University of Phoenix Affiliation FAQ

University of Phoenix is an institution of higher learning that has served mostly working adult learners with dependents for almost 50 years. Started in 1976, the university offers flexible online learning options for non-traditional students. Historically, University of Phoenix included physical locations in cities across the country, but the university now delivers education primarily in an online format due to the overwhelming preference of its students and prospective students choosing to access the flexible, innovative online learning environment. 

University of Phoenix has approximately 85,000 students and offers programs at all levels: microcredentials, certificates, associate degrees, bachelor’s, master’s and doctoral degrees. 

Mission: University of Phoenix provides access to higher education opportunities that enable students to develop knowledge and skills necessary to achieve their professional goals, improve the performance of their organizations, and provide leadership and service to their communities.  

Yes. It is accredited by The Higher Learning Commission and recently was reaccredited for a period of 10 years. The Higher Learning Commission is a U.S. Department of Education-recognized accreditor.

The full list of college and universities accredited by Higher Learning Commission is available on their website. These include:

• Northern Arizona University
• Ohio State University
• Creighton University
• Kent State
• Bowling Green State University
• Colorado State University
• U.S. Air Force Academy
• University of Colorado

The primary reason is that we share a common mission, to illuminate and elevate students to be successful in their careers and lives. Both institutions serve a significant number of first-generation students who benefit from robust support systems. We can learn from each other how to best serve all learners and ensure that address does not dictate access. We believe we are culturally aligned around student success.   

• This is an incredible opportunity for both institutions to diversify our programmatic portfolios. This transaction will improve student access to higher education and will expand learning technologies and strategies. 
• It builds capacity for expanding service to higher education by broadening U of I’s reach to adult learners and University of Phoenix’s reach into Idaho. As we face a national enrollment cliff in traditional students and increased demand from adult learners, this brings together two institutions that complement each other and share a vision for student success.
• It provides a robust technology infrastructure we can iterate for use by University of Idaho and statewide online programs. The student information system University of Phoenix has built for enrollment and student support is comprehensive and well-tested.   
• This diversifies revenue streams, adding stability for both institutions during a time of uncertainty in state funding in Idaho and significant changes in the national higher education landscape. 

University of Phoenix employs approximately 130 full-time faculty and 2,800 adjuncts. Most of the faculty are working professionals in their field. They are vetted, provided professional development and teaching support, and regularly reviewed to ensure classes are high quality. University of Phoenix instructors have an average of 14 years of teaching experience and 27.6 years of professional experience in their field.  

The not-for-profit corporation will acquire all the assets of University of Phoenix. This includes a high-capacity, well-developed digital education platform and a few remaining leases for physical locations. A few of University of Phoenix’s campuses remain open but are expected to migrate to a fully online modality. In addition, the plan is to maintain University of Phoenix’s leadership and staff who are highly skilled at delivering online education. The Phoenix campus, which houses the administrative offices of the university and offers space for in-person components of various degree programs, will remain open.

University of Phoenix has been working diligently to improve its reputation by continuing and amplifying its focus on student success and outcomes since it was purchased by its current owners in 2017. University of Phoenix management believes the goals set several years ago have been accomplished and is ready for the next chapter in the university’s evolution.

University of Phoenix is held as part of a private equity fund, which by its nature has a defined life. Our understanding is that the fund that holds University of Phoenix has reached its termination date. The fund must sell its investments upon termination date, and this is why they were willing to negotiate such a fair price.

We do not know the details of the Arkansas deal. We know that the vote was 5-to-4. We also understand, from public information, that their board was not fully included in the conversation prior to the day of the vote, and some were disgruntled by that fact.

This transaction is far from complete. While it has moved fast and will continue to be a priority, we also need to address the current needs of our university. Postponing necessary decisions has a ripple effect that will damage our university in the months and years ahead. While we have been proud to hold tuition level for the past three years, there is a funding gap in how CEC is administered and the makeup of the employee pool at universities. The primary reason U of I had to raise tuition is the unfunded CEC mandate. Prior to 2010, the legislature would fund CEC increases on lines covered by tuition. Except for last year’s exception, the legislature stopped fully funding CEC in 2010. We have no other funding sources to fully implement CEC except tuition. This gap in CEC is the source of much of the structural deficits you hear about from our peers. We did not have to raise tuition last year because the legislature funded these CEC lines. This year they did not. We used 3% of the 5% tuition increase to cover the unfunded mandate. The other 2% was used to help offset inflation. But as you all know, from your own households, 2% just scratches the surface of the inflationary pain we are all feeling. It certainly does not cover the full impact of inflation on our university. This is the reason we are looking for ways to help solve our own problem – the reason we would look to deals like this one with University of Phoenix. The well we return to each year is not getting any deeper. Like any city looking to grow its population, we must drill an additional well. 

Purdue Global 

University of Massachusetts 

University of Arizona  

Are a few who have also acquired for-profit entities. 

• Provides teaching and solutions that benefit Idaho.
• Removes barriers to access for place-bound or time-bound students.
• Addresses the adult learner category with potential to serve traditional and dual credit students.
• It gives legislators and the state a national platform to become a leader in shaping the future of education.
• Creates and acquires IP and technology solutions for the benefit of Idaho.
• Expands capacity for popular degrees for nursing, healthcare, teaching, and cybersecurity among others.  
• Maintains a financially sustainable and well-managed university through a strong business model that will enable continued investment in University of Phoenix and U of I.
• Diversifies revenue sources to help stabilize enrollment during the coming demographic disruption. 

The cost and time to develop the systems and programs that can become available to U of I through the University of Phoenix affiliation are prohibitive, and likely would not come close to generating the ROI this transaction possesses.

Experts tell us to build the technology would take up to 100 people working full time for at least two years, and likely much more. During this period, cash would be going out without any income coming in, and at the end of the day, there likely would not be enough students in Idaho to generate the ROI needed to make such an investment. With the University of Phoenix, we get the systems that the school has not only built but also spent decades refining. We also get the income streams that can help us leverage the system for Idaho students. They have focused for decades on creating a world-class learning environment. This positions U of I to mitigate disruption and meet the unique needs of adult learners

The transaction aligns with objectives laid out by U of I and state of Idaho. In 2017, the Higher Education Task Force recommended: 

• Establishing a state-wide digital delivery solution, 
• Removing barriers to access for place-bound or time-bound students and 
• Expanding online college deliver to adult learners.

This transaction does exactly these things.

Beyond that, it gives the state a national platform to become a leader in shaping the future of education. The transaction also aligns with U of I’s objectives and our land-grant mission to bring the university’s programs and research to the citizens of Idaho: 

• To provide teaching and solutions that benefit Idaho.  
• To create and acquire IP and technology solutions for the benefit of Idaho. 
• And to maintain a financially sustainable, well managed university. 

University of Phoenix is already a competitor to all Idaho institutions. More than 400 Idaho students are already enrolled at University of Phoenix – creating pathways into University of Idaho.

This transaction is about more than revenue, but the revenue U of I does receive may be reinvested in strategic initiatives.

Keeping costs down and increasing access to families with need will always be a priority for University of Idaho. While we are already ranked as the Best Value Public University in the West and #2 nationally only behind University of North Carolina, we know the cost of college, even at U of I is a barrier for some. That is why we have worked hard to raise over $120 million for student scholarships in our latest fund-raising campaign and have kept tuition increases to only the funds needed to cover our unfunded Change in Employee Compensation and a portion of inflation. Looking forward, University of Phoenix is almost exclusively online, so they will not have some of the costs that a destination campus has. Furthermore, by converting to a not-for-profit, dollars that used to be paid in taxes and distributions that would go to owners can now be used for student success. 

The return to Idaho taxpayers is infinite. The state will gain access to world-class systems and better access to education for place- and time-bound students, helping them qualify for in-demand jobs without the need for state appropriations. Since no money is directly invested into the business being affiliated by the state or University of Idaho, the payments received from University of Phoenix literally create an infinite return on investment.

No. U of I will continue to pursue the classification and affiliating with University of Phoenix will not change our metrics or our current status. We will continue to invest in our goal of R1 with financial support from P3.

University of Phoenix is a complete system of instructors, staff and leadership. We do not expect a significant impact to U of I operations, jobs or needs.

No. U of I’s online programs will continue as currently offered.

Degree paths will remain separate for now. U of I already accepts more than 560 transfer courses from University of Phoenix.

U of I through the Board of Regents will be the sole member of the new not-for-profit corporation that will operate University of Phoenix after the transaction is consummated. The not-for-profit corporation will be governed by a fiduciary board of trustees. The U of I Board of Regents will appoint the trustees consistent with accreditor expectations regarding an independent board.

No. The University of Idaho will continue to work through policies established by the State Board of Education. For instance, we regularly collaborate with Idaho State University to determine how to meet healthcare demand in North Idaho and leverage areas where the U of I has expertise (especially regarding physicians). We will continue to collaborate with our sister institutions to serve all of the state’s students.

In the areas of academics, shared governance will have a large role in any potential integration of academic programs. It is the goal of both U of I and University of Phoenix to ensure all students receive a quality education and that both institutions are good places to work.

There is no expectation for faculty at either institution to teach at the affiliated institution.

The availability of dual credit course for Idaho students through University of Phoenix would need to be discussed and approved by the not-for-profit independent governing board and U of I’s board of regents.

The University of Phoenix fee structure is one rate for all students. That will not change in the foreseeable future, although we hope that after closing the deal, we can refocus a portion of prior payout to investors into scholarships for Idaho students.

If the not-for-profit was not acquiring the assets of University of Phoenix, there would be no money. The debt issued against the University of Phoenix assets is paying for the transaction.

Yes, but we don’t believe that is what the legislature wants to do.

While we certainly appreciate and need the appropriations the legislature approves each year, it is no secret that the needs of all institutions just to maintain the status quo is beyond what is received. Knowing that higher educations’ percentage of the state budget continues to decline, we need to find resources for new programming to meet industry needs. U of I is simply engaging in a unique opportunity to supplement the state dollars and provide an even greater economic return back to the state for that continued investment.

We have proven success in identifying unique opportunities and bringing them to fruition. Our public-private partnership of our utilities is an example of doing business outside the traditional higher education model and, in return, increasing our financial ability to reinvest in ourselves without burden to taxpayers.

We would hope the legislature would want to work with us to be successful. We look forward to the great conversations we can have about the benefits of this affiliation to the state of Idaho. 

University of Phoenix is highly successful, earning $800 million a year, supporting 85,000 students and saw a healthy online enrollment growth of 8% so far this fiscal year. Their teaching and support systems are first-rate and students who need the flexibility of courses offered online every six weeks continue to look to University of Phoenix. They are more nimble than most if not all education providers in the country.

U of I executive leadership has met with University of Phoenix leadership. Our programs are complementary and our goals for serving students are similar. We share a mutual desire to reach first-generation and underserved students. U of I has 52% first-generation students. University of Phoenix has 60%. Our student populations are different — U of I focuses primarily on traditional, residential students and University of Phoenix focuses primarily on adult learners who are working. U of I excels at delivering courses in person and University of Phoenix excels at delivering courses online. Together, we can meet the needs of all learners and complement each other.

Beyond the financial support to U of I, University of Phoenix has the expertise and experience to quickly and cost-effectively develop data-informed courses to meet the immediate skill and competency needs of its students.

University of Phoenix provides a robust technology infrastructure we can iterate for use for U of I and statewide online programs. The student information system University of Phoenix has built for enrollment and student support is comprehensive and well-tested.

U of I has a 135-year history of delivering high-quality education in a public setting.

The affiliation with U of I allows University of Phoenix to move to a not-for-profit operation. This will allow surplus revenue to be directed to the benefit of the institution’s students and operations without the need to consider investor financial expectations.

Initially, University of Phoenix will operate separately from U of I, in a 501(c)(3) that is affiliated with the University of Idaho. University of Phoenix will remain an independent educational institution operated by its own president and leadership team.  

There are areas of future collaboration and integration that we will explore and evaluate together. We will take the time to do this right for all involved.

Mission: The University of Idaho will shape the future through innovative thinking, community engagement and transformative education.  

This transaction and resulting affiliations gives us the opportunity to expand the educational offering and financial resources of U of I and is innovative, engaging and transformative. We are a high-value educational organization, and this brings our value to even more students for the betterment of the university, the students, our state and our country.

It does not change the mission, focus or goals of U of I. U of I will continue to be a great value for Idaho – teaching its future leaders, answering its most vexing questions and collaborating with industry and citizens to make Idaho productive and relevant in the world market. 

In addition, University of Phoenix’s mission is aligned with our mission:

University of Phoenix provides access to higher education opportunities that enable students to develop knowledge and skills necessary to achieve their professional goals, improve the performance of their organizations, and provide leadership and service to their communities. 

U of I is a traditional land-grant university focused on education, research and outreach in the state of Idaho. Our largest audience is undergraduate students – primarily from the Northwest. We also have a robust research portfolio and extend our outreach to every county in the state. 

University of Phoenix serves primarily adult learners nationwide in an online environment. There is some overlap in classes and programs, but University of Phoenix’s online programs are largely complementary, including in fields U of I does not offer, such as nursing, healthcare administration and counseling.  

Classes at University of Phoenix are not on a traditional academic schedule. New classes begin every five to six weeks, depending on the program, offering greater flexibility for working adults.

It is a separate institution from Online Idaho which is a collaborative effort to provide a marketplace for Idaho-based online classes. We are in discussion with the State Board of Education about iterating University of Phoenix’s platform to support Online Idaho.

When looking at both online and in-person delivery, there are some overlapping programs between U of I and University of Phoenix, but they are primarily complementary. The audience and delivery methods are quite different. But there are also places of future collaboration where students could benefit from moving between the institutions to more efficiently and effectively complete degree programs.

More than 560 University of Phoenix courses are already accepted as transfer credits at U of I. 

U of I is the No. 1 Best Value Public University in the West because we provide quality education while working hard to keep costs to students low. We provide more than $30 million a year in scholarships and grants to students. By affiliating with University of Phoenix, more money will be available to students at both U of I and University of Phoenix.

• Tax savings are estimated at $16 million annually. 
• Operational successes from both institutions can be reinvested in the institutions and the students without factoring in return to investors.  
• Because of these changed financial streams, University of Phoenix students can benefit without detracting from the support for U of I students. 

Traditional universities publicize institutional graduation rates for students who are defined as being first-time college attendees and also full-time students. This rate is not helpful for University of Phoenix because most of their students have some college in their past or are taking courses at a part-time pace. Phoenix also publicizes its institutional graduation rate, which is the percentage of students who complete their programs at a part-time pace (e.g., 3 years for an associate degree and 6 years for a bachelor’s degree).

Nationally, certain risk factors contribute to lower levels of degree attainment, such as being a first-generation college student, working full-time, caring for dependents, as well as different socio-economic and demographic factors. This is why graduation rates vary for different institutions, depending upon the profile of their student body. University of Phoenix provides access to all learners, and many of its students possess multiple of these risk factors.

Phoenix has developed sophisticated data models to identify at-risk students and provide them with support services. Its 6-year graduation rate for bachelor’s degree students, from 2016-2022, is 27.2%. A strong focus on student support strategies, curriculum revisions, and faculty development over the last 5 years has resulted in reported improvements in retention rates of 8%, which Phoenix expects will result in graduation rate improvements in the years to come.

At this stage, the parties have entered into an agreement pursuant to which the newly created not-for-profit corporation affiliated with the U of I will acquire University of Phoenix. The transaction is subject to various necessary regulatory approvals and other actions that will take several months to accomplish.  Accordingly, it is expected that the transaction will be consummated by early 2024. 

The purchase price is $550 million. The seller is also providing $200 million in cash that will transfer to the not-for-profit corporation.

Yes, we had outside counsel review the transaction. The summary of their counsel is:

“The Regents possess ample powers through the Idaho Constitution and applicable Idaho statutes to (i) form a nonprofit corporation, (ii) acquire assets indirectly though the nonprofit corporation, (iii) allow the nonprofit corporation to issue debt and incur liabilities secured principally by the nonprofit corporations’ assets and revenues, and (iv) incur direct university liabilities on behalf of the nonprofit corporation if necessary, subject to the overall limitations that the university serves a public purpose and does not obligate state appropriated funds.”

Read the full text here.

There is no intent to ask for any appropriated funds to execute this transaction.

The initial benefit is $10 million in supplemental education funding to U of I. We expect that amount will grow over time. 

The purchase will be financed through non-taxable and taxable bonds. This money is separate from any U of I budgets or funding lines.

Should the not-for-profit corporation miss payments on debt related to the acquisition, U of I is agreeing to guarantee up to $10 million annually to cover the payment. However, cash modeling has been undertaken and University of Phoenix currently generates approximately $100 million of unrestricted cash flow annually.

Participation in federal student aid programs is a risk to every institution that participates in such programs, including U of I. We had specialists evaluate the risks and built that into our purchase price and mitigation tools to limit the risk to both institutions.

Moody's notified U of I on Feb. 14 that it would review University of Idaho's rating due to the desire to affiliate with University of Phoenix. 

University of Idaho was expecting a reevaluation of our rating and will meet with Moody’s as part of this ratings review process.

No, the transaction is being paid for by bonds issued by the not-for-profit entity.

We are not asking for any investment or subsidy from the state.

U of I’s collaboration and innovative thinking on other projects drew University of Phoenix’s attention and they approached us in March. We recognized the potential value to our university, the benefit for students and the need to move quickly to take advantage of this unique opportunity.

The institutions are interested in obtaining accreditor approval as soon as possible. The transaction will need the approval of The Higher Learning Commission, the accrediting body for University of Phoenix, before it is consummated. The parties are seeking to have The Higher Learning Commission consider their application for approval at the commission’s November board meeting and therefore the application was due by Friday, May 19. A similar process is happening with U of I’s accreditor, the Northwest Commission on Colleges and Universities (NWCCU).

Because of the sensitive nature of such a transaction, a very limited number of members of U of I leadership, supported by outside advisors who specialize in the nuances of such acquisitions, worked on the transaction pursuant to a seller-required non-disclosure agreement.

As part of the transaction, University of Phoenix will become operated by a not-for-profit corporation that will have tax-exempt status under Section 501(c)(3) of the Internal Revenue Code.

The accrediting institution for each university has cleared this affiliation to proceed. 

The Higher Learning Commission confirmed on Nov. 6, 2023, that University of Phoenix accreditation would continue after the close of the transaction and a change in control in the ownership of the institution.

The Northwest Commission on Colleges and Universities confirmed on Feb. 7, 2024, that the transaction does not constitute a substantiative change to University of Idaho and the commission does not need to take any action. U of I's accreditation is not impacted. 

The University of Idaho has agreed to co-sign program participation agreements with Four Three Education, Inc. and understands that in doing so, U of I may be financially responsible for recoupment of liabilities that are finally determined and imposed by the U.S. Department of Education, to the extent those liabilities are not paid by Four Three Education, Inc. This was the subject of due diligence in considering this transaction and the university believes that with $200 million left on the balance sheet at close, the operating strength of Phoenix, as well as other financial consideration, mitigates the risks.

We were first approached in early February 2023, and while there were preliminary discussions with the seller and the sellers’ representatives to understand the opportunity and determine if it was something we would be interested in, we entered into negotiations and due diligence in earnest mid-March.

The timeline of state board of education meetings to discuss this opportunity, with links to agendas and materials is below. 

May 18, 2023 Special Board Meeting 

• Public Meeting Agenda
• Attachment 1 – Initial Articles of Incorporation for NewU, Inc. Attachment 2 – Initial Bylaws of NewU, Inc. Attachment 3 – Asset Purchase Agreement Term Sheet Attachment 4 — Resolution of The Regents of the University of Idaho 

May 15, 2023 Special Board Meeting 

• Agenda 

April 24, 2023 Regular Board Meeting, Executive Session  

• Agenda 

March 22, 2023 Special Board Meeting 

• Agenda 

The Board of Regents approved the creation of a 501(c)(3) with the intent of purchasing the University of Phoenix assets.

We engaged lawyers with the international firm Hogan Lovells, who are leaders in higher education law. Their specialists advise us on the education law elements and on income tax laws applicable to the new affiliated not-for-profit corporation. The Boise law firm, Hawley Troxell, has advised us from the beginning on the corporate structure of the Idaho not-for-profit entity, including the legality of forming the entity and of the proposed bond financing. A national accounting firm performed quality of earnings analysis, valuation and other services to aid in the transaction negotiations.

Our advisors included legal, regulatory, financial and accounting experts to help us conduct our due diligence.

From the beginning the university engaged lawyers with the international firm Hogan Lovells, who are experienced in acquisitions such as this. Their specialists also advised the university on the education law elements and on income tax laws applicable to the new affiliated not-for-profit corporation.

The Boise law firm Hawley Troxell has advised the university from the beginning on the corporate structure of the Idaho not-for-profit entity, including the legality of forming the entity and of the proposed bond financing. A national accounting firm performed quality of earnings analysis and other services to aid in the transaction negotiations.

We also engaged Reith Jones Associates and Citibank. Their findings were used to help us produce representations and closing conditions to mitigate any risks found.

In addition, we have watched other recent transactions like this and learned from them. University leadership has taken into account the regulators’ rules and expectations.

For example, some transactions have faced some regulatory challenges because the seller remained involved after closing or the board was not fully independent. This transaction will be a “clean break” from the sellers, meaning the sellers will have no continuing role in the University of Phoenix. The acquiring entity, Four Three Education, Inc., will have a new board, with an independent majority, appointed by the University of Idaho Board of Regents.

Understanding that this sort of transaction is not normal for higher education nor done before in Idaho, we recognized the need to bring in experts in a variety of areas to ensure this is a good deal for the state of Idaho. We have been paying our advisors from our reserves but expect to be reimbursed from proceeds at closing for most, if not all, of the expenses. Any remaining expenses will be reimbursed from revenue streams emanating from the University of Phoenix after the transaction is closed.

The state party to this transaction is the Board of Regents. The Board was, and is, fully represented.

The taxpayers are not being asked for any financial support for this transaction. In fact, it is designed to complement the funding received from taxpayers. We greatly appreciate the support of the Idaho taxpayers through our regular appropriations. But we know this revenue stream has limitations, and there are many demands for these dollars. That is why we are working to add additional revenue and technology to a stressed system. This transaction does not require investment by the state or Idaho taxpayers.

Distributions of funds from the not-for-profit corporation can be handled under an affiliation agreement approved by the independent board of the corporation. U of I will remain protected as a separate legal entity as will the State of Idaho.  Even the Board of Regents does not have direct liability for the day-to-day operations of the not-for-profit corporation simply because it is the sole member.

Student loan debt is certainly something we pay attention to at U of I. It is a conversation we have had with the new management of University of Phoenix and looked into as part of our due diligence. First, as a result of careful due diligence, University of Idaho leadership has full faith in University of Phoenix's business practices. But U of I has evaluated the risk and prepared for a worst-case scenario.

University of Phoenix management believes that the exposure is approximately $1.5 million annually. We are conservative and believe it could be higher, so a number of tools will be used to mitigate exposure. There is over $200 million in cash that will be left on the balance sheet as of day one, and other financial tools will be utilized to hedge or mitigate risk.  Converting the for-profit institution to a not-for-profit will also help as the regulatory authorities are primarily concerned with the for-profit sector. University of Phoenix will be actively managing these risks.

As with any business transaction, there has to be a certain amount of pre-work done to understand what is at stake. U of I made no commitment to the acquisition before the approval vote by the Regents. But the Regents needed enough information to make an informed decision. The transaction was on tight deadline, should they vote to proceed. The work was done in parallel, gathering facts for the Regents to act on and moving forward with work we could do that would not bind us, should the Regents deny the effort. Because of that, we filed the paperwork to set up the 501c3 a couple days before the vote was taken. This action was non-binding and easily reversed should the transaction not be approved.

The state’s Attorney General has challenged some of the meetings held by our Board of Regents. After significant legal review, our board strongly believes they complied with all open meeting law requirements. Importantly, a Deputy Attorney General was present for all of those meetings.

District Judge Jason Scott ruled on Jan. 20, 2024 that University of Idaho Board of Regents did not violate open meeting laws leading up to a public vote, setting in motion the purchase of University of Phoenix by Four Three Education Inc. The judge dismissed the case. On Feb. 16, 2024, the Attorney General appealed to the Idaho State Supreme Court. 

We cannot speak for the State Board of Education, but it is our understanding that they have followed their normal procedure for approving similar 501c3 entities. As reported in the media, the Board received significant feedback prior to their vote.

No, University of Phoenix will not be a public university in Idaho like U of I, Boise State, ISU or LC State. It is its own entity with its own independent board. University of Phoenix has been continuously accredited by the Higher Learning Commission since 1978 and recently had its accreditation reaffirmed for 10 years, through 2032-33. There are no plans to change the accreditor for University of Phoenix.

Knowing the importance of following our chain of command, we worked closely with the State Board of Education during our due diligence. The State Board of Education met four times to discuss this transaction and review documents. They have been kept advised since early on and updated regularly. They also have their own deputy attorney general who advises them. Here are links to the board materials from each meeting.

May 18, 2023 Special Board Meeting

• Public Meeting Agenda
• Attachment 1 – Initial Articles of Incorporation for NewU, Inc. Attachment 2 – Initial Bylaws of NewU, Inc. Attachment 3 – Asset Purchase Agreement Term Sheet Attachment 4 — Resolution of The Regents of the University of Idaho

May 15, 2023 Special Board Meeting

• Agenda;

April 25, 2023 Regular Board Meeting, Executive Session

• Agenda

March 22, 2023 Special Board Meeting

• Agenda

This opportunity came to us unexpectedly and very close to the time it was made public. We quickly identified the potential of this transaction and began compiling a review team of the best and brightest professionals, including those at Hawley Troxell, to bring enough due diligence, data and fact checking to the state board to be able to make an educated decision on the formation of an entity to acquire University of Phoenix. Until the week of March 22, 2023, there simply was not enough common ground found with the seller to have a meaningful conversation.

While some may now suggest that a slower, more public process would have been preferred, this transaction moved at the speed of business to get us to this point – the point where we were able to agree to terms with the seller and could fully recognize the potential of this platform for all of Idaho. 

University of Idaho is Idaho’s land grant and could not continue to keep its cost of attendance affordable and execute on its statewide mission without General Funds.  

The transaction pays for itself. U of I is not making an equity investment, and transaction expenses will be recovered when payments begin flowing from University of Phoenix to U of I. The winners will be the citizens of the state of Idaho who will not only have one of the nation’s best destination teaching and research campuses, but also access to affordable online alternatives delivered through world class systems.

This is hard enough to execute as a single buyer. It is hard to imagine how to get this done at the state level. But having said that, we are committed to providing these systems to the state board to use anyway they see fit. It might be used for the K-12 education system if they deem it somehow useful. We do see a statewide benefit for these systems. 

We don’t have to have that experience. At the successful close of this transaction, University of Phoenix will be a not-for-profit institution. But most importantly the new management team at University of Phoenix is first rate, and they will have their own independent board with subject matter experts. That enables U of I to work with University of Phoenix to focus on pathways for students and iterate their systems for the benefit of Idaho students. The management of University of Phoenix and their board will oversee and manage their operations.

First, should this transaction be successful, University of Idaho will not own University of Phoenix. The University of Phoenix corporation is a legally separate not-for-profit corporation. We will be affiliated with the corporation through the Board of Regents, which serves as the sole member of the corporation. Therefore, the employees of University of Phoenix will not be state of Idaho employees. They will remain employees of University of Phoenix, through the not-for-profit corporation and will be covered for their benefits by that corporation. 

With the closing of this transaction, Apollo Group will indeed be completely out of the picture. University of Phoenix has a strong president and provost. We are impressed with this team, which was highly focused on continuing to serve students and help them achieve their higher education goals. It is clear we share a vision for pathways for any student who chooses to earn a degree. We have asked our benefits consultants to evaluate how we can ensure we keep key employees. Those packages would, of course, be paid for by University of Phoenix in the normal course of its ongoing operations.

The Regents of the University of Idaho will appoint a slate of directors.

Four Three Education, Inc., is structured as a separate and distinct nonprofit corporation, which will do business as the University of Phoenix. The Board of Regents serves as the sole member.  The Regents will appoint the Trustees of Four Three Education, Inc., the majority of whom must be independent Trustees. These trustees govern Four Three Education, Inc. the same way the Board of Regents governs the U of I. Employees of Four Three Education, Inc. will not be state employees. Instead, they will be employees of Four Three Education Inc., managed by the President of the University of Phoenix, who reports to the Board of Trustees.

That is a question for Workforce Development as they administer the program.

On Wednesday, Sept. 20 the U.S. Department of Education (ED) announced that it had discharged nearly $37 million in federal student loan debt for more than 1,200 student borrowers who enrolled at the University of Phoenix between Sept. 2012 and Dec. 2014, who were allegedly impacted by the “Let’s Get to Work” campaign, and who filed Borrower Defense to Repayment (BDR) claims against University of Phoenix. The "Let's Get to Work" campaign was the focus of a Federal Trade Commission (FTC) inquiry and settlement with University of Phoenix. University of Phoenix adamantly disagrees with FTC’s and ED’s allegations and stands behind its statement from December 2019 in which the University of Phoenix admitted no wrongdoing as part of its settlement with the FTC.  The University of Phoenix intends to continue to defend itself vigorously through available factual and legal defenses, including in any recoupment action. A recoupment action is a procedure by which ED seeks to require an institution to reimburse ED for loan amounts that ED discharged under the BDR rules. As part of due diligence conducted prior to execution of the Asset Purchase Agreement, University of Idaho’s due diligence team engaged specialists in U.S. Department of Education requirements and procedures, and they reviewed and advised on the University of Phoenix’s compliance history and its policies and procedures related to compliance, including with respect to BDR claims. 43E and U of I are highly confident in the comprehensive compliance systems in place at University of Phoenix and the rigorous process used to review each and every BDR claim about which it receives notice from ED, as well as the nature of the BDR claims submitted and the overall risk.

It is important to keep in mind that the Department of Education’s actions here are a direct result of a judgment against Ashford University. Ashford lost at trial in a case brought by the California Department of Justice. The court found that Ashford had made more than 1.2 million misleading representations to students from March 2009 to April 2020. The University of Phoenix has no such judgment against it.

Under the terms of the asset purchase agreement, University of Phoenix would be owned by a newly created not-for-profit known as Four Three Education, Inc., which would be affiliated with the University of Idaho. University of Idaho would not be liable for the obligations of University of Phoenix, except for what it agrees to take on such as a potential agreement to backstop $9.9 million in annual debt service payments in the unlikely event University of Phoenix is unable to pay bond debt obligations or should the University of Idaho co-sign University of Phoenix’s PPA agreement.

Based on its due diligence, University of Idaho is confident in the comprehensive compliance systems in place at University of Phoenix and the rigorous process used to review and respond to each and every BDR claim, as well as the overall financial risk.

If University of Phoenix were to face a BDR recoupment demand based on a large-scale loan forgiveness action similar to Ashford’s, the University of Phoenix is prepared to vigorously challenge such action on appropriate grounds.

Additionally, University of Phoenix has a long history of financial stability and strong operating performance. That, combined with other financial tools in place (including $200 million in cash that is to be left on the balance sheet post-closing) mitigate that risk. Accordingly, it is expected that the University of Phoenix would be able to meet its own obligations.

University of Phoenix has robust student support systems for non-traditional students that it honed over nearly 50 years. There are best practices established by University of Phoenix that U of I will be able to incorporate into our own student support systems. These include skills mapping courses to help students identify the skills built through coursework; around-the-clock support through their Life Resource Center and a Virtual Student Union; and a commitment to support after graduation through their Career Services for Life program, among other resources.

Yes. A number of public institutions have affiliated through acquisition of online universities. A few examples include: 

• Purdue affiliated with Kaplan University, which was a for-profit university and is now known as Purdue Global. 
• UMass affiliated with Brandman University, a not-for-profit institution that is now known as UMass Global. 
• University of Arizona affiliated with Ashford University, formerly a for-profit institution now known as University of Arizona Global Campus. 

But, these transactions are not comparable to the University of Phoenix/University of Idaho affiliation. 

• In the other transactions the sellers retained post-transaction rights revenues.  
• This transaction removes the sellers after the transaction closes so excess revenues can be reinvested in students and the institutions, with no obligation to the prior owners.  
• UOP is in a stable financial position it continues to get even better. It makes money.    
• UOP is being sold in its entirety.

University of Phoenix's reputation was tarnished by massive growth in the mid-2000. A change in ownership refocused the university on its founding mission to serve working adult learners who did not have the ability to attend college in a traditional setting and found the need for credentials to advance in their careers. They required a career-relevant education, significant student support and flexible online learning. Part of the evolution under new ownership in 2017 included the strategic closing of some physical campuses, greater investment in student support and outcomes, and improving business practices. 

U of I leadership has done due diligence to assess the current state of University of Phoenix and believes University of Phoenix has strong academic operations and a robust compliance-oriented approach, and that the acquisition would benefit the U of I. The potential financial risks have been factored into the transaction structure and terms. 

University of Phoenix experienced massive growth with enrollment as high as 470,000 students in the early 2000s. The university has since refocused and redoubled its efforts on returning to its founding mission of quality education for adult learners with support and flexible online learning. Today, it has 85,000 students that will greatly enhance opportunities for U of I.

U of I has a long history of providing the best value public education in the West. U of I leadership has met with University of Phoenix leadership. University of Phoenix leadership cares deeply about education and access for non-traditional students. By becoming a non-profit university affiliated with U of I, University of Phoenix can focus on what it values — helping working adults advance their education and find success in their careers. We believe this shared value will lead to a successful collaboration.

The U of I leadership team believes reputational risks can be managed, and the affiliation with U of I will help with that objective. There are many things they do very, very well.

The leadership team does not believe taking bold steps to put U of I on a path to stability is damaging to Vandal alumni. They also do not believe bringing additional educational opportunities to the citizens of this great state is damaging to the state. University leadership does not believe providing additional revenue to invest in students and research is damaging to the university’s push for R1 status. This bold move does exactly the opposite. It positions the U of I to take full advantage of new and innovative ideas, programs and to fill industry needs.

It is important to note that the current University of Phoenix management was put in place recently. There is no question University of Phoenix endures heavy and unrelenting scrutiny, particularly from ideological opponents of for-profit colleges. Over the past 20 years, University of Phoenix has elected to settle a few high-profile matters rather than litigate to resolution. Litigation presents significant uncertainty and distracts from the institution's mission, so it is sometimes better to settle the matter and move on. These settled matters have been disclosed and explained to the University of Phoenix’s accreditor and regulators. Critics and ideological opponents use these settlements to allege impropriety, even absent findings, of wrongdoing by a judge or jury. University of Phoenix remains focused on serving working adult learners and notes that its more than one million graduates stand in proud testimony to the university’s success.

University of Phoenix has purposefully reduced its student population yet remains one of the largest universities in the country. The current owners divested the international operations, closed underutilized in-person campuses, and focused on delivering what students have indicated they are seeking, particularly post-COVID. Namely, University of Phoenix remains focused on providing quality online programs delivered to adult learners.

There has been much news about “borrower defense to repayment” (BDR), under which a student borrower may allege certain acts or omissions of an institution of higher education as a defense to repayment of a federal student loan. The BDR process is regulated and administered by the U.S. Department of Education (ED) and applies to all types of institutions, including public, private non-profit, and for-profit schools.  ED reports that hundreds of thousands of BDR claims are currently pending against more than 7,000 institutions.

The University of Phoenix provides a substantive response on the merits to each BDR claim about which it receives notice from ED.  As part of the University of Phoenix’s process for reviewing and responding to each such BDR claim, the University of Phoenix reviews the claim, researches its student and business records for relevant facts and circumstances, then develops and timely submits to ED responses, objections, and defenses, including evidence to support reductions to the amount of any loan discharge. Based on this review and research, the University of Phoenix believes that the majority of the University of Phoenix’s known BDR claims are without substantive merit, lack sufficient supporting evidence, are otherwise deficient, and/or are subject to valid defenses (including regulatory limitations periods).

In September 2023 ED announced that it had approved more than 1,200 BDR claims made by student borrowers who had been enrolled at University of Phoenix between September 21, 2012 and December 31, 2014.  ED stated that the approval was based on its finding “substantial misrepresentation” related to the University of Phoenix’s “Let’s Get to Work” advertising campaign, which ran from approximately Fall 2012 to February 2014.  With respect to these specific BDR claims, ED announced it had discharged nearly $37 million in federal student loans. ED also announced its intention to pursue recoupment from the University of Phoenix of what ED characterized as the liabilities associated with the approved BDR claims. To date, however, ED has not initiated any recoupment action against University of Phoenix.

University of Phoenix intends to continue to respond to each BDR claim and to defend itself vigorously through available factual and legal defenses, including in any recoupment actions.

University of Idaho’s due diligence team is conservative and so several financial tools will be used to mitigate exposure. There is over $200 million in cash that will be left on the balance sheet as of day one, and other financial products and mitigation tools will be utilized. University of Phoenix will continue to actively manage these risks.

Student loan debt is certainly something we pay attention to at U of I. It is a conversation we have had with the new management of University of Phoenix and looked into as part of our due diligence. University of Phoenix works with its students to support responsible borrowing. The characteristics of University of Phoenix’s student population — their average student age is 38 years old, most have dependents, and most are working — are consistent with students who borrow to fund higher education. University of Phoenix has launched various initiatives to help reduce student borrowing, and those initiatives have been successful. Notwithstanding general inflation and increasing costs, the average debt levels for University of Phoenix graduates have decreased by almost 10% between 2013-14 ($34,202) and 2020-21 ($30,907). University of Phoenix continues to work with students to reduce costs where possible, and to encourage responsible borrowing. The affiliation between University of Idaho and University of Phoenix will open new learning opportunities for students. Both institutions remain committed to providing high quality, cost effective higher education.

University of Phoenix has more than 1 million alumni – people who have elevated themselves and their families by earning a degree.  

Following the mass expansion of online education in the mid-2000s, the entire for-profit education industry came under great scrutiny. Some for-profit universities put returns to investors above students during that era, and made other bad decisions, and most paid the consequences.

University of Phoenix did indeed grow rapidly during the mid-2000s as well, but since 2017 has had a change in philosophy and leadership. New leadership and ownership refocused the university on its founding mission to serve working adult learners who did not have the ability to attend college in a traditional setting yet needed credentials to advance in their careers. They required a career-relevant education, significant student support and flexible online learning. Part of this evolution has included the strategic closing of some physical campuses, greater investment in student support and outcomes, and improving business practices.

U of I leadership has done due diligence to assess the current state of University of Phoenix and believes University of Phoenix has strong academic operations and a robust compliance-oriented approach, and that the acquisition would benefit U of I. The potential financial risks have been factored into the transaction structure and terms.

More than 400 students from Idaho are currently enrolled at University of Phoenix. Additionally, there are more than 7,370 University of Phoenix graduates from Idaho. Nevertheless, the vast majority of University of Phoenix students live outside of Idaho.

We see several reasons beyond the financial benefits derived from having these students as a part of our affiliation and the funding they bring to build out systems for the benefit of Idaho citizens. Our two universities can build program pathways to the U of I — someone with an associate degree who may want to finish with a bachelor’s in person, or a doctoral candidate that may want to utilize U of I labs, something University of Phoenix does not have. These students can be a source of highly trained and educated labor filling the desperate needs of Idaho industry. And we can serve more Idaho students through our affiliation.

President Green has written on this topic in one of his two previously published books and more recently on university management issues in a book currently under production that should be published at the end of the year. The president fully understands the flawed structure and execution of the Water Center project.

But the two projects could not be more different. The Water Center was a real estate development project over 20 years ago that ran into financial trouble due to prolific spending and conflicts of interest between the U of I Foundation and the university, the most notable being that the CFO of the university was also the CFO of the Foundation and was moving money back and forth between the two entities and spending millions in pre-construction costs without oversight. University administrators chose to do all the work themselves, excluding their own general counsel and did not bring independent consultants in to advise. President Green has been involved in high-dollar transactions his entire career and firmly believes the initiative to affiliate with University of Phoenix is quite different from the Water Center. This is a transaction to buy a profitable business and benefit from its technologies and online support strengths. The university brought in the brightest minds to ensure the new entity is set up under modern corporate governance and risk mitigation standards.

The only thing about this project that resembles University Place and the Water Center is that it involves the University of Idaho.

Yes. Hawley Troxell addressed several issues in a July memo.

The section dealing directly with this states: 

1. Liabilities Migrating to the State

The earlier Memorandums addressed the constitutional issues relating to the whether the Four Three debt under the Loan Agreement constitutes debt of the State or is subject to legislative appropriation. Those questions are answered in the summary above. In addition, beyond the constitutional, statutory and caselaw analysis, Legislators should note that the State’s own financial reporting confirms these distinctions and principles. Page 39 of the CAFR explains that the debt of only the Idaho State Building Authority and the Fish and Wildlife Foundation are considered “component units” of the State. This is the case because the payments for their bonds are traceable to state appropriations. The Note on page 186 of the CAFR states that:

“the debt and liabilities of independent bodies corporate and politic created by law and which have no power to levy taxes or obligate the General Fund of the State are not debts or liabilities of the State of Idaho.”

Also, in the State CAFR on page 113 is a reference to the Idaho Housing Agency’s bonds issued for the benefit of nonprofit corporations.  Although it appears a conduit other than Idaho Housing will issue the bonds secured by the Four Three Loan Agreement, it is instructive that this footnote makes clear, as we have also concluded from a legal matter in Memorandums, that the obligation on such bonds is solely that of the resources of the nonprofit borrower. 

At the end of this transaction, University of Phoenix will no longer be a for-profit business. It will operate as a tax-exempt 501(c)(3) organization. Additionally, University of Phoenix will seek recognition from the U.S. Department of Education that it operates as a not-for-profit educational institution.

As a non-profit entity, revenues that previously went to investors and taxing authorities can then be invested in students in the form of scholarships, cutting edge programming and student-facing technologies. We can’t think of a better way to exhibit our role as a land-grant institution than to turn profits from investor’s pockets to student access.

NDAs are standard in all business transactions of this nature. NDAs protect both the buyer and the seller. The seller requires an NDA so that sensitive information cannot be shared with competitors, or if they do, there is recourse. This is important because should the deal not make it to close, the entity may find itself back competing in the marketplace. It helps the buyer because it enables them to review the books and records of the entity being bought at a detailed level rather than just relying on management’s representations. Because it does limit the number of people who can review the books, we made sure we brought in the right people, with the right experience, to review them.  We have full faith in the team that represented University of Idaho and know that their work greatly reduces risk to us.

While it is not illegal for the university to own assets outside the state of Idaho, at the close of this transaction, U of I will not own University of Phoenix assets, the not-for-profit corporation will own the assets.

The transaction structure does not create a fifth public state higher education institution. University of Phoenix currently provides online education services to students across the country, including those living in the state of Idaho and will continue to do so. More than 500 University of Phoenix courses are accepted by U of I for credit transfer by our students now. University of Phoenix’s current operations will operate under the not-for-profit corporation, which remains legally separate from the state of Idaho and will not be a public institution. None of this requires state appropriations or makes the state liable.  In addition, since the state is not a party to the transaction, the Board of Regents does not need legislative approval.

Many land-grants own assets outside their home state. In fact, as an interesting aside, some received land outside their state as their original federal land-grant used to finance their institutions. Cornell University received 500,000 acres across 15 states, including Wisconsin, California, Kansas and Minnesota.

We have had our outside counsel review the transaction. The summary of their counsel is:

“The Regents possess ample powers through the Idaho Constitution and applicable Idaho statutes to (i) form a not-for-profit corporation, (ii) acquire assets indirectly though the not-for-profit corporation, (iii) allow the not-for-profit corporation to issue debt and incur liabilities secured principally by the not-for-profit corporations assets and revenues, and (iv) incur direct University liabilities on behalf of the not-for-profit corporation if necessary, subject to the overall limitations that the University serves a public purpose and does not obligate state appropriated funds.” 

We have had our outside counsel review the transaction. The summary of their counsel is:

“The Regents possess ample powers through the Idaho Constitution and applicable Idaho statutes to (i) form a not-for-profit corporation, (ii) acquire assets indirectly though the not-for-profit corporation, (iii) allow the not-for-profit corporation to issue debt and incur liabilities secured principally by the not-for-profit corporations assets and revenues, and (iv) incur direct University liabilities on behalf of the not-for-profit corporation if necessary, subject to the overall limitations that the University serves a public purpose and does not obligate state appropriated funds.” 

Idaho does have a structure for new non-profits to bond. The conduit issuer in Idaho is Idaho Housing and Finance Association (IHFA). However, the statutes that govern IHFA do not allow the entity to issue debt to finance intangible assets.  Because the purchase agreement for Phoenix involves intangible assets, IHFA has informed us that they cannot serve as the issuer for our transaction.

University of Idaho approached a number of different national conduits. National Finance Authority (NFA) in New Hampshire agreed to participate in the financing.  

This transaction does not lend the state’s credit. These bonds are being issued by the University of Phoenix not-for-profit corporation that is acquiring University of Phoenix, using University of Phoenix assets as collateral. There is no state credit involved in the debt.

There is an interesting story to be told regarding why the Board of Regents of the University of Idaho has this authority. The Idaho Supreme Court was asked to weigh in on this question way back in 1935. Back then, U of I had 2,300 students but had no hospital facilities. The U of I Board of Regents wanted to enter into a contract with the U.S. government to construct an infirmary. The deal consisted of a gift of $49,682 from the U.S. government and a loan of $68,500 to be repaid over 30 years from infirmary operating revenues.

The Idaho Attorney General at the time sued and argued that the pledging of infirmary revenues would necessitate that the state would have to expend large sums of money for administration and maintenance from legislature appropriations and the state treasury.

Importantly, the court held that bonds issued against the revenues of the infirmary did not constitute debt of the state of Idaho and would be unenforceable out of any funds of the institution issuing said bonds except for the pledged revenues. Fortunately, the students at the university got their infirmary.

What U of I is proposing has even more separation and thus protection for the state of Idaho, since the bonds intended to be issued in this transaction will be issued and secured by the revenues and assets of the University of Phoenix corporate entity, not the state of Idaho or University of Idaho. 

University of Phoenix has 117 programs – from certificates through doctoral programs and over 1,500 classes.

That said, the online offerings of the four-year institutions have never been covered by state board policy IIIz that limits the work that universities can provide outside their service area. So, this transaction does not change anything regarding those offerings.

University of Idaho will remain bound by the State Board’s policies regarding live instruction offerings outside of our assigned service areas. U of I will continue to work through these policies where we see unmet demand. For instance, we regularly collaborate with Idaho State University to determine how to meet healthcare demand in North Idaho and leverage areas where the U of I has expertise, especially regarding physicians. We will continue to collaborate with our sister institutions to serve all of the state’s students.

There are no “dividends” from a not-for-profit corporation.  The not-for-profit corporation is authorized under the law to distribute funds that it generates from operations for appropriate purposes based on the reason it was created, as well as the limitations imposed by the Internal Revenue Code section 501c3. Educational distributions from the not-for-profit corporation can be made that benefit both entities. The early use of some of these streams will be to support the costs of creating the affiliation, iterate the systems that will benefit Idaho students, and provide pathways to U of I and to University of Phoenix.

The state can always benefit from more broadband infrastructure, particularly last and mid mile. But most students in Idaho, be they traditional or adult learners, have access to adequate broadband to take courses through University of Phoenix. University of Idaho and its statewide extension and research network provide a level of access in their communities but accessibility to online courses differs in rural Idaho from that in more urban areas. Continued investment in The Idaho Broadband Strategic Plan, under the oversight of the Idaho Broadband Advisory Board, is critical. This is where University of Idaho and the state can work together in a shared overall goal of improving broadband access statewide for education and for business.

University of Phoenix’s systems will be an upgrade to Idaho’s technology. They are intuitive, effective and easy to use.

The University of Phoenix has been in business for 50 years and is one of the top five schools in the online market. It is nationally accredited by the Higher Learning Commission, has more than a million alumni and is enjoying a new management team with a change in educational philosophy. They have 85,000 students actively enrolled. Their online enrollments are up approximately 8% this fiscal year.

From a financial standpoint, it is an $800 million-a-year business, clearing $150 million in EBITDA. EBITDA is up 8%, and free cash flow is up 10%.

Furthermore, the adult learner market is expected to grow 5% during the same period the traditional college age student market will shrink as much as 15%. These are not the metrics that accompany a failing or poorly positioned business.

Our modeling does not require significant enrollment growth, yet still expects University of Phoenix’s EBITDA number to grow modestly over the term of the bonds. That provides a roughly 1.5 to 2x’s debt coverage. This is considered a very strong metric of financial strength and ability to cover debt payments. And the institution’s financial performance is further buttressed by $200 million in cash that will remain on the University of Phoenix balance sheet. Or, put another way, even if University of Phoenix’s operations generated zero positive cash flow, they would still have $200 million in cash, which is enough to cover several years of the anticipated $60-70 million in annual debt service. All in all, they have several years’ worth of payment capability, and we would see problems coming long before their arrival. To receive preferred pricing on the proposed bond issuance, U of I may provide a debt service guarantee not to exceed $9.9 million annually. This guarantee would be the last money in. 

Should University of Phoenix fail and U of I need to cover the bond payment, the university has a number of non-appropriated sources to draw from. These include housing, food, parking, VandalStore, Vandal Brand Meats and other auxiliary service such as timber sales, licensing our magic wheat variety that has brought in several million dollars over the past few years, distributions from our foundation and donor gifts, etc. While we would not ever welcome having to make these payments, and the probability of this ever happening is very remote, we could manage it from a combination of these sources. The state has no financial liability for this transaction.