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Alabama Senate advances Birmingham Southern loan program solution

On Tuesday night, the Alabama Senate voted to authorize a loan program to Birmingham Southern College, currently in financial crisis. Last year, the Alabama Legislature approved a similar measure under the distribution authority of State Treasurer Young Boozer, however he cited concerns over the school’s unlikelihood of being able to meet the conditions of loan payback.

SB31 is sponsored by State Senator J.T. “Jabo” Waggoner (R-Vestavia Hills) – a Birmingham Southern alum.

The legislation to provide a bailout for distressed institutions of higher education is a controversial topic. Birmingham Southern administrators originally sought a $30 million bailout from the state using COVID relief funds. That proposal was rejected.

Last year, Waggoner was able to usher through a piece of legislation that would allow the State Treasurer to loan the university $30 million so that it can keep its doors open. That passed both Houses of the Legislature and was signed by the Governor. After a careful examination of Birmingham Southern’s finances, State Treasurer Young Boozer rejected.

RELATED: Alabama lawmakers advance effort to financially support BSC by sidelining state treasurer

BSC initially sued to force Boozer to give them the loan arguing that it was the legislative intent of the legislation for them to get the money. That claim was rejected by the courts.

SB31 replaces that bill with new legislation that would give the Director of the Alabama Commission on Higher Education the authority to make the bridge loan to effectively bail out the school.

“I represent Stillman College which is a private college like Birmingham Southern. It was losing its accreditation, it was losing its student body, its finances were in disarray,” Senate Minority Leader Bobby Singleton (D-Greensboro) said on the Senate floor, Like Birmingham Southern it went to the state to ask for help and was denied.

That was a historically black college and university, an HBCU. As soon as this came out with Birmingham Southern everybody jumped on board to do what they can to save poor Birmingham Southern.”

Singleton credited then-Congressman Bradley Byrne and the Trump and Biden administrations with coming to Stillman’s aid — but the state said that they could do nothing to help Stillman.

“Why is the state of Alabama is getting in the lending business?” Singleton said. “I am going to vote for this bill to allow it to happen, but I would be remiss if I did not point out that HBCUS do not get the same treatment by this body.”

Singleton said that the Senate is pushing this loan through, “Evern after our state treasurer said this was a bad deal.”

“Yes, every child that goes to Birmingham Southern deserves an education, but so do the students at HBCUs. This legislation is drafted carefully so that no one other than Birmingham Southern can qualify.”

Singleton said that Stillman is still in trouble.

“This is an issue that has been well vetted,” said Waggoner. “It passed last year giving the state treasurer the authority to vette the loan. That did not work out.”

“We have talked about this,” Waggoner said. “I will be honest if this does not pass they probably are cutting their doors this spring.”

“We have already spoke on this issue,” said Sen. Rodger Smitherman (D-Birmingham). “This school has met every circumstance that was laid out for them.”

If we don’t get this done and get this done in a timely manner this institution will close,” Smitherman said. “If Birmingham Southern is not able to continue Jefferson County will lose $100 million out of its GDP.”

“I still have some issues,” said Sen. Arthur Orr (R-Decatur). “I can’t support the bill, because who’s next? What’s next?”

RELATED: Young Boozer: If Birmingham-Southern College closes, it’s on them – not the State Treasurer

Orr said that the 2.7% interest rate is below market. There is no ability for the director to set a payment schedule. This says that they have to pay the loan back in twenty years but there is no mechanism to see that that is done.

“This is something that does not make good fiscal policy for the state,” said Orr who chairs the Senate Finance & Taxation Committee that prepares the education budget.

“If there is a default then Alabama would own Birmingham Southern?” Singleton asked.

“In my opinion that is correct,” Waggoner answered.

“This bad publicity hurt their enrollment,” Waggoner said. “Right now they probably have 750 students. It has never been a big Auburn, Alabama, or UAB type college.”

“We are still not out of the woods at Stillman,” said Singleton. “We would lose that same kind of economic engine in Tuscaloosa” if Stillman closes.

SB31 passed in a 22 to 5 vote. The bill now goes to the Alabama House of Representatives for its consideration.

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