Alabama private college is seeking a bailout and warns it could be shut down
BIRMINGHAM, Ala. (AP) — A private college in Alabama is seeking a $37.5 million federal bailout after years of deficits and declining enrollment, with state legislatures warning that without the money, Birmngham-Southern College could be within months could be closed
The 1,000-student Birmingham institution released a statement on Saturday, describing the application as part of a plan “to put the college on a sound financial footing over the long term.”
Jefferson County lawmakers are scheduled to debate the proposal Monday, AL.com reported.
“Birmingham-Southern has been in financial distress for over a decade. Without support, it will not be able to continue operating after May 2023,” Sen. Jabo Wagoner and Rep. Jim Carns, both Republicans from Vestavia Hills, wrote in a letter to lawmakers first reported by the news outlet. “Without a commitment from the state, the college must notify students that it will no longer be accepting applications until mid-January.
The college didn’t immediately respond to a question Saturday about whether it would close without the money. It has attributed its financial troubles to the Great Recession of the late 2000s, significant investment in new buildings, and an error in accounting for federal grants.
The Methodist-affiliated college wants a one-time infusion of $12.5 million in federal COVID-19 relief funds and $17.5 million in state education funds. Alabama has broad powers to spend pandemic funding as needed, including for the college, although the school’s decline in enrollment and financial woes began long before COVID-19 spread.
The school also wants $5 million from the city of Birmingham and $2.5 million from Jefferson County.
“We believe that Birmingham-Southern College’s contributions to the greater Birmingham area and the state warrant such an investment, which is clearly permitted under state law and for which there is considerable precedent,” the college said.
The school dates back to 1856 when Southern University was founded in Greensboro, Alabama. This school merged with Birmingham College in 1918 to become Birmingham-Southern, with a campus west of downtown Birmingham.
The college’s problems have been clear to financial observers for years. Moody’s Investors Service downgraded the college’s bonds in January, saying the college spent $17 million from its endowment to “compensate for continued enrollment and revenue declines that are causing deep operating deficits.” Institutions should spend income from foundations, but not the capital of the fund.
Moody’s said the college had a “dangerously low” 24-day cash balance as of May 31, 2021, the end of its most recent fiscal year, and had defaulted on some of its bank loans under the rules, though the banks waived the default and did so did not rule out. Birmingham-Southern owed $33 million in debt at the time.
Undergraduate college enrollment has fallen from 1,345 in fall 2015 to 1,058 in fall 2021, according to college financial reports and federal reports. Birmingham-Southern posted a deficit of $10 million in 2019 and a deficit of $8.2 million in 2018, according to the latest audited financial statements posted online.
The school cut tuition in 2018 to attract more students, also recognizing that most students weren’t paying anywhere near the sticker price. Small private colleges across the country are struggling with declining numbers of traditional college-age students and competition from larger, wealthier institutions.
Some are closing, including Judson College in Alabama, a women’s school that closed its Marion campus in 2021.
The college says it is trying to raise $200 million by May 2026 to rebuild its foundation. It states that President Daniel Coleman has received more than $45 million in pledges from private donors over the past 18 months.
“The government’s cash injection would allow fundraising to continue for three additional years to allow BSC to replace its endowment and continue to operate as an independent college,” read the lawmaker’s letter.
