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University of Idaho-Phoenix megadeal clears a key regulatory hurdle. Where it stands now

The Administration Building at the University of Idaho is seen in this undated photo in Moscow, Idaho. The Higher Education Learning Commission has approved a “continuation of accreditation” under Four Three Education, the UI-formed nonprofit that would finance the purchase.  (Shutterstock)
By Kevin Richert Idaho Statesman

The University of Idaho-University of Phoenix megadeal cleared one regulatory hurdle this month.

Phoenix’s accreditors have signed off on the deal, which would turn the giant for-profit online university into a nonprofit operating under UI’s umbrella.

Accreditation is crucial for colleges and universities. Primarily, it ensures students can transfer one school’s credits to another school.

Phoenix has been fully accredited since 1978. The Chicago-based Higher Learning Commission granted the university a 10-year renewal earlier this year but that renewal came before UI announced plans to pursue a $685 million acquisition of Phoenix.

As a result, the commission needed to approve a “continuation of accreditation” under Four Three Education, the U I-formed nonprofit that would finance the purchase and assume oversight of Phoenix.

The commission approved Phoenix’s request on Nov. 2. UI President C. Scott Green broke Phoenix’s news Tuesday, in an email to university employees. (A Higher Learning Commission spokesperson confirmed the accreditation decision in an email Wednesday morning.)

“This is great news and a big step closer to finalizing the affiliation,” Green wrote.

Several obstacles remain in the path of the purchase.

UI still needs the go-ahead from its own accreditors, the Northwest Commission on Colleges and Universities.

“(We) will meet with them soon to ensure their support,” he wrote.

There is no time frame for NWCCU to take up the matter, UI spokeswoman Jodi Walker said late Tuesday.

Green downplayed another obstacle: Attorney General Raúl Labrador’s lawsuit, which accuses the State Board of Education of breaking state law when it met behind closed doors to discuss the Phoenix purchase.

The case will go to trial, likely sometime within the next three months. A district judge has rejected several of Labrador’s complaints.

The trial will focus on one question: whether UI faced competition from other public bidders as it pursued a Phoenix purchase. The State Board cited competition as justification for the closed-door executive sessions.

Green dismissed the complaint as a “technical question,” adding that the State Board “believes it will prevail on this question as well.”

And if UI’s accreditors endorse the deal, and the State Board prevails in court, another big obstacle remains. Four Three would then have to go to the bond market to finance the purchase. UI officials maintain that Four Three can swing the purchase without any state support, using Phoenix’s revenues to cover bond payments – but UI could wind up offering up to $10 million a year as a taxpayer-funded backstop, in case Four Three fails to make payments.

UI also maintains that the deal could provide the university with $10 million or more in annual funding, gleaned from Phoenix revenues.

UI hopes to finalize the complicated, controversial purchase early next year. If a deal is not in place by May 31, either party can walk away.

Like Green, University of Phoenix spokeswoman Andrea Smiley expressed confidence that a deal will be completed.

“University of Idaho and University of Phoenix will continue their work together, and with our regulators, as we work to finalize our agreement,” she said Wednesday. “We are highly confident in our future affiliation and its benefits for our students, staff and faculty, and alumni.”