SB400: SB400 Education; unaccredited institutions from offering degrees; prohibit

26 LC 61 0478S The House Committee on Higher Education offers the following substitute to SB 400: A BILL TO BE ENTITLED AN ACT To amend Part 1A of Article 7 of Chapter 3 of Title 20 of the O fficial Code of Georgia1 Annotated, relating to nonpublic postsecondary educational inst itutions, so as to prohibit2 unaccredited institutions from offering degrees; to authorize the use of irrevocable letters of3 credit in lieu of surety bonds; to require denial of applicatio ns to operate in certain4 circumstances; to clarify that grievance procedures for denials of authorization to operate do5 not apply to denials of authorization to offer additional cours es; to require certain6 postsecondary educational institutions to provide academic records to the executive director7 in certain circumstances; to require certain institutions to participate in the Tuition Guaranty8 Trust Fund and to provide how such institutions may participate ; to provide for9 indemnification; to provide for definitions; to provide for rel ated matters; to repeal10 conflicting laws; and for other purposes.11 BE IT ENACTED BY THE GENERAL ASSEMBLY OF GEORGIA:12 SECTION 1.13 Part 1A of Article 7 of Chapter 3 of Title 20 of the Official C ode of Georgia Annotated,14 relating to nonpublic postsecondary educational institutions, i s amended in Code Section15 S. B. 400 (SUB) - 1 - 26 LC 61 0478S 20-3-250.2, relating to definitions relative to nonpublic posts econdary educational16 institutions, by revising paragraph (17) and adding a new paragraph to read as follows:17 "(7.1) 'Distance education' means education or educational services that use one or more18 technologies to deliver such education or educational services to students who are19 separated from the instructor and to support regular and substantive interaction between20 the students and the instructor, either synchronously or asynchronously."21 "(17) 'Postsecondary activity' means:22 (A) Awarding a postsecondary degree or certificate; or23 (B) Conducting or offering study, experience, or testing for an individual related to a24 field or profession associated with public health, public welfa re, or public safety, as25 determined by the commission in its sole discretion; or26 (C) Offering distance education:27 (i) To a person within this state; or28 (ii) From within this state and operating a campus, branch, instructional facility, or29 administrative office within this state."30 SECTION 2.31 Said part is further amended in Code Section 20-3-250.7, relati ng to prohibited activities32 relative to nonpublic postsecondary educational institutions, b y revising subsection (a) as33 follows:34 "(a) No person, group, or entity of whatever kind, alone or in concert with others, shall:35 (1) Operate in this state a nonpublic postsecondary educationa l institution or conduct36 postsecondary activities in this state unless issued a current certificate of valid37 authorization by the executive director;38 (2) Offer postsecondary instruction leading to a postsecondary degree or certificate to39 Georgia residents from a location outside this state by corresp ondence or any40 S. B. 400 (SUB) - 2 - 26 LC 61 0478S telecommunications or electronic media technology unless issued a current certificate of41 valid authorization;42 (3) Solicit prospective students without being authorized by the executive director to do43 so and without being bonded if required to do so by Code Section 20-3-250.10;44 (4) Make or cause to be made any statement or representation, oral, written, or visual,45 in connection with the offering or publicizing of a course, if such person knows or46 reasonably should have known the statement or representation to be false, deceptive,47 substantially inaccurate, or misleading;48 (5) Instruct or educate, or offer to instruct or educate, including advertising or soliciting49 for such purpose, enroll or offer to enroll, contract or offer to contract with any person50 for such purpose, or award any educational credential, or contract with any institution or51 party to perform any such act, in this state, whether such pers on, group, or entity is52 located within or outside this state, unless such person, group, or entity observes and is53 in compliance with the minimum standards set forth in Code Sect ion 20-3-250.6, the54 criteria established by the commission pursuant to paragraph (2 ) of subsection (b) of55 Code Section 20-3-250.5, and the rules and regulations adopted by the commission;56 (6) Promise or guarantee employment utilizing information, training, or skill purported57 to be provided or otherwise enhanced by a course, unless the promisor or guarantor offers58 the student or prospective student a bona fide contract of employment agreeing to employ59 said student or prospective student for a specified period of t ime in a business or other60 enterprise regularly conducted by him or her where such informa tion, training, or skill61 is a normal condition of employment;62 (7) Do any act constituting part of the conduct or administrat ion of a course or the63 obtaining of students thereof, if such person knows or reasonably should know that any64 phase or incident of the conduct or administration of the course is being carried on by the65 use of fraud, deception, other misrepresentation, or by any per son soliciting students66 without a permit; or67 S. B. 400 (SUB) - 3 - 26 LC 61 0478S (8) Grant, or offer to grant, postsecondary degrees, diplomas, certificates, or honorary68 or unearned degrees without authorization to do so from the commission; or69 (9) Grant, or offer to grant, postsecondary degrees unless such person, group, or entity70 is accredited or in the process of becoming accredited by an ac crediting agency71 recognized by the United States Department of Education or its successor."72 SECTION 3.73 Said part is further amended in Code Section 20-3-250.10, relating to surety bonds, filing,74 release of surety, and suspension upon release of surety, by adding a new subsection to read75 as follows:76 "(e) The commission, by rule or regulation, shall authorize the executive director to accept77 an irrevocable letter of credit issued by a bank or savings and loan association, as defined78 in Code Section 7-1-4, in lieu of the surety bond otherwise required under this Code section79 and subject to the same requirements and conditions provided for surety bonds in this Code80 section."81 SECTION 4.82 Said part is further amended in Code Section 20-3-250.12, relating to denial of application,83 by revising subsection (a) and adding a new subsection to read as follows:84 "(a) If the executive director, upon review and consideration of an application for85 authorization to operate or for renewal thereof, the executive director determines that the86 applicant meets one or more of the factors considered pursuant to subsection (a.1) of this87 Code section, the executive director shall deny the application and shall notify the applicant88 setting forth the reason or reasons therefor.89 (a.1) The review of an application for authorization to operate or for renewal thereof shall90 include consideration of whether the applicant:91 (1) Fails fails to meet the criteria established as provided in this part,;92 S. B. 400 (SUB) - 4 - 26 LC 61 0478S (2) Has previously caused loss or damage to a student of a non public postsecondary93 educational institution as a result of any act or practice which is a violation of this part94 or of the rules and regulations established by the commission f or the administration of95 this part or as a result of the commission of an offense provided for in Chapter 9 of Title96 16 or a substantially similar offense in another jurisdiction;97 (3) Has willfully failed to comply with the provisions of this part or the rules and98 regulations established by the commission for the administration of this part or with the99 laws applicable to nonpublic pos tsecondary educational institut ions of another100 jurisdiction;101 (4) Is acting for or on behalf of a person who has caused loss or damage to a student of102 a nonpublic postsecondary educational institution as a result of any act or practice which103 is a violation of this part or of the rules and regulations established by the commission for104 the administration of this part or as a result of the commission of an offense provided for105 in Chapter 9 of Title 16 or a substantially similar offense in another jurisdiction; or106 (5) Is acting for or on behalf of a person who has willfully f ailed to comply with the107 provisions of this part or the rules and regulations established by the commission for the108 administration of this part or with laws applicable to nonpublic postsecondary educational109 institutions of another jurisdiction the executive director shall so notify the applicant,110 setting forth the reasons therefor in writing, and shall deny the application."111 SECTION 5.112 Said part is further amended in Code Section 20-3-250.15, relating to hearing and review by113 commission of denial of authorization to operate, by adding a n ew subsection to read as114 follows:115 "(f) This Code section shall not apply to denials of authorizat ion of additional course116 offerings pursuant to subsection (i) of Code Section 20-3-250.8."117 S. B. 400 (SUB) - 5 - 26 LC 61 0478S SECTION 6.118 Said part is further amended by revising Code Section 20-3-250. 17, relating to119 discontinuation of operations of nonpublic postsecondary educational institution, as follows:120 "20-3-250.17.121 (a) In the event any nonpublic postsec ondary educational institut ion, including122 degree-granting institutions exempted from this part under paragraphs (7), (10), (11), (13),123 and (14) of subsection (a) of Code Section 20-3-250.3, now or hereafter operating in this124 state proposes to discontinue its operations, the chief administrative officer, by whatever125 title designated, of such institution shall cause to be filed w ith the executive director the126 original or legible true copies of all such academic records of such institution as may be127 specified by the executive director. The commission shall be a uthorized to establish128 requirements for the format of such records, including whether such records shall be filed129 in a paper or digital format. Such records shall include, at a minimum, such information130 as is customarily required by colleges or other postsecondary educational institutions when131 considering students for transfer or advanced study and, as a s eparate document, the132 academic record of each former student. In the event it appears to the executive director133 that any such records of an institution discontinuing its operations are in danger of being134 destroyed, secreted, mislaid, or otherwise made unavailable to the executive director, the135 executive director may, with court order, seize and take possession of such records, subject136 to the confidentiality accorded normal school records. The exe cutive director shall137 maintain or cause to be maintained a permanent file of such records coming into his or her138 possession.139 (b) In the event the executive director determines that any no npublic postsecondary140 educational institution, including degree-granting institutions exempted from this part141 under paragraphs (7), (10), (11), (13), and (14) of subsection (a) of Code142 Section 20-3-250.3, now or hereafter operating in this state is at risk of discontinuing143 operations and that the academic records of such institution are at risk of being destroyed,144 S. B. 400 (SUB) - 6 - 26 LC 61 0478S secreted, mislaid, not properly maintained, not safeguarded, or otherwise made unavailable145 to the executive director or the students of such institution, the executive director shall be146 authorized to request that such institution file with the executive director copies of all such147 academic records of such institution in a format required by the commission, subject to the148 confidentiality accorded normal school records. If such institution fails to file such records,149 the executive director shall be authorized to seek a court orde r to obtain such records or150 copies of such records. The executive director shall maintain or cause to be maintained a151 permanent file of such records coming into his or her possession."152 SECTION 7.153 Said part is further amended by revising Code Section 20-3-250. 27, relating to Tuition154 Guaranty Trust Fund, as follows:155 "20-3-250.27.156 (a) It is the purpose of this Code section to create a trust fund from participation fees from157 postsecondary educational institutions to enable such institutions, collectively, to protect158 students against financial loss when a postsecondary educational institution closes without159 reimbursing its students and without completing its educational obligations to its students160 and to provide consumer information, as necessary in the determination of the commission,161 to prospective and currently enrolled students.162 (b)(1) Effective on July 1, 1992, the Tuition Guaranty Trust F und is created. The163 participation fees received by the commission from postsecondar y educational164 institutions pursuant to the provisions of subsections (c) and (d) of this Code section shall165 be deposited in a special account designated 'Tuition Guaranty Trust Fund' and shall be166 held in trust by the board of trustees provided for in paragraph (2) of this subsection for167 the purpose of carrying out the provisions of this Code section. The money in the fund168 may be invested by said board of trustees in any bonds and other securities of agencies169 of the government of the United States and bonds and other securities of state and local170 S. B. 400 (SUB) - 7 - 26 LC 61 0478S governments. The earnings from such investments shall be deposited to the credit of the171 Tuition Guaranty Trust Fund and shall be available for the same purposes as other money172 deposited in the fund.173 (2) The fund shall be administered by the Board of Trustees of the Tuition Guaranty174 Trust Fund. The board of trustees shall consist of five member s of the commission175 designated by majority vote of the commission, where at least two members, by June 30,176 2020, shall represent postsecondary educational institutions. The five members of the177 commission who are so designated shall serve for such terms of office as members of the178 board as the commission shall establish by rule or regulation. The commission shall179 appoint one of the members so designated as chairman of the boa rd. The executive180 director shall also serve as executive director and secretary of the board. Three members181 of the board must vote in agreement in order for the board to t ake official action. The182 commission may by rule or regulation provide for another member of the commission to183 serve in the place of a member of the board who is absent from a meeting of the board.184 (c)(1) All Except as expressly provided otherwise in this Code section, all postsecondary185 educational institutions operating or conducting postsecondary activity in this state,186 except those which are exempt from the provisions of this Code section pursuant to Code187 Section 20-3-250.3, shall participate in the tuition guaranty fund. Those postsecondary188 educational institutions specified in paragraphs (10) and (14) paragraph (4) of subsection189 (a) of Code Section 20-3-250.3 and in subsection (c) of Code Se ction 20-3-250.3 shall190 not be required to participate in the tuition guaranty fund regardless of whether such191 institution has received authorization to operate.192 (2) Postsecondary educational institutions which were authorized to operate in this state193 prior to July 1, 1990, and which have maintained continuous authorization in this state194 since July 1, 1990, and institutions which have been continuously licensed since July 1,195 1990, pursuant to the provisions of Title 43 and were authorized by the commission prior196 to July 1, 2022, shall participate in the fund and shall not be required to provide surety197 S. B. 400 (SUB) - 8 - 26 LC 61 0478S bonds as provided in Code Section 20-3-250.10; provided, however, that any surety bond198 provided by an institution before July 1, 2021, shall remain in effect for one full year after199 the effective date of such surety bond.200 (3) Postsecondary educational institutions which are currently authorized to operate in201 this state and which were first authorized to operate in this state on or after July 1, 1990,202 shall participate in the fund for seven years of authorized operation; provided, however,203 that no postsecondary educational institution first authorized to operate in this state on204 or after July 1, 1990, which fully participated in the fund for five years on or before205 January 1, 2022, shall be required to participate in the fund for seven years as otherwise206 provided in this paragraph. A postsecondary educational institution specified in207 paragraph (14) of subsection (a) of Code Section 20-3-250.3 sha ll not be required to208 participate in the fund if such institution fully participated in the fund on or before209 January 1, 2026.210 (4) Following a change of ownership, as provided for in subsection (f) of Code Section211 20-3-250.8, a postsecondary educational institution may be required to participate in the212 fund for a period of up to seven years as determined by the executive director in his or213 her sole discretion.214 (d)(1)(A) In addition to any other fees required by this part, the commission shall by215 regulation establish fees to which shall be paid annually by postsecondary educational216 institutions for participation in the tuition guaranty fund, except as otherwise provided217 in this subsection. The fees shall be based on gross tuition collected during a year by218 each postsecondary educational institution. If an institution has not operated for a full219 year, its participation fee shall be based initially on its pro jected gross tuition for the220 first full year of operation. At the conclusion of the first year, the fee for that year shall221 be adjusted to reflect actual gross tuition. The annual fee es tablished by the222 commission shall be sufficient, when added to the earnings of t he fund, to create a223 balance in the fund of at least $10 million by July 1, 2040. 224 S. B. 400 (SUB) - 9 - 26 LC 61 0478S (B) Each postsecondary educational institution required to par ticipate in the fund,225 excluding an institution that has filed a surety bond with the commission pursuant to226 Code Section 20-3-250.10, shall be authorized to participate in the fund by securing and227 maintaining a surety bond or irrevocable letter of credit in lieu of paying the annual fee228 established pursuant to subparagraph (A) of this paragraph. The commission shall, by229 rule or regulation, establish conditions for such bonds and letters of credit to ensure that230 such bonds and letters of credit include provisions to indemnify the Tuition Guaranty231 Trust Fund and students of the institution in the event the institution ceases operations232 without fulfilling its educational obligations to its students or without reimbursing its233 students.234 (2)(A) The board of trustees shall notify the commission when the fu nd balance235 exceeds $10 million, and, except as otherwise provided in parag raph (2) of this236 subsection, upon receiving such notification, the commission shall cease collection of237 participation fees from postsecondary educational institutions which have contributed238 to the fund for at least five years. 239 (B) Except as otherwise provided in subparagraph (C) of this p aragraph, the240 commission shall cease collection of participation fees from a postsecondary241 educational institution which is currently authorized to operate in this state and which242 was first authorized to operate in this state on or before January 1, 2026, after the total243 amount of the participation fees collected from such postsecond ary educational244 institution reaches 5 percent of the fund balance specified in subparagraph (A) of this245 paragraph, regardless of the current balance of the fund.246 (C) The commission, upon notification from the board of trustees, shall reestablish247 collection of participation fees from such the participating postsecondary educational248 institutions provided for in subparagraphs (A) and (B) of this paragraph at any time the249 fund balance is less than $4 million. At such time and until the fund balance reaches250 $10 million, fees shall be collected from such participating institutions according to a251 S. B. 400 (SUB) - 10 - 26 LC 61 0478S schedule adopted by the commission based on gross tuition in am ounts sufficient to252 raise the fund balance to $10 million.253 (2) Each postsecondary educational institution which is first authorized to operate in this254 state after July 1, 1992, and is required to participate in the fund for seven years of255 authorized operation under the provisions of paragraph (3) of subsection (c) of this Code256 section shall be required to pay participation fees for such period of time notwithstanding257 the amount in the tuition guaranty fund. If the balance in the fund exceeds $10 million,258 participation fees shall be collected from each such institutio n according to the fee259 schedule adopted by the commission pursuant to paragraph (1) of this subsection. No260 postsecondary educational institution first authorized to operate in this state on or after261 July 1, 1992, which fully participated in the fund for five years on or before January 1,262 2022, shall be required to participate in the fund for seven years as otherwise provided263 in this paragraph.264 (e) The annual cost incurred by the commission and by the boar d of trustees in265 administering the Tuition Guaranty Trust Fund and providing con sumer information as266 necessary for prospective and currently enrolled students, including expenses incurred in267 collecting from defaulting postsecondary educational institutions the amounts paid from268 the fund to or on behalf of students pursuant to the provisions of subsection (g) of this Code269 section, shall be paid from the fund; provided, however, that s uch annual administrative270 costs shall not exceed 2.5 percent of the fund during the fiscal year. The commission shall271 issue a report annually to each postsecondary educational insti tution participating in the272 fund. The report shall provide an evaluation of the financial condition of the fund and a273 summary of claims paid or other expenditures from the fund duri ng the immediately274 preceding fiscal year.275 (f) The commission shall establish by regulation a late paymen t fee for the failure of a276 postsecondary educational institution to pay its participation fee at the time established by277 regulation of the commission for the payment of such fees. An application for278 S. B. 400 (SUB) - 11 - 26 LC 61 0478S authorization to operate or for the renewal thereof may be deni ed under Code Section279 20-3-250.12 for failure to pay participation fees. Late payment fees shall be paid into the280 fund. Any authorization to operate may be revoked, suspended, or made conditional under281 Code Section 20-3-250.13 for failure to pay participation fees.282 (g)(1) In the event a postsecondary educational institution pa rticipating in the fund283 ceases operations without fulfilling its educational obligations to its students or without284 reimbursing its students, the board of trustees may reimburse f rom the fund valid and285 documented claims of students for tuition and fees paid to that institution as well as costs286 incurred as a result of such cessation of operations in accorda nce with guidelines and287 procedures adopted by the commission; provided, however, that i n the event of a288 precipitous closure, no student of the institution which is the subject of such closure shall289 be reimbursed from the fund unless such institution was participating in the fund at the290 time of such closure . Payments from the fund shall be made by warrant of the state291 treasurer on the order of the board of trustees.292 (1.1) No student who is not a resident of this state shall be reimbursed from the fund if293 he or she is eligible for reimbursement for such tuition and fees from a similar fund in his294 or her state of residence.295 (2) The maximum amount that may be paid from the fund in claim s on behalf of the296 students of any single defaulting postsecondary educational ins titution shall be297 determined by the commission, but shall not exceed 10 percent o f the total fund,298 regardless of the fact that total claims may exceed that amount , unless a higher299 percentage is authorized by a two-thirds' majority vote of the commission in the event of300 a significant precipitous closure.301 (3) As an alternative to paying claims to or on behalf of stud ents of a defaulting302 postsecondary educational institution, the board of trustees ma y arrange for another303 postsecondary educational institution to complete the education al obligations to the304 students of the defaulting postsecondary educational institutio n, provided that the305 S. B. 400 (SUB) - 12 - 26 LC 61 0478S program offered by the other institution is substantially equiv alent to the program for306 which the students had paid tuition; and provided, further, tha t attendance at the other307 institution does not cause unreasonable hardship or inconvenience to the students. The308 commission shall have the authority to adopt rules or regulations which shall govern the309 board of trustees in the administration of the provisions of this paragraph. As a part of310 any such program, the board of trustees may reimburse the other postsecondary311 educational institution from the fund for expenses incurred by the institution in providing312 educational services for the students of the defaulting postsec ondary educational313 institution. The Tuition Guaranty Trust Fund shall have an ind ependent claim for314 recovery against the defaulting postsecondary educational insti tution and any surety315 issuing a bond pursuant to Code Section 20-3-250.10 to the exte nt that the fund has316 reimbursed a postsecondary educational institution from the fund for expenses pursuant317 to this paragraph and without the necessity of any further act by any party.318 (4) It shall not be necessary to claim a loss or damage pursuant to the provisions of Code319 Section 20-3-250.14 in order for the board of trustees to pay c laims to or on behalf of320 students pursuant to the provisions of this Code section. Procedures and requirements for321 filing claims under this Code section shall be as provided by rules or regulations adopted322 for that purpose by the commission.323 (5) Any person aggrieved by a decision of the board of trustees to pay or deny a claim324 pursuant to the provisions of this Code section may appeal to the commission. A decision325 of the board of trustees shall be in writing and shall be sent by certified mail or statutory326 overnight delivery to the claimant and to the owner of the defa ulting postsecondary327 educational institution. If the whereabouts of the owner of the defaulting postsecondary328 educational institution is not known and cannot reasonably be ascertained by the board329 of trustees, a notice of the d ecision shall be published in the legal organ of the county330 where the student claimant attended the defaulting postsecondary educational institution331 or a facility of such institution. The appeal to the commissio n shall be commenced by332 S. B. 400 (SUB) - 13 - 26 LC 61 0478S filing a written notice of such appeal to the commission within 30 days after receiving the333 written decision of the board of trustees. Within 30 days afte r receiving a notice of334 appeal, the commission shall affirm the decision of the board o f trustees, modify and335 affirm the decision of the board of trustees, or overrule the d ecision of the board of336 trustees. Any person aggrieved by the action of the commission shall have the right to337 judicial review pursuant to the provisions of Code Section 20-3-250.16. The commission338 shall adopt rules or regulations providing procedures for the conduct of appeals from the339 board of trustees, but such rules or regulations shall be consistent with the provisions of340 this paragraph.341 (h) The board of trustees shall issue a biennial report to the Governor and members of the342 General Assembly providing a summary of the financial condition of the fund and claims343 experience during the preceding biennium. Such reports shall be issued during the regular344 session of the General Assembly held during each even-numbered year beginning in 1994.345 (i) The tuition guaranty fund shall be exempt from all license fees or income, franchise,346 privilege, occupation, or other taxes levied or assessed by the state or by any county,347 municipality, or other political subdivision of the state. Any payment of claims or refund348 of participation fees from the tuition guaranty fund shall not be exempt from taxation349 unless such payment or refund is exempt from taxation pursuant to the provisions of law350 independent of the provisions of this part.351 (j) Authorization for a postsecondary educational institution to operate shall be suspended352 upon written notice by the executive director when such institution fails to participate in353 the fund as required under this Code section.354 (k) The Tuition Guaranty Trust Fund shall have an independent claim for recovery against355 a defaulting postsecondary educational institution and any surety issuing a bond pursuant356 to Code Section 20-3-250.10 for reimbursements of valid and doc umented claims of357 students paid from the fund pursuant to paragraph (1) of subsection (g) of this Code section358 and without the necessity of any further act by any party."359 S. B. 400 (SUB) - 14 - 26 LC 61 0478S SECTION 8.360 All laws and parts of laws in conflict with this Act are repealed.361 S. B. 400 (SUB) - 15 -