Legislature(1997 - 1998)
04/30/1997 03:34 PM House HES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 256 - REGULATION OF POSTSECONDARY SCHOOLS Number 1244 CHAIRMAN BUNDE announced the next item on the agenda was HB 256, "An Act relating to regulation of postsecondary educational institutions; and providing for an effective date." Number 1253 REPRESENTATIVE GARY DAVIS, Sponsor of HB 256, explained that HB 256 provides language that agencies will cover their own cost of implementing regulations and statutes. The Alaska Commission on Postsecondary Education, through regulations, operates the numerous vocational and secondary education programs and schools throughout the state in order to protect students and the public. Currently the $100 fee for program authorization is inadequate. The section of the commission which authorizes and investigates these institutions has a one and a half person staff. Number 1377 REPRESENTATIVE DAVIS said the essence of the bill is located on page 2, Section 2, relating to the implementation of fees through regulation. This would not be fee specific, but a fee structure based on enrollment and the tuition generated from each institution. Research has found that Alaska has a low authorization fee. Number 1446 CHAIRMAN BUNDE cited an example where one of these institutions went bankrupt a month ago. He pointed to the need for these authorizations. Number 1465 REPRESENTATIVE DAVIS said this was a good example of why we need the staff to go in and investigate situations and staff to make sure that the institutions authorized by the license are properly screened. Number 1496 DEBORAH CRAIG, Director, Institutional Relations, Postsecondary Education Commission, Department of Education, stated that the purpose in institutional authorization is to set standards relating to the quality of education as it affects health, safety, fiscal responsibility, et cetera and to address rights and remedies available to the public. Organizationally, there has been a period of flux within her section and serious looks have been taken in regards to cost efficiencies and professionalism. This fee structure is something which was broached in the past. Number 1549 MS. CRAIG referred to an information packet located in the committee file. Research was done in 25 of 50 states, Alaska was at the low end of the spectrum. The fees from various states were set at a percentage of the total tuition and by tuition generated by the schools. The sample fee structure has been based on a percentage of tuition and fee revenue, setting a minimum and maximum. The minimum has been set at $500, recognizing that there is a minimum cost to the commission to authorize the institution. There was also a reluctance to burden schools, so the high end of the fees was capped at $2,500. Number 1616 MS. CRAIG explained that over 60 percent of the schools under this authorization have revenues over $80,000. These school would only pay $2,500. Only 17 percent of institutions have revenues under $17,000, the level at which the $500 fee is set. There are relatively few small schools who would be impacted by this fee schedule and a larger number of schools would benefit from capping the fee. The authorization is from one to five years, the cost varies based on the school's performance. This mechanism allows the commission to honor those schools who operate in an appropriate fashion. If authorized for a longer period of time, then the cost for authorization would be lessened than if it were calculated on a yearly basis. Conversely, those schools which require more time, based on their performance, would be held responsible by more frequent authorization fees. Number 1666 CHAIRMAN BUNDE stated that the current fee schedule is heavily subsidized. He asked if this subsidy came from general fund money or from the operating budget of the Postsecondary Education Commission which is bonded. Number 1679 MS. CRAIG answered that it came from corporate receipts. Number 1681 CHAIRMAN BUNDE explained that on a global view, the student loan program is funded by corporate receipts and it is challenging for those receipts to meet all the demands of the program. Currently, there are student loans which are subsidizing these businesses. Number 1702 REPRESENTATIVE GREEN referred to the minimum and maximum fees and asked if the amount charged would not be a fixed formula and not open to discretion, but a combination of both. Number 1727 MS. CRAIG said the sample fee structure is one that would be set in regulation. The fee schedule would be based on a percentage of tuition and fee revenue with a fixed minimum and maximum. The fees would be on a sliding scale between the $500 and $2,500. Number 1738 REPRESENTATIVE GREEN thought he heard a discussion about the use of discretion in determining the fees. Number 1745 MS. CRAIG answered that there is discretion in terms of the length of time that the commission would authorize a school to operate, based on their performance. REPRESENTATIVE GREEN clarified that it is the length of time and not the amount of the fee that is discretionary. Number 1755 REPRESENTATIVE PORTER stated that the normal regulatory process would be followed and instituted in these fees, the people impacted would have the ability to come forward and avoid situations which occurred in recent years. Number 1776 MS. CRAIG explained that she has only been made aware of those situations in retrospect. Number 1786 REPRESENTATIVE DAVIS said that when Ms. Craig came to him with the proposal he was reminded of the situation referred to by Representative Porter. As a result he questioned how the institutions felt about this fee change. The answer was that it had been discussed with these schools, it shouldn't be a surprise to them and they should know that something like this would be proposed. After investigating, he did not feel there was a collective opposition. Number 1827 MS. CRAIG added that her background is in administering vocational education programs. She understood what it takes to operate a "tight ship" and is sympathetic to a school's needs and the parameters under which they operate. The goal in this whole structure was to try to find a mechanism that was fair and equitable. She stated that as a former school administrator, she would testify that this would increase the cost of operating. She felt the commission was charged with finding a mechanism to make this fair and equitable for the state and the regulated public. Number 1865 CHAIRMAN BUNDE commented that those schools who would receive the capped fee would still be subsidized. Number 1875 MS. CRAIG clarified that the proposed fees would not cover the cost of the service. Over 60 percent of schools had revenues that if the calculation were based on a percentage basis would place them over the $2,500 fee. Number 1902 REPRESENTATIVE DAVIS mentioned a section in HB 256 which relates to investigations. This would assist the commission in recovering costs involved in investigations based on complaints. These costs do not specifically relate to the fees. Number 1943 MS. CRAIG explained that there are three components to the bill: the fee component, clarification of which schools are exempt from authorization, and allowing the commission to recoup some of their costs of investigation and adjudication of cases when schools have engaged in acts which clearly violate statute and regulation. The language clearly states that the school must clearly be in violation of statute and regulation for the commission to recoup some of these costs. These recouped costs are capped at $5,000. Recently, the state paid significant amounts of money to investigate and adjudicate a situation where the school was clearly out of compliance. Number 1990 JENNIFER DEITZ, Member, Alaska Association of Private Career Educators, Owner, Career Academy, testified next via teleconference from Anchorage. She spoke in favor of the commission's attempt to streamline the processes and procedures, rewriting the statute so that it was clearer. She spoke with Theresa Williams who helped her understand some of the nuances of the language. She expressed concern regarding the fee structure as it is ambiguous, specifically regarding the initial authorization and the application fee. As a new school entering the state of Alaska, a tremendous amount of the commission's time is spent evaluating the school's ability to be a school. She thought their fee should probably be higher than the fee for a school that has been doing business in the state and has a track record with the commission. Number 2044 MS. DEITZ explained that as a state association representing about 40 different types of institutions, some larger than others, she cautioned against overburdening small institutions who will be paying a higher cost per student. She referred to Ms. Craig's comment about the commission spending an inordinate amount of time investigating those smaller schools. As the owner of an accredited school, she felt that she was asked by every possible government body for fees and structures, eventually those costs are passed on to the students. She wanted to find some way for schools that are doing a good job and meeting or exceeding the standards of the commission to not suffer under all these fees. Number 2096 REPRESENTATIVE DYSON stated that his consulting firm is registered with the commission. Number 2132 REPRESENTATIVE PORTER made a motion to move HB 256 out of committee. There being no objection, HB 256 was moved from the House Health, Education and Social Services Standing Committee. TAPE 97-38, SIDE B
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