The Final Decline of Birmingham-Southern College: A Pattern of Financial Loss Emerges
In Birmingham, Alabama, Birmingham-Southern College has, unfortunately, been battling numerous financial issues over many years; its situation has now reached a critical point. Starting off the 2022 tax year with slightly over $6 million cash in hand, but by May 2023, this slumped to less than $800,000.
The Long-Term Struggles
While most might see this as a sudden decline, financial problems had been brewing in the background for around two decades, as revealed by tax records filed with the IRS. The college had marked several near collapses during its 168-year history, operating in the negative for six consecutive years starting in 2004. At its worst, it marked a single-year deficit of $22 million during the 2008-09 school year.
A closer examination of the financial audits for 2022 and 2023 reveals that BDO USA, the college’s accounting firm, had projected a bleak future for Birmingham-Southern. By March 11, auditors asserted a “substantial doubt” about the college’s ability to continue operating due to recurring losses, misuse of federal programs, and unreliable accounting practices.
Shutdown and Immediate Aftermath
The final blow came two weeks later when the board of trustees announced the college’s closure due to the state treasurer’s refusal of a $30 million bridge loan. Operations officially ceased on May 31 and since then, the college’s specific financial status remains unclear.
Liabilities and Potential Repercussions
The most recent data shows the institution had almost $36 million liabilities with the college reportedly non-compliant with the terms of its loans for 2022 and 2023. Surprisingly, no bankruptcy filings have been reported and the college has yet to reveal a public plan to address its debt and finalize its accounts.
Dealing with the Debt
Options available to Birmingham-Southern include selling physical assets, liquidating publicly traded securities, or retrieving owed money. The land and campus buildings, worth around $65 million last year, are speculated to be put up for sale. However, the college owes ServisFirst Bank $16.5 million, giving the bank first claim to these proceeds, which further complicates matters.
On a potentially positive note, Alabama A&M University officials have mentioned plans to present a second cash offer to buy the campus and assure the clearance of Birmingham-Southern’s entire debt in the process. Miles College in Fairfield also rumored to be interested in acquiring the property.
Donors and restrictions
The majority of Birmingham-Southern’s financial assets were held up by restrictions placed by donors. This stipulation required the college to funnel these assets towards specific expenses, often imposing further financial strain.
Years of Struggle Culminated
Birmingham-Southern implemented a 50% reduction in tuition and fees for the 2017-18 academic year. Coincidentally, donations dipped during this same time, from $12 million to just above $5 million. Though a preventive measure, this reduction possibly exacerbated the college’s financial state.
By 2022-23, the college began pulling from its endowment — a common last resort in emergencies — to plug its financial gaps. With just under $26 million left in May 2023, its lowest ever, the situation looked futile. The drop in endowment followed the plunge in student enrollment during the Covid pandemic. As fewer students arrived, those who did needed more financial aid, increasing the institution’s financial burden.
The Final Verdict
It’s evident that the final years of Birmingham-Southern were marked by desperate attempts to keep afloat. The revenue drastically decreased from an annual $81 million to $42 million, while costs didn’t see a similar drop. By the 2022-23 academic year, they’d almost halved their revenue from six years before. With the institution now officially closed and over 200 employees being laid off without severance, the community is keenly waiting for the next steps towards resolving these financial complications.
