Dive Brief:
- An Idaho legislative committee advanced a resolution Friday that urges the state’s education board to reconsider its approval of the University of Idaho’s planned acquisition of the University of Phoenix.
- The House’s State Affairs Committee unanimously approved the resolution, which would also allow Idaho’s legislative leaders to file a lawsuit over the deal.
- If the resolution clears the full Legislature, it could create a major hurdle for the transaction. University of Idaho officials are hoping to close the deal to acquire the for-profit university this spring.
Dive Insight:
Last May, the Idaho State Board of Education approved the University of Idaho’s request to set up a nonprofit corporation to purchase the University of Phoenix for $550 million.
Proponents of the transaction say it will enable Idaho to expand higher education access and protect itself against looming demographic challenges. Colleges nationwide are preparing for the demographic cliff, a sharp decline in high school graduates projected to begin next year.
But critics have said the state’s education board didn’t give the public enough time to review the deal before its members approved it. And some lawmakers say they should have been involved in the process.
Officials plan for the newly created nonprofit, Four Three Education, to issue $685 million in bonds to finance the deal. But Kurt Liebich, a member of the state’s education board, told lawmakers last week that they could put the transaction at “grave risk” if they file a lawsuit.
“It would be very difficult for us to place bonds with a legal threat like that out there,” Liebich said during the two-day hearing before the vote.
C. Scott Green, University of Idaho’s president, made the case for the transaction Friday.
“The risk of doing nothing we think is greater than the risk of entering into this transaction,” Green said.
He pointed to increased competition stemming from demographic challenges.
“These other states see declines and have excess bandwidth,” Green said. “They're coming to Idaho to compete for our students. We're already seeing this. So I believe the enrollment margin losses will hit universities in our state harder than most are expecting.”
In order for the state to meet its workforce needs, it needs to focus on adult learners, Green said.
“We all need to pivot there,” Green said.
However, the deal faces growing legal threats.
In February, Legislative Legal Counsel Elizabeth Bowen issued a 10-page legal memo arguing that Idaho’s education board lacks the legal authority to pursue the University of Phoenix deal as it is currently structured.
She contended that the board doesn’t have the ability to acquire or own a private institution like the University of Phoenix, even by indirectly pursuing a purchase through a nonprofit corporation.
And Idaho Attorney General Raúl Labrador recently appealed over a recent ruling, reviving his lawsuit alleging that the state’s education board improperly held closed-door discussions over the deal. The Idaho Supreme Court said it would hear oral arguments in June, Idaho Education News reported.
The publication noted that either the University of Phoenix or the University of Idaho could walk away from the transaction if it isn’t complete by the end of May.
