MONTGOMERY — The Alabama Legislature approved a bill Tuesday to create a loan program for universities in financial distress after Gov. Kay Ivey returned the original bill with an executive amendment.
Senate Bill 278 (SB278), sponsored by State Sen. Jabo Waggoner (R-Vestavia Hills), also called the Distressed Institutions of Higher Education Revolving Loan Program, would create the loan program administered by the State Treasurer. To be eligible, the college must have operated in the state for over 50 years, be experiencing financial hardship that could lead to the institution's closure, and have assets sufficient to pledge as collateral.
According to State Rep. Juandalynn Givan (D-Birmingham), who carried the bill in the House, Ivey's amendment clarified the state would have a primary security interest in collateral offered by a university.
Ivey's amendment requires the state to charge interest to borrowing institutions and requires borrowers to submit a written financial restructuring plan to the state before receiving state loan funds.
"I believe that, if Senate Bill 278 is to become law, it should be amended to enhance the integrity of the proposed Distressed Institutions of Higher Education Revolving Loan Program," Ivey said in a letter to lawmakers announcing her executive amendment. "Specifically, if this program is to go into effect, it should feature additional parameters and restrictions to better protect taxpayers. For example, any loan recipient under the program should be required to document its ability to repay the loan prior to being awarded the loan. The recipient should be required to pay interest on the loan. The loan should take priority over the recipient's other loans for repayment purposes. And loan funds should be disbursed only after the recipient meets specific benchmarks set forth in a written financial restructuring plan."
Ivey added, "I have previously said that taxpayers' public funds should not be used to bail out a private college, and I remain concerned about the wisdom and propriety of this program... However, if Senate Bill 278 is to become law, adoption of the above-proposed executive amendment will enhance the integrity of the loan program in the name of protecting taxpayer funds."
The House voted to concur with Ivey's amendment by a vote of 97-0.
While not limited to one university, the loan program was inspired by the beleaguered Birmingham-Southern College (BSC).
According to Givan, the BSC situation served as the catalyst, but it would help other colleges in similar financial straits.
In December 2022, BSC officials announced in a press release that the private college would seek a combination of federal funding the state oversees with state, city and county funding amounting to $37.5 million.
In the aftermath, Jefferson County lawmakers scrambled to assemble a bailout to keep the college afloat.
To connect with the author of this story or to comment, email firstname.lastname@example.org.
Don't miss out! Subscribe to our newsletter and get our top stories every weekday morning.