MONTGOMERY, Ala. — The future of Birmingham Southern College remained in question Tuesday following a public hearing that saw lawmakers and state officials fiercely debate whether or not the state should assist the financially struggling private university with a sizable loan.
Lawmakers last year created a new state-run loan program, administered by the Alabama State Treasurer. After State Treasurer Young Boozer denied BSC’s $30 million loan request, however, a new bill materialized that would strip Boozer from the decision-making process.
Senate Bill 31 was discussed Tuesday morning during a meeting of the House Ways & Means Education Committee.
“I know I have been persistent about this legislation, and here I am again, pleading, if you will, to give this bill a favorable report out of committee and move it through the state House in the next few days,” said Sen. Jabo Waggoner, R-Vestavia Hills, the sponsor of the bill.
“That would save a four-year institution that’s probably 150 years old. BCS is near and dear not only to me, but thousands and thousands of alumni across this state and across this nation.”
A substitute bill is expected to be voted on Wednesday in the House committee. Besides shifting oversight of the loan program to the executive director of the Alabama Commission on Higher Education, the new bill also adds some steps loan recipients would be required to meet to avoid default. Colleges approved for a loan must see an annual enrollment growth of at least 10% a year, and must also see their budget deficits improve by at least 15% over a five-year period. The loan would be considered to be in default were either of the two milestones not met, and would be required to be repaid in full.
Rep. David Faulkner, R-Mountain Brook, called the bill’s new additions a means to “strengthen your security in passing this legislation,” and urged for the bill’s support.
“Those milestones were very important to me to show you that this college is serious and believes they can make it,” Faulkner said.
Another new addition to the bill will also require collateral that exceeds $15 million to be U.S. Treasury securities, something Faulkner called the “best and most secure collateral assets available.”
“The other part of the collateral is a first-priority interest in BCS’s main campus, (which) has a liquidation value of $22 million. Members, give this college a chance to do what they say they can do, and if they can’t, you have the collateral.”
Following the explanations of the changes to the bill, the committee commenced the public hearing.
Among the opponents was Boozer, who called the debate a “clash of politics and fiscal responsibility,” and likened efforts to bail out BSC to trying to “catch a falling knife.”
“According to the law, BSC was not and is not eligible (for a loan under the distressed college loan program), and furthermore, not credit worthy; their credit was terrible then, and it’s worse now,” Boozer said.
Boozer outlined a number of statistics that he considered damning to the prospects of BSC’s ability to both repay a sizable loan, as well as meet the milestones required of them under SB31. The college’s enrollment, Boozer noted, had dropped from 1,286 students in 2018 to 689 in the current spring semester, representing a loss in tuition of $13 million a year.
Boozer also said BCS was “overstaffed and overpaid,” with staffing expenses around $40 million, and called the college’s management “unstable,” noting it’s had eight presidents over the last 20 years.
Daniel Coleman, current BSC president, argued that the collateral the college was offering – $15 million in U.S. Treasury securities and the college campus, that if sold was estimated to net $22 million – should be sufficient enough to quell any concerns of non-repayment.
Furthermore, Coleman said extraordinary circumstances had led to the decrease in enrollment, circumstances that, were the college to receive the loan, would no longer be a factor.
“I think a 10% growth (in enrollment) is not extraordinary,” Coleman said.
“The reason it’s so low is because last year, we didn’t know if we’d get the funds, and we had an obligation to help our students transfer, so we helped about 250 students transfer last year, and obviously if we don’t get the funds, we will have to do that again.”
Boozer was not alone in speaking out against the proposal, and was joined by Gordon Stone, the executive director of the Alabama Higher Education Partnership, an organization that represents Alabama’s 14 public universities.
“We ask you to think very seriously about the potential of what the door that this opens could lead to, the potential that other industries and business (could) come to the state with great stories of their economic impact and have similar needs or desires to have the state come in and support them, give them a loan,” Stone said.
The bill divided some lawmakers who represent Birmingham.
Democratic Rep. Niel Rafferty, who represents Birmingham, told Alabama Daily News later on Tuesday that while he wasn’t able to publicly commit to supporting the bill, he wanted to ensure that BSC did not have to shutter its doors.
“Birmingham Southern is a jewel and a very storied institution that doesn’t just bring some of the best and brightest into Birmingham and into this state, but keeps them here,” Rafferty said. “So we want to keep Birmingham Southern open, or at least I do.”
On the other hand, Rep. Mary Moore, D-Birmingham, said she was more neutral on the proposal, and would prefer if BCS were to convert to a public university, or at least offer public programs in exchange for a loan.
“I talked to the president on Friday, and I told him you’ve had so many universities in the past that got in financial problems, but you’ve got other schools that, when they got into financial problems, in order to accept state money, you’ve got to be a public school,” Moore told ADN.