A loan program that could save Birmingham-Southern College and other universities at risk of closure is now headed to the governor’s office for final approval.
A bipartisan bill, SB278, would establish the Distressed Institutions of Higher Education Revolving Loan Program Fund to provide temporary aid to struggling public and private colleges in Alabama.
House members voted 66-27 to approve the bill for final passage Thursday.
The program, approved through 2027, is intended to support Birmingham-Southern, but could theoretically help other struggling colleges in Alabama. It is not clear whether any have asked the legislature for help. Officials say Judson College, which closed in 2022, did not ask for state support.
“A lot of us are conflicted about what we’re doing, but I think it’s important that we realize that we are not voting today to make a loan to Birmingham-Southern,” said Rep. Danny Garrett, R-Trussville, said before the vote. “What we have done rather is to set up a vehicle, a program for institutions that are important to our state.”
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Birmingham-Southern, a private liberal arts college in the Bush Hills neighborhood of Birmingham, revealed in January that it would shut its doors if it could not find enough money to keep the school running. Officials originally asked for a $30 million appropriation from state education and pandemic recovery funds, and a combined $7.5 million from the city and county.
But the initial plan failed to gain traction in the legislature, and in late March, Gov. Kay Ivey said she had “no plans to use the taxpayers’ public funds to bail out a private college.”
Despite a lack of support, Birmingham-Southern officials announced in April that they would keep the school open, citing “encouraging news” from the legislature. Juandalynn Givan, D-Birmingham, and other members of the Jefferson County delegation proposed the loan program in early May.
“I do not want the public to think that this is something we are entering into lightly,” she said Thursday.
The loan program, if enacted, doesn’t promise a specific amount of funding.
However, lawmakers are finalizing a proposal to add $30 million toward the fund, essentially offering the amount the college said it needed.
In order to qualify for the loan, colleges that apply must meet the following criteria:
- The college must have been in operation for more than 50 years in Alabama
- Have a significant impact on the local community
- Be at risk of closure due to financial hardship
- Must maintain operations and have a plan to fundraise as it receives the loan
- Have assets that it can pledge as collateral if it is unable to pay back the loan
Other details – like total loan amounts, repayment interest rates and timing of disbursements – will be up to the state treasurer to determine. The state will also audit recipients annually to assess their financial viability.
The money for the loan program will come from an appropriation in the state budget. All repayments will go back into that fund to use for future applications.
An amendment, also passed Thursday, would sunset the bill at the end of the term of the current treasurer and would put unused funds back into the Education Trust Fund.
Another amendment would require minority leaders of the House and Senate and the chair of the Education Trust Fund to receive copies of annual reports on the loans.