Section 20.17.045. Bonding requirements.

	(a)  Except as provided in (e) of this section, a postsecondary educational institution and an agent shall post a surety bond, a cash deposit, or commission-approved negotiable securities as required by AS 14.48.100 and in an amount determined under this section. The surety bond, cash deposit, or negotiable securities must be executed solely in favor of and filed with the commission. The commission may increase or decrease the bonding requirement to conform to the level set in (b) or (h) of this section based on updated financial or other information received during a renewal period.  
	(b)  Except as provided in (h) of this section, the amount of the required surety bond, cash deposit, or commission-approved negotiable securities is based, for an existing institution, upon the highest amount of revenue received by the institution for all students enrolled in all programs during an academic or a vocational program period, term, or semester in the previous academic year; or for new institutions or institutions that have added or deleted programs, the highest amount of revenue the commission staff projects will be earned by the institution for all students enrolled in all programs during an academic or a vocational program period, term, or semester in the upcoming academic year. The amount of the bond is determined as follows:  
                    POSTSECONDARY EDUCATIONAL INSTITUTIONS
                                   Bond Amount
                                                        Bond Amount
Institution Revenue            (Pay-As-You-Go
                               Schools)                   (Other)
Up to $25,000                        $ 3,750               $  5,000
$ 25,001 - $ 50,000                  $ 7,500               $ 10,000
$ 50,001 - $100,000                  $15,000               $ 20,000
$100,001 - $150,000                  $22,500               $ 30,000
$150,001 - $200,000                  $30,000               $ 40,000
$200,001 - $250,000                  $37,500               $ 50,000
$250,001 - $300,000                  $45,000               $ 60,000
$300,001 - $400,000                  $60,000               $ 80,000
$400,001 - $500,000                  $75,000               $100,000
$500,001 - $750,000                  $112,500              $150,000
$750,001 - $1,000,000                $150,000              $200,000
$1,000,001 and above                 $200,000              $250,000
                                    AGENTS
    Institution Revenue                       Bond Amount 
    Up to $ 25,000                             $ 2,500
    $ 25,001 - $50,000                         $ 5,000
    $ 50,001 - $100,000                        $10,000
    $100,001 - $150,000                        $15,000
    $150,001 - $200,000                        $20,000
    $200,001 - $250,000                        $25,000
    $250,001 - $300,000                        $30,000
    $300,001 - $350,000                        $35,000
    $350,001 - $400,000                        $40,000
    $400,001 - $450,000                        $45,000
    $450,001 and above                         $50,000
	(c)  For the purpose of determining the amount of a bond required by the commission,  
		(1) institutions must include revenues received for all students, including those enrolled in programs otherwise exempt from this chapter;  
		(2) a flight school must include revenues for its private pilot, commercial pilot, and ratings programs; and  
		(3) the calculation of institution revenues must include all revenues received from all funding sources for all commodities and services provided by the institution as part of its provision of postsecondary education, including tuition and fees, books and materials, and room and board.  
	(d)  A negotiable security filed with the commission in place of a bond will not be released by the commission until at least six months after the end of the enrollment period for which the security is filed or at least six months after the date the institution or agent ceases operations, whichever comes first. If a complaint has been filed, or action is pending on a complaint filed, relative to the enrollment period covered by the security, the security will not be released until the complaint has been resolved or final action has been taken.  
	(e)  An agent who is a bona fide employee of a postsecondary educational institution authorized to operate in this state or exempted from authorization, and who acts as an agent only in the scope of the agent's employment with the postsecondary educational institution is exempt from the agent bonding requirements in (b) of this section.  
	(f)  Institutions may meet bonding requirements through participation in an institutional surety pool, training assurance pool, or tuition recovery fund approved by the commission.  
	(g)  A certificate of deposit or other negotiable instrument offered by a postsecondary educational institution authorized to operate in Alaska must be established either for the period of authorization plus six months or be automatically renewable, and must meet liquidity requirements approved by the executive director of the commission.  
	(h)  For a postsecondary educational institution that is not financially sound, the amount of the required surety bond, cash deposit, or commission-approved negotiable securities is the greater of  
		(1) the highest amount of revenue received by the institution for all students enrolled in all programs during an academic or a vocational program period, term, or semester of the previous year; or  
		(2) the highest amount of revenue for all students projected by the commission that the postsecondary educational institution will receive during a similar period of the current year.  
	(i)  For the purposes of this section, a postsecondary educational institution is not financially sound if  
		(1) its financial statement submitted under 20 AAC 17.060 or the commission staff's investigation shows  
			(A) recurring operating losses;  
			(B) recurring negative cash flows from operations;  
			(C) adverse financial ratios; or  
			(D) conditions or events similar to those described in (A) - (C) of this paragraph that raise substantial doubts the institution will be able to continue as an ongoing concern;  
		(2) its accrediting agency, if any, has found it not to be financially sound; or  
		(3) the United States Department of Education has  
			(A) made a final determination that the institution is not financially sound; or  
			(B) placed the institution on reimbursement status.  
	(j)  An institution considered not to be financially sound must maintain a commission approved, detailed teach-out plan as well as document surety to cover all costs of delivery of the proposed teach-out plan. An institution that continues to operate in other than a financially sound status must annually update its detailed teach-out plan and required surety.  

Authorities

14.48.050;14.48.100

Notes

Authority

AS 14.48.050 AS 14.48.100

History

Eff. 3/6/86, Register 97; am 5/8/88, Register 106; am 9/15/88, Register 107; am 12/8/88, Register 108; am 5/4/90, Register 114; am 8/18/91, Register 117; am 4/24/98, Register 146; am 8/26/98, Register 147; am 4/20/2000, Register 154; am 12/31/2005, Register 176; am 12/29/2010, Register 196; am 2/22/2015, Register 213