Board Games

New regulatory bodies should be viewed with suspicion. Sometimes they cause more problems than they solve: they can choke off business with unnecessary regulations; they can become political; and they can be used by the industry they are supposed to regulate to limit competition.

Yet North Carolina has just formed a new Board of Proprietary Schools, and it appears to be an improvement over the previous state of affairs.

Proprietary schools are privately owned schools, which are generally operated for a profit; under North Carolina law, they must be licensed by a state authority. The University of North Carolina system is the licensing agency for proprietary schools that offer bachelors’ degrees. Until this year, the State Board of Community Colleges has been the licensing agency for proprietary schools that offer associates’ degrees, trade certificates, and technical training.

The new board replaces the community college board as licensing authority.

Certainly, placing the licensing authority in the hands of the community colleges created something of a conflict of interest, for the community colleges directly compete with proprietary schools for students. “It’s always been a little uncomfortable for the community college system to license schools that offer the same kinds of instruction that are offered at the community colleges,” said the North Carolina Community College System (NCCCS) executive vice-president and chief of staff, Kennon Briggs, after the board’s first meeting. He said that the State Board of Community Colleges, the NCCCS staff, and the Association of Proprietary Schools, a trade association, approached the North Carolina legislature together to push for the new board. The legislature passed a law creating the new board last summer.

The chairman of the new Board of Proprietary Schools, Robert Hodge, explained that the NCCCS also benefited by off-loading oversight of the proprietary schools. With the legislature making deep budget cuts, the NCCCS was eager to stop paying the salary costs of staff members who conducted the licensing procedures (the salaries totaled $234,945 during 2011). Under the new organization, staff salaries will be paid by licensing fees rather than by state appropriations. The fee for initial licensing is $2,500, and the additional site location fee (for those schools with more than one location) is $1,000. The annual renewal fee is $750.

John Pettitt, the new board’s secretary-treasurer, who had served as the executive director of proprietary schools for the community colleges until last year, said the time was right to create an independent board, not just because of the loss of appropriations, but because the number of proprietary schools is increasing in the state.

Hodge said that he also welcomed the change, because he wanted to end some of bureaucratic red tape the proprietors of new schools had encountered under the old system. He said that the system office had been fair when processing applications and conducting other proprietary school business, but that it sometimes moved too slowly for the high energy entrepreneurs who own such schools. “Most owners make decisions and want to take action quickly,” he explained. “But then they have to apply for a license, and the government bureaucracy would take a lot of time to process the applications.”

“We thought that if we had our own board,” Hodge continued, “we could eventually turn applications around within 30 days.”

They won’t be able to do so for a while, however. Initially, the Board of Proprietary Schools will function under the authority of the State Board of Community Colleges; decisions made by the proprietary board must be approved by the community college board as well. John Pettitt said the current situation is intended to be “an intermediate step. Sometime down the road the proprietary board will become independent, but until everyone learns the ropes and gets familiar with the issues, they will make recommendations to the community college board.”

Board members come from various backgrounds within the field of proprietary education. Chairman Hodge retired from the proprietary school business in 2008, having started in 1972 with King’s College in Charlotte, which offers vocational training in business, technology, and health care specialties. He was appointed by the state Senate. Jack Henderson, vice chairman of the board, is the president of Brookstone College of Business, also in Charlotte. He was appointed by Governor Perdue, as was Scott Aaron, the president of New Horizons Computer Learning Centers in Durham.

Rounding out the board are Kuburat Ganiyu, president of Care One Health Training Institute in Raleigh, Ashley Wallace, vice president of the College of Wilmington, and Pettitt. Ganiyu was a House of Representatives appointment, Wallace was appointed by the Senate, and Pettitt was appointed to serve by the community college system’s president, Scott Ralls,

To give some idea of the scope of the State Board of Proprietary Schools’ responsibilities, during the 2011-12 fiscal year the community college board licensed or renewed the licenses for 80 schools. The board has received twelve new applications this fiscal year and has thus far approved seven of them.

While it does not technically turn down schools that apply, the board does occasionally delay the licensure of some schools, listing them as “pending.” NC Community College System executive vice president Kennon Briggs explained that the current five schools whose licenses have not yet been approved “did not meet 100 percent of the criteria for licensure or re-licensure, and as such they remain pending until they are withdrawn by the applicant or can be recommended to the State Board for approval.” Briggs added that the board’s staff work with the schools to help make them suitable for licensure.

Despite the potential for cartel-like activities that try to keep the competition out, the Board of Proprietary Schools got right to work trying to reduce a backlog of applications and communications from the community college board at its first meeting on January 3.

Board members’ entrepreneurial mindsets received a cold dose of reality about conducting public meetings, for nearly an hour was spent trying to decide how to work through the regulations governing state boards so that the pending business could be completed quickly. Three factors made it a difficult and complex task: board members must meet stringent regulations regarding public meetings, much of the pending business requires privacy about proprietary matters (for instance, a school may not want to reveal its start-up location to competitors too soon); and the board has not yet approved a staff member who can legally handle such matters on his or her own,

Eventually, a subcommittee was formed that can conduct routine correspondence and perform due diligence on applications by holding meetings and then going into private sessions when needed.

If the board continues to focus on helping businesses get up and running quickly, it will be a welcome addition to the state. It’s too soon to tell whether it can maintain that focus or whether it will lapse into one more self-interested board looking to keep out the competition.