A new bill to provide a state loan to help financially troubled Birmingham-Southern College remain open won approval in a committee this week, and the sponsor said he hopes it can be considered in the Alabama Senate next week.

SB31 by Sen. Jabo Waggoner, R-Vestavia Hills, makes changes to the Distressed Institutions of Higher Education Revolving Loan Program, which the Legislature created last year in response to the request for public assistance from Birmingham-Southern.

Birmingham-Southern applied for a $30 million loan through the program, money that officials from the private, liberal arts college said would help the college keep operating while it pursued a private fundraising campaign to build its endowment.

State Treasurer Young Boozer, designated by the Legislature to run the loan program, turned down Birmingham-Southern’s application because he said the college did not meet the qualifications established by the law, including adequate collateral and a financial plan that showed it would be able to repay the debt.

Birmingham-Southern disputed Boozer’s conclusions and challenged his authority to deny the application in a lawsuit, but the case was dismissed.

Now Birmingham-Southern’s hopes of receiving the state assistance, which the college said is essential to being open for the fall semester, appear to depend on the new legislation.

SB31 would replace Boozer as administrator of the loan program with Jim Purcell, the executive director of the Alabama Commission on Higher Education. The bill would make other changes to the loan program that appear to make it more likely for Birmingham-Southern to receive a loan.

For example, while the current law says the state treasurer “may” award a loan to a college that met the qualifications, SB31 says the ACHE executive director “shall” issue the loan to a qualified applicant within 30 days of the application.

Waggoner, who attended Birmingham-Southern on a basketball scholarship, told senators to be ready to consider the legislation.

“I have 21 co-sponsors and I think that’s a good sign of the interest in preserving this great college that’s on the west side of Birmingham, but it’s in the state of Alabama,” Waggoner told the Senate. “All of you have had constituents who attended Birmingham-Southern.”

Sen. Rodger Smitherman, D-Birmingham, is a co-sponsor of the bill. Birmingham-Southern is in Smitherman’s Senate district.

The legislation is not limited to Birmingham-Southern. Other colleges can apply for loans from the Distressed Institutions program. Selma University applied last year. Boozer denied the application because he said it did not meet the minimum criteria to qualify.

Sen. Arthur Orr, R-Decatur, chair of the Senate’s Finance and Taxation education committee, which handles the state’s annual education budget, opposed SB31 when it came before the committee this week.

“I went through the bill line by line and pointed out over 10 very problematic areas,” Orr said.

Orr said the changes the bill would make in the Distressed Institutions loan program extend far beyond replacing the treasurer as head of the program with the executive director of ACHE.

Waggoner and supporters of the legislation are working on a new version of the bill that is expected to be presented to the Senate.

“They are working on a substitute but I still have serious reservations and concerns,” Orr said. “I voted against the filed version in committee as did several others but asked members to vote their conscience.”

Orr has clout as chairman of the education budget committee. Waggoner also has influence as chair of the Rules Committee, which determines what bills come to the Senate floor.

AL.com first reported in December 2022 that Birmingham-Southern was in financial distress and was in danger of closing.

Virginia Loftin, vice president for advancement and communications for Birmingham-Southern, responded on Friday to questions from AL.com about the legislation and the status of the college’s efforts to raise funds and continue operating.

“Assuming the state loan is made, BSC will open as usual for fall 2024,” Loftin wrote. “We continue to welcome prospective students and families for visits. Applications and deposits have slowed not only due to the situation with the state, but also because of well-reported problems with the Free Application for Federal Student Aid, which has left students across the U.S. in limbo.”

Loftin said Birmingham-Southern has a total enrollment of 689 students for the spring semester. That’s down from 731 students in the fall.

Birmingham-Southern has said the state funding is needed as a bridge while it builds an endowment that would then support operations. The goal is to raise about $150 million to $200 million.

“Active fundraising for the BSC Foundation – which has $46M committed — is on hold until the state loan is awarded,” Loftin wrote in her response to questions from AL.com. “However, many of those donors have already begun making pledge payments.

“BSC’s trustees, alumni, parents, students, faculty, staff, and friends have worked tirelessly over the past year to ensure that the College can continue to serve the state of Alabama and can continue to be a choice for students seeking a small, residential, rigorous, and highly personalized college education.”

In November, the Birmingham City Council approved $5 million in loans to Birmingham-Southern, and the United Methodist Church voted to approve a $2.5 million, one-year investment to the college.

“Our plan for financial stability focuses on our endowment campaign,” Lofton said. ”The loan we seek from the state will provide us time to complete that campaign while we continue to make a significant and measurable contribution to the state economy.”

Birmingham-Southern submitted a report to the Senate committee from economist Keivan Deravi that said the college had an economic impact of $90.7 million for Alabama in fiscal year 2023. That includes factors such as the spending of salaries and wages by faculty and staff, the operating expenditures for goods and services at the college, and the spending by students. The report said the fiscal impact of the college produced $6.3 million in state taxes and $6.8 million in local taxes.

Purcell, the executive director of ACHE, issued a statement Friday about the legislation that would make him the administrator of the Distressed Institutions loan program.

“The criteria of the original bill was found to be too rigorous for any distressed institutions to qualify, so this bill revises those criteria, as well as the administration,” Purcell said. “Should the legislation succeed, the Commission on Higher Education will administer the distressed institutions program in adherence to the revised law.

“Birmingham-Southern College is a historic university that has provided a quality education to thousands of students, while making tremendous contributions to the economic development and growth of the state of Alabama. BSC has been recognized as one of the leading national liberal arts colleges in the country by US News and World Report. BSC faculty are well-respected among their peers.”

Boozer said there are many concerns about the version of SB31 that was approved by the Senate committee. Boozer said it fails to provide the oversight needed to protect state funds.

An example is the criteria to determine whether a college has sufficient collateral for a loan. Boozer determined that Birmingham-Southern did not have sufficient collateral when he denied the loan.

SB31 says a college applying for a loan will be determined to have sufficient collateral if it provides a letter from a bank that says the collateral is sufficient. But Boozer that leaves taxpayers at risk because it would be the state, and not the bank that wrote the letter, on the hook for the loan.

“The amendments (SB31) cause the state of Alabama to be subject to the decisions of third parties who have no financial risk,” Boozer said. “That is huge.”