A4409 —

A4409 ACS AAP1R StatementFISCAL 11/12/20ESTIMATE ASSEMBLY  APPROPRIATIONSLEGISLATIVE COMMITTEEFISCAL  ESTIMATE STATEMENT[First TOReprint]   ASSEMBLY COMMITTEE SUBSTITUTE FOR ASSEMBLY, No.

4409   with committee amendments   STATE OF NEW JERSEY 219th LEGISLATURE   DATED:

 NOVEMBERNOVEMBER 12,19, 2020         SUMMARY The  AssemblySynopsis: Appropriations Committee reports favorably Assembly Bill No.

4409Establishes ACS,requirements withfor committeeclosures amendments.of private career schools and institutions of higher education, modifies review process of new academic programs, and requires approval of branch campuses.    Type of Impact:

CurrentAnnual lawState requiresexpenditure theincrease; New Jersey Presidents’ Council to review and comment on proposals for new programs that demand significant added resources or raise significant issues of duplication but do not exceed the programmatic mission of the institution or require a change in the programmatic mission.  As amended, this bill requires the council to review proposals for new programs that do not exceed the programmatic mission or require a change in the programmatic mission according to standards set forth in regulation by the Secretary of Higher Education for the following:

    annual (1) State sufficientrevenue academicincrease; quality;

    periodic (2) cost sufficientincrease evidenceto ofpublic laborinstitutions marketof demandHigher forEducation theAgencies program;Affected:

    Office (3) of duplicationthe withSecretary comparable programs of studyHigher inEducation; the State;

andDepartment     of (4) Labor whetherand theWorkforce proposedDevelopment; new program will require significant additional State resources.

    Public UnderInstitutions theof bill,Higher ifEducation the  council  determinesOffice accordingof toLegislative theServices reviewEstimate standardsFiscal thatImpact aYear proposed1 newYear program2 mayYear be3 of  insufficientState academicCost quality,Increase mayIndeterminate lack  sufficientState evidenceRevenue ofIncrease laborIndeterminate market  demand,Periodic mayCost beIncrease duplicativefor Public Institutions of comparableHigher programsEducation Indeterminate         ·         The Office of study,Legislative orServices (OLS) determines that the bill may requirecause significantan additionalindeterminate increase in annual State resources,costs to the councilOffice mustof referthe Secretary of Higher Education (OSHE) to the extent that proposalthe changes to the secretarySecretary forof review.Higher Education’s role in the approval of new academic programs, branch campuses, and additional locations would necessitate additional administrative and staffing costs.

      Within·         daysThe ofbill themay referralalso fromincrease thecosts council,to the secretary,OSHE usingand the sameDepartment review standards, may deny approval of theseLabor programsand proposedWorkforce byDevelopment all(DLWD) institutionsto of higher education.        Current law provides that when the governingextent board of a public research university or a State college determines that itadditional isresources advisableare needed to establishfulfill a branch campus out-of-State or out-of-country that will serve at least 500 students, the boardsecretary’s mustand submitcommissioner’s theduties planrelated to monitoring the secretaryclosures forof reviewinstitutions andof recommendations. higher Thiseducation, billproprietary requires these institutions tolicensed receive approval from the secretary to establishoffer aacademic branchdegrees, campus or additional location that will serve at least 100 students out-of-State or out-of-country and establishesprivate criteriacareer forschools. such approval.

      ·         The bill directswill thealso secretarylead to preparean aindeterminate feeannual scheduleState revenue increase due to coverprovisions that require the reasonableOSHE to collect new fees to cover administrative costs associated with current licensing procedures and submitpermit the initialOSHE feeto schedulecollect new fines from certain institutions of higher education.    ·         Public institutions of higher education will incur additional expenditures to pay for costs incurred by the LegislatureOSHE to review plans for review. new Subsequentbranch feecampuses schedulesor willadditional belocations.  establishedAny costs for consultants or other out-of-pocket expenses incurred by the secretary throughin regulations. reviewing Feesthe collectedplans will be depositedpaid inby the institution seeking to establish a branch campus or additional location.      BILL DESCRIPTION         This bill makes various changes to current State Treasury.law concerning the Secretary of Higher Education’s role in several areas regarding new initiatives proposed by institutions of higher education.  For one, the bill requires the secretary to establish new standards for the review and approval of certain proposed academic programs developed by institutions of higher education.  These programs would be initially reviewed by the New Jersey Presidents’ Council and forwarded to the secretary if a program does not meet the new standards.  The standards will concern:

    the Theacademic billquality also provides that an institution of higher education and a proprietarynew institutionprogram; licensed to offer academic degrees are to immediately notify the secretary of any financial liabilities or risks that are reasonably likely to result in the imminent closure of the institution, or otherwise negatively affect the institution’s ability to fulfill its obligations to students.

Underevidence theof bill,labor themarket secretarydemand will establish and disseminate guidelines for thea implementationprogram; of the notification.

Theduplication independent and proprietary institutions, as well as any institution of highercomparable educationprograms that has notified the secretary of knownstudy financial liabilities or risks, are to submit an annual fiscal monitoring report to the secretary in a format, and according to a schedule, developed by the secretary. State; The secretary will establish a process to annually assess each independent institution, proprietary institution, or institution that has notified the secretary of known financial liabilities or risks, to identify whether an institution is at risk of closure.  The bill specifies actions that such an institution must take in the event that the secretary makes such a determination.

    and  Thewhether or not the new program will require significant State resources.        Secondly, the bill providesamends current law concerning the establishment of branch campuses by public research universities and State colleges.  The bill allows that a proprietarypublic institutionresearch licenseduniversity toor offerState academiccollege degreesmay isestablish toa providebranch campus.  The plan for the secretaryestablishment withof athe teach-outbranch plancampus thatwill addressesbe subject to the potentialreview closureand approval of the institution. secretary.  AIn teach-outaddition, planthe isbill definedwould give the secretary the authority to approve the establishment of out-of-State or out-of-country branch campuses and additional locations that will serve at least 100 students, as along writtenas planthe developedbranch campuses or additional locations meet certain criteria.  Any costs for consultants or other out-of-pocket expenses incurred by the secretary in reviewing the plans will be paid by the institution thatseeking to establish a branch campus or additional location.        The bill also provides forthat thean equitableindependent treatmentinstitution of higher education seeking to establish a branch campus or additional location in the State that will serve at least 100 students ifwill ansubmit institution,a plan for the establishment of the branch campus or certainadditional institutionallocation locations,to ceasethe secretary for review and comment.        Thirdly, the bill amends a section of current State law to operaterequire beforethe allsecretary studentsto haveprepare completeda theirfee program.schedule to cover the reasonable administrative costs associated with current higher education licensing procedures.  The fee schedule is to be reviewed by the Legislature.

          UnderThe the bill also requires proprietary institutions licensed to offer academic degrees and private career schools to develop teach-out plans that address an institution or school’s plans for potential closure.  Private career schools are defined as privately owned and operated postsecondary schools, other than institutions of higher education andor a proprietary institutioninstitutions licensed to offer academic degreesdegrees, arethat offer programs for the purpose of training, retraining, or upgrading individuals for gainful employment.  Under the bill, proprietary institutions would submit their plans to the Secretary of Higher Education, while private career schools would submit their plans to the Commissioner of the DLWD.         Under the bill, institutions of higher education, proprietary institutions, and private career schools would be required to enter into a school-to-school teach-out agreement atand leastprovide written notice to the secretary or commissioner, as applicable, 120 days prior to the cessation of institution operations.  AThe teach-outschool-to-school agreementagreements iswould aaddress writtenplans agreementfor betweentransitioning students attending institutions and schools that providesare forclosing operations, to eligible transfer institutions or schools, which are required to be approved by the equitablesecretary treatmentor commissioner, as applicable.  In addition, the bill requires submittal and retention of studentscertain student records and atranscripts reasonableby opportunitytransfer forinstitutions studentsand tothird completeparty theirentities programapproved by the secretary, as well as by the commissioner in the case of studyprivate atcareer aschool transferclosures.  institution.       The bill also requires independent institutions of higher education and proprietary institutions licensed to offer academic degrees, as well as institutions of higher education that have notified the secretary willof approveknown financial liabilities or risks that are reasonably likely to result in imminent closure of the institution, to annually submit fiscal monitoring reports.  The bill further lays out the process that an institution of higher education or a proprietary institution would be required to actundergo asif anthe eligiblesecretary transferfinds that the institution is at risk of imminent closure.      FISCAL ANALYSIS   EXECUTIVE BRANCH         The Executive Branch did not submit a formal fiscal note on this bill.  However, in accordanceresponse withto standardsa establishedLegislative underBudget Question during the bill.FY 2021 Revised Budget Proposal process, the OSHE indicated that a total $300,000 increase in the office’s salaries and wages appropriation for the combined 12-month period from July 1, 2020 through June30, 2021 was being used to support an increase in staff necessary to carry out the provisions of Assembly Bill No.

    4409, Underwhich thewas bill,substantially beforesimilar anyto institutionthis ofbill higherin educationits orcurrent proprietaryform.  institutionThe licensedOLS tonotes offerthat academicthe degreesOSHE’s ceasesFY operations,2020 theadjusted institutionappropriation mustfor filesalaries withand thewages eligiblewas transfer$1.768 institutionmillion, orwhile athe thirdappropriation partyfor approved by the secretarycombined copies12-month ofperiod alltotals essential$2.068 recordsmillion.  of  currentOFFICE orOF formerLEGISLATIVE students. SERVICES             The OLS determines that this bill alsomay establisheslead certainto requirementsindeterminate forannual cost increases to the closureOSHE ofand privatethe careerDLWD, schoolsand thatperiodic operatecost increases to public institutions of higher education, in order for those entities to fulfill the State. requirements prescribed to them.  Under the bill, the closureOSHE will also experience an increase in annual fee revenue related to administering licenses to confer degrees to certain institutions of privatehigher careereducation schoolsand isfine overseenrevenue byfrom thecertain Commissionernoncompliant institutions of higher education.    Potential Costs to the DepartmentOSHE:  This bill makes various changes to the Secretary of LaborHigher Education’s role in approval of new academic programs, branch campuses, and Workforceadditional Development. locations.  PrivateThese careerchanges schoolsmay willcause alsoan beindeterminate requiredincrease in annual State costs to providethe OSHE to the commissionerextent withthat athe teach-outchanges planmade thatto addressescurrent potentiallaw schoolwould closurenecessitate additional administrative and astaffing teach-outcosts.  agreement      atRegarding leastthe 120approval daysof priornew toacademic programs proposed by an institution of higher education, current law permits the closure. Secretary Theof commissionerHigher willEducation approveto adeny privateapproval careerof schoolnew asacademic anprograms eligiblethat transferare institution.referred to the secretary by the New Jersey Presidents’ Council and:

    1) Underexceed thean bill,institution’s beforeprogrammatic anymission, privatedefined careeras school ceases operations, the schoollevel mustof fileacademic withdegrees thethat commissioneran copiesinstitution ofhas allbeen essentialauthorized recordsto ofoffer, current or formerrequire students.  The commissioner will maintain a permanentchange filein ofthe allinstitution’s records,programmatic andmission; may provide a student with a replacement transcript if necessary.

 or      2) Thedo not exceed or change an institution’s programmatic mission but are determined by the Presidents’ Council to be unduly duplicative or expensive.  Since the bill providesmodifies the scope of new academic programs that would be reviewed and approved by the secretary, it ismay anincrease unlawfuladministrative practicecosts to the OSHE to the extent that program reviews may be increased over current levels.        Current law requires the secretary to review and aprovide violationrecommendations on plans made by public research universities and State colleges to establish an out-of-State or out-of-country branch campus that will serve at least 500 students of the Stateinstitution.  consumerThe fraudbill act,amends P.L.1960,the c.39law (C.56:8-1to etrequire seq.),the secretary’s approval for anya institutionpublic research university or school,State person,college to establish any branch campus and for those institutions to establish out-of-State or entityout-of-country branch campuses and additional locations that will serve at least 100 students.  It also requires the secretary to collectreview and comment on plans made by independent institutions of higher education to establish a student'sbranch institutionalcampus debtor ifadditional thelocation institutionalthat financialwill aidserve agreementat doesleast not100 containstudents of the languageinstitution.  requiredThis bybroadened authority over the bill,review orof forbranch ancampuses institutionand oradditional schoollocations may necessitate additional staffing and administrative costs to collectthe onOSHE anto institutionalaccommodate debtpossible increases in workload.        The OSHE may incur additional increases in workload, which may in turn increase administrative and staffing costs, due to the provisions of athe studentbill whothat attendedrequire the secretary to review institutions’ fiscal monitoring reports and make determinations as to whether or not an institution oris schoolat inrisk whichof aimminent disorderlyclosure.  closure  occurred.Revenue Increases to the OSHE:

     While Asthe amendedheightened authority provided to the secretary may increase workloads and reportedadministrative byand staffing costs to the committee,OSHE, thisthe bill isalso identicalprovides that institutions submitting plans for branch campuses and additional locations must pay the costs for consultants and other out-of-pocket costs incurred by the secretary in reviewing the plans.  The costs that may be incurred by the OSHE, and inevitably reimbursed to the SenateOSHE, Committeefor Substitutethese functions are indeterminate as the expenses associated with each review may vary.  By way of example, the Texas Higher Education Coordinating Board (THECB), as noted in a summary of procedures for Senatethe Billestablishment Nos.of branch campuses by certain private institutions of higher education, has set the application fee for initial review of a branch campus at $5,000.

1271, The 2588,summary andindicates 2660,that whichthe fee covers the average cost of application reviews, including consultant fees for the review team.  In addition, the THECB has set the fee for a branch campus site visit at $2,500.        The OLS also wasnotes amendedthat the OSHE will experience a revenue increase under the bill due to the provision that requires the office to prepare a fee schedule to cover the reasonable administrative costs associated with current licensing procedures.  The OSHE will also experience increased revenue due to a provision of the bill which permits the secretary to order fines of no more than $1,000 per day for an institution of higher education or proprietary institution that does not comply with the requirements under the bill to submit fiscal monitoring reports and reportedto bysubmit certain information to the committeesecretary onupon thisa samefinding date.that the institution is at risk of imminent closure.    Potential Cost Increase to OSHE and DLWD:  Under the bill, the OSHE and the DLWD may experience increases in staffing and administrative costs to establish processes and regulations for:

reviewing teach-out plans and approving transfer institutions or schools in accordance with the criteria provided in the bill.  The DLWD may incur additional costs to retain certain records of students affected by private career school closures.    COMMITTEEPeriodic AMENDMENTS:Cost Increase to Public Institutions of Higher Education:  Public institutions of higher education will incur periodic additional expenditures to pay for costs incurred by the OSHE to review plans for new branch campuses or additional locations.  Any costs for consultants or other out-of-pocket expenses incurred by the secretary in reviewing the plans will be paid by the institution seeking to establish these new locations.

       TheSection: committee amended the bill to:

      (1)  add that the Secretary of Higher Education mayAnalyst: deny approval of programs proposed by all institutions of higher education which do not exceed the programmatic mission of the institution;

     Christopher (2) Myles clarifyAssociate thatFiscal theAnalyst governingApproved: board of a public research university or a State college is required to fix the salary of all faculty performing services at an out-of-State or out-of-country branch campus or additional location;

     Thomas (3) Koenig specifyAssistant thatLegislative whenBudget theand governingFinance boardOfficer of  anThis independentlegislative institutionfiscal ofestimate higherhas education,been afterproduced studyby andthe investigation,Office determinesof thatLegislative itServices isdue advisable for the institution to establish a branch campus or additional location in the Statefailure that will serve at least 100 students of the institution,Executive theBranch boardto mustrespond submit the plan to theour secretaryrequest for reviewa andfiscal comment;note.

and       This (4) fiscal changeestimate thehas bill’sbeen effectiveprepared datepursuant fromto theP.L.1980, 120thc.67 day(C.52:13B-6 nextet followingseq.). enactment to September 1, 2021.

FISCAL IMPACT:

      The Office of Legislative Services determines that the bill may cause an indeterminate increase in annual State expenditures for administrative and staffing costs associated with changes in the Secretary of Higher Education’s role in the approval of new academic programs, branch campuses, and additional locations for institutions of higher education.  Some of these costs may be defrayed by the institutions seeking the approval.

      The bill may further increase annual costs to the Office of the Secretary of Higher Education and the Department of Labor and Workforce Development to the extent that additional resources are needed to monitor the closures of institutions of higher education, proprietary institutions licensed to offer academic degrees, and private career schools.

      The bill will also lead to an indeterminate annual State revenue increase due to provisions that require the OSHE to collect new fees to cover administrative costs associated with current licensing procedures and permit the OSHE to collect new fines from certain institutions of higher education.