CA Assembly Bill 48

[Flying Pig]

I sat in on a brief about this a couple nights ago at the Fresno FAA FSDO.

Assembly Bill 48 is something we all need to aware of here in CA.  It is already law, and if allowed to stay in its current form, will effectively shut down flight training in CA.  It was a response to the Silver State Helicopters fiasco, but went way over the top in requiring flight schools to maintain huge amounts of cash on hand held in reserve for each flight school student they have.  The main requirement is that flight schools or private CFIs need to maintain a 1 to 1 debt to income ration.  If you have a student who is receiving $5000 in flight training, you need to have $5000 in cash on hand, untouched. 

This also includes private, free-lance CFIs teaching as well.  Mazzei Flying Service in Fresno is actively battling this Bill that was signed into law in Feb.  Mazzei recieved a letter from the CA Department of Post Secondary Education telling them they were out of compliance and needed to come into compliance by August.  Problem is, the "compliance requirements" havnt been established yet.  However, paying a $5000 application fee was enough to buy them some time.  Its to much to spell out here, but research it and contact your reps.  Otherwise, this will all but cease flight training in the state of CA.


http://www.aroundthecapitol.com/Bills/AB_48

[a2capt]

I gather that this is for pre-paid, and not pay-as-you-go setups.

When properly logged, each hour in a logbook is worth money, too- money that the school can not recoup should the student bail, IE, there is no refund. No way to actually do it.

So, when do the funds on hand go from a liability to an asset? All at once, or progressively?

The biggest problem was the way SSH marketed itself, and the steps of payments into the program so that by 90 days they had been paid in full, and the next 16 months of the student's program were without any risk to the school, that had the whole thing structured that you had to pay it back starting 18 months after starting, regardless of obtaining the even any of the ratings.

When your business model is "lets hope about 20% actually complete, and the rest drop out .. and still willingly write the repayment checks to the loan providers "...

Hell, the loan provider had to be smoking sub-prime crack for agreeing to that. Signing up so many people that aircraft time was about an hour a week if your lucky, instead of the 10 hours a week you need on average for a slower paced program.

When they decided not seek VA approval due to the refunding clauses required, that should have been an alarm bell parade.

Key Bank is no students friend either, they are a predatory lender that will screw you to the wall at every chance they get.

For the life of me, I can't believe that anyone would hand over multiple tens of thousands of dollars to an flight school of even the most respected kind. Thats simply not the best place for your money. Pay the bill as you go, or work with a place that has satisfied the VA requirements, even if you are not doing the VA route. But at least you know there's been more than just some quick background check done.

SST had scam written on it from day one.

[Gunner C]

That's something that's sure to kill ALL general aviation in CA.  When the CFIs go, the FBOs won't be far behind.

[a2capt]

If a CFI takes no funds from someone ahead of the day, the only thing they are really liable for is the hour or two of flight time that day, as I noted, all flights logged in the book, all properly logged experience - are vested, and earned, and transferrable.

Don't ask for $5K up front, and you don' t have to have $5K in a mirrored bank account.

[Flying Pig]

Mazzei doesnt have students pay up front and they are very concerned.  I was told at the brief that only one flight school in CA is able to comply with the Assembly Bill.  So its not just for schools who have students pay up front.  There are also fees and other costs associated, like the $5000 mandatory application fee, etc.

[a2capt]

SSH would have never happened if it hadn't had help from Key Bank. Or heck, anyone with reasonable brains going over all of it- especially when the comment about about 20% finishing. Plus anyone read the fine print should have said "WTF!?" when they realized that refunds were nil. Likewise, if you forked over $20K on your first 30 days, and got a sense of fedup and terminated the whole thing, you had better had hoped you had logged $20K worth of time. Probably not, because it sounds like most people were lucky to get a fraction of the '10 hours' per week.

So busting the balls of private education providers isn't a fix, it's penalizing everyone for the allowed lapse of oversight that went on with SSH.

[capchiro]

They sure did have attractive advertizing and it looked like a great thing.  Guaranteed employment as a flight instructor with them if you couldn't find other work.  I really feel for any young aviators that got involved with this mess..  I hope it didn't ruin anybodies dreams permanently.

[Flying Pig]

Article

May 19, 2010

California passes requirements for flight schools
By Ian J. Twombly

Calif. Gov. Arnold Schwarzenegger signed Assembly Bill 48 into law last fall, which mandates FAA-approved flight schools satisfy certain requirements. Called the California Private Postsecondary Act of 2009, the law will require flight schools to pay a yearly fee and open their books to regulators. A hearing about how to implement the law is set for June 7.

The intent of the law is to protect the financial wellbeing of students who seek an education at a postsecondary school. If the school goes out of business, or is unable to fulfill its obligation to the student, the student is reimbursed a certain amount of money. To fund the program, Part 141 FAA flight schools will now be required to pay an initial $5,000 fee, followed by a $1,000 annual fee, and 0.75 percent of yearly revenue to the program.

AOPA Director of State Legislative Affairs Mark Kimberling said it's important people understand that implementation of the law is still being determined. "Despite some speculation within the industry, the legislation does not specifically target individual flight instructors, and the effect on them is not yet clear," Kimberling said. "Yet it will clearly impact traditional 'brick and mortar' flight schools financially. While business accountability for flight schools is not necessarily a bad thing for students who invest in flight training, we want to be careful that this regulation is not overly burdensome to the point that the quality and availability of flight training in the state is significantly diminished."

A hearing on how to best implement the law will take place June 7 at 10 a.m. at the Bureau for Private Postsecondary Education, 2005 Evergreen Street, Sacramento, Calif.



(some excerpts that may be of interest provided by David Johnson)



Article 4.



Exemptions; 94874. The following are exempt from this chapter:



(a) An institution that offers solely avocational or recreational educational

programs.

(b) An institution offering educational programs sponsored by a bona

fide trade, business, professional, or fraternal organization, solely for that

organization's membership.

(c) A postsecondary educational institution established, operated, and

governed by the federal government or by this state or its political

subdivisions.

(d) An institution offering either of the following:

(1) Test preparation for examinations required for admission to a

postsecondary educational institution.

(2) Continuing education or license examination preparation, if the

institution or the program is approved, certified, or sponsored by any of the

following:

(A) A government agency, other than the bureau, that licenses persons

in a particular profession, occupation, trade, or career field.





Article 3. Definitions



94818. "Avocational education" means education offered for the purpose

of personal entertainment, pleasure, or enjoyment.