Looks like California is now regulating flight schools

[JOEFRIDAY2]

From what schools? Other than that helicopter school(Silver State I think).

Edit: That money (Silver State) wasn't just in california, it was nation wide.

I don't know every flight school that failed in California. Here are the schools that students contacted us about that are located in California:

Silver State Helicopters with 3 locations (Sacramento, Chino, El Cahon) in California. Total loss to CALIFORNIA based students is in excess of 25 MILLION DOLLARS. Here is the link to the settlement agreement:

http://ag.ca.gov/newsalerts/release.php?id=1827

American School of Aviation in Merced. Total loss to students is in excess of 2 MILLION DOLLARS.

Makarion Institute of Aeronautics in Chino, California. Total estimated loss to students is in excess of 9 MILLION DOLLARS.

So just on these flight schools alone there has been over 36 MILLION DOLLARS LOST in the past 4 years in CALIFORNIA.

That's a lot of money. And that is just the ones we know about.

Joe

 

[Patrick]

Couple points of clarification here, folks:

First of all, the $5000 is a one time application fee, hypothetically there to offset the administrative costs of this babysitting. (I'll add that some portion of that probably will wind up as tax revenue)

The .75% does not go into the general fund of the state to be used as tax revenue. It is to go into a "slush fund" that is created to fund refunds to students who get scammed. (Assuming that this "new system" works, it wouldn't surprise me if that slush fund grew rather rapidly, and the state bled it off at some point as tax revenue)

Now, in an ideal world, we wouldn't need any of this. We also wouldn't need police, a court system, a military, etc. Unfortunately, life is far from perfect, and yes, the *#%hats of the world ruin it for the rest of us, which is why we get regulation. Unfortunately, that's not going to stop anytime soon, so the regulation we have is at least somewhat needed.

I will also add, that if a "tax" that measures less than 1% (including the one time $5000 app fee) cripples a business with multi-million dollar revenue, that business wasn't going to make it anyway. The actual fiscal impact to a flight school from this is less than the cost of fuel going up $.10 a gallon.

Also, while it's easy for a lot of us to point fingers and say "well only an idiot would pay all their money up front to a scammer," you must understand that a good portion of students, especially international students, many of whom come from differing cultures that don't even understand the meaning of "scam," don't think like that. They're often very young (think how naive many of us were at age 18), naive, trusting, inexperienced at life and have the distinct disadvantage of a school holding their very Visa to be in this country. Due to those programs being arranged by international recruiters, they often don't have the option of paying as they go. They also can't just walk out, as they are legally in this country on the Visa that said school issued.

I hate to see unnecessary regulation in our society, but I do think that something needs to be done to stop the thievery that has gone on for decades in this industry. Ideally, this should probably be handled by the FAA, but we all know that isn't going to happen, so if it happens at the state level, I'd like to see it become more widespread.

 

[mshunter]

I don't know every flight school that failed in California. Here are the schools that students contacted us about that are located in California:

Silver State Helicopters with 3 locations (Sacramento, Chino, El Cahon) in California. Total loss to CALIFORNIA based students is in excess of 25 MILLION DOLLARS. Here is the link to the settlement agreement:

http://ag.ca.gov/newsalerts/release.php?id=1827

American School of Aviation in Merced. Total loss to students is in excess of 2 MILLION DOLLARS.

Makarion Institute of Aeronautics in Chino, California. Total estimated loss to students is in excess of 9 MILLION DOLLARS.

So just on these flight schools alone there has been over 36 MILLION DOLLARS LOST in the past 4 years in CALIFORNIA.

That's a lot of money. And that is just the ones we know about.

Joe

New regulation is not the answer to the problem in the form of this measure, and I just can't get behind it. Flight schools are not a place of higher education any more than a truck driving school. It's a place to get your ratings and move on. What about the mom and pop places that, although may not be just barely hanging on, but don't exactly make a handsome profit. It's another useless tax places on an already burdened and targeted industry. The smart thing to do would be to regulate the loan companies who are giving out this money, and make the flight schools have something to show for the money they are requesting. It's nothing more than a knee jerk reaction to try and get this awfull god-forsaken state out of a budget crisis created by politicians who can not and refuse to compromise.

Until you have lived in a state that not only taxes your paycheck, but everything you buy as well, you have no room to speak. I have lived in both states. I would rather find a way to live back in Florida, than stay one more minute necessary in California. Come walk a mile in our (CA's) shoes where the cost of living is 2/3's more expensive, and the state takes 1/5 of your paycheck from you just to bankrupt, or nearly so, themselves because they can't figure out how to spend their money properly. Just imagine how much money was spent researching this project that could have been used trying to figure out how to get away from a multi billion dollar budget deficit. This is not the answer to the scammers, just a bandaid to a problem created by the lending practices of banks doing business and lending money to something they know nothing about. And FYI, it only applies (the re-imbersment) to CA residents. It's one of those ridiculus laws that won't do much to help those who come here for their education, and was never targeted at the mom and pop places. As with anything in life, do your research, and if you get had by a fly by night operator, then you get what you deserve, simle as that. The BBB is a great place to start research.

California Education Code (CEC) Article 9.5

Student Tuition Recovery Fund

The State of California created the Student Tuition Recovery Fund (STRF) to relieve or mitigate economic losses suffered by California residents who were students attending schools approved by, or registered to offer Short-term Career Training with the Bureau for Private Postsecondary and Vocational Education (Bureau).

You may be eligible for STRF if you are a California resident, prepaid tuition, paid the STRF fee, and suffered an economic loss as a result of any of the following:

1. The school closed before the course of instruction was completed.
2. The school's failure to pay refunds or charges on behalf of a student to a third party for license fees or any other purpose, or to provide equipment or materials for which a charge was collected within 180 days before the closure of the school.
3. The school's failure to pay or reimburse loan proceeds under a federally guaranteed student loan program as required by law or to pay or reimburse proceeds received by the school prior to closure in excess of tuition and other costs.
4. The school's breach or anticipatory breach of the agreement for the course of instruction.
5. There was a decline in the quality of the course of instruction within 30 days before the school closed, or if the decline began earlier than 30 days prior to closure, a time period of decline determined by the Bureau.
6. The school committed fraud during the recruitment or enrollment program participation of the student.

You may also be eligible for STRF if you were a student that was unable to collect a court judgment rendered against the school for violation of the Private Postsecondary and Vocational Education Reform Act of 1989.

You must pay the state-imposed fee for the Student Tuition Recovery Fund (STRF) if all of the following applies to you:

1. You are a student, who is a California resident and prepays all or part of your tuition either by cash, guaranteed student loans, or personal loans and;
2. Your total charges are not paid by any third-party payer such as an employer, government program or other payer unless you have a separate agreement to repay the third party.

You are not eligible for protection from the STRF and you are not required to pay the STRF fee if either of the following applies:

1. You are not a California resident,
2. Your total charges are paid by a third party, such as an employer, government program or other payer, and you have no separate agreement to repay the third party.

It's a farce of a regulation at best, and doesn't do much to protecting many people.

 

[OldTownPilot]

Not all flight schools make hundreds of thousands or millions of dollars per year as you claim. Now I'm not in CA, but our flight school would not have a easy time paying a $5,000 sudden unplanned expense with one weeks notice, especially right now at the end of our slow season. Our revenues (not profit or 'make') are less than 200,000 per year, and that includes a sizable scenic tour operation as well. Would a freelance instructor that teaches a commercial student or two be subject to this 5,000 fee?

Second, for all of you that just claim the taxes will be passed on to the students, I know that you either didn't take micro economics or failed miserably. Hint, the demand for flight training is not inelastic, especially when there are untaxed alternatives in other states.

The thing is recessions are the time when you (the government) should be reducing taxes to spur growth, so that there is a robust economy in the future to draw revenues from. Not tax recessed industries into purgatory, just to have a much smaller benefit in the short term.

 

[TXTBOOK]

The $5000 is what California charges (and had charged) other vocational and secondary schools for licensing. These other schools (truck driving, bar tending, medical assistants, computer training, massage therapy, restaurant managment, etc) all charge far less for their training than flight schools charge. Yet those other vocational schools have been able to pay the $5000 without a problem. These schools keep renewing their licenses because there is money to be made teaching students. Do you think a school taking in hundreds of thousands of dollars (or millions of dollars) each year is going to give that revenue up over a $5000 fee?

That is not how pricing and economics work... just because flight training is more expensive for the consumer doesn't mean that the flight school is making more money than the truck driving school.

 

[trafficinsight]

I don't know every flight school that failed in California. Here are the schools that students contacted us about that are located in California:

Silver State Helicopters with 3 locations (Sacramento, Chino, El Cahon) in California. Total loss to CALIFORNIA based students is in excess of 25 MILLION DOLLARS. Here is the link to the settlement agreement:

http://ag.ca.gov/newsalerts/release.php?id=1827

American School of Aviation in Merced. Total loss to students is in excess of 2 MILLION DOLLARS.

Makarion Institute of Aeronautics in Chino, California. Total estimated loss to students is in excess of 9 MILLION DOLLARS.

So just on these flight schools alone there has been over 36 MILLION DOLLARS LOST in the past 4 years in CALIFORNIA.

That's a lot of money. And that is just the ones we know about.

Joe

Oh it's not lost. in ASA's case Prince knows exactly where it is.


Anyway, we got a 141 so that we could help out ASA students that were left in the cold, and since then have accepted a limited number of new students. We didn't accept everyone that wanted to come because we knew we didn't have the airplanes or instructors to handle a large student base, nor did we want to become a ratings mill.

I doubt our 141 made an extra 5k last year... so yeah. Small schools will close, big schools will have yet another tax to pay when I'm sure most of them are already struggling as it is.

 

[JOEFRIDAY2]

That is not how pricing and economics work... just because flight training is more expensive for the consumer doesn't mean that the flight school is making more money than the truck driving school.

Well I do understand that truck drivers make more money than regional jet pilots.

Bottom line is this industry has a problem on its hands and this is one state that has put regulations in place in an attempt to protect students.

I have read the entire regulation and here are some of the main points:

The $5000 fee is good for 5 years. A 2nd (or more) location is $3500 for 5 years. The renewel is $3500 for the main location and $3000 for a branch. You do the math, but this isn't a big number when you divide it out.

The $5000 is not due until July.

However the .075% is due starting on May 17th. There is a 25% penalty for late payment. If the payment is really late then the penalty is 35%.

The maximum amount of money deposited each year is capped at $25,000, per licensed school, for the student recovery fund.

There will be on premise vists at least once every two years. The visits will be both announced and unannounced.

Licensed schools are permitted to charge advance tuition. If the course is over 90 days long then only a portion of the tuition can be collected in advance.

The school must have a published refund policy.

The school must have a published catalog.

There are some disclosure forms which must be provided to students that indicate the historical number of students that have completed the program, the number that have been hired, the average rate of pay, etc. There are some specific time periods these reports must cover.

There is a fine of up to $50,000 for operating an unlicensed school.

Other fines can range from $250 to $5000. Most are capped at $1000.

Those will serious violations can be charged criminally according to sections 19.6 and 19.7 of the California Penal Code.

Any school charging less than $2500 (total) for their course is exempt from the regulation.

A school that has been in business (without closing and without a bankruptcy) for at least 25 years is exempt from the regulation.

There are over 1,500 private postsecondary schools in California attended by over 400,000 Californians. (2007 figures)

Here is the intent of the regulation:

It is the intent of the Legislature in enacting this chapter to ensure all
of the following:
(1) Minimum educational quality standards and opportunities for success
for California students attending private postsecondary schools in California.

(2) Meaningful student protections through essential avenues of recourse
for students.

(3) A regulatory structure that provides for an appropriate level of
oversight.

(4) A regulatory governance structure that ensures that all stakeholders
have a voice and are heard in policymaking by the new bureau created by
this chapter.

(5) A regulatory governance structure that provides for accountability
and oversight by the Legislature through program monitoring and periodic
reports.

(6) Prevention of the deception of the public that results from conferring,
and use of, fraudulent or substandard degrees.

(e) The Legislature advises future policymakers to continually and
carefully evaluate this chapter and its administration and enforcement.
Where there are de​

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ficiencies in the law or regulatory oversight, the Governor​

and the Legislature should act quickly to correct them.

Joe

 

[ILS37R]

New regulation is not the answer to the problem in the form of this measure, and I just can't get behind it. Flight schools are not a place of higher education any more than a truck driving school.

And, indeed, truck driving schools are already subject to this regulation.

Until you have lived in a state that not only taxes your paycheck, but everything you buy as well, you have no room to speak. I have lived in both states. I would rather find a way to live back in Florida, than stay one more minute necessary in California. Come walk a mile in our (CA's) shoes where the cost of living is 2/3's more expensive, and the state takes 1/5 of your paycheck from you just to bankrupt, or nearly so, themselves because they can't figure out how to spend their money properly.

I've lived in both Florida and California and am happily voting with my shoes and walking back to California (I already live in both part-time). Florida, by the way, is also way in the red at the state level and offered far less services prior to the economic downturn. Just like in Cali, Florida is doing even worse at the county and city levels. My cost-of-living is actually about the same in most places (higher rent in the Bay, much costlier utilities in Orlando; pricier gas in California, unusably horrific public transit in Florida). If I were willing to diminish my quality of life in Florida, I could come in lower than California, but I have no interest in doing that.

So, shoe-walking accomplished, this law seems long overdue to me. I've seen way too many people get burned by fly-by-night flight school operators. Even if they have legal recourse, by the time a school collapses, all the money is gone, so judgement or no, they never see a dime and have legal expenses to boot.

You do rightfully point out the problem with this law only impacting state residents for refunds, which is a carry-over from the previous versions for trade schools whose students are mostly local residents. That needs to be changed to reflect the realities of the flight training business. Other than that, timing is only bad thing about the regulation--it's not a good time to be hitting any business, let alone a largely luxury business like flight training, with new fees. But I'll take a poorly timed, good law over inaction any day.

 

[Douglas]

Que Sera Sera, really.

 

[TXTBOOK]

Other than that, timing is only bad thing about the regulation--it's not a good time to be hitting any business, let alone a largely luxury business like flight training, with new fees.

I pretty much agree with that.

But I'll take a poorly timed, good law over inaction any day.

I'm not so sure about that. There's a time and a place for everything.

 

[trafficinsight]

How about instead of regulating the good schools we educate people not to fall for the scam of giving someone 50k up front for ratings they may never receive.

Bottom line? Never give a school more money than you can afford to lose.

I can't count the number of people I've referred here to Jetcareers who choose to continue keeping their fingers in their ears about the reputation of some of these schools. If you've been given the advice and the tools to make a good decision and continue on the path to a bad decision I really have no sympathy.

The foreign students have a different problem. INS/TSA says that they must be able to show the ability to pay for the training they are applying for, they don't specify how exactly, they leave that up to the school to decide. So what the shyster schools do is require that they deposit the full amount and then they hold the students hostage by threatening to withdraw their visa if they want a refund.

 

[JOEFRIDAY2]

I still can't help but believe that the 36 MILLION DOLLARS that was stolen from California students, over the past 4 years, by the scam flight schools WOULD HAVE BEEN SPENT AT THE LEGITIMATE FLIGHT SCHOOLS in California. I just don't believe the 36 million dollars would have left the industry.

I don't know how many flight schools there are in California, but if there are 100 flight schools then the annual licensing cost of this program would be $100,000 TOTAL for all of the schools. It's basically $1000 a year per school.

That $100,000 would have have returned an average of $9,000,000, per year, to the legitimate California flight schools based on the recent four year time period. That seems like a pretty good return on investment to me.

Student loans are going to be a requirement in this industry as costs continue to increase.

Right now the student loans have dried up. That's why the flight school industry is suffering. Without student loans, this industry loses over 90% of the domestic US students. It's now close to $50,000 just to get your ratings not including flight instructor ratings. I don't see these costs going down. They will continue to increase just like they always have.

The student loans will not come back until this industry is properly regulated and the financial institutions can depend upon flight schools to deliver the contracted training. The California tuition recovery program will protect the students and the financial institutions from losses. That's a good thing.

That will inspire confidence in the flight training system as those schools that do not have the proper capital, for this business, will not be allowed to be in the business.

Schools have to submit financial statements to the regulators to prove that they have the have the resources to provide this training. That's also a good thing.

Joe

 

[Barty]

CA's new regulation protects students from unscrupulous scam artists. Why would anyone have a problem with that?

Who is John Galt?

Because, and this is what most people miss when they scream for regulations, is it hurts the honest people, who are, in fact, usually represent a majority of those doing business. I'm amazed how our society has become so conditioned to throw honest people under the bus, just to protect us from the minority of scamsters who come around every few years.

 

[Ian_J]

Who is John Galt?

John Galt is a fictional character in the novel "Atlas Shrugged" written by Ayn Rand.

 

[Patrick]

How about instead of regulating the good schools we educate people not to fall for the scam of giving someone 50k up front for ratings they may never receive.

Bottom line? Never give a school more money than you can afford to lose.

I can't count the number of people I've referred here to Jetcareers who choose to continue keeping their fingers in their ears about the reputation of some of these schools. If you've been given the advice and the tools to make a good decision and continue on the path to a bad decision I really have no sympathy.

The foreign students have a different problem. INS/TSA says that they must be able to show the ability to pay for the training they are applying for, they don't specify how exactly, they leave that up to the school to decide. So what the shyster schools do is require that they deposit the full amount and then they hold the students hostage by threatening to withdraw their visa if they want a refund.

I'll somewhat agree that it would be doable (with, perhaps, a decently high success rate) to educate domestic students to avoid the scammer operators. However, as many of us know, the international students are a much bigger problem, and in the grand scheme of things, are the ones most often taken advantage of by the scammers. There is no way to educate them to avoid certain places, so some higher authority needs to regulate this. Like I said, I hate to see more government regulation, especially when it does add to the cost of doing business in a poor economy, but there have been far too many people taken advantage of (both domestic and foreign) and that has to be stopped somehow.

 

[mshunter]

I've lived in both Florida and California and am happily voting with my shoes and walking back to California (I already live in both part-time). Florida, by the way, is also way in the red at the state level and offered far less services prior to the economic downturn. Just like in Cali, Florida is doing even worse at the county and city levels. My cost-of-living is actually about the same in most places (higher rent in the Bay, much costlier utilities in Orlando; pricier gas in California, unusably horrific public transit in Florida). If I were willing to diminish my quality of life in Florida, I could come in lower than California, but I have no interest in doing that.

Does not compute. When I was in FL, I was the only one in my family working. Yes, both states are in the red, but CA has done it by collecting tax money from my paycheck every two weeks + sales taxes that are some of the highest in the nation, and FL has done it w/ collecting sales tax alone. The median price for a single family home in FL is 1/3 of what it is in CA, so it's possible to survive on a single income. When I was in FL, it was possible for me to own a home on my income alone. In CA, with two incomes, it's not possible.

Example: Where I live now, costs me $1600 a month. Two bedrooms, a single car garage and about 1300sq/ft. I share a wall (duplex) with some one, and have a HOA watching over my back. Some months we are left with less than $100 in the bank, and we don't go out, we don't have hobbies, and we are very frugal.

When I was in FL, I was paying $1120 a month in PSL for a 3 bedroom 2 car garage single family home, on just under 1/4 acre lot with a canal in the back yard. It was in a nice neighborhood. My wife didn't work, and my son always had food in his belly. I went fishing in my boat at least every other night on week nights, and spent all day on the water both days on the weekend.

Both cities are approximately 150,000 in population, and considered suburbs of major cities. Both have major airports w/in 45 minutes to an hour drive, and small airports w/in a half hour drive. During this period in my life, I was an auto mechanic for dealerships. When I moved to FL, I took a $2 an hr pay cut, but took more money home because no state taxes were being taken out. Throw that in with the lower housing costs, and lower gas costs, I'd rather pay an extra $50 to $200 a month in utilities/food than an extra $480 in rent to take home less money, making the exact same dollar per hour, or in my case seeing less on paper/per hr., but more to pay the bills with.


BTW, I could care less about public transportation. Get a bike, save some money and buy a car, or get a motorcycle. My first job was commuted to on a bike, and it was about 4 miles each way. If you have the will, you'll find the way. The nice thing about using a bike in FL is it's for the most part, flat!

 

[Mike H]

Silver State Helicopters with 3 locations (Sacramento, Chino, El Cahon) in California. Total loss to CALIFORNIA based students is in excess of 25 MILLION DOLLARS. Here is the link to the settlement agreement:

I thought you said the money was lost/stolen and the students had no redress? Looks like there was redress after all, and without the benefit of this new regulation.

 

[Okie_Pilot]

Just come to Oklahoma. We love aviation.

 

[drunkenbeagle]

Who is John Galt?

Exactly. The way I see this, any reasonably busy flight school in California is going to see an extra $31,000 going out the door next year. For what? They get nothing for it. For any reasonably sized flight school, that means one less aircraft on the line. Cost passed on to the students.

Even worse? The .75% the state is taking seems to apply to gross revenues - I don't see anything exempting fuel sales/rentals/charters/ramp fees/etc. So presumably, flight schools will also have the expense of changing their corporate structure to avoid that. But hey, it does create jobs for state bureaucrats to administer the system.

Guess what, would I give $30 large to ANY aviation business up front? Hell no. Not even an airline. Or especially a manufacturer. (I would insist on the cash going into escrow). Or put it on your Amex and dispute the charge if the vendor folds.

Find a school/FBO that lets you run a tab and invoices you monthly. Mine does, and their prices are actually pretty good. Good businesses should grow and bad ones should fail. It is called capitalism. Taxing the good guys to bail out the bad guys is not the answer - it is just legislating mediocrity.

 

[drunkenbeagle]

Does not compute. When I was in FL, I was the only one in my family working. Yes, both states are in the red, but CA has done it by collecting tax money from my paycheck every two weeks + sales taxes that are some of the highest in the nation, and FL has done it w/ collecting sales tax alone.

Agreed. When I moved to Florida from Massachusetts, my take home pay went up by about $20,000 - mostly money that I was no longer paying in taxes. MA capital gains taxes were especially brutal.

My housing cost is half here, heating/cooling costs are half, car insurance is 75% cheaper, far fewer toll roads (I paid over $2,000 a year to Massachusetts in tolls for the privilege of driving 6,000 miles a year in a car that also cost $2,500 in excise taxes a year- we don't have those either in FL!)