Dive Brief:

• The University of Alaska System's board of regents voted Tuesday to merge its three separately accredited universities into a single accredited institution with multiple campuses. 
• The move comes after Alaska Gov. Mike Dunleavy slashed an unprecedented $130 million from the system's budget through line-item vetoes in late June. Coupled with an earlier cut approved by state lawmakers, that accounted for 41% of the system's state funding.
• In an 8-3 vote, the board approved a motion for U of Alaska System President Jim Johnsen to develop a plan for the board to approve. Other options on the table at the meeting were proportionately distributing the cuts across the universities or moving toward a consortium model.

Dive Insight:

With a one-university model, the system will be able to devote a larger share of its budget to academics and student services, while doling out slightly less to research, according to a presentation delivered to the board Tuesday. 

"The board needs to decide whether its house is on fire or whether it's just toast burning," Johnsen said at the beginning of the meeting, which was available as a live stream. "In my view, our house is on fire. It is also my view that determining what's essential, while extremely difficult, is much simpler in a one-university context."

Chancellors of the system's three flagship universities — the University of Alaska Fairbanks, the University of Alaska Anchorage and the University of Alaska Southeast — brought forward the consortium model. They contended it would allow them to retain the strong relationships they have with their regions and better serve nontraditional learners. Those opposed to the plan said it didn't do enough to reduce administrative overhead. 

Last week, the system's board of regents voted 10-1 to declare financial exigency, which allows it to lay off faculty and make program cuts more quickly. In addition to layoffs, it is expected to eliminate programs to make up for the cuts.

"Financial exigency can be credit positive if, along with other steps, it plays a key role in preserving a university's viability," analysts from Moody's Investors Service wrote in an investors note emailed to Education Dive on Friday. But "restructuring and sweeping changes" will be key to doing so, they explained.

Moody's downgraded U of Alaska's credit rating by several notches earlier this month over the cuts, which it called "unprecedented." Analysts said it will be critical for the system to downsize quickly without depleting its cash reserves to improve its rating. 

The size of the cuts is still in the air, however. Earlier this week, Alaska lawmakers passed a bill that would restore $110 million to the system. Still, Dunleavy could veto the measure. He did not say if he'll sign the bill into law, but he told the Anchorage Daily News that it was a "dark day" for the oil revenue dividends for state residents he pledged to increase in part through significant budget cuts. 

Dunleavy's proposal to soften the blow to the U of Alaska has strings attached. It would spread the cuts over two years, restoring $38 million to the 2020 fiscal year budget. However, it "requires reductions to be confined to identified categories," including research and athletics. 

That's raised the alarm of U of Alaska's accreditor. The Northwest Commission on Colleges and Universities (NWCCU) warned the board of regents in a letter Monday that it must retain its independence from the governor to keep its accreditation. 

"NWCCU remains concerned about the long-term consequences of reduced funding," wrote its president, Sonny Ramaswamy. "The additional and, perhaps, inappropriate strong-arm 'guidance' of the Alaska Governor in place of the proper and shared-decision making processes central to the healthy functioning of an institution of higher learning poses yet another factor as NWCCU considers the long-term viability and accreditation status of the institutions within your stewardship."