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Opinion | A deal that’s too good for Alabama to pass up

Birmingham-Southern generates $97.2 million each year in direct economic impact.

Birmingham-Southern College
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We’ve spent a lifetime making decisions in the business world that affect companies, markets, and—most importantly—lives and livelihoods. 

Experience has long since taught us that, when it comes down to whether to invest in something, you have to set sentiment, personal feelings, and other irrelevant factors aside. 

When you are investing other people’s resources, you have to focus on what really matters. That usually boils down to straightforward questions like, “Will this investment deliver a good return?” and “Will it add value to our brand?” and “What do we stand to lose if we don’t make the investment?”

Last spring, the Alabama Legislature made a sound decision to invest in the future of Birmingham-Southern College when it passed a bill tailored to help the 167-year-old college continue to operate while it finishes raising a $200 million endowment that will restore it to long-term financial health. The Birmingham Business Alliance included BSC on our list of legislative priorities for 2023, and we were pleased to see the bill pass with overwhelming bipartisan support.

The Distressed Institutions of Higher Education Revolving Loan Program was written with BSC’s specific situation in mind, the loan program set aside funds that institutions could tap into for loans if they met certain criteria. 

As they considered the bill, legislators took into account the fact that Birmingham-Southern generates $97.2 million each year in direct economic impact. BSC will pay back the $30 million loan in full and, on top of that, will pay enough taxes in just four years to defray the entire cost.

Setting aside the immense impact BSC graduates have made and continue to make to our state—providing business and civic leadership in every county in the state—the economics of the investment were simply too good to pass up.

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The loan program is a legal use of state funds. The funds have already been appropriated from an unprecedented $2.8 billion surplus in the Education Trust Fund. The college meets all of the requirements. Each of the loan requirements was written with an awareness that BSC met the necessary criteria. 

And in just four years, Birmingham-Southern College will directly generate enough taxes paid to the state of Alabama to over the entire loan. In other words, the only way the state loses $30 million is to not make the loan. 

The legislature designated the State Treasurer to administer the fund. And then something unexpected happened: The loan was denied, putting $1 billion in direct economic impact to Alabama at risk over the next decade. 

An amendment to the 2023 legislation is under consideration in Montgomery that includes three key changes: 

  • Moving the administration of the loan program to the Executive Director of the Alabama Commission on Higher Education, who can provide more subject matter expertise on the financial and legal governance of a college or university.
  • Requiring a state-regulated bank – one that does not have a creditor relationship with the applying institution — to review and approve the collateral offered and the restructuring plan submitted.
  • Requiring repayment according to the bank-approved plan within 20 years according to terms that include an interest rate commensurate with the rates charged under the State Revolving Loan Fund (an existing fund through which major infrastructure projects are managed).

The amendment has been passed by the Senate and is now being considered by members of the House of Representatives, who must decide whether to ensure that, as they originally intended with their 2023 support, the State will continue to benefit from the rich economic dividends the college provides year after year. 

At a time when the Lt. Governor’s workforce commission has created a roadmap for transformative change, BSC offers a proven model that can help Alabama’s businesses and citizens through 21st century areas like data science.

Not to mention that thousands of today’s tax-paying wage earners depend on BSC either directly or indirectly for their livelihood. 

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The historic West Birmingham neighborhoods of Bush Hills and College Hills would be devastated by the loss of BSC, just at the time when the City of Birmingham has acquired federal funds that can help revitalize the area.

Now all of it hangs in the balance.

The Birmingham Business Alliance has once again included funding for BSC on our list of legislative priorities. We urge lawmakers to make the right economic decision once again for the state. 

So much is riding on it.

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