1-1 By: Delco (Senate Sponsor - Barrientos) H.B. No. 1705
1-2 (In the Senate - Received from the House May 5, 1993;
1-3 May 10, 1993, read first time and referred to Committee on
1-4 Education; May 20, 1993, reported adversely, with favorable
1-5 Committee Substitute by the following vote: Yeas 7, Nays 0;
1-6 May 20, 1993, sent to printer.)
1-7 COMMITTEE VOTE
1-8 Yea Nay PNV Absent
1-9 Ratliff x
1-10 Haley x
1-11 Barrientos x
1-12 Bivins x
1-13 Harris of Tarrant x
1-14 Luna x
1-15 Montford x
1-16 Shapiro x
1-17 Sibley x
1-18 Turner x
1-19 Zaffirini x
1-20 COMMITTEE SUBSTITUTE FOR H.B. No. 1705 By: Barrientos
1-21 A BILL TO BE ENTITLED
1-22 AN ACT
1-23 relating to proprietary schools; providing civil penalties.
1-24 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-25 SECTION 1. Section 32.11, Education Code, is amended by
1-26 adding Subdivision (10) to read as follows:
1-27 (10) "Small proprietary school" means a proprietary
1-28 school that does not receive any payment from federal funds under
1-29 20 U.S.C. Section 1070 et seq. and its subsequent amendments or a
1-30 prepaid federal or state source as compensation in whole or in part
1-31 for any student tuitions and fees or other charges and either:
1-32 (A) has an annual gross income from student
1-33 tuition and fees that is less than or equal to $100,000 for
1-34 programs regulated by the agency;
1-35 (B) exclusively offers programs to assist
1-36 students to prepare for an undergraduate or graduate course of
1-37 study at a college or university; or
1-38 (C) exclusively offers programs to assist
1-39 students, who have obtained, or who are in the process of
1-40 obtaining, degrees after completing an undergraduate or graduate
1-41 course of study at a college or university, to prepare for an
1-42 examination.
1-43 SECTION 2. Subchapter C, Chapter 32, Education Code, is
1-44 amended by adding Section 32.241 to read as follows:
1-45 Sec. 32.241. COMPREHENSIVE REVIEW. The administrator shall
1-46 conduct a comprehensive review of the existing rules and policies
1-47 governing proprietary schools and reduce regulation of small
1-48 proprietary schools by January 1, 1995. This section expires
1-49 February 1, 1995.
1-50 SECTION 3. Subchapter D, Chapter 32, Education Code, is
1-51 amended by adding Sections 32.321 and 32.322 to read as follows:
1-52 Sec. 32.321. STATUTORY WAIVER AUTHORITY. (a) The State
1-53 Board of Education after consultation with the Proprietary School
1-54 Advisory Commission may establish rules that waive, alter, suspend,
1-55 or replace any of the following provisions governing small
1-56 proprietary schools:
1-57 (1) the fee schedule authorized under Section 32.71 of
1-58 this code, provided that fees under a fee schedule established by
1-59 rule may not be less than the reasonable administrative cost for
1-60 regulation or more than the amount that a small proprietary school
1-61 would otherwise pay if it were not classified as a small
1-62 proprietary school;
1-63 (2) participation in the proprietary school tuition
1-64 protection fund required by Section 32.91 of this code;
1-65 (3) the refund policy provisions of Section 32.39 of
1-66 this code;
1-67 (4) the bonding requirements of Section 32.38 of this
1-68 code;
2-1 (5) the examination of a school for compliance under
2-2 Section 32.34(f) of this code;
2-3 (6) the reporting requirements of Section 32.33(o) of
2-4 this code; and
2-5 (7) the term for which a certificate of approval is
2-6 issued under Section 32.34(b) of this code, provided that a rule
2-7 adopted under this section may not provide for a term that exceeds
2-8 three years or is less than one year.
2-9 (b) A rule proposed under this section may be adopted only
2-10 if it will reduce the regulatory burden for small proprietary
2-11 schools and will adequately safeguard the interests of the students
2-12 of small proprietary schools to receive either the education for
2-13 which they have contracted or an appropriate refund.
2-14 Sec. 32.322. SMALL SCHOOL EXEMPTION. The administrator may
2-15 exempt small proprietary schools from any requirement of this
2-16 chapter to reduce the cost to small schools of receiving a
2-17 certificate of approval.
2-18 SECTION 4. Section 32.39, Education Code, is amended by
2-19 amending Subsections (a), (b), and (e) and adding Subsection (g) to
2-20 read as follows:
2-21 (a) Except as provided by Subsection (g) of this section, as
2-22 <As> a condition for granting certification each school must
2-23 maintain a cancellation and settlement policy which must provide a
2-24 full refund of all monies paid by a student if:
2-25 (1) the student cancels the enrollment agreement or
2-26 contract within 72 hours (until midnight of the third day excluding
2-27 Saturdays, Sundays, and legal holidays) after the enrollment
2-28 contract is signed by the prospective student;
2-29 (2) the enrollment of the student was procured as the
2-30 result of any misrepresentation in advertising, promotional
2-31 materials of the school, or representations by the owner or
2-32 representatives of the school.
2-33 (b) Except as provided by Subsection (g) of this section, as
2-34 <As> a condition for granting certification, each school must
2-35 maintain a policy for the refund of the unused portion of tuition,
2-36 fees, and other charges in the event the student, after expiration
2-37 of the 72-hour cancellation privilege, fails to enter the course,
2-38 or withdraws, or is discontinued therefrom at any time prior to
2-39 completion, and such policy must provide:
2-40 (1) refunds for resident courses will be based on the
2-41 period of enrollment computed on the basis of course time expressed
2-42 in clock hours;
2-43 (2) the effective date of the termination for refund
2-44 purposes in residence schools will be the earliest of the
2-45 following:
2-46 (A) the last date of attendance, if the student
2-47 is terminated by the school;
2-48 (B) the date of receipt of written notice from
2-49 the student;
2-50 (C) ten school days following the last date of
2-51 attendance;
2-52 (3) if tuition and fees are <is> collected in advance
2-53 of entrance, and if, after expiration of the 72-hour cancellation
2-54 privilege, the student does not enter the residence school, not
2-55 more than $100 shall be retained by the school;
2-56 (4) for the student who enters a residence course of
2-57 not more than 12 months in length, terminates or withdraws, the
2-58 school may retain $100 of tuition and fees and the minimum refund
2-59 of the remaining tuition and fees will be:
2-60 (A) during the first week or one-tenth of the
2-61 course, whichever is less, 90 percent of the remaining tuition and
2-62 fees;
2-63 (B) after the first week or one-tenth of the
2-64 course, whichever is less, but within the first three weeks of the
2-65 course, 80 percent of the remaining tuition and fees;
2-66 (C) after the first three weeks of the course,
2-67 but within the first quarter of the course, 75 percent of the
2-68 remaining tuition and fees;
2-69 (D) during the second quarter of the course, 50
2-70 percent of the remaining tuition and fees;
3-1 (E) during the third quarter of the course, 10
3-2 percent of the remaining tuition and fees;
3-3 (F) during the last quarter of the course, the
3-4 student may be considered obligated for the full tuition and fees;
3-5 (5) for residence courses more than 12 months in
3-6 length, the refund shall be applied to each 12-month period paid,
3-7 or part thereof separately, and the student is entitled to a refund
3-8 as provided by Subdivision (4) of this subsection;
3-9 (6) refunds of items of extra expense to the student,
3-10 such as instructional supplies, books, student activities,
3-11 laboratory fees, service charges, rentals, deposits, and all other
3-12 such ancillary miscellaneous charges, where these items are
3-13 separately stated and shown in the data furnished the student
3-14 before enrollment, will be made in a reasonable manner acceptable
3-15 to the administrator;
3-16 (7) refunds based on enrollment in residence schools
3-17 will be totally consummated within 60 <30> days after the effective
3-18 date of termination;
3-19 (8) refunds for correspondence courses will be
3-20 computed on the basis of the number of lessons in the course;
3-21 (9) the effective date of the termination for refund
3-22 purposes in correspondence courses will be the earliest of the
3-23 following:
3-24 (A) the date of notification to the student if
3-25 the student is terminated;
3-26 (B) the date of receipt of written notice from
3-27 the student;
3-28 (C) the end of the third calendar month
3-29 following the month in which the student's last lesson assignment
3-30 was received unless notification has been received from the student
3-31 that he wishes to remain enrolled;
3-32 (10) if tuition and fees are <is> collected before any
3-33 lessons have been completed, and if, after expiration of the
3-34 72-hour cancellation privilege, the student fails to begin the
3-35 course, not more than $50 shall be retained by the school;
3-36 (11) in cases of termination or withdrawal after the
3-37 student has begun the correspondence course, the school may retain
3-38 $50 of tuition and fees, and the minimum refund policy must provide
3-39 that the student will be refunded the pro rata portion of the
3-40 remaining tuition, fees, and other charges that the number of
3-41 lessons completed and serviced by the school bears to the total
3-42 number of lessons in the course;
3-43 (12) refunds based on enrollment in correspondence
3-44 schools will be totally consummated within 60 <30> days after the
3-45 effective date of termination.
3-46 (e) If a refund is not made within the period required by
3-47 this section, the school shall pay a penalty <interest on the
3-48 refund for the interval beginning with the first day following the
3-49 expiration of the refund period and ending with the day immediately
3-50 preceding the date the refund is made>. If the refund is made to a
3-51 lending institution, the penalty <interest> shall also be paid to
3-52 that institution and applied against the student's loan. The
3-53 commissioner of education annually shall establish the level of the
3-54 penalty <interest> at a level sufficient to provide a deterrent to
3-55 the retention of student funds. The Central Education Agency may
3-56 exempt a school from the payment of the penalty <interest> if the
3-57 school makes a good faith effort to refund the tuition, fees, and
3-58 other charges but is unable to locate the student. The school
3-59 shall provide to the agency on request documentation of the effort
3-60 to locate the student.
3-61 (g) a program that is 40 hours or less of class time, or a
3-62 seminar or workshop, is exempt from the 72-hour rule provided by
3-63 Subsection (b) of this section. The school shall maintain a policy
3-64 for the refund of the unused portion of tuition, fees, and other
3-65 charges in the event the student fails to enter the course,
3-66 withdraws from the course, or is discontinued from the class at any
3-67 time before completion of the course as provided by this section.
3-68 The policy must provide that:
3-69 (1) refunds are based on the period of enrollment
3-70 computed on the basis of course time expressed in clock hours;
4-1 (2) the effective date of the termination for refund
4-2 purposes is the earlier of:
4-3 (A) the last date of attendance; or
4-4 (B) the date the school receives written notice
4-5 from the student that the student is withdrawing from the class;
4-6 and
4-7 (3) the student will be refunded the pro rata portion
4-8 of tuition, fees, and other charges that the number of class hours
4-9 remaining in the course after the effective date of the termination
4-10 bears to the total number of class hours in the course.
4-11 SECTION 5. Subchapter D, Chapter 32, Education Code, is
4-12 amended by adding Section 32.402 to read as follows:
4-13 Sec. 32.402. NONQUALIFICATION AS PROPRIETARY SCHOOL. (a) A
4-14 school operating as a small proprietary school but that has an
4-15 annual gross income from tuition and fees that exceeds $100,000
4-16 (other than a test preparation school as defined in Section
4-17 32.11(10)(B) or (C)) that intends to receive a payment from federal
4-18 funds under 20 U.S.C. Section 1070 et seq. or intends to receive
4-19 prepayment of tuition, fees, or other charges from federal or state
4-20 funds shall send written notice to the administrator. The notice
4-21 must be sent not later than the following date, as applicable:
4-22 (1) the 60th day after the date on which annual gross
4-23 income is determined to exceed the maximum;
4-24 (2) the day before receiving a payment of federal
4-25 funds under 20 U.S.C. Section 1070 et seq.; or
4-26 (3) the day before enrolling a student who will prepay
4-27 tuition, a fee, or another charge in whole or in part from federal
4-28 or state funds.
4-29 (b) A school that no longer qualifies as a small proprietary
4-30 school shall apply for an initial certificate of approval as a
4-31 proprietary school within 30 days after the date the school has
4-32 notified the administrator that it no longer qualifies as a small
4-33 proprietary school. The administrator may apply or prorate any
4-34 fees paid by the school as a small proprietary school.
4-35 (c) A school that no longer qualifies as a small proprietary
4-36 school shall submit to the administrator an amount of money equal
4-37 to the difference between the fee for the small proprietary school
4-38 certificate of approval submitted by the school and the fee that
4-39 the school would be required to submit after its qualifications as
4-40 a small proprietary school cease.
4-41 (d) The authority of a school to operate under a small
4-42 proprietary school certificate of approval terminates on the final
4-43 determination of issuance or denial of an initial certificate of
4-44 approval. If a school fails to file a complete application within
4-45 the period required by Subsection (b) of this section, the school,
4-46 as a condition of issuance, must pay a late fee in an amount
4-47 established by State Board of Education rule of at least $100.
4-48 SECTION 6. Subchapter G, Chapter 32, Education Code, is
4-49 amended by adding Section 32.65 to read as follows:
4-50 Sec. 32.65. PENALTY FOR SMALL PROPRIETARY SCHOOL. (a) If a
4-51 school fails to timely comply with the requirements of Section
4-52 32.402 of this code, in addition to any other penalties authorized
4-53 by law, the administrator may assess a penalty in an amount not
4-54 greater than two times the amount that the school would have paid
4-55 in fees and other charges if the school had complied with the
4-56 requirements of Section 32.402 or may assess a penalty in the
4-57 amount of the tuition or fee charge to any students whose tuition
4-58 or fees were contracted to be funded by a prepaid federal or state
4-59 source.
4-60 (b) If the administrator finds that the school acted
4-61 intentionally, the administrator may, in addition to any other
4-62 remedy available under law, assess a penalty against the owner in
4-63 an amount not greater than four times the amount of the fees and
4-64 charges that the school should have paid or four times the amount
4-65 of the student tuition that was contracted to be funded from a
4-66 prepaid federal or state source.
4-67 (c) The failure to notify the administrator within four
4-68 months after the school's earnings exceed that of a small
4-69 proprietary school gives rise to a rebuttable presumption of intent
4-70 for purposes of assessment of a penalty.
5-1 (d) The failure to notify the administrator within 10 days
5-2 after a school has enrolled a student whose tuition or fees are
5-3 paid in whole or in part from a prepaid federal or state source
5-4 gives rise to a rebuttable presumption of intent for purposes of
5-5 assessment of a penalty.
5-6 (e) A civil penalty under this section shall be assessed in
5-7 accordance with the procedures stated in Section 32.611 of this
5-8 code. A penalty collected shall be deposited in the state treasury
5-9 to the credit of the general revenue fund.
5-10 SECTION 7. Section 32.71, Education Code, is amended by
5-11 amending Subsections (a), (f), and (g) and adding Subsection (h) to
5-12 read as follows;
5-13 (a) Certificate and registration fees, except those charged
5-14 pursuant to Subsection (d) of this section, shall be collected by
5-15 the Administrator and deposited with the State Treasurer. Each fee
5-16 shall be in an amount set by the Administrator and approved by the
5-17 State Board of Education in an amount not to exceed 150 percent of
5-18 each fee in the following schedule:
5-19 (1) the initial fee for a school:
5-20 (A) for a certificate of approval <the initial
5-21 fee for a school> is $2,000; or
5-22 (B) for a small proprietary school certificate
5-23 of approval is $1,000;
5-24 (2) the first <annual> renewal fee and each subsequent
5-25 renewal fee for a school is the greater of:
5-26 (A) an amount that is determined by applying a
5-27 percentage, not to exceed 0.3 percent, to the gross tuition and
5-28 fees, excluding refunds as provided by Section 32.39 of this code,
5-29 of the school; or
5-30 (B) $500;
5-31 (3) the initial registration fee for a representative
5-32 is $60;
5-33 (4) the annual renewal fee for a representative is
5-34 $30;
5-35 (5) the fee for a change of a name of a school or
5-36 owner is $100;
5-37 (6) the fee for a change of an address of a school is
5-38 $180;
5-39 (7) the fee for a change in the name or address of a
5-40 representative or a change in the name or address of a school that
5-41 causes the reissuance of a representative permit is $10;
5-42 (8) the application fee for an additional course is
5-43 $150, except for seminar and workshop courses, for which the fee is
5-44 $25;
5-45 (9) the application fee for a director, administrative
5-46 staff member, or instructor is $15;
5-47 (10) the application fee for the authority to grant
5-48 degrees is $2,000;
5-49 (11) the application fee for an additional degree
5-50 course is $250; and
5-51 (12) the fee for an inspection required by rule of the
5-52 State Board of Education of classroom facilities that are separate
5-53 from the main campus is $250.
5-54 (f) The administrator may allow payment of any fee
5-55 authorized under this section or under Section 32.91 of this code
5-56 that exceeds $1,000 to be paid by installment. The administrator
5-57 shall provide for appropriate interest charges and late penalties
5-58 in addition to any other remedy that is provided for by law for the
5-59 late payment of a fee installment authorized under this section.
5-60 The administrator may assess a reasonable service charge or
5-61 interest to be paid by a school that pays a fee by installment in
5-62 an amount not to exceed 10 percent annually of the fee that is to
5-63 be paid by installment <The Administrator, with the approval of
5-64 the State Board of Education, may increase any fee authorized under
5-65 this section at a rate not to exceed the increase in the National
5-66 Consumer Price Index For All Urban Consumers. The calculation of
5-67 the index in effect on September 1, 1989, shall be the base for
5-68 calculating the rate at which fees may increase. Fee increases
5-69 under this subsection do not have to be made annually>.
5-70 (g) All fees, interest, or other charges collected under
6-1 this section shall be used only for the administration of the Texas
6-2 Proprietary School Act.
6-3 (h) The administrator may apply or prorate a fee paid by a
6-4 small proprietary school that has complied with the notification
6-5 requirements of Section 32.402 of this code toward an initial
6-6 certificate as a proprietary school in the event that a school has
6-7 ceased to qualify as a small proprietary school during a
6-8 certification period.
6-9 SECTION 8. Section 32.91, Education Code, is amended by
6-10 amending Subsection (a) and adding Subsection (e) to read as
6-11 follows:
6-12 (a) Except as provided by Subsection (e) of this section, at
6-13 <At> the time that each school pays its annual renewal fee, in the
6-14 years provided by Subsection (c) of this section, the State Board
6-15 of Education shall also collect a fee from the school for deposit
6-16 to the credit of a special fund in the state treasury to be called
6-17 the proprietary school tuition protection fund.
6-18 (e) A school is not required to pay the fee for the tuition
6-19 protection fund under Subsection (a) of this section if, at the
6-20 time the school pays the annual renewal fee, the bond provided by
6-21 the school under Section 32.38 of this code is greater than the
6-22 unearned tuition of the school.
6-23 SECTION 9. Section 32.12(a), Education Code, is amended to
6-24 read as follows:
6-25 (a) The following schools or educational institutions are
6-26 specifically exempt from the provisions of this chapter and are not
6-27 within the definition of "proprietary school":
6-28 (1) a school or educational institution supported by
6-29 taxation from either a local or State source;
6-30 (2) nonprofit schools owned, controlled, operated, and
6-31 conducted by bona fide religious, denominational, eleemosynary, or
6-32 similar public institutions exempt from property taxation under the
6-33 laws of this State, but such schools may choose to apply for a
6-34 certificate of approval hereunder, and upon approval and issuance,
6-35 shall be subject to the provisions of this chapter as determined by
6-36 the administrator;
6-37 (3) a school or training program which offers
6-38 instruction of purely avocational or recreational subjects as
6-39 determined by the administrator;
6-40 (4) a course or courses of instruction or study
6-41 sponsored by an employer for the training and preparation of its
6-42 own employees, and for which no tuition fee is charged to the
6-43 student;
6-44 (5) a course or courses of study or instruction
6-45 sponsored by a recognized trade, business, or professional
6-46 organization for the instruction of the members of the organization
6-47 with a closed membership;
6-48 (6) private colleges or universities which award a
6-49 recognized baccalaureate, or higher degree, and which maintain and
6-50 operate educational programs for which a majority of the credits
6-51 given are transferable to a college, junior college, or university
6-52 supported entirely or partly by taxation from either a local or
6-53 State source;
6-54 (7) a school or course which is otherwise regulated
6-55 and approved under and pursuant to any other law or rulemaking
6-56 process of the State or approved for continuing education credit by
6-57 an organization that accredits courses for the maintenance of a
6-58 license, except as provided by Subsection (c) of this section;
6-59 (8) aviation schools or instructors approved by and
6-60 under the supervision of the Federal Aviation Administration;
6-61 (9) a school which offers intensive review courses
6-62 designed to prepare students for certified public accountancy
6-63 tests, public accountancy tests, law school aptitude tests, bar
6-64 examinations, or medical college admissions tests; and
6-65 (10) a private school offering primary or secondary
6-66 education, which may include kindergarten or prekindergarten
6-67 program, and which satisfies the compulsory attendance requirements
6-68 of Section 21.032 of this code pursuant to Section 21.033(a)(1) of
6-69 this code.
6-70 SECTION 10. Section 32.12, Education Code, is amended by
7-1 adding Subsection (d) to read as follows:
7-2 (d) Notwithstanding the exemptions listed in Subsection (a)
7-3 above, a dispute resolution organization, as defined by Section
7-4 154.001, Civil Practice and Remedies Code, may elect to seek a
7-5 certificate of approval pursuant to Subchapter D of the Texas
7-6 Proprietary Schools Act.
7-7 SECTION 11. This Act applies beginning with the 1993-1994
7-8 school year.
7-9 SECTION 12. The importance of this legislation and the
7-10 crowded condition of the calendars in both houses create an
7-11 emergency and an imperative public necessity that the
7-12 constitutional rule requiring bills to be read on three several
7-13 days in each house be suspended, and this rule is hereby suspended,
7-14 and that this Act take effect and be in force from and after its
7-15 passage, and it is so enacted.
7-16 * * * * *
7-17 Austin,
7-18 Texas
7-19 May 20, 1993
7-20 Hon. Bob Bullock
7-21 President of the Senate
7-22 Sir:
7-23 We, your Committee on Education to which was referred H.B. No.
7-24 1705, have had the same under consideration, and I am instructed to
7-25 report it back to the Senate with the recommendation that it do not
7-26 pass, but that the Committee Substitute adopted in lieu thereof do
7-27 pass and be printed.
7-28 Ratliff,
7-29 Chairman
7-30 * * * * *
7-31 WITNESSES
7-32 FOR AGAINST ON
7-33 ___________________________________________________________________
7-34 Name: Robert D. Agee x
7-35 Representing: RDA Computer Training
7-36 City: Austin
7-37 -------------------------------------------------------------------
7-38 Name: Mark C. Hastings x
7-39 Representing:
7-40 City: Austin
7-41 -------------------------------------------------------------------
7-42 Name: Dee Bednar x
7-43 Representing: TX Education Agency
7-44 City: Austin
7-45 -------------------------------------------------------------------
7-46 Name: Paul Lindsey x
7-47 Representing: Texas Education Agency
7-48 City: Austin
7-49 -------------------------------------------------------------------
7-50 Name: Kathleen Thomas x
7-51 Representing: Thomas School Retail Floristr
7-52 City: Austin
7-53 -------------------------------------------------------------------
7-54 Name: Bob Henderson x
7-55 Representing: Whittle Communications
7-56 City: Austin
7-57 -------------------------------------------------------------------