SCHEV Protest (2003)

M E M O R A N D U M
DATE: March 10, 2003
FROM: Richard J. Bishirjian, Ph.D., President, Yorktown University
TO: The Honorable Mark R. Warner
The Honorable Jerry Kilgore
Phyllis Palmiero, Executive Director, SCHEV
Members of SCHEV’s Council

RE: Proposed Certification Language: A Final Critique

I have had an opportunity to review revisions in proposed certification regulations and I am still convinced that their effect will be to freeze out the development of Internet education opportunities domiciled in the Commonwealth of Virginia.

Yorktown University, and, at most, three or four other proprietary education companies nationwide have utilized the Web to enter the education marketplace. In doing so, though they have no classrooms, no “sites” to be regulated, they are incorporated somewhere, and subject to regulations of their state of incorporation.

Only one such institution is domiciled in Virginia—Yorktown University. About Yorktown University there is no lack of information. Our founding investors are two not for profit institutions whose Presidents live in Virginia: Paul Weyrich and Morton Blackwell. Our Chairman of the Board is a very prominent Fairfax, Virginia, attorney, Gilbert K. Davis.

And, the company began its existence by first incorporating in the Commonwealth, then applying for operating approval from SCHEV, and then by filing a registered security offer with the U.S. Securities and Exchange Commission. That offer was made effective by the State Corporation Commission of Virginia, and twenty-four other states.

Yorktown University recruited fifty distinguished faculty, many with former service in state and federal government, and we announced that we are “Putting Tradition Back into Education.”
Still this digital technology and its uses for education are in the incubation stage, and formidable barriers exist to national and regional accreditation. Yorktown University may not expect to become nationally accredited until two and a half years after it enrolls its first student. And, because the regional accrediting association for this area (SACS) has never accredited a university that is solely based on the Internet, until those rules change, the only students Yorktown University may enroll who have some form of federal tuition assistance are members of our military services.
For that reason, we have developed two undergraduate degree programs, a MA in Government with concentrations in Political Economy and National Security Studies, and are developing an Executive MBA degree program, that will be marketed at tuition costs affordable to military personnel.
Regulations proposed by SCHEV will increase our costs, “bust” our budget, and destroy this business model.

Only an exemption of this University from proposed regulations will enable us to remain in the Commonwealth.

I ask Council to consider seriously what it is proposing, and, perhaps, delay the imposition of new regulations until such time as their impact on this new industry has been fully analyzed.
Having made that request, I am providing you an analysis of SCHEV’s revised proposed regulations to identify where they are in conflict with SCHEV’s former practice, and with most other state regulations
Restrictions on the use of the name “University.”

When Yorktown University first applied to SCHEV for operating authority, we were told that it couldn’t use the name “University” unless SCHEV granted approval. We have argued on several occasions that, if a new company desires to call itself a “University” in order to engage in financing its operations, it should be permitted to do so, as long as it doesn’t enroll students using that name without SCHEV approval. I believe this provision is unconstitutional on its face, and constitutes a form of prior restraint on the fundamental, Constitutionally protected, freedom of speech.

The institution’s catalog “shall clearly describe the institution’s accreditation status.”
“If the institution is not accredited, a statement regarding the status and timeframe for full accreditation” is required.

Two observations must be made about academic “accreditation.” When Congress made regional accreditation the prerequisite for Title IV eligibility, it removed the six regional accrediting association’s responsiveness to markets. As a result, a century long decline in education quality accelerated, and regional accreditation no longer is a guarantee of “quality education,” it merely guarantees access to $50 billion in annual tuition assistance.

“Accreditation” as that is currently assessed by all chartered accrediting associations, uses the “values clarification” method as the means to certify “quality.” In other words, applicants are judged on the basis of having demonstrated that its constituents understand its “mission,” and that the goals or values of that mission are achieved. Values Clarification is a form of moral relativism that enables those assessed to see themselves in terms of their published goals or mission. Accreditation does not reflect a consensus about what constitutes a good and happy life. There is no such consensus in Academe today, which is why, in the past fifteen years, an ideology called “political correctness” has come to dominate the “value systems” of our universities.

Though SCHEV has responsibility for higher education in the Commonwealth, nothing in SCHEV’s regulations addresses the closure of our academic institutions to the quest for truth, closure to knowledge and understanding about Western civilization, closure to the Judaeo-Christian tradition, nor even closure to the history of the Commonwealth of Virginia. In focusing on new, proposed, regulations that touch on “process,” not educational content, SCHEV has abdicated the moral high ground, and proposes to fill the Code of Virginia with regulations distrustful of proprietary education companies that do business in the state, and the students who willingly enroll as degree candidates because the proprietary sector is the most innovative, progressive, force in education today.

By requiring that non-accredited institutions state that they are not accredited reflects SCHEV’s lack of understanding of the cultural collapse of higher education standards, and the role accreditation has played in fostering that collapse.

Attached to this message is the February 11, 2003 letter to Members of Congress by Cong. Thomas Petri titled “Is Accreditation Necessary.” Cong. Petri, and a coalition of Members of Congress are moving to de-couple accreditation as the criterion for Title IV eligibility.

If the Higher Education Act reauthorization decouples Title IV eligibility from regional accreditation, hundreds of institutions will no longer aspire to regional accreditation, but will become eligible on the basis of audited financial statements submitted to the U.S. Department of Education.
Must these institutions then say that they have not met the standard of “full accreditation.”
In essence what I am arguing is that SCHEV represents a philosophy of control, regulation, distaste for competition, free markets, and the free choice of citizens enjoying the benefits of markets. And it manifests that animosity at the very moment that, at the federal level, we may see some relaxation in regulation and control of education.

Annual Recertification.
SCHEV seeks to require that existing institutions “re-certify” annually. In all honesty, recertification would be a) a nightmare of the first order for those institutions regulated by SCHEV, b) a dangerous Sword of Damocles for stock corporations, especially those publicly traded, and with operating approval solely in the Commonwealth, AND c) would compel an order-of-magnitude upward revision in this institution’s budget. We calculate that the minimum cost of recertification for Yorktown University is an annual regulatory tax of $35,000.

This proposed regulation, on its face, achieves two things:
a) That every institution operating in the Commonwealth is at risk annually to losing its “license,” and

b) That SCHEV will increase its staff to monitor re-certification documents.

The first imposes a regulatory burden (in effect a tax) on existing companies that will compel “stock” companies to leave the Commonwealth because even the possibility of a of loss of license will drive investors away; and the second assures that SCHEV will grow its staff. Our securities markets haven’t recovered from the meltdown of high tech stocks, yet Virginia expects stock companies to remain domiciled here, even though they may lose their license to operate at any moment? Here is another reason to grant an exemption to the only Internet-based university operating in the Commonwealth.

Though SCHEV’s executive director may argue that SCHEV only has twenty-five staff, I believe a close analysis of other states will show that this staff complement represents a bloated bureaucracy that could, easily, be reduced by half, if some of the more crippling powers Gordon Davies gave to SCHEV in his twenty-five year career of empire building were removed.

Recertification surely compels an exponential increase in staff so designated. In a recession, when all other agencies of government are facing reductions in force, SCHEV demonstrates a compelling need to grow staff.

Annual Fees
Originally, SCHEV proposed an annual fee of $10,000 for the five un-accredited institutions operating in the state. That has been reduced to $5,000, but accredited institutions only pay a fee of $2,300. This is, on its face, offensive.

Instead of assessing certified institutions an annual fee, how about reducing SCHEV’s staff by the amount of new fees?

Or, why not assess every institution in the state the same annual fee?
“General Education courses”

Currently, SCHEV requires that only state universities require students to take thirty semester hours in General Education subjects “in each of the following areas; the humanities/fine arts, the social/behavioral sciences, and the natural sciences/mathematics. The curriculum must provide components designed to ensure competence in reading, writing, oral communication, fundamental mathematical skills, and the basic use of computers.” DETC accreditation requires thirty semester hours in General Education subjects, but does not direct institutional members to specify exactly what general education courses are to be taken.

SCHEV’s original Draft Certification Language proposed to apply state university general education standards to private universities. My concern is that, in this one area where I approve of what SCHEV proposes, it has not gone far enough.

SCHEV’s current core General Education requirements are not academically sound. They do not require students at state universities to take courses in American Government, the history of The Commonwealth of Virginia; principles of Economics, religious studies, English literature, nor is there a requirement that every student at a state university take two semester courses in the History of Western Civilization. If SCHEV were more interested in academic matters, all education in the Commonwealth would benefit.
All instructional courses for degree credit … require 15 class contact hours (45 hours total for a three credit course).

This requirement, not a new requirement but re-stated in the Draft Certification Language document, exceeds the federal standard.

The Chronicle of Higher Education, September 6, 2002, page A43, reports that the U.S. Department of Education has changed the requirement that “college programs that don’t operate on a traditional academic calendar to deliver at least 12 hours of course work a week for their students to be eligible to receive federal financial aid.” This rule has been dropped, allowing distance learning institutions more flexibility in designing curricula. The Chronicle reports, “With both the 12-hour and 50-percent rules relaxed, ‘you would see a real move toward distance and online education…’”

Virginia, through SCHEV, maintains a standard more severe than the federal government, and does not take into consideration the difference between distance and traditional education.

This is only one of several instances in which the Draft Certification Language does not account for the differences between Internet-based and classroom instruction. For example, SCHEV states that “each institution shall provide students … a catalog, bulletin, or brochure…”
Yorktown University is solely Internet-based and every document it generates is available online, not in printed “catalog, bulletin or brochure” form. The language SCHEV uses reflects traditional practices, not those engendered by new technologies, and could be interpreted to mean that this institution should incur expensive print publication costs not suitable for an Internet-based company.
“The institution’s refund policy” should state that the “Institution only accepts tuition on a per-term/services rendered disbursement basis.”

Here, too, the traditional concept of “term” is employed that does not adapt to the ways of Internet institutions. And, what does a regulation of this specificity have to do with SCHEV’s fundamental charter? What next will SCHEV require? Restrictions on which Credit Cards we are allowed to accept?
Most Internet colleges operate on an Open Admission basis, or Directed Reading schedule AND/OR a schedule of five ten-week terms, or sometimes six eight-week “terms.” It is not practical (nor even meaningful) when dealing with students eligible for DANTES or Title IV funds to restrict tuition policy to one out of five or six terms a year. SCHEV’s regulation regarding “tuition per term” could kill an institution that requires degree candidates to take three courses a year to maintain their degree candidacy. Again, SCHEV is thinking (and its language reflects) traditional practices, not the reality of Internet education.
Annual audits or financial reviews

Because Yorktown University operates as efficiently as it can, and is not obliged to conduct costly financial audits by DETC, Yorktown University has not maintained audited financial information of it first two full years of operation. It does retain the services of a Certified Public Accountant. The cost of audits can easily be $10,000 annually. For startup Internet universities the audit or financial review requirement proposed here should be waived.

The institution shall maintain a surety bond … adequate to provide refunds to students for the unused portion of tuition and fees for any given semester, quarter, or term.
In a review by Yorktown University staff of regulations of other states, we could not find a state with as severe a Surety Bond standard as proposed by SCHEV. Ten percent to twenty percent of the refund due students is standard, not 100%.

Not many years ago, the Commonwealth of Virginia was fondly referred to as the “Digital Dominion.” SCHEV’s regulations are not in keeping with the promise of that vision, nor the promise of the digital revolution in education that can transform the delivery of educational products to Virginia’s consumers. A small traditional college that is just beginning its existence, may easily require $30 million in order to assure its survival. Digital technologies make it possible for Internet colleges to commence operations, and achieve positive cash flow, delivering courses and degree program on the Web with assets of far less than $1 million.

That reality, and anticipated de-regulation by the 108th Congress, could make the Digital Dominion a reality for hundreds of new colleges and universities exploiting the web.

Please let me be clear, here. What is at stake is not simply competition with the education market in Virginia. The world made available to us all by the Internet is national and in fact global. SCHEV is not just driving out of Virginia businesses with statewide markets. It’s making it undesirable and, perhaps, impossible to base global businesses here.

If new Certification Language is adopted, Virginia will become the Appalachia of digitally delivered higher education.

The impact of this provision on universities that are solely Internet-based is disproportionate to the impact on established, traditional, classroom institutions. Again, the industry we represent is in the incubation stage, and the Surety Bond requirement will drive Yorktown University from the state.
The positive development of the digital, New, Economy will not occur in Virginia if SCHEV imposes these financial requirements and maintains its policy of “top down” bureaucratic administration of the education marketplace.

Whenever Yorktown University advertises employment opportunities, we are inundated by applications from residents of Hampton Roads with excellent credentials employed in occupations far below their level of education. Recently, American Military University left the Commonwealth to reside in West Virginia. Though its reasons were motivated by regional accrediting regulations, I’m confident that SCHEV regulations were also a consideration. At a time in the local, state and national economy when less regulation is called for, SCHEV asks for “Emergency” authority. I fear that a “disconnect” exists between the offices of SCHEV in the James Madison Building in Richmond, and the local, state, and national mood.
Who Must Comply?

Lastly, I would like to ask some questions that, on their face, new regulatory proposals do not answer, and I request an answer before the next meeting of SCHEV’s Council on March 19.

a) Why are these regulations being proposed?
b) Having read original and proposed regulations, I am not certain that the certified education community in the Commonwealth understands to whom new regulations apply. If an institution is certified in the state, but is not incorporated here, must it comply with new regulations?
c) If an institution is incorporated here, but has no classrooms, must it comply with new regulations?
c) If an institution is not certified here, may it engage in advertising its educational products in the Commonwealth?

And lastly I must ask the following question:
d) “Can Virginia Afford SCHEV?”

The above questions touch on the highly technical nature of the Empire of Codes developed by SCHEV’s former Executive Director, Gordon Davies, and which inflicts injury on all institutions operating on the state, and increases of the cost of higher education for Virginia’s students.
The “Empire of Codes” is so technical that new institutions (foolish enough to incorporate here) may easily incur, in addition to the newly proposed $50,000 Surety Bond, costs similar to what we incurred in 2000. Applying for certification easily cost Yorktown University $35,000. And that was before SCHEV proposed an annual fee. The president of Patrick Henry College told me he incurred costs in excess of $100,000.

I think one single question should be asked by members of the General Assembly, and the Governor of the Commonwealth: “Can the Commonwealth of Virginia afford, in its present form, a regulatory body like SCHEV?”

Sincerely yours,
Richard J. Bishirjian, Ph.D.
President