Birmingham-Southern College - My View

Birmingham-Southern College: My View

A. The Roots: Southern University

Birmingham-Southern roots go back to 1856 when Southern University was established in Greensboro, Alabama by the Alabama Conference (now the Alabama-West Florida Conference) of the Methodist Church. The college was the product of the Second Great Awakening, a Protestant revivalist movement that swept the United States in the early and mid-19^th Century as the nation’s population grew and moved westward in rough and unsettled territories.  Methodist circuit riders were prominent in this movement, holding tent revivals and converting thousands of souls to Christianity and righteousness.  Ministers were needed to preach to these new converts after the circuit riders left town and the General Conference of the Methodist Church, the highest authority of the church, passed a resolution in the mid-1800’s requesting that the annual conferences of the church establish colleges where new ministers could be educated and trained.^[1] The Alabama Conference, wished to comply with this request, but was in no financial position to establish a college on its own. It therefore put out a RFP and two groups of individuals submitted proposals; one from Auburn, Alabama and one from Greensboro, Alabama. The Greensboro, Alabama proposal was accepted as a local merchant in Greensboro, offered to put up $10,000 to establish the college even though he was not a Methodist.^[2]

Southern University struggled to stay open. One of the problems was that the University admitted the sons of Methodist ministers without charging tuition.  One year, the faculty went on strike because there were no funds to pay them a salary due to these tuition waivers.  The Civil War had a devastating effect on the Black Belt of Alabama. The major asset of the Black Belt planters was lost when slaves became free. In the post war period, the price of cotton fluctuated wildly and there were numerous bank failures, all of which affected the University.  One year the students had to pick cotton to earn money to keep the school open; in another year they had to grow a vegetable garden so the school cafeteria would have food. The University finally failed in 1918 after young men went off to war in WWI; then the Spanish flu proved devastating.

B. The Merger: Birmingham College

Birmingham College was established in 1898 by a real estate development company that was developing land in western Birmingham. The company believed that a college located in its development would make the home sites more attractive to potential buyers. The developers gave the land and buildings they developed to the North Alabama Conference of the Methodist Church to operate as a college. 

Birmingham College had an entirely different focus than the mission of Southern University. Birmingham College sought to train young men and women in the new office jobs that were becoming available in Birmingham as the city industrialized. Think Massey-Draughon Business School. The College offered courses in shorthand, bookkeeping, typing, and even cotton grading. After the merger, the school, now known as Birmingham-Southern College, took on the liberal arts character of Southern University and professors and students moved to Birmingham from Greensboro.^[3]

The merger of Southern University and Birmingham College took place in 1918, however, there was a problem with the legal documents that made this merger invalid.  To correct the defect, an Alabama nonprofit corporation, Birmingham-Southern College, Inc., was created in 1920 that properly merged the schools. This 1920 incorporation stated that the incorporators desired to be known as Birmingham-Southern College, (without the “inc.”) and that its Board of Trustees would not be self-perpetuating but elected by the Alabama Conference and the North Alabama Conference of the Methodist Episcopal Church South.^[4]

C: A Flawed Governance Structure: The Governing Documents

The current Charter (Articles of Incorporation) of Birmingham-Southern College resulted from a reincorporation that occurred in 1974. The Alabama legislature passed a revised Nonprofit Corporation Act (“Act”) that set forth more definitively the powers, duties, and authorities of nonprofit corporations incorporated in the State of Alabama.  BSC wanted to avail itself of these advantages and reincorporated under this revised Act. However, there was a problem. To understand this problem, an explanation is needed about the legal nature of nonprofit corporations.

There are two types of nonprofits: (1) Member nonprofits; and (2) Nonmember nonprofits.  If a nonprofit is a “Member nonprofit,” its Board is appointed by an outside entity that is considered the “Member.”  A “Nonmember nonprofit” has a Board that is self-perpetuating, meaning that the initial Board members will thereafter appoint those who will serve on the Board.  The Alabama Nonprofit Corporation Act defined a “Member” as a person, partnership, or corporation…basically an entity with a legal existence.  The two Methodist Conferences, however, considered itself as only a “spiritual connection,” not an earthly entity.  The origin of this idea was that John Wesley and his movement never broke from the Church of England, they were a revivalist movement within the Church.

Because the two Conferences could not be Members of a nonprofit corporation, Birmingham-Southern College’s charter stated the corporation was a nonmember nonprofit.  In doing so, the College should have had a self-perpetuating Board. Instead, the Charter provided that members of the Board of Trustees were to be appointed by the two Methodist Conferences in Alabama with whom Southern University and Birmingham College had been affiliated. This clearly was not kosher as it made the Conferences de facto Members; something the law did not allow them to be.

The 1974 Charter created 4 categories of Board members:

(i) Members elected by the North Alabama Conference.  These were 12 in number, 6 of whom are ordained ministers of the Conference and 6 were lay members of the Conference who lived within the boundaries of the Conference;  

(ii) Members elected by the Alabama-West Florida Conference. These were also 12 in number, 6 of whom are ordained ministers of the Conference and 6 lay member of the Conference who lived with the boundaries of the Conference; 

(iii) Members-at-Large.  These were 12 in number and were elected “jointly” by the 2 Conferences.  There were no geographical or religious restrictions on the individuals elected as Members-at-Large; and 

(iv) Life Members.  Individuals qualify for life membership on the Board when they have either (a) reached 72 years of age while serving as a Board member, or (b) have reached a cumulative 24 years of service on the Board.

In 1989, during the Berte Administration, the Charter was amended.  This amendment changed the composition of the Board as follows:

(i) Sixteen (16) members are elected by the 2 Conferences. Each Conference elected 8 members to the Board, instead of 12 as provided for in the 1974 Charter.  Four of these eight members were to be ordained ministers of the Conference and 4 lay members of the Conference who resided within the boundaries of the Conference.

(ii) Twenty-four (24) Members-at-Large were to be elected by “joint action” of the 2 Conferences.  Two of these 24 members were the Presiding Bishops of the 2 Conference, or ordained ministers without regard to Conference affiliation, 2 shall be lay members of the United Methodist Church, and 20 shall be without regard to church affiliation or geographic restrictions, with the proviso that a majority of the Board had to be affiliated with the United Methodist Church at all times.

(iii) An unlimited number of “Life Members.”  In addition to the 1974 Charter’s provision that any Trustee who reached 72 while serving on the Board or who had served a cumulative 24 years on the Board, the 1989 Amendment also added all Trustees who have completed either a 3-year term as Chairman of the Board of Trustees or Chairman of the Executive Committee of the Board of Trustees.  The Amendment further states that any Trustee who qualifies for Life Membership shall be elected by the joint action of the 2 Conferences upon certification by the President of BSC of their eligibility and that election to life membership eliminates the necessity of re-election.

 The Board grew exponentially from its base of 40 members due to the category of Life Members.  By the early 2000’s there were at least 72 Board members, although there was some uncertainty as to the exact number when I inquired back in 2004. Many of these Life Members were members in Birmingham’s business community who originally were Members-at-Large and, because of their business background, had served in executive positions on the Board. This diluted the Church-related representation on the Board and allowed the President of the college to have more of his supporters on the Board.

While the charter provided a method of appointing Trustees, there was no provision regarding removal of a Trustee who was no longer willing or capable of serving. At least one of the Life Members was in Hospice, others were barely hanging on, when the Board met to vote on leaving Division I athletics. The Administration walked into the meeting not knowing if it had the support of the Board, it all depended on which Trustees showed up at the meeting. I was told that only approximately 50 Trustees showed up for the meeting and a substantial number voted to remain in Division I athletics. 

There were many other problems with the College’s governing document.  First, you don’t want your Board to be constantly expanding in size, and you want the Board to have an odd number of members to prevent a tie vote. As a result of the size of the Board and the way that President Berte treated the Board (more on this later), many Board members never attended the meetings, which according to the Charter were to take place twice a year, one in the fall and the other in the spring. In order to obtain a quorum, enough absent members would be contacted, placed on a speaker phone, and counted as present.

There was also a technical legal problem with this selection process. The Charter of Birmingham-Southern College could not legally tell the Conferences who they had to appoint, yet the Charter provided that the Conferences must appoint Life Members when provided with a list of Trustees who qualified for Life Membership.  Only the Conferences’ own governing documents had the power to dictate what they had to do. This provision, in effect, gave the College the power to tell the Conferences that certain Trustees had to remain on the Board.

Additionally, the “joint appointment” by the two Conferences of the Members-at-Large is not a thing.  Annual Conferences of the Methodist Church operate totally independent of each other.  There is no convention where delegates from the two Conferences meet together and jointly vote on a matter. What happened was that the college President would prepare a list of the individuals he wanted on the Board as Members-at-Large and this list would be approved, serially, not jointly, by each of the two Conferences in their separate annual conference meetings. Had one of the two Conferences disagreed as to these appointments, there would have been no other way to fill these Board vacancies, resulting in an impasse that would render the College unable to operate. Although this never happened, this possibility should never have been left open.

The disjointed process for selecting Member-at-Large Trustees allowed Dr. Berte to control the Board by appointing friends who would never oppose him. There was no challenging Berte’s decisions or policies. Board members could not ask questions at Board meetings. If a Member had a question, he/she had to first submit the question in writing before the meeting. At the meeting Berte would read the question and then read his answer. No follow up questions were permitted. Berte would have students perform at the meetings like it was an entertainment event, not a serious business meeting intended to provide oversight of the operation of the College.  Once, when William Rushton, the CEO of Protective Life, who was chairman of BSC’s Board of Trustees, asked Berte to allow him to see the books and records of the College, Berte refused and had the Rushton removed from the Board.

D. The Berte Years: Growth and Disfunction Due to Lack of Oversight

Prior to Neal Berte’s appointment as President, the College in the late 1960’s received an offer from a real estate developer to move its campus from the Hilltop in western Birmingham to a suburban setting in Shelby County. For several years the Board delayed making a decision concerning this offer and did not finally decide to stay in Birmingham until sometime in 1974-75.

The Board also decided to hire Neal Berte, who had been the Dean of New College at the University of Alabama, as President. Dr. Berte became President on February 1, 1976.

Soon after Dr. Berte’s arrival at BSC, a horrific event occurred that shook the College and local community.  On December 20, 1976, Quenette Shehane, who had just graduated from BSC, was kidnapped at a convenience store just off campus, then raped and murdered by three Afro-American men. The neighborhood surrounding the campus had become increasingly Afro-American and this Black on White crime had a significant impact on the College’s recruitment of white students.  Dr. Berte’s response to the incident was to build a wall around the campus with secure entry points. In making this move, Berte made every effort to not offend the local residents of the neighborhood, and his efforts were generally met with approval, although the wall engendered some complaints from people in the Black community, and some folks in the White community remained hesitant to send their kids to BSC as they were not totally satisfied that the campus was safe.

Berte commenced an ambitious program to beautify the campus and build much needed new facilities and thus augment the enrollment that had dropped below 1,000 students. The campus had suffered from deferred maintenance during the period of uncertainty about the move to Shelby County and needed a major facelift. These projects were paid for primarily with debt.  Mortgages were taken out on the campus property and in 1996, 1997, and 2002, BSC issued under the authority of the Private Education Building Authority of the City of Birmingham tuition revenue bonds in approximately $30 million.  Almost immediately after their issuance, the bonds began receiving ratings downgrades from Moody’s bond rating service. By the time Berte left office, the bonds had received three downgrades. Although the Endowment grew to over $130 million, and the enrollment grew under the Berte administration, the College was also burdened by heavy in debt and an unsustainably high tuition discount rate that was causing the college to bleed money.

The operation of a quality, liberal arts college at the level of only 1,200 students virtually ensures that a College will operate at an annual deficit. There is simply not enough tuition revenue to cover fixed costs. In addition to beautifying the campus and adding much needed new facilities, Berte attempted to grow the College out of this financial hole by adding new programs. An adult studies program, a degree in nursing, and a graduate program in public and private management were added. All of these programs ultimately failed and were eventually abandoned. The most disastrous decision by Berte, in pursuit of additional enrollment, however was to take the College into NCAA Division I athletics.

Berte did not prepare or present to the Board a financial projection of the implications of moving into Division I athletics. There was no discussion at all at the Board meeting where this move was adopted, only a motion by Berte and an obligatory show of hands.

The NCAA requires all Division I schools to give tuition scholarships to its athletes. In BSC’s case, this amounted to approximately 110 athletes receiving scholarships, many of them full scholarships. Board members were never advised of this requirement. BSC did not have a scholarship fund in its Endowment to pay for these scholarships.  What the College did was write off the tuition of the athletes and call it “scholarships.”  These “tuition discounts” caused the College to have significant annual operating deficits without this tuition revenue. These deficits however were hidden by improper accounting.

E. Financial Misfeasance: Failure to Properly Separate the Operating Account from the Endowment

   Under generally accepted accounting principles established by the Financial Standards Accounting Board (FASB), funds in the Endowment cannot be comingled with the operating account funds. BSC’s financial records and its annual financial statements failed to keep these funds separate. Deficits in the operating account were being covered by funds in the Endowment, some of which were restricted funds that could be used only for specific purposes, a really serious financial violation. The Board did not learn that the College’s financial statements were out of compliance with FASB standards, and thus failed to provide an accurate account of the College’s financial performance, until the CFO, Johnny Johnson, unexpectedly died in November 2001 while on vacation. One of the Trustees, a CPA, went to Johnson’s office to clean out his desk and made this discovery.  Berte, who always had total control over every aspect of the College’s operations, denied knowing about the commingling of funds.

F. Shit hit the fan.

Two Trustees contacted me and asked for my legal opinion as to whether they might have personal liability to the donors of restricted funds.  When they provided me with the background information, I was shocked by what they told me. The answer as to whether the Board members were legally liable was obvious. 

At the October 2, 2003 meeting, Berte announced his retirement effective June 30, 2004. A head hunting firm was hired to find a replacement. The leadership of the Board wanted a replacement who could help the College recruit students nationally. The head hunting firm recommended David Pollick, a native of San Diego, California, who was then the President of Lebanon Valley College, a Pennsylvania college affiliated with the United Methodist Church. Dr. Pollick and his wife, Karen Bentley, projected an image that definitely wasn’t the stereotype of the Birmingham Rotary Club or Canterbury UMC.  Pollick’s Ph.D. was in Philosophy, not finance, but he seemed just the ticket to make BSC into a national liberal arts college. Because Pollick was not familiar with the lay of the land in Birmingham or with the College’s major donors, Dr. Berte was asked to stay on as the College’s Chancellor and mentor Pollick and he agreed to do so.

G. Post Berte’s Presidency: The Board Becomes More Proactive

Realizing that they had not fulfilled their legal duty to oversee the operation of the College, the Board vowed it would start taking a closer look into the affairs of BSC.

The first thing the Board did was to double the coverage limits of its officer and directors liability insurance policy. The Board also passed a by-law that provided that the nominees for the Member-at-Large positions on the Board would henceforth be given to the Conferences by the Chairman of the Board, not the President. Another by-law sought to address the problem with the Life Members and the unwieldy size of the Board . This by-law provided that Life Members would not be counted for purposes of determining a quorum, a way of encouraging Life Members to take a hike, although legally these Life Members had full rights as Trustees under the governing Charter and their status could not be diminished by a Board By-Law.

H. Division I Athletics: A Financial Disaster

Pollick was never told of the problem with the financial statements when he interviewed for the job, and he learned about it on the first day he started work. The exact words he used in telling me his reaction were: “I shit my pants.” He was speaking metaphorically, I assumed.

For over a year after Pollick’s arrival, attempts were made to restate properly the College’s prior financial statements. These attempts never succeeded, but it became clear to the Board that the College’s large deficits were caused by tuition discounts, primarily the tuition write-offs given to Division I athletes as “scholarships.” 

The Executive Committee of the Board, chaired by Jim Stephens, CEO of EBSCO, a graduate of Yale and the Harvard Business School, and an astute businessman, said that Division I athletics had to go. Pollick agreed and asked the faculty if they agreed. All but one faculty member agreed.  Berte, however, did not apparently agree, perhaps thinking that dropping Division I sports was a personal affront to his prior leadership and tarnished his legacy. When the Board met and narrowly approved the resolution to drop Division I athletics, Berte left the meeting, went home, then faxed a letter to the Chairman of the Board resigning his position as Chancellor, omitting to “cc” Dr. Pollick. In fact, he never spoke to Pollick again.

I. Division III Athletics: A Financial Albatross

Because there was substantial support on the Board for the continuation of sports, the Board decided to participate in Division III athletics. In doing so, the College was required to field a football team by the other schools in the conference it wished to join .  This conference, the Southern Athletic Association, was comprised of other small, liberal arts colleges that BSC considered its comparable. These included Sewanee, Rhodes, Millsaps, and Hendrix colleges.

To participate in Division III athletics, in addition to football, BSC had to offer a total of 22 varsity sports. Half of the entire student body became Division III athletes. Although Division III athletes could not be offered “athletic scholarships,” there is little doubt that most received substantial, if not total, tuition discounts. Additionally, the administration thought that an on-campus football field and stadium was necessary to accommodate football practice and games. I was advised that, Dowd Ritter, CEO, of Regions Bank, and now the Chairman of the BSC Board of Trustees, told at least some trustees that his bank would pay for the stadium in exchange for naming rights.

J. 2004-2010: A Five-Year Plan to Grow Enrollment

The Board, post-Berte, faced a financial dilemma.  The funds in the Endowment would eventually run out if the College continued to incur annual deficits. The Board, who had hired a new CFO after Johnson’s death, and prior to Pollick’s arrival, had the CFO prepare a 5-Year Business Plan.  This Plan projected that at 1,700-1,800 students, the College would have enough tuition revenue to meet its expenses, thus achieving financial stability.

The College’s 5-Year Plan relied on the principle of economies of scale and projected that the marginal cost of adding additional students would be far less than the revenue they produced.  This analysis, however, failed to factor into the equation tuition discounts.  In reality, the College lost money on many of the new students it enrolled.

Pollick allowed me to review the Plan and interview the CFO about the assumptions and the financial numbers projected by the Plan.  After I hung up my call with the CFO, I emailed Pollick and said that the College should immediately bring in an outside consultant as the Plan was flawed. To my knowledge this was never done.

K. Growing the Enrollment: Where Does The College Get the Money?

The game plan to grow the enrollment was not unlike what Berte had done – build a more beautiful campus and they will come.  The College however needed money for capital projects. The College existed in a very competitive environment for exceptional students. BSC was having to complete with large universities that had established Honors Colleges with almost unlimited funds. These Honors Colleges were offering full tuition scholarships, laptop computers, money for foreign travel and study, and modern dorms with luxury amenities. Where was the College going to get the money to keep up with the competition?  Its campus was mortgaged, and its tuition was pledged to secure the revenue bonds.  Except for a line of credit with Regions Bank, the assets in the Endowment were the only funds available.

The Board decided to gamble the funds in the Endowment and roll the dice. This decision proved to be a huge mistake. However, had the Board not made this decision, and not tried to achieve financial equilibrium, the same financial failure eventually would have happened.

Many of the capital expenditures the College made between 2004-2010 turned out to be boondoggles. Especially the lake. The underground water source that was to fill the lake could not be found until after multiple, costly drillings. There were cost overruns in building the football stadium and Regions Bank never made good on Dowd Ritter’s promise.  By 2008, Regions Bank was itself in financial distress and had to accept TARP funds. In doing so, it came under rules dictated by the Department of the Treasury, charitable donations to a college was not something the feds would allow.

The financial crisis of 2008 also saw a $25 million dollar loss in the value of the assets in the Endowment that had been invested in securities. By 2010, unrestricted funds in the Endowment were nearing depletion.

The College’s annual budgets from 2004-2010 were the vehicles that depleted the Endowment. The costs of the new capital projects were listed in the budgets as annual expense items. These annual budgets were initially prepared by the Board’s Budget and Finance Committee with the assistance of the College’s CFO.  The entire Board would then approve the budget.  Even though the Board might have relied on advice from the Administration there is no question that the Board depleted the Endowment with its eyes wide open, knowing what it was doing,  Unfortunately, there were no alarms in place to let the Board know when the Endowment funds were approaching depletion.

L. The Pell Grant Snafu: Defining a Tuition Discount

The 2009-2010 budget, approved by the Board, contained an approximate $14 million deficit.  In building the budget, the Committee on Budget and Finance projected revenue by setting a “tuition discount rate.”  The amount the Board set was an overall rate for all students. The admissions office could discount tuition for a particular student as much as it thought necessary to attract the student into enrolling, as long as the aggregate discounts did not exceed the the overall discount rate set by the Board. In calculating the discount rate, the Board intended that Pell Grants would be counted as a discount, but this understanding was not conveyed to the admissions office. The admission office did not treat Pell Grants as “discounts” because actual money was received by the College from the federal government. By not including Pell Grants in the tuition discount rate, the admission office unknowingly exceeded the overall tuition discount rate. This mistake broke the 2009-2010 budget and caused the college to exceed its already high deficit.

M. The Green Sheets: An Alarm Finally Rings and Pollick is Fired

The College’s CFO would prepare financial reports printed on green sheets that showed the revenue and expenses the College was experiencing on an ongoing, daily basis. These green sheets were given to the President and other members of management.  They did not indicate that anything was amiss, it appeared that the College was on track to meet its 2009-2010 budget.

In the spring of 2010, Regions Bank called and advised the College that it had overdrawn its credit line. The credit line agreement with the Bank provided that two signatures from BSC officials were needed to draw funds.  The CFO alone, without anyone else’s knowledge, had withdrawn funds from the credit line and represented on the green sheets that it was revenue, thus disguising the loss of tuition from the excessive discounts. 

The Board never sued Regions over the improper disbursements or, to my knowledge, received a return of the improperly disbursed funds. At the time, the CEO of Regions Bank was Dowd Ritter.  Dowd Ritter was also the Chairman of BSC’s Board of Trustees.

Pollick took the fall and was fired by the Board. Pollick’s employment contract with the College gave him a large buyout in case he was fired. The Board wanted to get out of this buy-out and investigated whether Pollick had committed malfeasance or had misappropriated funds.  A lawyer who also had a CPA degree was hired to do a forensic audit.  He concluded that there had been no intentional wrongdoing on Pollick’s part.  Pollick walked away with a substantial payoff which many Trustees and members of the College community resented.

N. The Deathbed Years: 2010 – 2024

Following Pollick’s firing, BSC had a string of Presidents. General Charles Krulak, who had been the Commandant of the U.S. Marine Corps, came onboard and was able to stabilize the ship from sinking, but was unable to make it seaworthy.  He served from 2011–2015 and was well-liked by the students, faculty, alums and the Birmingham community. Upon his unexpected resignation, the Board in 2016 hired Edward Leonard, III, the president of Bethany College in Kansas. He proved to be a disappointment, and the Board relieved him as President after less than a year in order to get a refund from the head hunting firm that had recommended him. In 2016, the College hired Linda Flaherty-Goldsmith who had served as VP for Financial Affairs at the University of Alabama System and who had previously performed financial consulting for BSC. Ms. Flaherty-Goldsmith told the Board that she would serve as President only if the Board worked with her and agreed to raise or personally give $5 million each year for the next 3 years . Each Trustees were assigned an amount of money that each was to personally donate or raise.  The Chairman went around the table and asked each Trustee to commit to the amount assigned to him/her.  They all committed to do so. In the end, the Board raised less than 1/3 of their commitment; several Trustees contributed bupkis, $0.  A former Trustee, who in the past had given substantial donations to the College, was incensed by the Board’s lack of financial support to the College and the lack of personal support given to President Flaherty-Goldsmith. He contacted me and asked if I would send a letter to then-BSC Board Chairman, David Smith, a partner in Maynard, Cooper & Gale law firm. He could not, for diplomatic purposes, send the letter himself, but he knew I didn’t mind stepping on toes, in fact he knew that I would probably stomp on them. My letter asked Smith to remove the Trustees who had pledged to make a specific financial contribution but failed to do so.  My letter got no results.  In the end, the College’s governing documents did not give the Board the power to discipline its members, and no one was willing to rock the boat and demand that a Trustee, appointed by the Methodist Conferences, had to step off the Board.

Ms. Flaherty-Goldsmith realized that she was dealing with an uncooperative Board and resigned her position as President for “personal health reasons.”

Daniel Coleman was the last president of the College. He started in 2018, although he previously served as a Trustee.  Coleman was a native of Birmingham, having grown up in Mountain Brook. Coleman attended Yale undergraduate school and the University of Chicago where he obtained a MBA. Coleman had a strong financial background, having served as CEO of KCG, a securities trading company that was as pioneer in computerized trades. Prior to KCG, he had worked for USB Investment Bank. It was hoped that his Wall Street connections would produce an angel donor.

Coleman had a difficult time in attracting donors. Prospective donors told him that they did not trust the College’s Board of Trustees to be good stewards with their money.  Coleman responded by creating a Foundation, the original Board consisting of himself, Denson Franklin, III, and William A. Terry. It was hoped that this Foundation could raise a fund of $200 million, an amount that could generate enough annal interest and income to sustain the College’s annual operating deficits. Coleman promised individuals they would not be held to their pledges unless the Foundation reached its $200 million goal. It is my understanding that the pledges never reached higher than $40 million.

Not long after Coleman started, COVID struck in 2020 and BSC’s enrollment plunged. Enrollment was already at a low during the period from 2011-2018 as the College had slashed programs and faculty positions in order to stay alive. The federal government’s COVID relief funds gave the College the ability to continue operating, but eventually these programs ended. The College was desperate to find sources of funds to continue operating.

The College looked to the State of Alabama which had been appropriated funds by the federal government for COVID relief. The State could disburse these funds as it saw fit. The State, however, turned down the College’s request. 

The College then sought a loan from the State. With the help of state Sen. Jabo Waggoner, a BSC alumnus, and others in the Birmingham delegation, the College was able to get an act passed that would provide up to $30 million in loans to financially distressed educational institutions in Alabama. The Act was clearly meant to save BSC.  The Act, however, left the decision as to whether to grant a loan to the State Treasurer, Young Boozer. Boozer turned down BSC’s request based on his opinion that the College was not offering sufficient security for the loan and did not have a viable repayment plan. The College sued Boozer to force him to make the loan, but the court held that it could not force the State Treasurer to make the loan as the Act gave Boozer full discretion to grant or deny loan requests.  The College next tried to revise the Act and give the State Department of Education the power to grant the loan requests.  This revision bill passed the Senate but died in the House. After receiving the news that the revision bill had died, the Board of Trustees voted to close the College effective May 31, 2024.

O. Why BSC Failed: My Analysis

The penultimate answer is that the College could never attract enough tuition-paying students.

For the last 25 years, the College was discounting tuition to approximately 99% of its students. In aggregate, nearly 50% of tuition was being waived in order to attract students. I may have been the only parent who paid 100% of tuition when I sent my son to BSC, although I have no regrets about having done so.

Religiously affiliated Colleges do well when they are a part of a church’s evangelism. BSC served no clear mission for the Methodist Church. Students at BSC were taught to think critically, not accept religious dogma they were told they had to believe.

Other than producing Miss Alabama’s, the school never had a brand that set it apart from other liberal arts colleges, or a reputation that could attract students from a wide geographic area. Unfortunately, this national attention came too late, when the BSC baseball team heroically continued winning after the College closed, making it to the Division III World Series.

It was folly to offer intercollegiate athletic programs that the College could not afford.

The College faced competition for students from colleges and universities that had far greater financial resources. In addition to the Honors Colleges, the rise of UAB’s undergraduate program siphoned students and the financial largesse of donors in the Birmingham business community. 

The architecture of the College’s governance structure created a weak and ineffective Board of Trustees. Rather than being hung up with giving equal appointment to each of the two conferences, the Charter should have appointed Trustees based on the yardstick: is it in the best interest of the College for this person to be in charge of overseeing the College’s operations and will he/she take his/her fiduciary duties seriously. Although BSC’s Board of Trustees had some of the finest financial and legal minds in Birmingham, as a collective body the Board members saw service on the Board as honorific and passive; not a role in which they were charged with ensuring its survival. 

I am not sure that the College would have survived even if it had received the $30 million loan from the State. ProPublico, a news organization, publishes on its website tax returns of non-profits. According to Birmingham-Southern College’s tax returns, In each year of the 5-year period from 2019-2023, the College incurred substantial annual operating losses, totaling over $70 Million. In 2022, alone, the College’s operating deficit was $37,883,000. https://projects.propublica.org/nonprofits/organizations/630288811

Other small colleges in the United States have recently closed, or they are failing and about to close. https://hechingerreport.org/experts-predicted-dozens-of-colleges-would-close-in-2023-and-they-were-right/. These closures are for the same reasons that BSC closed, not enough tuition-paying students.  Demographics have played a large role in why this is happening. From the Baby Boom era to the present, the birth rate in the US has dropped.  The pool of students who are reaching the age to enter college will soon drop off a cliff. https://www2.deloitte.com/us/en/insights/industry/public-sector/articles-on-higher-education/enrollment-rates-in-higher-education.html

We who love Birmingham-Southern College are all heart broken by its loss. Many of us wish there was single answer as to why BSC failed and a single person who we could vilify. Truth, however, never boils down to a simplistic, one explanation answer.

P. Afternote: A Caveat

All historical accounts are subjective. Mine represent events seen through the rose-colored glasses and critical eyes of a lawyer.  Because much of my information is from secondary sources to the extent these sources are wrong, my account is wrong. However, I have a high level of confidence in the information that these sources have told me. In most cases, I was able to rely on more than one source. 

The books I have relied on were written by professional historians who had access to primary sources.  I consulted as many primary sources as I could: the College’s charter, amended Charter, its By-Laws, its Form 990 tax returns, its 5-Year Business Plan, Moody’s analysis and financial outlook after each of its downgrades of BSC’s bonds., and the Foundation’s Articles of Incorporation. 

This paper is intended to be a communication between myself and others with whom I have a common interest - BSC graduates, faculty, and staff who have informed me they are seeking a more fulsome explanation as to why BSC failed than vague statements about “mismanagement” and Boozer’s failure to approve the loan.

Finally, the following are books that have been written about BSC’s history.  I highly recommend the one by Joseph Parks and O.C. Weaver. The last two were commissioned by the BSC administration and are more akin to public relations press releases than a critical look in the historical mirror.

1. A History of Birmingham-Southern College, 1856-1931, by Wilbur Dow Perry;

2. A History of Birmingham-Southern College 1856-1956, by Joseph Parker and O.C. Weaver;

3. Forward, Ever: Birmingham-Southern College at its Sesquicentennial, by David Brown, with a forward by Howell Raines.

4. View from the Hilltop: The First 125 Years of Birmingham-Southern College, by Robert Corley and Samuel Stayer.

FORWARD, EVER.

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^[1] The Methodist Church has a hierarchical governing structure. Each church belongs to an Annual Conference comprised of local churches within a defined geographical area.  Annual Conferences are then grouped into Jurisdictions, and finally the Jurisdictions are under the umbrella of the General Conference.  Annual conferences, as the name implies, meet annually, and are attended by delegates from each of the churches in the conferences. They are presided over by Bishops, and they assign ministers to the conference churches who serve these churches on a rotating basis. Jurisdictions also meet annually and are comprised of delegates from each of the Annual Conferences within the Jurisdiction. Jurisdictions elect the Bishops who preside over the Annual Conferences. The General Conference, which meets only every 4 years, adopts, and occasionally amends, the Book of Discipline and sets other overarching policies for the entire church.

For these purposes, I am using the term “Methodist” to include the Methodist Episcopal Church South, the Methodist Church, and the United Methodist Church, all of which are in the line of succession to the current UMC. The Methodist Episcopal Church South broke from the Methodist Church over slavery in the mid-19^th century, but in 1939, in connection with a merger with the Methodist Protestant Church, became the Methodist Church. The United Methodist Church came into existence in 1968 with the merger of the Methodist Church and the Evangelical United Brethren Church.

^[2] The Auburn folks were not happy about the choice of Greensboro, a town they viewed as a wicked place where there was horse racing down the middle of the main street, gambling, saloons, and houses of prostitution.  The Black Belt of Alabama, and King Cotton, were however the financial backbone of the state and the place mostly likely to sustain a college that had no endowment provided by its establishing church. Two years after its proposal was passed over in favor of Greensboro, the Auburn group established a small Methodist college in Auburn. This college in Auburn soon failed financially and closed.  It was taken over by the state and its campus became the footprint of what is now Auburn University.

Other Methodist colleges were established in Alabama. The first one was in Florence, Alabama, established by the Tennessee Conference of the Methodist Church. At the time, the northern area of Alabama was within the jurisdiction of the Tennessee Conference (this area was later broken off to form the North Alabama Conference).  The Methodist college in Florence did not last as it too failed financially. It was taken over by the State of Alabama and is now the University of North Alabama.

^[3] A remnant of Birmingham College still existed at BSC in the 1960’s.  There was a course in typing for academic credit .  I know because I took this course, and it was consequential in my life. When I was drafted into the U.S. Army after graduation from BSC, I was sent to an induction center where I was required to fill out a resume of my education and skills. I wrote down that I could type. The Army decided to issue me a typewriter rather than a M-16.

^[4] BSC was also the product of a second merger, although, unlike the 1918 merger, this merger did not affect BSC’s governance. In 1953, the Birmingham Conservatory of Music, which had a renowned history, but financial difficulties, merged into BSC’s music department as the “Birmingham-Southern College Conservatory of Fine and Performing Arts.”