On Tuesday night, the Alabama Senate voted to approve a loan program for Birmingham Southern College, which is currently in financial crisis. Last year, the Alabama Legislature approved a similar measure under the appropriation authority of state Treasurer Young Boozer, who cited concerns that the school was unlikely to meet loan repayment requirements.

SB31 is sponsored by state Sen. JT “Jabo” Wagoner (R-Vestavia Hills), a Birmingham South alumnus.

The bill to bail out struggling higher education institutions is controversial. South Birmingham officials initially sought $30 million in relief from the state using coronavirus relief funds. That proposal was rejected.

Last year, Wagoner was able to pass legislation allowing the state treasurer to loan $30 million to universities to help them keep their doors open. The bill passed both houses of Congress and was signed by the governor. After careful review of Birmingham Southern's finances, state Treasurer Young Boozer vetoed it.

RELATED: Alabama lawmakers sideline state treasurer to move forward with efforts to finance BSC

BSC initially sued to force Boozer to make the loan, arguing that the legislative intent of the bill was for Boozer to receive the funds. That claim was rejected by the court.

SB31 replaces this bill with a new bill that would authorize the Secretary of the Alabama Higher Education Commission to make bridging loans to effectively bail out schools.

“I represent Stillman College, which is a private college like South Birmingham. It lost its accreditation, it lost its student body, its finances were in shambles,” said Senate Minority Leader Bobby Singleton. (D-Greensboro) on the Senate floor asked the state for help, as did south Birmingham, but was denied.

It was a historically black college or university, an HBCU. As soon as this was announced in south Birmingham, everyone jumped to do what they could to help poor south Birmingham. ”

Singleton credited then-Rep. Bradley Byrne and the Trump and Biden administrations for supporting Stillman, but said the state could do nothing to help Stillman.

“Why would Alabama get into the lending business?” Singleton said. “I intend to vote yes on this bill to make that happen, but I would be remiss if I did not point out that HBCUS has not received similar treatment from this agency.”

“The Senate is moving forward with passing this loan even though the state treasurer said it was a bad deal,” Singleton said.

“Yes, every child who attends Birmingham South has a right to an education, but so do HBCU students. This bill was carefully drafted to ensure that no one outside of Birmingham South could qualify. Masu.”

Singleton said Stillman remains in a difficult situation.

“This is a well-scrutinized issue,” Wagoner said. “It was passed last year and gave the state treasurer the power to review loans. That didn't work.”

“We talked about this,” Wagoner said. “Honestly, if this doesn't pass, we'll probably be shutting down operations this spring.”

“We're already talking about this issue,” said Sen. Roger Smitherman (D-Birmingham). “This school met every situation that was set out for them.”

If this is not completed in a timely manner, this agency will be shut down,” Smitherman said. “If South Birmingham doesn't survive, Jefferson County stands to lose $100 million in GDP.”

“There are still some issues,” said Sen. Arthur Orr (R-Decatur). “I can't support this bill because who's next? What's next?”

RELATED: Young Boozer: If Birmingham Southern University closes, it's their fault, not the state treasurer

Orr said the 2.7% rate is below market. Directors do not have the authority to set payment schedules. This states that the loan must be repaid in 20 years, but there is no mechanism to ensure that it is completed.

“This is not good fiscal policy for the state,” said Orr, who chairs the Senate Finance and Taxation Committee, which prepares the education budget.

“Will Alabama own Birmingham Southern if there is a default?” Singleton asked.

“In my opinion, that's correct,” Wagoner replied.

“This bad publicity hurt their registration,” Wagoner said. “Right now he probably has 750 students. It wasn't a big university like Auburn, Alabama or UAB.”

“Stillman is not out of the woods yet,” Singleton said. If Stillman closes, “Tuscaloosa will lose a similar economic engine.”

SB31 passed by a vote of 22-5. The bill now heads to the Alabama House of Representatives for consideration.

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