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Education A Look at State Laws and Federal Grant-making policies towards Private Post-Secondary Schools and Distance Education Schools in particular. by Sophia Barkat A Possible Case for Antitrust? Once you read this article you will be convinced that there is no real laissez faire in the US. It's a lie. The fifty US States put various barriers on new businesses seeking to enter the education industry and as such should be prosecuted under Antitrust laws. The fact that States and Federal Governments are never prosecuted when they break Antitrust Laws or Constitutional Laws for that matter, implies that the State and Federal Governments considers themselves above the law. It is a fact that State and Federal Antitrust lawyers spend more time chasing corporations and trade associations -- e.g. Microsoft et al -- than they do to make sure that State and Federal Governments abide by antitrust laws, or for that matter Constitutional Law. This article introduces some ways in which States create laws and regulations that make it impossible for private corporations to offer post-secondary education, particularly distance education, and how the Federal Department of Education strangles distance education schools in other ways with it's discriminatory grant-making policies. State Private Post Secondary Education Board Requirements deter Ease of Entry into Industry Anyone trying to start a college or school in the US, especially a distance education school, will have a horror story to tell you about their attempts to start the school. Not only do repeated calls to State and Federal Educational Boards lead to no reliable information, as few on-the-phone Staff seem to know what legislature private schools must abide by, but also the arduous attempts to uncover basic State and Federal regulations ends in frustration. At the end of the tunnel is a pile of legislature that private schools and distance education schools operating in any State have to comply with. Those wanting to "operate" -- which may mean any combination of things including hire/fire employees, enroll students offer courses etc. depending on what State the law is written in -- in all fifty States in the US should be prepared to follow laws and legislation of each State regarding licensing, operations, finances, etc. The excuse such licensing boards give is that schools are "huge undertakings" or "commitments" and thus such requirements. The type of legislation in most States -- large surety bond requirements of the order of $10,000-15,000 and fees per State in the order of $500-$1000 -- are just sunken costs and prevent the business from flexible market expansion and competitive needs. In place of such fees and bonds States should offer step-by-step guides to such companies to make sure they don't fail. History of default and such financial viability reports are already done by corporations for shareholders with more than 10-20% ownership. Should small businesses be penalized even before they start to manage themselves? The Federal Government's hands-off policy The Federal Board of Education does not have a say in how distance education is offered, and instead sits idly as States regulate such "commerce" activities. The Federal Government has this hands-off policy towards State Governments because it interprets Education under Amendment X to be a State matter, mostly: "The powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people." (U.S. CONST. amend. X.) But distance education is technically "commerce" between States and should fall under federal jurisdiction, under the Commerce Clause in the US Constitution: “To regulate commerce with foreign nations, and among the several states, and with the Indian tribes;” U.S. CONST. art. I, sec. 8 cl. 3. More so, on matters that concern both States and the Federal Government, the US Constitution says the Federal Government has the right of way, according to the Supremacy Clause: "This Constitution, and the laws of the United States which shall be made in pursuance thereof; and all treaties made, or which shall be made, under the authority of the United States, shall be the Supreme law of the land; and the judges in every state shall be bound thereby, any thing in the Constitution or laws of any state to the contrary notwithstanding. U.S. CONST. art. VI., cl. 2. This means that as far as Distance Education goes, the State laws should be null and void. To date, State Laws dictate the ability of private post-secondary schools to operate. State Laws on the day-to-day Operations of Schools break Constitutional Laws Second Amendment There is no doubt that students brining weapons to school is of no good use. But the US Constitution makes legal the right to bear arms and as such, laws that prosecute the possession of weapons in school break this Constitutional Law and are illegal laws until the Constitution is amended. A student with fire-arms may be expelled from school in the State of Alabama for up to one year, though Federal Law dictates that students will Special Education requirements may only be removed from a school for up to 45 days, in which time the student must be given free public education and a committee set up to create an individualized educational program for the student. The fact that States can remove a student from class at all is an example of how States and Federal Governments pay no heed to the Constitutional Law and how the Second Amendment takes a back-seat to the Tenth Amendment. Perhaps changes need to be made to this Amendment and not have fifty different amendments on it at the State level? The Contract Clause Many States allow by law their State Boards of Education to enter into contracts with vendors and even employees, even though Constitutional Law forbids this: “No state shall enter into any treaty, alliance, or confederation; grant letters of marque and reprisal; coin money; emit bills of credit; make any thing but gold and silver coin a tender in payment of debts; pass any bill of attainder, ex post facto law, or law impairing the obligation of contracts, or grant any title of nobility.” (U.S. CONST. art. 1, sec. 10, cl. 1.) The First Amendment “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of grievances.” U.S.CONST. amend. I. Freedom of speech and assembly, and of practice of faith are all protected by Constitutional Law, but were thrown out of public schools by State Laws and periodically also by schools themselves. Youth gangs are made illegal by making the right to assembly illegal for some parties in a school. Religious prayer is kept out of schools in same way. School Boards regulate what is read by students -- forming a list of banned books and unacceptable speech. The Fourth Amendment “The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no warrants shall issue, but upon probable cause, supported by oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.” U.S.CONST. amend. IV. State Laws allow schools to seize property from students at all times. The Fifth Amendment “No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a grand jury, except in cases arising in the land or naval forces or in the militia, when in actual service in time of war or public danger; nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.” U.S.CONST. amend. V. School Boards can punish teachers by firing them if the teacher commits a felony. It can force a property owner to sell real-estate or other property if the school finds it useful for educational purposes, just as the Department of Transportation confiscates property to build roads and highways, in complete abrogation of Constitutional Law. These are just a few ways in which State Governments legislate policies for schools that compromise the Supremacy Clause and yet nothing is done about it legally. This raises questions about the relevance of the Constitution and the relevance of the Justice system. In particular are the State and Federal Departments of Justice concerned with enforcing the Supremacy Clause? In the following section it will be clear that the Federal Department of Education is no better than State Post-Secondary Boards of Education in the way it strangles financial grants towards distance education schools. Federal Government Controls the Moneys The General Welfare Clause: “The Congress shall have power to lay and collect taxes, duties, imposts and excise, to pay the debts and provide for the common defense and general welfare of the United States; but all duties, imposts and excises shall be uniform throughout the United States;” U.S. CONST. art. I, sec. 8, cl. 1. As such, the Federal Government may use it's power to fund public education in the US and it does. The Federal Income Tax raises money for States to spend, though local property taxes account for some of that spending. For-profit corporation schools never get Federal Funding. Corporation schools have to compete with public education, private education for the market share, which such competitors get Federal Aid for school expansions, federal student loans etc. Federal Funding Practices punish new distance education schools There are Department of Education rules for those who wish to apply for State or Federal funding too. Private corporation schools who want to compete for Federal or State funding -- loans and grants -- also have to comply with numerous teacher-, director-, school- etc., licensing issues, and there are rules related to curriculum, operation etc. Schools wishing to receive Federal or State aid must forfeit their for-profit status in order to compete for grants that incidentally may never come their way. Distance education schools for one are not even invited to the table when it comes to federal grants if they offer more than 50% of their curriculum via distance education -- giving schools that offer up to but not exceeding 49% of their courses online a great advantage. All this is bad for distance education school, which already have to face severe competition from on-location private and public schools and even from "home-schooling". Fed. Dept. of Education's Accreditation Agencies charge Distance Education Schools in the millions Accreditation, another major hurdle if one wants to attract students, takes two to six years depending on what State the school is incorporated in for on-location schools, and costs distance education school up to $6,000-$10,000 per course if done by the DETC -- the Distance Education & Training Council. What's unfair is the DETC is the only accreditation organization for Distance Education recognized by the Federal Department of Education and other State Departments, though there are several others that charges less fees but are not recognized by the DOE. Accreditation expenses lead to about $600,000 to $1,500,000 for post-secondary level schools that offer 100 to 150 accredited courses via distance education -- that being the average number of courses that a typical college offers on-site -- a price that one can ignore if one's school is already accredited for non-distance education courses. Thus, distance education schools have no hopes of getting accreditation in the US if they want to remain financial viable and are nothing more than cash crops to Accreditation agencies, who amusingly enough operate as non-profit organizations. http://www.ed.gov/about/offices/list/ous/international/usnei/us/edlite-accred-recog_associations.html Federal Government & State Public Schools involved in Distance Education Could it be that the Federal Board of Education sees the untapped potential and easy of market entry into distance education as a threat to the way traditional colleges and universities have operated in the US and is thereby aiming to protect them from being wiped out -- in particular public school system, which is a part of State offered public services? Low-cost distance education could well be a threat to expensive public and private colleges. According to Monetary Herald the average college tuition for on-location education was $18,000 http://www.montereyherald.com/mld/montereyherald/4334214.htm According to Distancelearningcostcomparison.com, the cost was anywhere from $30 per credit hour to $400 per course for those attending college via distance education, implying that distance education is a lot less expensive and may be a threat to traditional schools, especially with rising on-site tuition. To tap the potentials the government has set up several State and Regional distance education programs and doesn't wish to give grants to new distance education schools. As it is, State-run Schools and Colleges don't need licensing in other States, making it so much easier for public schools to offer distance education courses. It would make no sense to charge them, of course, as they would be getting funding from Federal and Local funding anyway, but it is also an unfair advantage. They also do not have to be accredited. This makes distance education an almost anti-competitive industry. Under many State Education Boards, public schools and colleges do not require licensing or certification in other states, whether for on-site school or distance education. According to Arizona State Board for Private Post Secondary Education's General Licensure Information, Exhibit A, Exemptions Under A.R.S. § 32-3001, ET. SEQ: A.R.S. § 32-3001(6): "[vocational programs exempt from licensure include programs which are] conducted solely by a public school, public community college or public university except as provided in § 15-1424.. (See http://azppse.state.az.us/licenseinfo.html) Clearly, private schools entering the business of offering distance education or any education at the post-secondary level are made to be at a disadvantage. Here are some federally funded distance education programs that fall under State Schools: TEAMS -- http://teams.lacoe.edu/ The City of Los Angeles runs an online school called TEAMS. TEAMS is the largest interactive distance learning provider for the elementary grades in the U.S (145,000 students, 7,500 teachers, 21 states) and most popular for K-8 students. It reaches this vast group by forming partnerships with high-schools that offer distance education, state universities, local television and radio stations and also with telecommunications corporations. StarNet -- http://www.starnet.org StarNet is another leader in distance learning with over eighteen years' experience offering award-winning instruction, represented in over 30 states as a leader in blended distance learning technologies using live, interactive satellite broadcasts with CD-ROM and web-based integration. Producer of the widest selection of programming for your school or distribution network, StarNet annually delivers over 150 hours of innovative professional development, over 20 engaging student courses, and over 120 hours of student enrichment programming as a rich classroom resource for teachers. As an initiative of the United Star Distance Learning Consortium (USDLC), Inc., StarNet is a non-profit organization broadcasting 24 hours per day. STAR Schools -- http://www.dlrn.org/ The Star Schools Program is one of the largest and most successful public and private partnerships for delivering distance education in the United States and around the world. Since 1988, the Star Schools grants have provided access to technology, telecommunications equipment and instructional programs for more than ten million learners, and provided professional development activities for teachers and administrators in tens of thousands of schools across the United States and abroad. The program has awarded nearly $300 million to 48 projects over 14 years. These projects continue to offer state-of-the-art technology products and services to students across the nation. Preferential treatment of some non-profit Distance Education Schools by the Department of Education The US Board of Education, the Federal department overseeing education policy matters that cross state lines, has taken up Distance Education under it's study, creating what is called the Distance Education Demonstration program. But why? According to the U.S. Education Department's National Center for Education Statistics (NCES) report "Distance Education at Degree-Granting Post Secondary Institutions 2000-2001", about "56 percent of the nation's two- and four-year degree-granting institutions offered distance education courses in the 2000-2001 academic year", and "34 percent offer degree or certificate programs totally by distance education". The Board recognizes that a number of statutory and regulatory provisions currently limit the growth of distance education programs at institutions that provide federal financial aid to students. Under the Distance Education Demonstration program, the participating institutions receive waivers from one or more of these requirements in order to give their students greater access to federal financial aid. The program provides waivers of the statutory rule that bars institutions that enroll 50 percent or more of their students in distance education programs or that offer 50 or more of their courses via distance education from participation in the federal student aid programs. This waiver will make it possible for students at institutions that offer all courses and programs via distance education to receive federal financial aid and allows currently participating institutions to significantly expand their distance education programs. Three of the new participants provide education and training exclusively via telecommunications technologies. The Distance Education Demonstration program has been in existence since the initial group of participants entered the program in 1999. The projects are expected to continue through the 2004-05 academic year when Congress is expected to consider comprehensive changes to the Higher Education Act. Changes limiting State legislation? Perhaps not, but one can only hope. Advice to aspiring Distance Education Schools The best bet for a private corporation hoping to provide distance education is to start as a private secondary level school offering distance education within one State and then get more States under it's wing gradually as it is able to pay for State Licenses and meet the other expensive entry requirements. The advice is also to completely avoid post-secondary level State Education Boards unless one can afford throwing away $10,000-$20,000 per State. Last but not least avoid accreditation agencies in the US that are looking for victims, irrespective of what other schools are doing. The Federal Board of Education in the US may recognize such accreditation organization but it doesn't require accreditation, which is just an education industry "shake-up" plan to make sure corporations that are adequately large can play while small fish in the sea keep to their ranks. There are big fish in the sea in this industry who are protected from competition arising from startling technological developments -- a threat such as distance education is turned into a weapon, while small schools are held down under water. This is not a free market industry and should not be entered by anyone unless they have significant capital or want to learn how to maneuver the minefields. When possible offer distance education with a public institution -- and start making friends in high places, therefore. History of Collusion in Higher Education Industry In the 1990s Cornell University led a group of 28 colleges who were sharing information about applicants so that they could reduce the actual financial aid to students. They were tried under antitrust laws by the Federal Government. http://www.antitrustinstitute.org/recent/140.cfm "In the early 1990's, the U.S. Department of Justice charged some of the same colleges, including Cornell, with violating the Sherman Antitrust Act by conspiring to restrain price competition through the financial aid that they provided. Those colleges, known collectively as the Overlap Group, entered into a consent decree, promising not to collude on the amount of aid that they offered specific students. Congress limited the scope of the decree by the 568 exemption, but that exemption will expire in September of this year. (The U.S. House of Representatives approved its renewal in April; the Senate has yet to schedule any action.) " said Peter Carstensen in 2001, a professor of Law at the University of Wisconsin at Madison. It's worth mentioning that 568 exemption is a federal law that protects such oligopolistic behavior and that this Bush Administration and the Republican Government . Does the education industry then have friends in the US Congress? You bet. And that is why one should not take legislation and legislators to be above antitrust laws or be shocked when it's found that such laws are broken by them. Attacking the problem head on as a Concerned Citizens It seems that State Legislation and Federal Funding practices break the Sherman Act. The National Association of Attorney Generals or NAAG is committed to protecting anti-trust laws and opposing legislation that ignore anti-trust laws: http://www.naag.org/issues/pdf/1982-res-standards.pdf BE IT RESOLVED that the National Association of Attorneys General: For the sake of for-profit Distance Education providers hoping to enter the post-secondary level, it is worth lodging a complaint with NAAG, even if one cannot expect much to happen. Most anti-trust cases have been against companies, organizations formed by companies, or associations created by persons or professionals. States and Federal Departments themselves have rarely been targeted by lawyers in the US. If they had, I might not be talking about anti-competitive laws in this article. So, please protest such barriers to entry. Here are some of the key points to protest: 1) Protest Private Post Secondary Education laws at the State-levels that set anti-competitive entry requirements to new colleges, especially distance education colleges -- such as high surety bonds and fees per State of operation or where courses are delivered or advertised or students enrolled -- when States can instead enforce a strrict Tuition Refund Policy Agreement in which States stress that breaking the Refund Policy Agreement will lead to criminal prosecution and large penalty fines on schools that do not abide by such policies. The fines should be paid only in event the schools are found guilty of breaking such Agreements. 2) Protest US Department of Education's denial of grants to schools that provide more than 50% of their courses via distance education unless they are participating in the highly selective Distance Education Demonstration Program. This allows non-distance education schools to get grants, even for implementing distance education courses, while new distance education schools cannot. 3) Protest State Education Laws that do not abide by US Constitutional Law. 4) Demand that the US Department of Education not recognize Accreditation agencies that charge exorbitant fees to any college, distance education provider or not, such as the DETC -- http://www.detc.org -- for the process of accreditation. Such Accreditation organizations put unnecessary barriers to entry to new colleges and therefore break Federal Antitrust Laws. More so, members of such accreditation organizations should be checked for prior employment or current affiliations with colleges and universities in the US -- such relationships posing as conflicts of interest and raising questions on possible collusion in the higher education industry against new colleges. 5) Demand that State Governments and Federal Government departments do a routine check of State laws to make sure they do not cause problem for any businesses, especially small businesses, to take part in inter-state trade -- as per the US Constitution's Commerce Clause -- whether the small business is offering distance education or selling cookies online across State borders. Also write your State Representatives and Senators in the Congress. See Juryfury.com under Activism 101 to locate your US Congress Representative or Senator. http://www.juryfury.com Also protest to Rod Paige, Secretary of Education (rod.paige@ed.gov), who oversees funding policies of the Department of Education and is likely to be in charge of the 2004 changes to funding policies regarding distance education. References: Dept. of Justice: http://www.usdoj.gov/atr/foia/divisionmanual/ch2.htm NAAG: http://www.naag.org/issues/pdf/1982-res-standards.pdf For Antitrust Laws see : http://antitrustinstitute.org/ State Law guide: http://www.ed.gov/about/contacts/state/index.html?src=ov http://www.alsde.edu/Academy/Law/32%20Organizational%20Issues%20-%20 Federal%20Government.pdf About the Author(s): See under Our Contributors to find out about the Author(s) of this article. |
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