Trade Schools Threaten Suit on State Rules : Education: New law aims at recruiting and financial abuses. Vocational institutions say the restrictions are impractical and unconstitutional.

California’s for-profit vocational schools are threatening legal action to block implementation of a new law that would substantially increase state regulation of the institutions.

The law, authored by Assemblywoman Maxine Waters (D-Los Angeles) and signed by Gov. George Deukmejian, affects about 2,000 schools enrolling 500,000 students and takes effect Jan. 1. It seeks to curb abuses by trade schools that recruit students from unemployment lines, persuade them to take government loans they cannot repay and offer instruction of such poor quality that students are not prepared for jobs.

The proprietary schools initially supported the legislation but now say it is unconstitutional and would drive many of them out of business.

“This is oppressive legislation,” said Doreen Adamache, president of Sawyer College at Ventura, a business and graphic design school. “It would close a lot of us down.”

Adamache and other vocational school operators object to many provisions of the law but especially requirements that schools:

- Keep enough cash on hand to pay 30 days’ operating expenses.

- Maintain a ratio of current assets to current liabilities of 1.25 to 1.

- See that at least 60% of the students complete course work and at least 70% be placed in jobs for which they have been trained within six months of completing the work.

If these and many other conditions are not met, the state Department of Education can close a school.

The 30-day cash reserve requirement is “not practical,” said Coleman Furr, president of Coleman College in La Mesa, which grants bachelor’s and master’s degrees in computer studies. “Most institutions have to meet a payroll and pay the rent the first of the month and then they couldn’t meet that requirement.”

But Herschel T. Elkins, a state senior assistant attorney general and a strong supporter of the new law, said the requirement is not unreasonable. “One would think that if you’re operating a school you ought to have enough money on hand for 30 or 45 days,” he said.

Elkins also said the requirement for a 1.25-1 ratio of assets to liabilities is lower than that maintained by most businesses.

Vocational educators argue that it is impractical to require that at least 60% of students complete a course because many drop out for reasons that have nothing to do with the quality of classes being offered. They also contend that it is unfair to require that at least 70% be placed in jobs within six months because local economic conditions and job markets can change quickly.

But supporters of the legislation say these provisions are needed because many proprietary schools are more interested in enrolling students and getting their money than they are in providing meaningful education or training people for jobs that actually exist.

The proprietary schools also have raised constitutional objections to the new law.

Los Angeles attorney Shirley M. Hufstedler, who represents the California Assn. of Private Postsecondary Schools, said the legislation violates constitutional protectionn involving procedural due process, equal protection, deprivation of property without due process and, most of all, free speech provisions of the First Amendment.

She said the limits on recruitment for vocational schools violate the First Amendment, as does a requirement for state approval before a school could increase the salary of any staff member by more than $20,000.

“Any organization that preys on poor and desperate people is detestable,” said Hufstedler, who was the first U.S. Secretary of Education in the administration of former President Jimmy Carter.

But she said the governor, the Legislature and the attorney general were so concerned about getting the “bad guys” among the for-profit schools that “they didn’t consider the constitutional aspects.”

Deputy Atty. Gen. Ronald Reiter, who has been closely involved with the legislation, called Hufstedler’s argument a “flight of fancy.”

“We’re not trying to tell Stanford University how to teach its political science classes here,” Reiter said. “This is not an academic freedom issue. We’re trying to set some financial stability standards for these schools and get some protection for these students.”

The vocational schools “want to cloak themselves in the First Amendment,” he added, “but really they’re performing a business function, not some lofty academic purpose.”

Elkins said he is meeting with Hufstedler, other proprietary school representatives, members of Assemblywoman Waters’ staff and officials of the state Department of Education to discuss possible changes in the law. But, he said, “it doesn’t appear to us at this point that there is a valid argument to be made.”

Hufstedler said that if these meetings do not produce an agreement, she will seek a Superior Court restraining order and preliminary injunction against implementation of the law. Elkins and Reiter said the law is needed because some for-profit schools are exploiting low-income students by enrolling them in classes they are not likely to finish and then persuading them to take several thousand dollars’ worth of federal and state loans--money that ends up in the schools’ coffers.

Not only does this contribute to a high loan default rate among vocational school students (more than 30%), they pointed out, but students who default are ineligible for other federal programs such as low-income housing.

In addition, Reiter said, some of the instruction is so poor that many students drop out or “don’t have the skills to get a job even if they finish the course.”

“The problem is very, very serious,” he said. “We currently have complaints about a couple of dozen schools that enrolled about 100,000 students last year.”

The uproar over the Waters bill is surprising because it sailed through the Legislature with almost no opposition.

This happened, according to Cathy Sizemore, lobbyist for the California Assn. of Private Postsecondary Schools, because members of Waters’ staff and Reiter, representing the attorney general, promised to make changes in the bill’s language but did not do so.

“We supported the bill because of the agreement that they would make these changes,” Sizemore said, “but the amendments they added were contrary to what we wanted.”

“That’s complete nonsense,” Reiter replied. “We put in everything we agreed to put in and we took out everything we agreed to take out. Every commitment we made, we honored. . . . It sounds like they may be trying to cover up their own failures.”