73R5174 CAE-F
By Delco H.B. No. 1705
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to proprietary schools; providing civil penalties.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Section 32.11, Education Code, is amended by
1-5 adding Subdivision (10) to read as follows:
1-6 (10) "Small proprietary school" means a proprietary
1-7 school that:
1-8 (A) does not receive any payment from federal
1-9 funds under 20 U.S.C. Section 1070 et seq. and its subsequent
1-10 amendments or a prepaid federal or state source as compensation in
1-11 whole or in part for any student tuitions and fees or any other
1-12 charge; and
1-13 (B) has an annual gross income from student
1-14 tuitions and fees that is less than or equal to $100,000 for
1-15 programs regulated by the Central Education Agency.
1-16 SECTION 2. Subchapter C, Chapter 32, Education Code, is
1-17 amended by adding Section 32.241 to read as follows:
1-18 Sec. 32.241. COMPREHENSIVE REVIEW. The administrator shall
1-19 conduct a comprehensive review of the existing rules and policies
1-20 governing proprietary schools and reduce regulation of small
1-21 proprietary schools by January 1, 1995. This section expires
1-22 February 1, 1995.
1-23 SECTION 3. Subchapter D, Chapter 32, Education Code, is
1-24 amended by adding Sections 32.321 and 32.322 to read as follows:
2-1 Sec. 32.321. STATUTORY WAIVER AUTHORITY. (a) The State
2-2 Board of Education after consultation with the Proprietary School
2-3 Advisory Commission may establish rules that waive, alter, suspend,
2-4 or replace any of the following provisions governing small
2-5 proprietary schools:
2-6 (1) the fee schedule authorized under Section 32.71 of
2-7 this code, provided that fees under a fee schedule established by
2-8 rule may not be less than the reasonable administrative cost for
2-9 regulation or more than the amount that a small proprietary school
2-10 would otherwise pay if it were not classified as a small
2-11 proprietary school;
2-12 (2) participation in the proprietary school tuition
2-13 protection fund required by Section 32.91 of this code;
2-14 (3) the refund policy provisions of Section 32.39 of
2-15 this code;
2-16 (4) the bonding requirements of Section 32.38 of this
2-17 code;
2-18 (5) the examination of a school for compliance under
2-19 Section 32.34(f) of this code;
2-20 (6) the reporting requirements of Section 32.33(o) of
2-21 this code; and
2-22 (7) the term for which a certificate of approval is
2-23 issued under Section 32.34(b) of this code, provided that a rule
2-24 adopted under this section may not provide for a term that exceeds
2-25 three years or is less than one year.
2-26 (b) A rule proposed under this section may be adopted only
2-27 if it will reduce the regulatory burden for small proprietary
3-1 schools and will adequately safeguard the interests of the students
3-2 of small proprietary schools to receive either the education for
3-3 which they have contracted or an appropriate refund.
3-4 Sec. 32.322. SMALL SCHOOL EXEMPTION. The administrator may
3-5 exempt small proprietary schools from any requirement of this
3-6 chapter to reduce the cost to small schools of receiving a
3-7 certificate of approval.
3-8 SECTION 4. Section 32.39, Education Code, is amended by
3-9 amending Subsections (a), (b), and (e) and adding Subsection (g) to
3-10 read as follows:
3-11 (a) Except as provided by Subsection (g) of this section, as
3-12 <As> a condition for granting certification each school must
3-13 maintain a cancellation and settlement policy which must provide a
3-14 full refund of all monies paid by a student if:
3-15 (1) the student cancels the enrollment agreement or
3-16 contract within 72 hours (until midnight of the third day excluding
3-17 Saturdays, Sundays, and legal holidays) after the enrollment
3-18 contract is signed by the prospective student;
3-19 (2) the enrollment of the student was procured as the
3-20 result of any misrepresentation in advertising, promotional
3-21 materials of the school, or representations by the owner or
3-22 representatives of the school.
3-23 (b) Except as provided by Subsection (g) of this section, as
3-24 <As> a condition for granting certification, each school must
3-25 maintain a policy for the refund of the unused portion of tuition,
3-26 fees, and other charges in the event the student, after expiration
3-27 of the 72-hour cancellation privilege, fails to enter the course,
4-1 or withdraws, or is discontinued therefrom at any time prior to
4-2 completion, and such policy must provide:
4-3 (1) refunds for resident courses will be based on the
4-4 period of enrollment computed on the basis of course time expressed
4-5 in clock hours;
4-6 (2) the effective date of the termination for refund
4-7 purposes in residence schools will be the earliest of the
4-8 following:
4-9 (A) the last date of attendance, if the student
4-10 is terminated by the school;
4-11 (B) the date of receipt of written notice from
4-12 the student;
4-13 (C) ten school days following the last date of
4-14 attendance;
4-15 (3) if tuition and fees are <is> collected in advance
4-16 of entrance, and if, after expiration of the 72-hour cancellation
4-17 privilege, the student does not enter the residence school, not
4-18 more than $100 shall be retained by the school;
4-19 (4) for the student who enters a residence course of
4-20 not more than 12 months in length, terminates or withdraws, the
4-21 school may retain $100 of tuition and fees and the minimum refund
4-22 of the remaining tuition and fees will be:
4-23 (A) during the first week or one-tenth of the
4-24 course, whichever is less, 90 percent of the remaining tuition and
4-25 fees;
4-26 (B) after the first week or one-tenth of the
4-27 course, whichever is less, but within the first three weeks of the
5-1 course, 80 percent of the remaining tuition and fees;
5-2 (C) after the first three weeks of the course,
5-3 but within the first quarter of the course, 75 percent of the
5-4 remaining tuition and fees;
5-5 (D) during the second quarter of the course, 50
5-6 percent of the remaining tuition and fees;
5-7 (E) during the third quarter of the course, 10
5-8 percent of the remaining tuition and fees;
5-9 (F) during the last quarter of the course, the
5-10 student may be considered obligated for the full tuition and fees;
5-11 (5) for residence courses more than 12 months in
5-12 length, the refund shall be applied to each 12-month period paid,
5-13 or part thereof separately, and the student is entitled to a refund
5-14 as provided by Subdivision (4) of this subsection;
5-15 (6) refunds of items of extra expense to the student,
5-16 such as instructional supplies, books, student activities,
5-17 laboratory fees, service charges, rentals, deposits, and all other
5-18 such ancillary miscellaneous charges, where these items are
5-19 separately stated and shown in the data furnished the student
5-20 before enrollment, will be made in a reasonable manner acceptable
5-21 to the administrator;
5-22 (7) refunds based on enrollment in residence schools
5-23 will be totally consummated within 60 <30> days after the effective
5-24 date of termination;
5-25 (8) refunds for correspondence courses will be
5-26 computed on the basis of the number of lessons in the course;
5-27 (9) the effective date of the termination for refund
6-1 purposes in correspondence courses will be the earliest of the
6-2 following:
6-3 (A) the date of notification to the student if
6-4 the student is terminated;
6-5 (B) the date of receipt of written notice from
6-6 the student;
6-7 (C) the end of the third calendar month
6-8 following the month in which the student's last lesson assignment
6-9 was received unless notification has been received from the student
6-10 that he wishes to remain enrolled;
6-11 (10) if tuition and fees are <is> collected before any
6-12 lessons have been completed, and if, after expiration of the
6-13 72-hour cancellation privilege, the student fails to begin the
6-14 course, not more than $50 shall be retained by the school;
6-15 (11) in cases of termination or withdrawal after the
6-16 student has begun the correspondence course, the school may retain
6-17 $50 of tuition and fees, and the minimum refund policy must provide
6-18 that the student will be refunded the pro rata portion of the
6-19 remaining tuition, fees, and other charges that the number of
6-20 lessons completed and serviced by the school bears to the total
6-21 number of lessons in the course;
6-22 (12) refunds based on enrollment in correspondence
6-23 schools will be totally consummated within 60 <30> days after the
6-24 effective date of termination.
6-25 (e) If a refund is not made within the period required by
6-26 this section, the school shall pay a penalty <interest on the
6-27 refund for the interval beginning with the first day following the
7-1 expiration of the refund period and ending with the day immediately
7-2 preceding the date the refund is made>. If the refund is made to a
7-3 lending institution, the penalty <interest> shall also be paid to
7-4 that institution and applied against the student's loan. The
7-5 commissioner of education annually shall establish the level of the
7-6 penalty <interest> at a level sufficient to provide a deterrent to
7-7 the retention of student funds. The Central Education Agency may
7-8 exempt a school from the payment of the penalty <interest> if the
7-9 school makes a good faith effort to refund the tuition, fees, and
7-10 other charges but is unable to locate the student. The school
7-11 shall provide to the agency on request documentation of the effort
7-12 to locate the student.
7-13 (g) A program that is 40 hours or less of class time, or a
7-14 seminar or workshop, is exempt from the 72-hour rule provided by
7-15 Subsection (b) of this section. The school shall maintain a policy
7-16 for the refund of the unused portion of tuition, fees, and other
7-17 charges in the event the student fails to enter the course,
7-18 withdraws from the course, or is discontinued from the class at any
7-19 time before completion of the course as provided by this section.
7-20 The policy must provide that:
7-21 (1) refunds are based on the period of enrollment
7-22 computed on the basis of course time expressed in clock hours;
7-23 (2) the effective date of the termination for refund
7-24 purposes is the earlier of:
7-25 (A) the last date of attendance; or
7-26 (B) the date the school receives written notice
7-27 from the student that the student is withdrawing from the class;
8-1 and
8-2 (3) the student will be refunded the pro rata portion
8-3 of tuition, fees, and other charges that the number of class hours
8-4 remaining in the course after the effective date of the termination
8-5 bears to the total number of class hours in the course.
8-6 SECTION 5. Subchapter D, Chapter 32, Education Code, is
8-7 amended by adding Section 32.402 to read as follows:
8-8 Sec. 32.402. NONQUALIFICATION AS PROPRIETARY SCHOOL. (a) A
8-9 school operating as a small proprietary school but that has an
8-10 annual gross income from tuition and fees that exceeds $100,000,
8-11 intends to receive a payment from federal funds under 20 U.S.C.
8-12 Section 1070 et seq., or intends to receive prepayment of tuition,
8-13 fees, or other charges from federal or state funds shall send
8-14 written notice to the administrator. The notice must be sent not
8-15 later than the following date, as applicable:
8-16 (1) the 60th day after the date on which annual gross
8-17 income is determined to exceed the maximum;
8-18 (2) the day before receiving a payment of federal
8-19 funds under 20 U.S.C. Section 1070 et seq.; or
8-20 (3) the day before enrolling a student who will prepay
8-21 tuition, a fee, or another charge in whole or in part from federal
8-22 or state funds.
8-23 (b) A school that no longer qualifies as a small proprietary
8-24 school shall apply for an initial certificate of approval as a
8-25 proprietary school within 30 days after the date the school has
8-26 notified the administrator that it no longer qualifies as a small
8-27 proprietary school. The administrator may apply or prorate any
9-1 fees paid by the school as a small proprietary school.
9-2 (c) A school that no longer qualifies as a small proprietary
9-3 school shall submit to the administrator an amount of money equal
9-4 to the difference between the fee for the small proprietary school
9-5 certificate of approval submitted by the school and the fee that
9-6 the school would be required to submit after its qualifications as
9-7 a small proprietary school cease.
9-8 (d) The authority of a school to operate under a small
9-9 proprietary school certificate of approval terminates on the final
9-10 determination of issuance or denial of an initial certificate of
9-11 approval. If a school fails to file a complete application within
9-12 the period required by Subsection (b) of this section, the school,
9-13 as a condition of issuance, must pay a late fee in an amount
9-14 established by State Board of Education rule of at least $100.
9-15 SECTION 6. Subchapter G, Chapter 32, Education Code, is
9-16 amended by adding Section 32.65 to read as follows:
9-17 Sec. 32.65. PENALTY FOR SMALL PROPRIETARY SCHOOL. (a) If a
9-18 school fails to timely comply with the requirements of Section
9-19 32.402 of this code, in addition to any other penalties authorized
9-20 by law, the administrator may assess a penalty in an amount not
9-21 greater than two times the amount that the school would have paid
9-22 in fees and other charges if the school had complied with the
9-23 requirements of Section 32.402 or may assess a penalty in the
9-24 amount of the tuition or fee charge to any students whose tuition
9-25 or fees were contracted to be funded by a prepaid federal or state
9-26 source.
9-27 (b) If the administrator finds that the school acted
10-1 intentionally, the administrator may, in addition to any other
10-2 remedy available under law, assess a penalty against the owner in
10-3 an amount not greater than four times the amount of the fees and
10-4 charges that the school should have paid or four times the amount
10-5 of the student tuition that was contracted to be funded from a
10-6 prepaid federal or state source.
10-7 (c) The failure to notify the administrator within four
10-8 months after the school's earnings exceed that of a small
10-9 proprietary school gives rise to a rebuttable presumption of intent
10-10 for purposes of assessment of a penalty.
10-11 (d) The failure to notify the administrator within 10 days
10-12 after a school has enrolled a student whose tuition or fees are
10-13 paid in whole or in part from a prepaid federal or state source
10-14 gives rise to a rebuttable presumption of intent for purposes of
10-15 assessment of a penalty.
10-16 (e) A civil penalty under this section shall be assessed in
10-17 accordance with the procedures stated in Section 32.611 of this
10-18 code. A penalty collected shall be deposited in the state treasury
10-19 to the credit of the general revenue fund.
10-20 SECTION 7. Section 32.71, Education Code, is amended by
10-21 amending Subsections (a), (f), and (g) and adding Subsection (h) to
10-22 read as follows:
10-23 (a) Certificate and registration fees, except those charged
10-24 pursuant to Subsection (d) of this section, shall be collected by
10-25 the Administrator and deposited with the State Treasurer. Each fee
10-26 shall be in an amount set by the Administrator and approved by the
10-27 State Board of Education in an amount not to exceed 150 percent of
11-1 each fee in the following schedule:
11-2 (1) the initial fee for a school:
11-3 (A) for a certificate of approval <the initial
11-4 fee for a school> is $2,000; or
11-5 (B) for a small proprietary school certificate
11-6 of approval is $1,000;
11-7 (2) the first <annual> renewal fee and each subsequent
11-8 renewal fee for a school is the greater of:
11-9 (A) an amount that is determined by applying a
11-10 percentage, not to exceed 0.3 percent, to the gross tuition and
11-11 fees, excluding refunds as provided by Section 32.39 of this code,
11-12 of the school; or
11-13 (B) $500;
11-14 (3) the initial registration fee for a representative
11-15 is $60;
11-16 (4) the annual renewal fee for a representative is
11-17 $30;
11-18 (5) the fee for a change of a name of a school or
11-19 owner is $100;
11-20 (6) the fee for a change of an address of a school is
11-21 $180;
11-22 (7) the fee for a change in the name or address of a
11-23 representative or a change in the name or address of a school that
11-24 causes the reissuance of a representative permit is $10;
11-25 (8) the application fee for an additional course is
11-26 $150, except for seminar and workshop courses, for which the fee is
11-27 $25;
12-1 (9) the application fee for a director, administrative
12-2 staff member, or instructor is $15;
12-3 (10) the application fee for the authority to grant
12-4 degrees is $2,000;
12-5 (11) the application fee for an additional degree
12-6 course is $250; and
12-7 (12) the fee for an inspection required by rule of the
12-8 State Board of Education of classroom facilities that are separate
12-9 from the main campus is $250.
12-10 (f) The administrator may allow payment of any fee
12-11 authorized under this section or under Section 32.91 of this code
12-12 that exceeds $1,000 to be paid by installment. The administrator
12-13 shall provide for appropriate interest charges and late penalties
12-14 in addition to any other remedy that is provided for by law for the
12-15 late payment of a fee installment authorized under this section.
12-16 The administrator may assess a reasonable service charge or
12-17 interest to be paid by a school that pays a fee by installment in
12-18 an amount not to exceed 10 percent annually of the fee that is to
12-19 be paid by installment <The Administrator, with the approval of
12-20 the State Board of Education, may increase any fee authorized under
12-21 this section at a rate not to exceed the increase in the National
12-22 Consumer Price Index For All Urban Consumers. The calculation of
12-23 the index in effect on September 1, 1989, shall be the base for
12-24 calculating the rate at which fees may increase. Fee increases
12-25 under this subsection do not have to be made annually>.
12-26 (g) All fees, interest, or other charges collected under
12-27 this section shall be used only for the administration of the Texas
13-1 Proprietary School Act.
13-2 (h) The administrator may apply or prorate a fee paid by a
13-3 small proprietary school that has complied with the notification
13-4 requirements of Section 32.402 of this code toward an initial
13-5 certificate as a proprietary school in the event that a school has
13-6 ceased to qualify as a small proprietary school during a
13-7 certification period.
13-8 SECTION 8. Section 32.91, Education Code, is amended by
13-9 amending Subsection (a) and adding Subsection (e) to read as
13-10 follows:
13-11 (a) Except as provided by Subsection (e) of this section, at
13-12 <At> the time that each school pays its annual renewal fee, in the
13-13 years provided by Subsection (c) of this section, the State Board
13-14 of Education shall also collect a fee from the school for deposit
13-15 to the credit of a special fund in the state treasury to be called
13-16 the proprietary school tuition protection fund.
13-17 (e) A school is not required to pay the fee for the tuition
13-18 protection fund under Subsection (a) of this section if, at the
13-19 time the school pays the annual renewal fee, the bond provided by
13-20 the school under Section 32.38 of this code is greater than the
13-21 unearned tuition of the school.
13-22 SECTION 9. This Act applies beginning with the 1993-1994
13-23 school year.
13-24 SECTION 10. The importance of this legislation and the
13-25 crowded condition of the calendars in both houses create an
13-26 emergency and an imperative public necessity that the
13-27 constitutional rule requiring bills to be read on three several
14-1 days in each house be suspended, and this rule is hereby suspended,
14-2 and that this Act take effect and be in force from and after its
14-3 passage, and it is so enacted.
14-4 COMMITTEE AMENDMENT NO. 1
14-5 AMENDMENT NO. 1
14-6 TO HB1705
14-7 Section 1, amending Section 32.11(10), Education Code, is amended
14-8 by substituting the following on page 1, line 6:
14-9 (10) "Small proprietary school" means a proprietary school
14-10 that does not receive any payment from federal funds under 20
14-11 U.S.C. Section 1070 et seq., and its subsequent amendments or a
14-12 prepaid federal or state source as compensation in whole or in part
14-13 for any student tuitions and fees or other charges; and either,
14-14 (A) has an annual gross income from student tuition
14-15 and fees that is less than or equal to $100,000 for programs
14-16 regulated by the agency;
14-17 (B) exclusively offers programs to assist students to
14-18 prepare for an undergraduate or graduate course of study at a
14-19 college or university; or
14-20 (C) exclusively offers programs to assist students,
14-21 who have obtained, or who are in the process of obtaining, degrees
14-22 after completing an undergraduate or graduate course of study at a
14-23 college or university, to prepare for an examination.
14-24 EXPLANATION: This amendment incorporates the changes recommended
14-25 from the testimony of Stanley Kaplan and other small schools, and
14-26 affords test preparation schools the same advantages in regulation
14-27 as small proprietary schools.
15-1 Delco
15-2 COMMITTEE AMENDMENT NO. 2
15-3 AMENDMENT NO. 2
15-4 TO HB1705
15-5 Section 5, page 8, line 6, amending Subchapter D, Chapter 32,
15-6 Education Code, by adding Section 32.402, is amended by replacing
15-7 Subsection (a), to read as follows:
15-8 Sec. 32.402. NONQUALIFICATION AS PROPRIETARY SCHOOL. (a) A
15-9 school operating as a small proprietary school but that has an
15-10 annual gross income from tuition and fees that exceeds $100,000
15-11 (other than a test preparation school as defined in Section
15-12 32.11(10)(B) or (C)), that intends to receive a payment from
15-13 federal funds under 20 U.S.C. Section 1070 et seq., or intends to
15-14 receive prepayment of tuition, fees, or other charges from federal
15-15 or state funds shall send written notice to the administrator. The
15-16 notice must be sent not later than the following date, as
15-17 applicable:
15-18 (1)-(3) no change.
15-19 EXPLANATION: This amendment clarifies that test preparation
15-20 schools are not subject to the $100,000 ceiling for small
15-21 proprietary schools.
15-22 Delco