PA 09-99—sSB 809

Higher Education and Employment Advancement Committee

Banks Committee

Finance, Revenue and Bonding Committee

AN ACT CONCERNING PRIVATE OCCUPATIONAL SCHOOLS

SUMMARY: This act revises and expands the requirements a private occupational school must meet to operate in the state. It:

1. conforms the law to Department of Higher Education (DHE) practice by increasing certain fees and establishing new ones that private occupational schools must pay to operate in the state;

2. revises the process for a private occupational school to appeal the DHE commissioner's decision to deny or revoke its authorization or assess an administrative penalty; and

3. prohibits Private Occupational School Student Protection Account funds from being used to refund federal student loans if a school becomes insolvent or ceases operating.

EFFECTIVE DATE: July 1, 2009, except for the provisions concerning (1) hearings for schools whose authorization has been revoked or that have been assessed an administrative penalty and (2) the DHE commissioner's authority to enforce orders, which are effective October 1, 2009.

ADDITIONAL REQUIREMENTS FOR NEW PRIVATE OCCUPATIONAL SCHOOLS

Financial Condition

By law, anyone applying for an initial certificate of authorization to operate a private occupational school in the state must submit financial statements detailing its financial condition that have been prepared by management and reviewed or audited by an independent licensed certified public accountant or licensed public accountant. The act requires that the financial statements conform to generally accepted accounting principles. And it requires the applicant to show that its net worth consists of sufficient liquid assets or produce other evidence of fiscal soundness to demonstrate, during the period for which it is seeking a certificate of authorization, the school's ability to (1) operate; (2) achieve all of its objectives; (3) and meet all of its obligations, including those concerning staff and students.

On-Site Directors

The act prohibits the DHE commissioner, or his designee, from authorizing a private occupational school to operate in this state if it does not have an on-site director at the school and each of its in-state branches. This requirement applies to private occupational schools applying for or renewing a certificate of authorization because (1) the commissioner may place a school on probation, and ultimately revoke its authorization, if it fails to comply with any of the authorization requirements and (2) a school must meet all conditions of its authorization to be renewed.

By law, the commissioner, or his designee, appoints a team to evaluate, based on specified criteria, a private occupational school seeking an initial certificate of authorization to operate in this state. The act requires the team to determine whether the school and each of its in-state branches has an on-site director responsible for overseeing daily operations.

Letter of Credit

The act increases, from $20,000 to $40,000, the amount of the irrevocable letter of credit a new private occupational school must file with DHE to guarantee its payments to the student protection account. Additionally, it (1) requires that the letter of credit be issued by a bank with a main office or branch in the state and (2) extends, from eight to 12 years, the period for which the DHE commissioner holds the letter of credit.

FINANCIAL REPORTS AND RECORDS

Financial Records and Filing Requirements

The act requires each private occupational school authorized to operate in the state to keep financial records that conform with generally accepted accounting principles. The school's management must prepare and submit an annual financial statement detailing the school's financial status that has been reviewed or audited by a licensed certified public accountant or licensed public accountant, in accordance with the American Institute of Certified Public Accountants' standards.

The act requires nationally accredited schools recognized by the U. S. Department of Education to file copies of their financial statements within six months after their fiscal year ends. All other schools must do so within the first four months following the end of their fiscal year, unless they make a written request for a filing extension. The commissioner may grant nonaccredited schools up to a 60-day extension for good cause. Nationally accredited schools must submit audited financial statements and cannot receive a filing extension.

Financial Reports Due at Renewal

By law, a private occupational school must submit reports or audits on its fiscal condition or continuing eligibility for participation in federal student aid programs when renewing its certificate of authorization with DHE. The act specifies that the school must submit the reports or audits as the commissioner, or his designee, prescribes.

The act additionally requires a renewing school to submit documentation that it has a passing score on the financial ratio test the U. S. Department of Education uses for institutions participating in federal student aid programs. In doing so, it conforms the law to DHE's practice.

FEES

Application Fee

The act conforms the law to practice by increasing the application fee, from $2,000 to $2,000 plus $200 per branch school, for a private occupational school applying for an initial certificate of authorization to operate in the state. The fee continues to be payable to the student protection account.

Annual and Renewal Fees

Under prior law, a private occupational school had to pay, to the Board of Governors of Higher Education (BOG), an annually nonrefundable $200 fee for the school and each of its branches as a condition of its reauthorization. The act conforms the law to practice by requiring the school to pay a nonrefundable $200 renewal fee to the BOG for the school and each of its branches in addition to the annual fee ($200 per school plus $200 per branch). It makes the annual fee payable to the student protection account for each year after the school's, or branch school's, initial year of authorization.

By law, a private occupational school's certificate of authorization must be renewed annually for the school's first four years, after which it may be eligible for an extended authorization of up to five years.

Change of Ownership Process and Fee

Under prior law, a private occupational school that changed ownership had to ask DHE for a revision to its certificate of authorization. The act requires such schools to (1) reapply for authorization; (2) file with the commissioner an irrevocable letter of credit, which the act increases from $20,000 to $40,000; and (3) pay a nonrefundable change of ownership fee of $2,000 plus $200 for each in-state branch to the student protection account.

Hospital-Based Occupational School Fees

The act conforms the law to practice by requiring hospital-based occupational schools to pay a $200 annual fee to the student protection account for each year after the school's initial period of authorization. The law already requires these schools to pay a $200 renewal fee, in addition to quarterly assessments on tuition revenue. By law, a hospital-based occupational school must renew its certificate of authorization with DHE every three years.

HEARINGS FOR AGGRIEVED SCHOOLS

The law permits the higher education commissioner to (1) deny or revoke a private occupational school's certificate of authorization or (2) assess an administrative penalty against any school that violates any provision of the occupational school law. The act transfers, from the BOG to the commissioner, the authority to hear complaints from aggrieved schools. Hearings must continue to comply with the Uniform Administrative Procedure Act.

The act also makes a conforming change by giving the commissioner the sole authority, through the attorney general, to ask the Hartford Superior Court to enforce any order it issues and for other appropriate relief. Previously, the BOG or the commissioner could petition the court.

PRIVATE OCCUPATIONAL SCHOOL STUDENT PROTECTION ACCOUNT

By law, the Private Occupational School Student Protection Account is used to make tuition refunds to students who are unable to complete a course at a private occupational school that becomes insolvent or ceases operating. The act prohibits the account from being used to repay federal student loans. And it requires that the student protection account contain, in addition to quarterly tuition assessments, any fees and other funds the law requires.

BACKGROUND

Federal Student Loan Discharge for School Closure

The U. S. Department of Education discharges a student's obligation to repay federal student loans if he or she cannot complete a program of study due to a school's closure. The loan discharge application requires applicants to assign and transfer to the department any right to a refund on the discharged loans made by a third party, including those made by a tuition recovery program.

Financial Ratio Scoring System

The U. S. Department of Education uses a financial ratio scoring system as a measure of an institution's financial responsibility in determining its eligibility for participation in federal student aid programs. The system uses composite scoring, based on an institution's primary reserve, equity, and net income ratios, to measure its viability, profitability, liquidity, ability to borrow, and capital resources.

Related Act

The law permits the DHE commissioner to assess a $500-per-day administrative penalty against any private occupational school that violates any provision of the occupational school law. PA 09-116 extends the penalty to violations of any applicable regulations.

OLR Tracking: RP: RC: JSL: TS