H-3915.1  _______________________________________________

                          HOUSE BILL 2598

          _______________________________________________

State of Washington      56th Legislature     2000 Regular Session

By Representatives Dunn, Kenney, Carlson and Lantz

Read first time 01/17/2000.  Referred to Committee on Higher Education.

Changing tuition recovery trust fund provisions.

    AN ACT Relating to the tuition recovery trust fund; and amending RCW 28C.10.084.

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

    Sec. 1.  RCW 28C.10.084 and 1999 c 321 s 3 are each amended to read as follows:

    (1) The agency shall establish, maintain, and administer a tuition recovery trust fund.  All funds collected for the tuition recovery trust 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 related to school closures under subsection (10) of this section and the settlement of claims 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) By June 30, 1998, a minimum operating balance of one million dollars shall be achieved in the fund and maintained thereafter.  If disbursements reduce the operating balance below two hundred thousand dollars at any time before June 30, 1998, or below one million dollars thereafter, each participating ((entity)) owner shall be assessed a pro rata share of the deficiency created, based upon the incremental scale created under subsection (6) of this section for each private vocational school.  The agency shall adopt schedules of times and amounts for effecting payments of assessment.

    (3) In order for a private vocational school to be and remain licensed under this chapter each ((entity)) owner shall, in addition to other requirements under this chapter, make cash deposits on behalf of the school into a tuition recovery trust fund as a means to assure payment of claims brought under this chapter.

    (4) The amount of liability that can be satisfied by this fund on behalf of each ((individual entity)) private vocational school licensed under this chapter shall be ((established by the agency, based on an incremental scale that recognizes the average)) the 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.  The upper limit of liability is reestablished after any disbursements are made to settle an individual claim or class of claims)) owner.

    (5) The fund's liability with respect to each participating ((entity)) private vocational school commences on the date of ((its)) the owner's initial deposit into the fund and ceases one year from the date ((it)) the school is no longer licensed under this chapter.

    (6) The agency shall adopt by rule a matrix for calculating the deposits into the fund ((required of each entity)) on behalf of each vocational school.  Proration shall be determined by factoring the ((entity's)) school'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 by subsection (4) 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 up to twenty increments over a ten-year period, commencing with the sixth month after the ((entity)) owner makes its initial capitalization deposit on behalf of the school.  Additionally, the agency shall require deposits for initial capitalization, under which the amount each ((entity)) owner deposits is proportionate to ((its)) the school's share of two hundred thousand dollars, employing the matrix developed under this subsection.  The amount thus established shall be deposited by each applicant for initial licensing before the issuance of such license.

    (7) 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, serve appropriate notices to affected ((entities)) owners 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 justifies such modifications, the agency may at its own option reduce the schedule of deposits whether as to time, amount, or both and the agency may also entertain proposals from among the licensees with regard to disbursing surplus funds for such purposes as vocational scholarships.

    (8) Based on annual financial data supplied by the ((entity)) owner, the agency shall determine whether the increment assigned to that ((entity)) private vocational school on the incremental scale established under subsection (6) of this section has changed.  If an increase or decrease in gross annual tuition income has occurred, a corresponding change in ((its)) the school's incremental position and contribution schedule shall be made before the date of ((its)) the owner's next scheduled deposit into the fund.  Such adjustments shall only be calculated and applied annually.

    (9) ((No deposits made into the fund by an entity are transferable.))  If the majority ownership interest in ((an entity)) a private vocational school is conveyed through sale or other means into different ownership, all contributions made to the date of transfer ((accrue to)) remain in the fund.  The new owner ((commences contributions under provisions applying to a new applicant, except that if ownership of an entity is transferred to an immediate family member,)) shall continue to make contributions to the fund until the original ten-year cycle is completed.  All tuition recovery trust fund contributions shall remain with the ((entity)) private vocational school transferred, and no additional cash deposits may be required beyond the original ten-year contribution cycle.

    (10) To settle claims 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 claims under RCW 28C.10.120, the following procedures are established to deal with reimbursements related to school closures:

    (a) The agency shall attempt to notify all potential claimants.  The 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 trust fund to settle or compromise the claims.  However, the liability of the fund for claims against the closed ((entity)) school shall not exceed the ((maximum amount of liability assigned to that entity under subsection (6) of this section)) amount of unearned prepaid tuition in the possession of the owner.

    (d) 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)) owner, including but not limited to asserting claims as a creditor in bankruptcy proceedings.

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

(12) For purposes of this section, "owner" includes, but is not limited to, a person, company, firm, society, association, partnership, corporation, or trust having a controlling ownership interest in a private vocational school.

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