Montgomery County Circuit Judge James Anderson questioned lawyers Thursday about whether the court has the authority to order State Treasurer Young Boozer to issue a loan intended to keep Birmingham-Southern College from closing.

Anderson held a hearing in Birmingham-Southern’s lawsuit against Boozer, which the college filed on Wednesday after receiving a letter from Boozer rejecting its loan application.

Birmingham-Southern has asked the court to order Boozer to approve the college’s application for a $30 million loan and disburse the first $16 million this academic year.

The judge did not announce a decision but said he would move the case quickly and scheduled another hearing for next week.

In the lawsuit, lawyers for Birmingham-Southern say the college met all the requirements the Legislature established for receiving the loan when it created the Alabama Distressed Institutions of Higher Education Revolving Loan Program. The bill was passed in response to requests by officials, alumni, and supporters of Birmingham-Southern, a 167-year-old private college. The college said it needs the public funds as a bridge while it raises money from private sources to overcome financial problems.

Gov. Kay Ivey signed the bill into law in June.

Lawyers for the college said it could close for good after this semester if it does not receive the loan.

Anderson said he was sympathetic to Birmingham-Southern’s position and the urgency of its request. But the judge raised the question of whether the Legislature gave the state treasurer discretion over whether to approve loans.

“The State Treasurer may. in his or her judgment, award a loan to any eligible institution that meets the requirements provided in this section,” the law says.

Anderson noted the Legislature’s language, “may, in his or her judgment, award a loan.” He said lawmakers could have used the word “shall” award a loan if their intent was to limit the treasurer’s discretion and require the treasurer to issue loans to colleges that met the criteria.

Lawyers for Birmingham-Southern said the law requires the state treasurer to issue loans to colleges that met the requirements spelled out in the law, including adequate collateral.

The college claims that Boozer was arbitrary, capricious, and acted in bad faith. It claims that the treasurer unnecessarily delayed the loan application and a decision on whether to approve it

Birmingham-Southern said it submitted its application on Aug. 24, the first day applications were available. The college said it pledged collateral in property on its 192-acre campus and in U.S. Treasury notes that exceeded what was required for the amount it was borrowing.

The denial of the loan application came in a letter from Boozer that Birmingham-Southern said it received on Wednesday. The letter was dated Oct. 13. Birmingham-Southern attorney Robert Battle said Boozer did not inform the college of the decision except through the letter, which came by regular mail.

In the letter, Boozer said Birmingham-Southern did not fulfill the requirements spelled out in the law for collateral and a restructured financial plan.

Anderson said Boozer’s assertions in the letter establish disagreements on facts that the court would have to settle if the case proceeds. But first, the judge said he would decide whether Boozer is shielded from the lawsuit by sovereign immunity and has full over whether to award loans.

Jim Davis, a lawyer from the attorney general’s office who represents Boozer, said it’s the state’s position that Boozer has sovereign immunity. Davis told Anderson the state would make its arguments in a motion to dismiss the case by Monday.

Anderson scheduled another hearing for Wednesday.

Lawyers for Birmingham-Southern said the college needs to know by Oct. 30 whether it will receive the money so the Board of Trustees can make a decision about whether the college continues to offer classes after this semester. That decision will affect 731 full-time students, including 439 Alabama residents, and 284 employees, the college said.

Birmingham-Southern asked the court to order the first $8.8 million draw by Nov. 6, followed by another $7.2 million on Feb. 1. The college is seeking $9 million in the 2024-25 academic year and $5 million in the 2025-26 academic year.

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