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Prior to college loan program launch, Treasurer sought AG’s opinion

Prior to launching a loan program for financially struggling colleges, Alabama Treasurer Young Boozer sought an Alabama Attorney General’s opinion about whether lending money to public and private institutions of higher education might violate state code or the constitution. 

In a response to the June request, Attorney General Steve Marshall said he couldn’t issue an opinion, but seemed ready to defend the new law if needed.

“… validly enacted acts of the Legislature are presumed to be constitutional until they are determined to be otherwise by a court of competent jurisdiction,” Marshall wrote in the Aug. 22 response. “The Attorney General has the unique responsibility to defend duly enacted laws in the face of constitutional challenges, so long as there is a reasonable argument to be made.

“Though it is the policy of this office to refrain from deciding questions of constitutionality (as this is the function of the courts), our analysis suggests that the law would be due a defense.”

Boozer’s inquiry may have been related to Section 93 of the Alabama Constitution of 1901, which says the state shall not “lend money or its credit to any individual, association, or corporation.”

But, there have been multiple amendments to that section over the years, particularly related to the state’s participation in economic development efforts. 

With Marshall’s response, the Distressed Institutions of Higher Education Revolving Loan Program, created by lawmakers this year and managed by Boozer’s office, is now accepting applications.

The legislation setting up the loan program was sponsored by Sens. Jabo Waggoner, R-Vestavia Hills, and Rodger Smitherman, D-Birmingham, after Birmingham Southern College sought a $37.5 million government bailout late last year.  

Smitherman, an attorney, told Alabama Daily News on Monday he didn’t see a constitutional issue.

“We set a criteria in the law and to receive the money, (colleges) all have to meet it,” Smitherman said. “It applies to all the same.” 

He also said there’s also precedent around Section 93 of the constitution.

The loan program is open to public and private schools in operation for at least 50 years. Colleges must be experiencing a financial hardship that could lead to closure and have sufficient assets to pledge as a collateral. The money will have to be repaid with interest. Lawmakers in May allocated $30 million to the fund from a supplemental education spending bill.

The legislation also says applying institutions have to have a significant impact on their communities.

Smitherman also said he’s pleased Birmingham Southern can now apply for a loan. He said it’s a good school with a major impact on the region and its economic development.

“It’s a win, win, win for everyone involved,” he said.

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