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Legislature passes loan system amid moves to save Birmingham-Southern

The college would shut down without a bailout. 

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Five months after Birmingham-Southern College (BSC) asked for $17.5 million in state funds to keep the school operating, the Alabama Legislature voted to create a loan system that may fund BSC and other institutions of higher education. 

Senate bill 278 will head to the governor’s desk after the House agreed to the bill 66-27, and the Senate agreed to the House version 27-2 on Thursday. 

The act would create a revolving loan system for institutions of higher education in financial distress. The state treasurer would receive applications, negotiate loan agreements, and make final decisions on loan awards. 

“This college is over a hundred years old. It sits on a campus in west Birmingham of probably 200 acres. Many, many people in Alabama and all over the country have attended Birmingham-Southern and I’m one of them,” Sen. J. T. ‘Jabo’ Waggoner, R-Shelby, said. “It’s a great Institution, and this is a bill that hopefully will protect them for the years to come.”

The act was the result of heavy bipartisan collaboration. Rep. Juandalynn Givan, D-Jefferson, and other members of the Jefferson County legislative delegation met with BSC administration in December 2022. The delegation was told the college would shut down without a bailout. 

“Today, we are asking for help — not to save something to commemorate our past, but so we can invest in our state’s future,” BSC President Daniel B. Coleman told the delegation in a letter. “We are asking for help to create a financial bridge — enough money to fill the gap normally covered by endowment.”

Givan and Rep. Allen Treadaway, R-Jefferson, facilitated town hall meetings about BSC and a potential bailout. Waggoner and Sen. Rodger Smitherman, D-Jefferson, authored the bill, working with Givan to establish a loan system rather than a one-time bailout to a single institution. Senator Arthur Orr, R-Decatur, and Rep. Danny Garrett, R-Jefferson were also involved in crafting the bill. 

“It was a tough sell because you’re dealing with public versus private, but Birmingham-Southern is a very storied institution,” Givan said. “The work begins because they have got to get their books in order, they’ve got to get accounting, and I started this whole path and journey on their behalf with one simple thing: accountability and transparency.”

Birmingham-Southern College took on debt starting in 2005 to improve its campus after spending much of its endowment. For the past decade, the college cut expenditures and maintained a budget close to its spending in 2003. 

Birmingham-Southern College aims to raise a $200 million endowment to keep operating through May 2026. Failing that goal, it may close. Judson College, a 183-year-old women’s college in Marion closed in 2021 after failed fundraising. 

The act does not award a loan to BSC or any institution. That authority would lie with the state treasurer. Any institution of higher education may apply for a loan. The treasurer would examine certain criteria of the institution like its impact on the community and the value of its collateral.

The loan program will sunset on Jan. 18, 2027, after which, no further loans may be awarded without reauthorization by the Legislature.

Samuel Stettheimer is a reporting intern at the Alabama Political Reporter. You can reach him at [email protected].

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