H-3998

AN ACT Relating to vocational schools; amending RCW 28C.10.020, 28C.10.070, 28C.10.084, and 28C.10.120; adding a new section to chapter 28C.10 RCW; and repealing RCW 28C.10.910.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

Sec. 1. RCW 28C.10.020 and 1991 c 238 s 81 are each amended to read as follows:

Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "Agency" means the work force training and education coordinating board ((~~or its successor~~)).

(2) "Agent" means a person owning an interest in, employed by, or representing for remuneration a private vocational school within or without this state, who enrolls or personally attempts to secure the enrollment in a private vocational school of a resident of this state, offers to award educational credentials for remuneration on behalf of a private vocational school, or holds himself or herself out to residents of this state as representing a private vocational school for any of these purposes.

(3) "Degree" means any designation, appellation, letters, or words including but not limited to "associate," "bachelor," "master," "doctor," or "fellow" which signify or purport to signify satisfactory completion of an academic program of study beyond the secondary school level.

(4) "Education" includes but is not limited to, any class, course, or program of training, instruction, or study.

(5) "Educational credentials" means degrees, diplomas, certificates, transcripts, reports, documents, or letters of designation, marks, appellations, series of letters, numbers, or words which signify or appear to signify enrollment, attendance, progress, or satisfactory completion of the requirements or prerequisites for any educational program.

(6) "Entity" includes, but is not limited to, a person, company, firm, society, association, partnership, corporation, or trust.

(7) "Private vocational school" means any location where ((~~[there is]~~)) there is an entity offering postsecondary education in any form or manner for the purpose of instructing, training, or preparing persons for any vocation or profession.

(8) "To grant" includes to award, issue, sell, confer, bestow, or give.

(9) "To offer" includes, in addition to its usual meanings, to advertise or publicize. "To offer" also means to solicit or encourage any person, directly or indirectly, to perform the act described.

(10) "To operate" means to establish, keep, or maintain any facility or location where, from, or through which education is offered or educational credentials are offered or granted to residents of this state, and includes contracting for the performance of any such act.

Sec. 2. RCW 28C.10.070 and 1986 c 299 s 7 are each amended to read as follows:

The agency shall establish fees by rule at a level necessary to approximately recover the staffing costs incurred in administering this chapter. All fees collected under this section shall be deposited in the ((~~state general fund~~)) private vocational school account created in section 5 of this act for the support of staffing costs incurred in administering this chapter.

Sec. 3. RCW 28C.10.084 and 1990 c 188 s 8 are each amended to read as follows:

(1) The agency shall establish, maintain, and administer a tuition recovery fund. All funds collected for the tuition recovery fund are payable to the state for the benefit and protection of any student or enrollee of a private vocational school licensed under this chapter, or, in the case of a minor, his or her parents or guardian, for purposes including but not limited to the settlement of claims ((~~procedures~~)) related to school closures under subsection (9) of this section and the settlement of complaints under RCW 28C.10.120. The fund shall be liable for settlement of claims and costs of administration but shall not be liable to pay out or recover penalties assessed under RCW 28C.10.130 or 28C.10.140. No liability accrues to the state of Washington from claims made against the fund.

(2) To be and remain licensed under this chapter each entity shall, in addition to other requirements under this chapter, make cash deposits into a tuition recovery fund as a means to assure payment of claims brought under this chapter. The fund shall ((~~be initially capitalized at two hundred thousand dollars and shall~~)) achieve an operating balance of at least one million dollars within ((~~five~~)) ten years after May 18, 1987, as required under subsection (5) of this section.

(3) The amount of liability that can be satisfied by this fund on behalf of each individual entity licensed under this chapter shall be established by the agency, based on an incremental scale that recognizes the average amount of unearned prepaid tuition in possession of the entity. However, the minimum amount of liability for any entity shall not be less than five thousand dollars ((~~and the maximum amount shall not exceed two hundred thousand dollars. Such limitation on each entity's liability remains unchanged by single or cumulative disbursements made on behalf of the entity~~)). The upper limit of liability is reestablished ((~~following the settlement of any claim~~)) after any disbursements are made to settle an individual claim or class of claims.

(4) ((Within sixty days after any entity deposits its initial contribution into the fund, the agency shall release whatever surety such entity had previously filed. Thereupon, the tuition recovery fund shall be liable for a period of one year following the date such surety is released with respect to prior claims against the surety. However, the liability of the fund is limited to the amount of and subject to the defenses of that released surety as though it had remained on file with the agency.)) The fund's liability with respect to each participating entity ((~~that makes an~~)) commences on the date of its initial deposit into the fund ((~~commences on that date~~)) and ceases one year from the date it is no longer licensed under this chapter.

(5) The agency shall adopt by rule a matrix for calculating the deposits into the fund required of each entity. Proration shall be determined by factoring the entity's share of liability in proportion to the aggregated liability of all participants under the fund by grouping such prorations under the incremental scale created ((in)) by subsection (3) of this section. Expressed as a percentage of the total liability, that figure determines the amount to be contributed when factored into a fund containing one million dollars. The total amount of its prorated share, minus the amount paid for initial capitalization, shall be payable in ((~~ten~~)) twenty equal increments over a ((~~five~~)) ten-year period, commencing with the sixth month after ((~~May 18, 1987~~)) the entity makes its initial capitalization deposit. Additionally, the agency shall require deposits for initial capitalization, under which the amount each entity deposits is proportionate to its share of two hundred thousand dollars, employing the matrix developed under this subsection. The amount thus established shall be deposited ((~~by each licensee of record, within thirty days after May 18, 1987, and a like amount shall be deposited~~)) by each ((~~subsequent~~)) applicant for initial licensing before the issuance of such license.

(6) No vested right or interests in deposited funds is created or implied for the depositor, either at any time during the operation of the fund or at any such future time that the fund may be dissolved. All funds deposited are payable to the state for the purposes described under this section. The agency shall maintain the fund, ((~~collect deposits when due by serving~~)) serve appropriate notices to affected entities when scheduled deposits are due, collect deposits, and make disbursements to settle claims against the fund. When the aggregated deposits total five million dollars and the history of disbursements ((~~so warrants~~)) justifies such modifications, the agency may at its own option reduce the schedule of deposits whether as to time, amount, or both((~~. When such level is achieved,~~)) and the agency may also entertain proposals from among the licensees with regard to disbursing surplus funds for such purposes as vocational scholarships.

(7) ((~~The agency shall make determinations~~)) Based on annual financial data supplied by the entity the agency shall determine whether the increment assigned to that entity on the incremental scale established under subsection (5) of this section has changed. If an increase or decrease in gross annual tuition income has occurred, a corresponding change in its incremental position and contribution schedule shall be made before the date of its next scheduled deposit into the fund. Such adjustments shall only be calculated and applied annually.

(8) No deposits made into the fund by an entity are transferable. If ((~~fifty-one percent or more of~~)) the majority ownership interest in an entity is conveyed through sale or other means into different ownership, ((the contribution schedule of the prior owner is canceled.)) all contributions made to the date of transfer accrue to the fund. The new owner commences contributions under provisions applying to a new applicant.

(9) To settle complaints adjudicated under RCW 28C.10.120 and claims resulting when a private vocational school ceases to provide educational services, the agency may make disbursements from the fund. Students enrolled under a training contract executed between a school and a public or private agency or business are not eligible to make a claim against the fund. In addition to the processes described for making reimbursements related to complaints under RCW 28C.10.120 ((for handling complaints)), the following ((~~additional~~)) procedures are established to deal with reimbursements related to school closures:

(a) The agency shall attempt to notify all potential claimants. The ((~~absence~~)) unavailability of records and other circumstances surrounding a school closure may make it impossible or unreasonable for the agency to ascertain the names and whereabouts of each potential claimant but the agency shall make reasonable inquiries to secure that information from all likely sources. The agency shall then proceed to settle the claims on the basis of information in its possession. The agency is not responsible or liable for claims or for handling claims that may subsequently appear or be discovered.

(b) Thirty days after identified potential claimants have been notified, if a claimant refuses or neglects to file a claim verification as requested in such notice, the agency shall be relieved of further duty or action on behalf of the claimant under this chapter.

(c) After verification and review, the agency may disburse funds from the tuition recovery fund to settle or compromise the claims. However, the liability of the fund for claims against the closed entity shall not exceed ((~~that total amount of the contribution schedule~~)) the maximum amount of liability assigned to that entity under subsection (5) of this section.

((~~(d)~~)) (10) In the instance of claims against a closed school, the agency shall seek to recover such disbursed funds from the assets of the defaulted entity, including but not limited to asserting claims as a creditor in bankruptcy proceedings.

((~~(10)~~)) (11) When funds are disbursed to settle claims against a current licensee, the agency shall make demand upon the licensee for recovery. The agency shall adopt schedules of times and amounts ((~~acceptable~~)) for effecting recoveries. An entity's failure to perform subjects its license to suspension or revocation under RCW 28C.10.050 in addition to any other available remedies.

((~~(11)~~)) (12) A minimum operating balance of two hundred thousand dollars shall be maintained in the fund during the first five years of operation. A minimum operating balance of one million dollars shall be achieved by May 1997, and maintained thereafter. If disbursements reduce the operating balance below two hundred thousand dollars at any time before May 1997, or below one million dollars thereafter, each participating entity shall be assessed a prorata share of the deficiency created, based upon the incremental scale created under subsection (5) of this section. The agency shall ((~~promptly~~)) adopt schedules of times and amounts acceptable for affecting payments of assessments.

Sec. 4. RCW 28C.10.120 and 1990 c 188 s 10 are each amended to read as follows:

(1) Complaints may be filed under this chapter only by a person or persons claiming loss of tuition or fees as a result of an unfair business practice ((~~may file a complaint with the agency~~)). The complaint shall set forth the alleged violation and shall contain information required by the agency on forms provided for that purpose. A complaint may also be filed with the agency by an authorized staff member of the agency or by the attorney general.

(2) The agency shall investigate any complaint under this section and ((~~may~~)) shall first attempt to bring about a negotiated settlement. The agency director or the director's designee may ((~~hold a hearing pursuant to the Administrative Procedure Act, chapter 34.05 RCW,~~)) conduct an informal hearing with the affected parties in order to determine whether a violation has occurred.

(3) If((~~, after the hearing,~~)) the agency finds that the private vocational school or its agent engaged in or is engaging in any unfair business practice, the agency shall issue and cause to be served upon the violator an order requiring the violator to cease and desist from the act or practice and may impose the penalties provided under RCW 28C.10.130. If the agency finds that the complainant has suffered loss as a result of the act or practice, the agency may order the violator to pay full or partial restitution ((~~for the loss~~)) of any amounts lost. The loss may include any money paid for tuition, required or recommended course materials, and any reasonable living expenses incurred by the complainant during the time the complainant was enrolled at the school.

(4) The complainant is not bound by the agency's determination of restitution. The complainant may reject that determination and may pursue any other legal remedy.

((~~(4)~~)) (5) The violator may, within twenty days of being served any order described under subsection (3) of this section, file an appeal under the administrative procedure act, chapter 34.05 RCW. Timely filing stays the agency's order during the pendency of the appeal. If the agency prevails ((~~in any administrative hearing~~)), the ((~~private vocational school~~)) appellant shall pay the costs of the administrative hearing.

NEW SECTION. Sec. 5. A new section is added to chapter 28C.10 RCW to read as follows:

The private vocational school account is created in the custody of the state treasurer. All receipts from fees collected under RCW 28C.10.070 shall be deposited into the account. Expenditures from the account may be used only for staffing costs incurred in administering chapter 28C.10 RCW. Only the director of the work force training and education coordinating board or the director's designee may authorize expenditures from the account. Moneys in the account may be spent only after appropriation.

NEW SECTION. Sec. 6. RCW 28C.10.910 and 1986 c 299 s 28 are each repealed.