A2138

An Act concerning incentive compensation and online program management companies in higher education and supplementing Title 18A of the New Jersey Statutes.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. As used in this act:

“Confidential information” means information contained in a report or contract submitted to the Office of the Secretary of Higher Education pursuant to this act that has been identified by the general counsel or chief financial officer preparing the report or contract as confidential or proprietary information.

“Incentive compensation” means a commission, bonus, or other incentive provided to an online program management company for the direct or indirect securing of enrollment or financial aid. Incentive compensation shall include commissions, bonuses, or other monetary or non-monetary incentives provided to any person or entity engaged in marketing, student recruiting, admissions, or determining financial aid awards. Incentive compensation shall include tuition sharing.

“Institution” means an institution of higher education or a proprietary institution licensed to offer academic degrees.

“Online program management company” means a third-party private non-profit or for-profit entity that enters into a contract or agreement with an institution to provide one or more of the following services on behalf of the institution in exchange for financial compensation: advertising and marketing services; recruiting, admissions, and financial services; instruction services; student support services; technology resources and support services; and curriculum development services.

“Tuition sharing” means compensation or payment to an online program management company based on a percentage of revenue or a fee collected from managed programs.

2. An institution shall be prohibited from providing incentive compensation, including tuition sharing, to an online program management company, or any representative or employee thereof, except for the purposes of recruiting students residing in foreign countries.

3. a. Each contract and agreement between an institution and an online program management company entered into, renewed, amended, or substantially modified after the effective date of this act shall be submitted to the Secretary of Higher Education within 20 days of execution. A copy of any contracts or agreements between an institution and an online program management company in effect on the effective date of this act shall be submitted to the secretary within 30 days of the effective date of this act and shall include the expiration date of the contract.

b. The governing board of an institution of higher education shall review and approve or disapprove of any contracts or agreements between the institution and an online program management company.

c. The governing board shall not approve a contract which contains a provision which:

(1) allows incentive compensation as payment for marketing or recruitment services, including when bundled with other services rendered by the online program management company;

(2) includes or permits tuition sharing;

(3) allows an online program management company to be involved in institutional governance, to share or fully delegate decision making authority over the design or development of course curriculums or course instruction, to set admission standards, to determine enrollment targets, or to share or fully delegate decision-making authority over the implementation or prioritization of existing or new online programs;

(4) permits an online program management company to hire or provide instructors for any online program, including replacing the faculty or staff of an institution of higher education with employees of an online program management company;

(5) authorizes an online program management company to utilize any copyrighted or trademarked information of the institution, including institutional letterhead, web addresses, and logos, except in materials that clearly disclose that the online program management company is a third-party entity that is separate from the institution and the relationship between the online program management company and the institution;

(6) authorizes or provides an online program management company or its staff with email addresses that utilize the name of the institution to appear as though the online program management company or its staff are employees of the institution; or

(7) interferes with, modifies, or relinquishes any intellectual property rights or patentable discoveries or inventions of employees of the institution.

d. The minutes of a meeting at which the governing board approves or disapproves a contract or agreement between the institution and an online program management company shall include information concerning the governing board’s approval or disapproval and review of the contract or agreement.

e. Existing contracts or agreements between an institution and an online program management company shall comply with the provisions of this section before the start of the fall 2027 semester, or upon the expiration date of the current contract or agreement, whichever occurs later.

4. a. An online program management company that enters into a contract or agreement with an institution shall submit an annual report to the governing board and chief financial officer of the institution detailing all expenditures made on behalf of the institution during the prior academic year. The governing board shall share the annual report with the majority representatives of all recognized bargaining units and any governing bodies for faculty or staff. The annual report shall specify the amounts expended by the online program management company in each of the following categories of expenditures:

(1) advertising, marketing, and recruitment services;

(2) admissions and financial services;

(3) instruction services;

(4) student support services, which shall include activities that occur outside of a student’s formal instructional program that are focused on advancing student development including, but not limited to, emotional and physical well-being and intellectual, cultural, and social development. Student support services shall include tutoring or extracurricular academic support, student services administration, social and cultural development, counseling, and career guidance, but shall not include marketing or advertising services;

(5) technology resources and support services, including the development, management, and maintenance of information systems including, but not limited to, online learning platforms, networks, and servers; and

(6) curriculum development materials.

b. The annual report shall include any additional information required by the Secretary of Higher Education pursuant to regulations promulgated pursuant to section 8 of this act.

c. An institution that enters into a contract or agreement with an online program management company shall submit an annual report to the secretary that includes for each online program which the online program management company provides services:

(1) the information provided to the institution by the online program management company pursuant to subsections a. and b. of this section;

(2) the amount of total payments made by the institution to the online program management company during each term of the prior academic year;

(3) the number of students receiving State financial assistance during the prior academic year, including a student loan distributed under the New Jersey College Loans to Assist State Students (NJCLASS) Loan Program established pursuant to N.J.S.18A:71C-21;

(4) the amount of State operating aid received by the institution, on a per-student basis, during the prior academic year, and the per-student amount provided to the online program management company; and

(5) a demographic profile of students, including age, gender, race and ethnicity, education level, withdrawal and completion rates;

(6) a demographic profile of student loan borrowers;

(7) the number of students who received a Pell Grant or a federal student loan through Title IV of the federal “Higher Education Act of 1965,” (20 U.S.C. s.1001 et seq.); and

(8) information on each contract with an online program management company, including the services provided under each contract.

d. The secretary shall publish each annual report received pursuant to this section on the Internet website of the Office of the Secretary of Higher Education.

5. a. An institution that enters into a contract or agreement with an online program management company to provide marketing or recruitment services for its online programs shall require that:

(1) the online program management company self-identifies as a third party entity that is separate from the institution at the beginning of any communication with a prospective student; and

(2) any digital or print advertising provided by the online program management company or the institution for an online program of the institution includes a clear disclosure of the relationship between the online program management company and the institution.

b. An institution that enters into a contract or agreement with an online program management company shall make publicly available on its Internet website the following information on the online programs that are supported by the online program management company:

(1) name of the online program management company contracted by the institution;

(2) admission requirements;

(3) online program’s tuition costs compared to on-campus program tuition costs;

(4) financial aid available for the online program;

(5) average financial aid amount provided to students in the online program; and

(6) percentage of students in the online program who receive financial aid.

6. a. Any information submitted to the secretary pursuant to this act may be disclosed in accordance with P.L.1963, c.73 (C.47:1A-1 et seq.), commonly known as the open public records act, except that confidential information shall not be disclosed by the secretary to any person other than employees and representatives of the Office of the Secretary of Higher Education.

b. An institution shall separately identify any confidential information submitted to the office pursuant to this act. Any information that is not identified as confidential information shall be considered public information and subject to disclosure.

7. An institution which violates the provisions of this act or regulations promulgated pursuant to section 8 of this act shall be subject to a civil penalty in the amount of $10,000 per violation, or the maximum amount of incentive compensation due to the online program management company under the institution’s contract or agreement with the online program management company, whichever is greater.

8. The Secretary of Higher Education shall adopt rules and regulations pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), necessary to effectuate the provisions of this act.

9. This act shall take effect immediately.

STATEMENT

This bill establishes requirements for contracts between online program managers and institutions of higher education and proprietary institutions licensed to offer academic degrees.

Under the bill, an institution is prohibited from providing incentive compensation, including tuition sharing, to an online program management company, or any representative or employee thereof, except for the purposes of recruiting students residing in foreign countries.

The bill requires a contract or agreement between an institution and an online program management company, and any amendments to, substantive changes in, or renewals of the contract, to be submitted to the Secretary of Higher Education within 20 days of execution. A copy of any contracts or agreements between an institution and an online program management company in effect on the effective date of the bill are to be submitted to the secretary within 30 days of the effective date of the bill and are to include the expiration date of the contract. The bill requires the governing board of an institution to review and approve or disapprove of any contracts or agreements between the institution and an online program management company. The governing board is not to approve a contract or agreement that contains a provision that: (1) allows incentive compensation as payment for marketing or recruitment services, including when bundled with other services rendered by the online program management company; (2) includes or permits tuition sharing; (3) allows an online program management company to be involved in institutional governance, to share or fully delegate decision making power over the design or development of course curriculums or course instruction, to set admission standards, to determine enrollment targets, or to share or fully delegate decision-making power over the implementation or prioritization of existing or new online programs; (4) permits an online program management company to hire or provide instructors for any online program including replacing the faculty or staff of an institution of higher education with employees of an online program management company; (5) authorizes an online program management company to utilize any copyrighted or trademarked information of the institution, including institutional letterhead, web addresses, and logos, except in materials that clearly disclose that the online program management company is a third-party entity that is separate from the institution and the relationship between the online program management company and the institution; (6) authorizes or provides an online program management company or its staff with email addresses that utilize the name of the institution to appear as though the online program management company or its staff are employees of the institution; or (7) interferes with, modifies, or relinquishes any or all intellectual property rights or patentable discoveries or inventions of faculty members of the institution.

The minutes of a meeting at which the governing board approves or disapproves a contract or agreement between the institution and an online program management company are required to include information concerning the governing board’s approval or disapproval and review of the contract or agreement.

The bill requires each online program management company that enters into a contract or agreement with an institution to submit an annual report to the governing board and chief financial officer of the institution. The annual report is to be shared with the appropriate faculty and staff unions and any governing bodies for faculty or staff. The report is to include the amounts expended by the online program manager on each of the categories of expenditures enumerated in the bill and any other information required by the secretary.

The bill also requires each institution to submit an annual report to the secretary that is to include: (1) the information provided in the annual report submitted by the online program manager; (2) the amount of total payments made by the institution to the online program management company during each semester of the prior academic year; (3) the number of students receiving State financial assistance during the prior academic year that were enrolled in each academic program for which the online program management company provided services; (4) the amount of State operating aid received by the institution, on a per-student basis, during the prior academic year, and the per-student amount provided to the online program management company; (5) certain demographic information; (6) a demographic profile of student loan borrowers; (7)

the number of students who received federal financial assistance; and (8) information on each contract with an online program management company, including the services provided under each contract. The secretary is required to publish each annual report on the Internet website of the Office of the Secretary of Higher Education.

Additionally, the bill requires an institution that enters into a contract or agreement with an online program management company to provide marketing or recruitment services for its academic degree programs is to require the online program management company to self-identify as a third party entity that is separate from the institution at the beginning of any communication with a prospective student. The institution is to also require that any digital or print advertising provided by the online program management company or the institution for an academic program of the institution include a clear disclosure of the relationship between the online program management company and the institution.

The bill further requires an institution that enters into a contract or agreement with an online program manager to make information publicly available on its website for online programs that are supported by the online program manager.

The bill provides that any information submitted to the secretary pursuant to provisions of the bill may be disclosed in accordance with the State’s open public records act. An institution is required to separately identify any confidential information submitted to the office pursuant to the bill, and any information that is not identified as confidential information is to be considered public information and subject to disclosure.

Finally, the bill stipulates that an institution which violates the provisions of the bill is to be subject to a civil penalty in the amount of $10,000 per violation, or the maximum amount of incentive compensation due to the online program management company under the institution’s contract or agreement with the online program management company, whichever is greater.