On Tuesday, Montgomery Circuit Judge James Anderson dismissed the lawsuit brought by Birmingham Southern College (BSC) to force State Treasurer Young Boozer (R) to give the troubled college a bridge loan to allow the private college to stay open.
In this past legislative regular session, the Legislature approved controversial legislation to help BSC. The Distressed Institutions of Higher Learning Revolving Loan Fund Act, passed by the Legislature and signed by Alabama Governor Kay Ivey (R), empowered the State Treasurer to loan money to failing private colleges. Boozer had the power to give BSC the money, but after evaluating BSC’s financial viability, Boozer concluded that there was little chance that BSC would ever be able to pay the state back.
BSC responded by suing Boozer, arguing that the legislative intent of the legislation was to give the school the money. Alabama Attorney General Steve Marshall (R) asked that the court dismiss the lawsuit. Judge Anderson agreed with the state’s arguments.
Daniel Coleman is the President of BSC.
“We are disappointed with this ruling and are exploring our options, which may include an appeal to the Alabama Supreme Court with a request for an expedited briefing,” said BSC President Coleman in a statement. “While the Alabama Constitution provides for immunity to state officials, such immunity should not apply to those who act arbitrarily or capriciously, or in bad faith, or who have misinterpreted the law in question.”
“Our good faith was betrayed over the several months of working with Treasurer Boozer to deliver this bridge loan to the College,” Coleman added. “The timeline of our interactions clearly demonstrates that his behavior was arbitrary and capricious. We also believe he is misinterpreting the language of the Act pertaining to collateral.”
The legislation allowed Boozer to give BSC a $30 million lifeline, providing the College with operating funds for three years.
BSC claimed that during those three years, it could raise an endowment of up to $200 million to ensure its long-term financial stability.
BSC likely would have closed in the spring of 2023 if not for the passage of the controversial bridge loan legislation. In a letter dated October 13, Boozer notified BSC that their loan application had been denied; the letter arrived on October 18.
BSC claimed that during months of discussions, Boozer gave them no indication that any aspect of BSC’s application was incorrect or that he would not act as the Legislature intended, Coleman said.
Coleman claims that Boozer has provided inconsistent reasons for his denial.
Judge Anderson ruled that the legislation gives Boozer discretion over who he grants a loan to and was within his rights to deny the loan.
Anderson said he sympathizes with the college. However, given the Legislature’s language, past precedent, and sovereign immunity, BSC has no case. Thus, he granted Marshall’s motion to dismiss.
BSC, which has been declining for decades, has been hemorrhaging students in recent years and is reportedly down to just 731 students, while the college still has 284 employees.
The college decided to stay open for the fall semester pending receiving the money from the state’s loan. At this point, however, it appears that the college will have to close soon, perhaps as soon as the end of the current semester.
BSC had initially asked the Legislature and local government for a cash bailout. That request was rejected, but BSC alum State Senator Jabo Waggoner (R-Vestavia Hills) sponsored the Distressed Institutions of Financial Learning Revolving Loan Fund Act to save the failing liberal arts college.
The closing of a private college is not without precedent in Alabama. Judson College, the state’s only women’s college, closed four years ago when its income could not meet its liabilities.
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