Closure of Birmingham-Southern College

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The Closure of Birmingham-Southern College was the culmination of a period of financial distress for Birmingham-Southern College, announced on May 9, 2024 and effected on May 31 of that year.

Birmingham-Southern College was founded and supported by the Methodist Episcopal Church, South, originally through its Alabama Conference, and later through the breakaway North Alabama Conference, which maintained offices on its campus in Birmingham's Owenton subdivision.

The Alabama Conference's Southern University, located in Greensboro since its founding in 1856, was merged into the newer Birmingham College, founded in 1898 as the North Alabama Conference College, in [1918]]. Though conceived as a "seminary of learning" for the church's benefit, the college thrived as a general liberal arts institution, graduating generations of students with a broad grounding in language, literature, mathematics and science.

The 28-year tenure of president Neal Berte which began in 1976 is generally remembered as a high water mark for the college's programs. However that period also began with the erection of a wrought-iron fence around the campus, manifesting a growing divide between the predominantly-white campus community and its surrounding neighborhoods, transitioning through desegregation and white flight into predominantly Black. For decades before his retirement in 2004 the school operated at a deficit, relying on funds from its endowment to balance the books, and also drawing down principal on some restricted gifts without input from donors. Moody's Investors Service characterized the situation as "structural financial distress".

Under the administration of David Pollick from 2004 to 2010 the decision was made and approved by the Board of Trustees to pursue a strategy of growing enrollment to improve the college's finances rather than to downsize. Pollick led several major building projects, focusing on student amenities and enhancement of the overall visual effect of the campus. The timing of this shift exposed the school to selling securities in a down market to offset fast-increasing construction costs. The endowment declined from $114 million to a little more than $60 million. Moody's Investment Services downgraded the school's credit rating more than once.

By 2010 the growth strategy had clearly failed. A special called meeting of the faculty was held on July 29, 2010 to discuss the "current financial situation." Pollick acknowledged that a multi-year accounting error in how the admissions office calculated and awarded financial aid packages would require at least $5 million per year to correct.

An analysis of the college's IRS filings carried out by Professor Marietta Cameron of the Department of Computer Science showed significant and growing deficits well in excess of the amount acknowledged by administrators. Her call for a faculty vote of no-confidence in the president and in executive committee of the board was tabled on a 54-to-14 vote.

After that meeting, Pollick announced plans to cut the school's $49 million annual budget by as much as 20%. Birmingham-Southern cut five majors, eliminated 29 faculty positions and laid off 51 staffers. He resigned in August 2010. History professor and Provost Mark Schantz was appointed interim president.

Birmingham-Southern College's financial stability was raised as an important matter in a warning issued by the Southern Association of Colleges and Schools in 2011. Charles Krulak, who began his term as president of the college that year, led a fund-raising campaign which garnered more than $15 million in pledges by January 2013, including an unrestricted $1 million infusion from the North Alabama Conference. In 2017 the college took in $86.2 million in revenues, exceeding its $76.5 million in expenses. In 2018 the school was back to a deficit, with $71.8 million revenues and $76.8 million in expenses. That trend continued, and by 2022 the college was operating at a significant loss, with only $42.7 million in revenues against $80.6 million in expenses.

In December 2022, the college issued an appeal for public funds, disclosing that it had been operating under "financial distress" for "over a decade" and that without help it would be forced to close in 2023. It cited the depletion of the endowment and errors in financial aid accounting, as well as challenges arising from the "Great Recession" and the COVID pandemic. Early that year, officials from Alabama A&M University met with Coleman about the possibility of operating under their public charter.

BSC opted to pursue public loans to buy time. The college requested a loan of $17.5 million from the state's Education Trust Fund (which had a $2.7 billion surplus), and another $12.5 million from the state's allocation from the American Rescue Plan Act of 2021. The college also requested loans of $5 million from the City of Birmingham and $2.5 million from Jefferson County.

To bolster the case for public assistance, the college commissioned an economic impact report from Auburn University Montgomery economist Keivan Deravi. His analysis concluded the Birmingham-Southern was responsible for an annual impact of $97.3 million for the state. The public funds would have been used to keep the school to continue operating through 2026, while it continued a campaign for $200 million in private donations. On April 6, 2023 the Board of Trustees voted to keep the college operating for the fall semester.

Governor Kay Ivey proposed changes to the bill before she signed it on June 16, creating the Alabama Distressed Institutions of Higher Education Revolving Loan Program, establishing the "Distressed Institutions of Higher Education Revolving Loan Program.". In October Alabama State Treasurer Young Boozer III denied BSC's application to the program. In December the Birmingham City Council approved an emergency loan of $5 million while the college attempted amend its state loan application. Later that month, the Southern Association of Colleges and Schools Commission on Colleges placed Birmingham-Southern's accreditation on "warning" status, citing its financial deficiencies.

During the 2024 Alabama legislative session, a modified bill was passed by the State Senate, but did not have enough votes to pass the House of Representatives. The college's board of trustees held an emergency meeting on May 9 and voted unanimously to close the school at the end of the spring term, May 31.

Following the announcement, numerous colleges around the region made efforts to streamline student transfers. Around 200 faculty and staff were laid off without severance, with priority given to satisfying creditors, including ServisFirst Bank, holders of bonds, and lenders including the North Alabama Conference Board of Pension and Health Benefits and the City of Birmingham.

BSC vice president for advancement and communications said in mid-May that the college had talked with several interested parties about the sale of the campus. Alabama A&M University publicized its $52 million offer to take over the campus for fall 2025, retaining some number of faculty and staff, and pursuing the opportunity to create a development corporation to benefit the surrounding neighborhood. Miles College also made an offer to purchase the campus.

References

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