Idaho lawmakers just killed University of Phoenix purchase proposal. Will that doom it?

BOISE (Idaho Statesman) — A potential truce between lawmakers and the University of Idaho fell apart Wednesday, leaving the future of the university’s planned purchase of the University of Phoenix in doubt.

An effort to restructure the U of I’s purchase of the University of Phoenix failed on the Senate floor Wednesday, potentially spelling doom for the North Idaho school’s planned $550 million purchase of the private online university.

With only days remaining in this year’s legislative session, its path forward was in question. Lawmakers voted down Senate Bill 1450 by a vote of 19-14, stymieing an effort by U of I and the University of Phoenix to appease lawmakers, who have spent weeks exploring ways to address their concerns about taxpayer liability from hundreds of millions of dollars in needed bonding and decrying their lack of involvement in the negotiations.

The state university initially created a nonprofit, Four Three Education, to house the University of Phoenix. University officials and the State Board of Education — which is also the university’s Board of Regents — have maintained the nonprofit would wall off taxpayers from liability if the online university defaults.

Lawyers for the Legislature and Idaho Attorney General Raúl Labrador have argued that the creation of the nonprofit and planned purchase exceed the State Board of Education’s legal authority and violate the state constitution.

IDAHO TREASURER: STATE WOULD STILL BE LIABLE UNDER SENATE BILL

The bill would have converted the nonprofit into an independent body politic, similar to the Idaho Housing and Finance Association, and required two lawmakers appointed by legislative leaders and six community members without a financial interest in the corporation to serve on the 11-member board that would have overseen the nonprofit. Four Three Education would have been barred from asking for state funds and required to provide an annual report to lawmakers.

A Senate committee advanced that measure Tuesday, with lawmakers arguing that it offered a legal path to restructure the agreement and further insulate the state from future creditors. But other state officials continued to cast doubt on the proposal, as lawyers, lobbyists and lawmakers scrambled to settle on agreements in the waning days of this year’s legislative session.

Treasurer Julie Ellsworth believed the new measure could still leave room for state liability “if things were to go south,” according to a letter she sent to lawmakers Wednesday.

A lawyer in Labrador’s office also argued the new structure would not have resolved his concerns about the limits of the board’s authority in a five-page letter Tuesday.

The range of doubts, coupled with worries about the University of Phoenix’s tainted management history, prompted a mix of Republicans and Democrats to vote down the bill.

“It seems to me a little bit odd that we are the only state clamoring to make this happen,” said Sen. Lori Den Hartog, R-Meridian.

Senate Minority Leader Melissa Wintrow, D-Boise, said she was not confident enough the new structure would prove enough of a “firewall” between the university and the state if the University of Phoenix ran into financial trouble.

U OF I IS ‘REVIEWING’ ITS OPTIONS

With only two scheduled days left in the session, U of I could be running out of options.

“We are disappointed this bill did not pass and are reviewing our options,” U of I spokesperson Jodi Walker told the Idaho Statesman by email.

State Board spokesperson Mike Keckler told the Statesman by phone that the board is also exploring its next steps.

Lobbyists for the University of Phoenix could not immediately be reached for comment.

Gov. Brad Little’s office did not immediately respond to a request for comment. Little has supported the purchase and appointed most of the State Board.

The university has a May 31 deadline to seal the purchase and issue $685 million in bonds.

A House measure — which would still need Senate approval — would allow the Legislature to sue over the deal, and Labrador has also said he may sue. The attorney general lost a related case about the state’s open meetings law against the State Board of Education in January, and has appealed it to the state Supreme Court.

State education officials have acknowledged that the legal threats from lawmakers and delays could torpedo the agreement.

Senate President Pro Tem Chuck Winder, R-Boise, who sponsored the failed bill, told the Statesman he doesn’t see a legal path forward for the land grant university to purchase the University of Phoenix without some kind of alternative structure like the one proposed this week.

Without legislative support, he was pessimistic about its prospects. Winder said senators lost out on a potential benefit to the university.

“I think they missed an opportunity to change the face of education,” he said.