show cause, or subject to other adverse action, or the equivalent thereof, by its accreditor or the accreditation of the institution is revoked or suspended.

(D) The institution settles, or is adjudged to have liability for, a civil complaint alleging the institution’s failure to provide educational services, including a complaint alleging a violation of Title IX of the federal Education Amendments of 1972 (Public Law 92-318) or a similar state law, or a complaint alleging a violation of a law concerning consumer protection, unfair business practice, or fraud, filed by a student or former student, an employee or former employee, or a public official, for more than two hundred fifty thousand dollars ($250,000). The institution shall provide to the bureau a copy of the complaint filed by the plaintiff and a copy of the judgment or settlement agreement for any such judgment or settlement, and the bureau shall consider, pursuant to subdivision (b), all material terms and aspects of the settlement, including, for example, whether a student plaintiff remained enrolled or reenrolled at the institution.

(4) The requirements of the Student Tuition Recovery Fund, established in Article 14 (commencing with Section 94923), and regulations adopted by the bureau related to the fund, for its students residing in California. ~~These requirements may be waived for a highly qualified nonprofit institution that places an approved surety bond, or other security in lieu of a bond, on file with the bureau.~~

(5) The institution shall provide disclosures pursuant to the requirements for the Student Tuition Recovery Fund, established in Article 14 (commencing with Section 94923), and regulations adopted by the bureau related to the fund, ~~or information related to an institutional surety bond or other security in lieu of a bond, as applicable,~~ for its students residing in California.

(b) (1) Upon receipt of any of the notifications in paragraph (3) of subdivision (a), the bureau shall, within 30 days of receiving the notice, request the institution to explain in writing why the institution should be permitted to continue to enroll California residents. If the bureau, after reviewing the information submitted in response to the request and after consultation with the Attorney General, issues a written finding that there is no immediate risk to California residents from the institution continuing to enroll new students, the institution shall be permitted, pending completion of a review by the bureau, to continue to enroll new students or the bureau may, in its discretion, limit enrollments.

(2) Any institution under review pursuant to paragraph (1) may have its registration revoked by the bureau if, after further review, the bureau issues a written finding that there is a substantial risk posed to California residents by the institution continuing to enroll California residents.

(3) An institution shall have the right to reasonable notice and opportunity to comment to and before the bureau regarding any determination to revoke registration or to limit enrollment before that determination becomes final. An institution may seek review of a bureau order limiting new student enrollment or revoking registration under this subdivision through an action brought pursuant to Section 1085 of the Code of Civil Procedure.

(4) This subdivision does not prevent the bureau from revoking an institution’s registration on any other grounds specified in this chapter. This section does not prohibit or impair the ability of an institution registered pursuant to this section or eligible to register pursuant to this section from applying to be an approved institution pursuant to this chapter.

(c) (1) This section does not apply to a higher education institution that grants undergraduate degrees, graduate degrees, or both, and that is a public institution of higher education.

(2) This section does not apply to a higher education institution that does not award degrees and that solely provides educational programs for total charges of two thousand five hundred dollars ($2,500) or less when no part of the total charges is paid from state or federal student financial aid programs. The bureau may adjust this charge threshold based upon the California Consumer Price Index and post notification of the adjusted charge threshold on its internet website as the bureau determines, through the promulgation of regulations, that the adjustment is consistent with the intent of this chapter.

(d) An institution described in subdivision (a) that fails to comply with this section is not authorized to operate in this state. Any institution whose registration is denied or revoked is authorized to reapply for registration after 12 months have elapsed from the date of the denial or revocation of registration.

(e) A registration with the bureau pursuant to this section shall be valid for five years.

(f) (1) The bureau shall develop through emergency regulations effective on and after July 1, 2021, a registration form for out-of-state private postsecondary educational institutions. The adoption of these regulations shall be deemed to be an emergency and necessary for the immediate preservation of the public peace, health and safety, or general welfare for purposes of Sections 11346.1 and 11349.6 of the Government Code. These emergency regulations shall become law through the regular rulemaking process by January 1, 2022.

(2) The bureau shall develop through emergency regulations effective on and after July 1, 2025, a registration form for highly qualified private nonprofit institutions. The adoption of these regulations shall be deemed to be an emergency and necessary for the immediate preservation of the public peace, health and safety, or general welfare for purposes of Sections 11346.1 and 11349.6 of the Government Code. These emergency regulations shall become law through the regular rulemaking process on or before January 1, 2026.

(g) The bureau shall disclose on its internet website a list of institutions registered pursuant to this section through reasonable means and disclose a designated email address for California residents to send a complaint to the bureau about an institution registered pursuant to this section. Complaints received through this email address shall be investigated in the same manner as complaints received by the bureau for institutions approved to operate pursuant to this chapter, but bureau enforcement in response to such complaints against institutions registered pursuant to this section shall be governed by subdivision (b).

(h) A highly qualified private nonprofit institution that has received an approval to operate by means of accreditation before July 1, 2025, may elect to instead register with the bureau pursuant to this section.

SEC. 2.

Section 94842.5 is added to the Education Code, to read:

94842.5.

“Highly qualified private nonprofit institution” means an institution that meets all of the following criteria:

(a) The institution is exempt from taxation under the Internal Revenue Code and has no insider transactions within the past five years.

(b) For the previous 20 years the institution has not operated as a for-profit institution and has awarded at least 500 degrees each year.

(c) The institution has been accredited by an institutional accrediting agency ~~recognized~~ that meets both of the following:

(1) It has been recognized by the United States Department of Education for at least 10 years ~~that accredits~~ for accrediting institutions, the majority of which are classified by the United States Department of Education as nonprofit or public.

~~(d)The institution~~

(2) It is governed by a board of directors with no directors who hold an equity interest in an institution of higher education.

SEC. 3.

Section 94874.9 of the Education Code is amended to read:

94874.9.

(a) An independent institution of higher education, as defined in Section 66010, that is exempt from this chapter pursuant to subdivision (i) of Section ~~94874~~ 94874, or a highly qualified private nonprofit institution, as defined in Section 94842.5, that registers with the bureau pursuant to Section 94801.5, shall comply with all applicable state and federal laws, including laws relating to fraud, abuse, and false advertising.

(b) An institution described in subdivision (a) may execute a contract with the bureau for the bureau to review and, as appropriate, act on complaints concerning the institution, in accordance with Section 600.9 of Title 34 of the Code of Federal Regulations.

(c) The execution of a contract by the bureau with an institution pursuant to subdivision (b) shall constitute establishment by the state of that institution to offer programs beyond secondary education, including programs leading to a degree or certificate, in accordance with Section 600.9 of Title 34 of the Code of Federal Regulations.

(d) The bureau shall use a standard form contract for purposes of this section.

(e) A contract executed pursuant to this section shall, at a minimum, do all of the following:

(1) Require an institution to do all of the following:

(A) Cooperate with the bureau to resolve complaints received pursuant to this section.

(B) Provide the following disclosure notice in all written and internet-based documentation in which the institution’s complaint process is described, including the student catalog, student handbook, and the institution’s internet website:

“An individual may contact the Bureau for Private Postsecondary Education for review of a complaint. The bureau may be contacted at (address), Sacramento, CA (ZIP Code), (internet website address), (telephone and fax numbers).”

(D) Pay one thousand seventy-six dollars ($1,076) each year for costs incurred by the bureau to perform activities pursuant to the contract, unless another amount is determined by the bureau.

(2) (A) Authorize the bureau, for any complaint it receives, including any complaints related to the institution’s policies or procedures, or both, as determined by the bureau, to refer the complaint to the institution, an accrediting agency, or another appropriate entity for resolution.

(B) The bureau shall notify the complainant and the institution of a referral.

(C) This paragraph ~~shall~~ does not ~~be construed to~~ relieve the bureau of its responsibility to ensure that a complaint it has referred for purposes of resolution is resolved by the receiving entity.

(f) The bureau may terminate a contract executed pursuant to this section if an institution is no longer an independent institution of higher education as defined in Section 66010 or fails to comply with the provisions of the contract.

(g) All moneys collected by the bureau that relate to a contract executed pursuant to this section, including payments collected in accordance with subparagraph (D) of paragraph (1) of subdivision (e), shall be deposited in the Private Postsecondary Education Administration Fund.

(h) The bureau shall maintain, on its internet website, both of the following:

(1) The provisions of the standard form contract used for purposes of this section.

(2) A list of institutions with which the bureau has executed a contract pursuant to this section.

(i) On or before February 1, 2017, and each year thereafter, the bureau shall report to the Director of Finance and, in conformity with Section 9795 of the Government Code, to the Legislature regarding implementation of this section. The report shall include all of the following information:

(1) A list of institutions with which the bureau has executed a contract pursuant to this section.

(2) The total number of complaints received by the bureau relating to institutions listed in paragraph (1).

(3) The general nature of those complaints.

(4) The total number of those complaints referred to another entity, disaggregated by the entity to which each complaint was referred.

(5) The total number of complaints resolved, disaggregated by the entity that resolved each complaint.

(6) The total number of complaints pending, disaggregated by the entity to which each complaint was referred.

(j) Notwithstanding any other law, the Department of General Services, at the request of the bureau, may exempt contracts executed pursuant to this section from any laws, rules, resolutions, or procedures that are otherwise applicable to public contracts that the Department of General Services administers.

SEC. 3.SEC. 4.

Section 94930.5 of the Education Code is amended to read:

94930.5.

Subject to Section 94930, an institution shall remit to the bureau for deposit in the Private Postsecondary Education Administration Fund the following fees, in accordance with the following schedule:

(a) The following fees shall be remitted by an institution submitting an application for an approval to operate, if applicable:

(1) Application fee for an approval to operate: five thousand dollars ($5,000).

(2) Application fee for the approval to operate a new branch of the institution: three thousand dollars ($3,000).

(3) Application fee for an approval to operate by means of accreditation: seven hundred fifty dollars ($750).

(b) The following fees shall be remitted by an institution seeking a renewal of its approval to operate, if applicable:

(1) Renewal fee for the main campus of the institution: three thousand five hundred dollars ($3,500).

(2) Renewal fee for a branch of the institution: three thousand dollars ($3,000).

(3) Renewal fee for an institution that is approved to operate by means of accreditation: five hundred dollars ($500).

(c) The following fees shall apply to an institution seeking authorization of a substantive change to its approval to operate, if applicable:

(1) Processing fee for authorization of a substantive change to an approval to operate: five hundred dollars ($500).

(2) Processing fee in connection with a substantive change to an approval to operate by means of accreditation: two hundred fifty dollars ($250).

(d) (1) In addition to any fees paid to the bureau pursuant to subdivisions (a) to (c), inclusive, each institution that is approved to operate pursuant to this chapter shall remit both of the following:

(A) An annual fee for each campus designated by the institution as a main campus location in California, in an amount equal to 0.45 percent of the campus’ total gross revenue derived from students in California, but not to be less than two thousand five hundred dollars ($2,500) and not to exceed sixty thousand dollars ($60,000).

(B) An annual campus fee for each branch of the institution in an amount equal to 0.45 percent of the branch’s total gross revenue derived from students in California, but not to be less than two thousand five hundred dollars ($2,500) and not to exceed sixty thousand dollars ($60,000).

(2) The amount of the annual fees pursuant to paragraph (1) shall be proportional to the bureau’s cost of regulating institutions under this chapter, but shall not exceed seven hundred fifty thousand dollars ($750,000) for any institution.

(e) The bureau may assess any of the following fees, if applicable:

(1) An out-of-state institution registration fee in an amount of one thousand five hundred dollars ($1,500).

(2) A request for inactive status fee in an amount of five hundred dollars ($500).

(3) A highly qualified private nonprofit institution registration fee in an amount of one thousand five hundred dollars ($1,500).

(f) It is the intent of the Legislature that the fees established pursuant to this section be evaluated during the 2017–18 state budget process and, if necessary, adjusted by subsequent legislation based upon information provided to the Legislature by the department and the bureau.

(g) Notwithstanding subdivision (d), effective July 1, 2018, the annual fee for each campus described in subparagraphs (A) and (B) of paragraph (1) of subdivision (d) shall be in an amount equal to 0.55 percent of that campus’ total gross revenue derived from students in California, but not to be less than two thousand five hundred dollars ($2,500) and not to exceed sixty thousand dollars ($60,000) for each campus.