MONTGOMERY — Birmingham-Southern College (BSC) will likely shut down at the end of the semester absent a court order forcing Alabama State Treasurer Young Boozer to issue the private school a $30 million state loan.
BSC officials filed a lawsuit Wednesday against Boozer after he notified them he was denying the loan.
Legislators passed the Distressed Institutions of Higher Education Revolving Loan Program and appropriated $30 million in the 2023 legislative session. The Alabama State Treasurer's Office administers the program.
Robert Battle, an attorney representing BSC, said in a complaint filed this week that Boozer's actions were a veto of the law "by delay and ultimate denial." Battle said in a filing that 292 employees would be laid off and 731 students would no longer be able to attend BSC without an intervention by the court forcing Boozer to issue the state loan.
Battle said in court on Thursday, "There's a trustees meeting, and we've been advised that that decision needs to be made by the end of the month. Part of the issue is the school has obligations under the WARN Act to provide 60 days' notice. That's the issue we're running into."
Employers must give 60 days' notice before mass layoffs under federal law. According to news reports, enrollment numbers at BSC declined dramatically at the start of the fall semester.
"The Treasurer has had most of our financial information for almost five months now," Battle said. "The legislation was signed in June, but he had that information ahead of time because we knew when it passed the Senate unanimously we were hopeful that this would happen. He did not open the loan application process for more than two months after the legislation was signed, except for one day. Birmingham-Southern was checking the website every day, and on July 14th, an application appeared on the website so Birmingham-Southern prepared all these materials and asked, 'How do we submit them?' They call us and say, 'That was a mistake. That shouldn't have gone up on the website.' They say you can't apply yet. So, they pulled it down. They put that application back up August 24th so almost another month and a half later. Same application, they just wouldn't let us apply until August 24th. We then submitted all the information that same day that the application went up.
"The State Treasurer's Office told Birmingham-Southern, 'We understand that time is of the essence. There's a lot of time pressure here and we'll review this expeditiously.' Almost two months later is when we find out the loan has been denied and a letter sent via snail mail just dropped in the mail dated October 13th that arrived on October 18th. Couldn't even get a phone call or an email to let us know. We're at a point now where the school, the leadership has been advised that it needs to make a decision on whether to go beyond the end of this semester or not by October 30th.
"The reason we're acting for this relief now is because we didn't get the denial until yesterday even though the State Treasurer has had the information for months. We've been put in this spot asking for this relief because the alternative is the college will potentially and likely be forced to shut down if we don't get this loan. The college has been relying on this loan since the legislation was passed and even before the legislation was passed."
Jim Davis, an Alabama Assistant Attorney General representing Boozer, said in court on Thursday the state planned to file a motion to dismiss the lawsuit next week based on Boozer having sovereign immunity and discretion in the law to issue or not issue a loan through the program. A hearing is set for Wednesday afternoon in the Montgomery County Circuit Court.
In his letter announcing his decision to deny the loan to Birmingham-Southern College, Boozer said, "After a thorough review of the application and all supporting documents, it has been determined that Birmingham-Southern College can not provide the state a first security interest in its collateral assets."
"Additionally, the institution's financial restructuring plan does not adequately provide for repayment of the loan," Boozer said in the letter.
State Sen. Chris Elliott (R-Josephine) told 1819 News in an interview on Thursday, "I've gotten a lot of calls and a lot of texts, emails from constituents whose kids are in Birmingham-Southern. The legislature certainly passed a law that allowed or appropriated funding in a manner that would have benefited Birmingham-Southern."
"Apparently, Birmingham-Southern's financial situation is more dire than anybody realized," Elliott said. "I think it was the legislature's intent to within reason figure out a way to try to save Birmingham-Southern, but it also seems like they've got themselves in one heck of a pickle, and while I think we still need to try to do what we can do to help we do not need to do something that is fiscally irresponsible or a bad business decision or a bad investment for the taxpayers. It's a hard line to walk. The legislature's intent clearly was to help out Birmingham-Southern within reason, and I think they're in a much worse financial situation than we thought."
State Sen. Jabo Waggoner (R-Vestavia Hills), an alumnus of Birmingham-Southern College, sponsored the bill that created the program. Waggoner and other Birmingham-area legislators hoped to secure a $30 million state grant to the financially-ailing Birmingham-Southern College early in the 2023 regular session, but the plan switched later in the session to loaning the school the money.
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