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Hearing Wednesday in Birmingham Southern loan lawsuit

A Montgomery judge has set a Wednesday hearing for Birmingham Southern College’s request that he order the state treasurer to loan the school $16 million this academic year.

The college last week filed a lawsuit claiming Treasurer Young Boozer, “has acted in bad faith, beyond his authority, and/or under a mistaken interpretation” of a new state law that allows financially struggling colleges and universities to apply for loans from a $30 million pool of money created by lawmakers this year.

Boozer’s office on Friday said because of the ongoing lawsuit, it wouldn’t comment on why it had denied Birmingham Southern’s loan application.

The higher ed loan program was crafted earlier this year in response to Birmingham Southern’s financial instability and threat of closure. The law says any college in existence for 50 or more years can apply for loans if they’re experiencing a financial hardship that could lead to its closure and have sufficient assets to pledge as a collateral.

The law also says  the state treasurer can create the terms and conditions of a loan and “may, in his or her judgment, award a loan to any eligible institution that meets the requirements…”

According to the lawsuit, the college’s board voted in April to keep the school open in the 2023-2024 academic year based on reassurances from legislators about the loan program.

The lawsuit also says Boozer told lawmakers prior to the bill’s passage that the college was a terrible credit risk.

According to the college, its board “received assurances from legislative leaders supporting a measure to provide bridge funding that, should the bill pass, the College would be positioned to borrow the $30 million in bridge funding required to keep it open.”

Montgomery Circuit Judge James Anderson last week set a hearing for 1:30 p.m. on Wednesday.

Sen. Jabo Waggoner, R-Vestavia Hills, was a sponsor of the loan legislation. On Friday, he told Alabama Daily News he was disappointed by Boozer’s decision, but said because of pending litigation he’d been advised not to discuss the situation.

Similarly, Gov. Kay Ivey’s office declined comment because of the ongoing lawsuit. 

Another sponsor of the bill, Sen. Rodger Smitherman, D-Birmingham, was guarded Friday in his comments to Alabama Daily News, but said the intent of the legislation was to provide funds to colleges and universities who met the requirements laid out in the bill.

“Birmingham Southern certainly was an institution that fell under that criteria,” he said.

In December of 2022, Birmingham Southern sought a $37.5 million government bailout, warning it was under risk of closure after years of declining enrollment and financial troubles.

View the lawsuit in its entirety by clicking here.

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