Is University of Idaho’s plan to purchase Phoenix University on the ropes?

The headwinds facing the University of Idaho’s plan to acquire the University of Phoenix got a lot stronger this week; as did obstacles toward issuing bonds to fund the $685 million purchase through U of I’s affiliated nonprofit, Four Three Education.

On Tuesday, the state’s House of Representatives passed House Concurrent Resolution 26 in a 49-21 vote urging the state Board of Education, acting in its capacity as the Board of Regents of U of I, to reconsider the $685 million purchase of the online for-profit university. If the board doesn’t reverse its approval, the resolution gives legislative leaders the power to file a lawsuit.

“We had hoped for a different outcome yesterday in the Idaho House of Representatives,” said Mike Keckler, the state board’s chief communications and legislative affairs officer. “However, the board has been, and is willing, to cooperate fully with the Legislature as it considers matters related to the proposed affiliation between the University of Idaho and the University of Phoenix.”

During committee hearings last week, lawmakers railed against the board’s decision last summer to enter into a non-binding agreement that expires May 31 to purchase the online university. Lawmakers and Attorney General Raul Labrador both contend the board superseded its authority by agreeing to purchase the online university without the approval of lawmakers.

The House vote comes on top of the Idaho Supreme Court’s decision earlier in the week to hear an appeal in a case filed by Labrador in June that claims the state Board of Education approved the state university’s purchase of the University of Phoenix behind closed doors, defying state open meeting laws.

Ada County District Judge Jason Scott had dismissed Labrador’s lawsuit without prejudice in January saying the board “reasonably believed it was in competition with other public agencies, in other states, to acquire the University of Phoenix.”

“We are very disciplined about following requirements established under Idaho’s Open Meeting Law for executive sessions,” Keckler said in a statement after the lower court ruled.

State Board of Education members discussed the possible purchase in closed executive sessions on March 22, April 25 and May 15 before a public vote in favor on May 18. The three closed meetings were justified by the board based on a segment of the state open meetings law that covers a competitive purchase.

U of I and the state board have sent mixed signals about whether the high court’s decision to hear the open meetings case in June will thwart plans to issue bonds in early May before the non-binding agreement expires May 31, according to Idaho Education News. The non-binding agreement gives either side the option to pull out if a more formal agreement isn’t struck by the deadline.

While U of I general counsel Kent Nelson reportedly said in court documents that the bonds need to be issued by May, Scott Green, the university’s president told lawmakers during hearings last week they have more time to sell the debt.

Wednesday morning, in response to a question about whether the high court’s timing in agreeing to hear the case in June could sour the deal, Keckler told the Bond Buyer, “The timeline for oral arguments related to the attorney general’s appeal is not what we had hoped for, but this remains a very fluid situation and we will continue to work toward resolution.”

Moody’s Investors Service announced in February it had placed the university’s A1 issuer and revenue bond rating under review for downgrade saying a multi-notch downgrade was possible.

The action affects roughly $130 million in rated debt outstanding as of June 30, 2023, according to the Moody’s report.