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Alabama Senate committee approves Birmingham-Southern College loan bill

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Alabama Senate committee approves Birmingham-Southern College loan bill

Feb 28, 2024 | 1:24 pm ET
By Jemma Stephenson
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Alabama Senate committee approves Birmingham-Southern College loan bill
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A photo of Birmingham-Southern College's campus. (Birmingham-Southern College Communications Department)

An Alabama Senate committee Wednesday approved a bill that would extend a loan to Birmingham-Southern College in the hopes of keeping the liberal arts college open. 

But several members of the Senate’s Finance and Taxation Education Committee expressed concerns about language that effectively required the state to give loans to distressed institutions. 

“If this bill passes we’re going to have trouble distinguishing from future colleges that may come within a financial distress situation,” said Sen. Arthur Orr, R-Decatur, the chair of the committee.

SB 31, sponsored by Sen. Jabo Waggoner, R-Vestavia Hills, revises language in a law passed last year that created the Distressed Institutions of Higher Education Revolving Loan Program. The bill would move oversight of the program from the state treasurer to the executive director of the Alabama Commission on Higher Education. It would also remove the discretion of the administrator in determining whether to extend a loan but does still have requirements.

The law was intended to extend financial help to Birmingham-Southern College, a private liberal arts college. Officials of the college say it may have to close if it does not get the loan.

However, State Treasurer Young Boozer last year declined to provide the loan to BSC, citing concerns about the school’s collateral. The school had 731 students in the fall 2023 semester, spokeswoman Virginia Loftin said earlier this month.

Waggoner said Boozer’s refusal to approve the loan led to the change.

“As all of you remember last year, we passed the bill and designated the state treasurer as the one to administer the $30 million loan program for Birmingham-Southern, but he refused and now we’ve had another bill to designate the administrator of the Commission on Higher Education as the one to administer this loan program and basically the bill is the same except who’s going to administer the program,” he said. 

In a statement sent Wednesday afternoon, BSC President Daniel A. Coleman thanked the committee and wrote that many, including students and faculty, have worked for continued existence of the school.

“Our plan for financial stability focuses on our endowment campaign,” he wrote. “The loan we seek from the state will provide us time to complete that campaign.”

In a phone conversation Wednesday, Boozer, who said he watched the committee, disagreed with the depiction of the bill as only changing the administrator, citing other changes such as the rate and payback period for the loan.

“Basically with all the changes that have occurred, there will be no effective oversight by the state over this loan, it boils down to that,” he said. “If that is put in place, it becomes a gift, not a loan and if the state makes that loan, over the next 20 years, somewhere along there, the state will own that school, because they will be unable, in my opinion, to be able to continue on as a separate entity,” he said.

Boozer also expressed concerns about the school’s declining enrollment.

“The decision about this significant thing was made based on estimates and supposition and assumptions and I just don’t think that that is the way things should be done, because this is a failing college, and it is failing dramatically and rapidly,” he said.

Waggoner said after the committee hearing that he and Boozer have disagreed throughout the process, but he’s pleased with what the Legislature is doing.

“If he had thought highly of the school and its future, he’d have done this loan, but he chose not to,” he said. “So we move to Plan B and we feel good about it. I’m very confident.”

Some members of the committee were worried about the changes in the administrator’s discretion. Orr said he was worried about removing the state treasurer’s ability to set terms and conditions for the loan program.

Senate Minority Leader Bobby Singleton, D-Greensboro, voted for the bill but questioned the support that Birmingham-Southern College was receiving when Historically Black Colleges or Universities had struggled to secure adequate public funding.

“So, I just want to make sure that the ears that heard this can hear this cry of those other schools that are in need also,” he said.

Sen. Rodger Smitherman, D-Birmingham, supported the bill and said that the Legislature needed to keep its word.

“We have to stay committed,” he said. “We made a commitment to do what was right and necessary. The simple fact that we could not get it implemented does not should not alter one bit, the commitment after going through the whole process that we as a body made.”

An amendment was added that said that the bank mentioned in the bill as providing the loan cannot be a current creditor of the college, said Orr.

Concerns about the involvement of a specific bank in the process have been raised by the Treasurer.

Boozer had previously told the Reflector that he felt this bill replaced the treasurer with a “straw man with no authority.”

The bill, which passed committee 11-3, moves to the full Senate.

This story was updated to correct the spelling of Virginia Loftin’s name.