Dive Brief:
- The Idaho Senate killed a bill Wednesday that would have restructured the University of Idaho’s planned purchase of the University of Phoenix to provide a legislative path forward.
- The bill, which failed on a 19-14 vote, would have created an independent state body to acquire the University of Phoenix. The proposal intended to shield the state from the for-profit university’s potential liabilities and give lawmakers more oversight of the institution.
- The proposal died only a few days after it was introduced. The bill’s demise adds yet another roadblock to the deal, which has been criticized by both lawmakers and student advocates.
Dive Insight:
Idaho Sen. Chuck Winder, a Republican, sponsored the bill to clear a path for the deal after it faced recent legislative pushback and legal threats. The two institutions face a looming deadline. If the deal is not completed before May 31, either party can back out freely, Idaho Education News reported.
A spokesperson for the University of Idaho said via email Thursday that officials are disappointed with the vote and are “reviewing their options.”
In May, the Idaho State Board of Education approved the University of Idaho’s bid to create a nonprofit corporation to acquire University of Phoenix for $550 million. The University of Idaho planned to finance the deal by issuing $685 million in bonds.
But just last month, legal counsel for the Idaho Legislature argued the state board lacks the authority to acquire a private institution through a nonprofit corporation.
The bill voted down this week would have converted the nonprofit corporation, called Four Three Education, into an independent body to conduct the acquisition. That body would have had two lawmakers on its board of trustees, been allowed to borrow money, and been required to submit annual reports to the Legislature. The state would not have been on the hook for bonds issued by the nonprofit.
Winder said he hoped the bill would assuage lawmaker concerns about the deal with University of Phoenix.
Senators who voted for the restructuring said they were hopeful the deal could help the state in its delivery of education.
But ultimately they were outnumbered.
“Right now, if our rural students in Idaho — this is one of the pitches I’ve heard — want to enroll in the University of Phoenix, nothing is stopping them,” said Sen. Lori Den Hartog, a Republican who voted against the bill. “It seems to me odd that we are the only state clamoring to make this purchase happen.”
Sen. Doug Okuniewicz also voted against the bill, saying that lawmakers were told the original deal presented no risk to the state.
The bill represents “a tacit admission that they admit they were wrong,” said Okuniewicz, a Republican. “I’m not sure why we should be so quick to trust that they got it right this time.”
Legal threats still loom.
A pending resolution in the Idaho Legislature would urge the state’s education board to reconsider its approval of the purchase and allow legislative leaders to take legal action against the deal. Idaho’s attorney general has also alleged that the board improperly held closed door meetings to approve the deal, a matter that’s pending before the state’s top court.
The deal has drawn criticism from outside Idaho as well. Last year, three U.S. senators, all Democrats, wrote to the University of Idaho’s president strongly advising him to reconsider the deal. They cited the University’s Phoenix’s graduation rate of just 27%, low median earnings and entanglements with federal agencies.
Idaho Gov. Brad Little, a Republican, responded with a letter of his own, saying the deal would open up opportunities for Idaho residents and criticizing the senators for the cost of education in their own states.
Last month, Moody’s Investors Service said the proposed deal could result in a significant downgrade in the University of Idaho’s credit, the Idaho Capital Sun reported. The credit rating agency said the purchase would increase the university’s debt and present “legal and regulatory liabilities.”