Policy decisions facing the California legislature and the Governor concerning the State's role in private postsecondary education are at the heart of this report. Described are the existing problems in the operation and effectiveness of California's "Education Code," which regulates these institutions. Chapters include: an introduction; background for the study; descriptions of private postsecondary institutions in California; the administration and enforcement of Division 21; degree-granting institutions--the "A-3 Problem;" consumer protection issues; the issue of accreditation; and contracting with private schools. Seven major conclusions are drawn, among them (1) California laws regulating private institutions are among the oldest in the nation; (2) continued inaction by state governments to enact consumer-oriented legislation to regulate private institutions could lead to the pre-emption of current state laws by more stringent federal laws; and (3) California has the largest number of private institutions in the nation. One of several recommendations suggests that the legislature undertake a complete revision of both Division 21 and the process by which it is implemented and administered. Some 22 appendices offer information such as the survey used in the study, survey participants, survey results, a list of accrediting agencies, A-3 schools by type, Division 21 of the Education Code, and sections of the Education Code to be affected by court decision. (LC)