When Birmingham-Southern College announced in March it was closing permanently on May 31, few supporters of the esteemed liberal arts college were surprised.
Alumni and ardent supporters of the private, Methodist-affiliated college watched a long, slow roller coaster ride that seemed to have more deep dives than upward climbs over 50 years.
“Birmingham-Southern was always a fragile institution since it lost the backing of the big industrial Stockham family,” said former New York Times Executive Editor Howell Raines, a BSC graduate and author of the novel “Whiskey Man” and the Civil War history “Silent Cavalry.”
Birmingham-Southern College’s string of bad fortune dates to the 1970s and includes the murder of a student that prompted the building of a fence around campus, a national scandal after church arsons committed by three former students in 2006 that detoured fundraising efforts to rebuild burned churches, and extensive financial mismanagement that caused multi-million-dollar budget shortfalls and plunged the college deep in debt, draining its endowment.
By 2022, the college was running a nearly $40 million deficit, with $80.6 million in expenses and only $42.7 in revenue, according to IRS filings.
How long could that downward spiral continue?
President Daniel Coleman hoped a $30 million state loan, along with $7.5 million in local funding could bridge the college through a crisis until a fundraising drive restored the drastically depleted endowment.
It went from a $48 million endowment in 2012 to between $20 million and $25 million in endowment now.
‘No prince at court’
Some blame State Treasurer Young Boozer’s denying the loan for the college’s demise. However, the college was struggling for survival for a long time and it’s not clear that loan would have been more than a stopgap to its ultimate demise.
Boozer insisted it was just a bad investment for the state.
“It’s highly politicized,” Raines said of Boozer’s rejection.
“Could they have survived? I don’t know. Would they have survived if they had not had 20 years of financial mismanagement beforehand? Possibly that’s true too.”
A lawsuit against Boozer failed, and an attempt to rewrite legislation to sidestep the treasurer never gained traction. Some legislators never embraced the idea of a public bailout for a private school.
Aerial photo of Birmingham-Southern College campus.bn
In an era of divisive politics, conservative politicians who dominate the legislature and statehouse may have seen it as a chance to derail an institution with a liberal reputation, Raines said. “Birmingham-Southern had no prince at court,” to help save it, Raines said.
“To be honest, it was one of the few liberal institutions in the state,” said BSC graduate Charles Gaines, author of the book “Pumping Iron,” and the novel, “Stay Hungry,” both of which became films and helped launch the career of bodybuilder Arnold Schwarzenegger.
“It always spoke with an even-minded and open-hearted position on issues.”
Financial crisis
Many point to critical failures during the tenure of David Pollick, college president from July 2004 until Aug. 11, 2011. Pollick, reached by AL.com, declined comment, but has said in emails that the college was financially troubled before he got there.
Before Pollick became president in 2004, Moody’s Investors Service had already downgraded the college’s bond rating three times.
“I have remained silent about the inner workings of BSC,” Pollick said in a previous email to AL.com.
“There was a financial crisis that was embedded in the university that preceded me and has never been brought into the light of day. I doubt it ever will. My response to it bore significant fruit, and in many ways secured BSC’s future, in spite of the financial problems that I and the Board later discovered.”
The chairman of the board at the time, Dowd Ritter, said the board supported Pollick’s strategy “that the path to a stronger financial position was to grow enrollment, thereby increasing student tuition revenues.”
Doing that required improving the condition of the facilities of the campus, according to Ritter.
The magnitude of BSC’s financial woes came to the forefront in 2010, when the college announced that it had for years been mistakenly not subtracting Pell grants from students’ financial aid packages in revenue projections.
That meant the college was giving too much financial aid, causing revenue shortfalls.
“As the Board commitments were made to improve facilities, the early effects of ‘the great recession’ began - thus lowering the value of the endowment, the income from these investments, and donors’ confidence in their ability to make donations to the college,” Ritter wrote.
“This resulted in increased debt/borrowing to pay for the facilities improvements to beyond historical levels, thus creating higher borrowing costs and higher depreciation costs. All of this occurred at a time when, due to the deteriorating economic conditions, students needed increased financial aid.”
In his 2010 statement, Ritter dropped a bombshell accusation about internal financial administration and accounting.
“At the same time, unbeknownst to the Board of Trustees and the President, the scholarship monies being paid to students was in excess of budgeted amounts and was inaccurately shown in internal financial reports -- not just Pell grants as has been widely reported, but scholarships and discounts to tuition, all in efforts to increase enrollment,” Ritter said.
Ritter said that in the 2009-2010 fiscal year, the situation worsened as the college’s Finance Department, “unbeknownst to the leadership - began to increase borrowings to meet the college’s financial obligations.”
The internal misstatements were discovered in early Spring 2010, Ritter said.
“Basically, the Finance Department overstated the revenues and understated the expenses -- purely on internal projections and not on any audited past fiscal years. It took the past four months to truly ‘peel back the layers of the onion’ to see the total causes and ultimate degree of deficient funding.”
The school enacted drastic reforms, cutting about $10 million a year, about a fifth of its budget. It also cut 29 faculty positions, five majors and 51 staff jobs. Student enrollment at the time was about 1,400.
The incoming class of 370 freshmen in 2010 was its fourth-largest.
Birmingham Southern College summer sports camp participants walk across campus for lunch inside the Norton Campus Center. ( The Birmingham News - Frank Couch )BN FTP
But increasingly dire budget deficits forced the end of Pollick’s tenure as the school’s deficit rose to $11.5 million by 2006, $18.8 million in 2007 and $22.1 million in 2008.
Pollick’s total pay in 2008 was up to $495,461. The school had to borrow operating money from Regions Bank and dip further into its endowment fund, which was already battered by a declining stock market.
In 2004, the endowment was $114 million. By the fall of 2010, it was down to just over $60 million.
“My first board meeting at Birmingham-Southern was Dr. Pollick’s first board meeting,” said Bishop William Willimon, who became head of the North Alabama Conference of the United Methodist Church the same week Pollick became BSC president.
“He casually said, ‘We’ve taken $5 million from the endowment for operating expenses.’ I just started hyperventilating. I’d been on three college boards before and never heard a president make a comment like that.”
Moody’s Investors Service slashed the college’s credit rating in the summer of 2010 and criticized its accounting.
The trustees said the crisis happened because the plan to increase enrollment by improving facilities led to increased financial commitments just as the value of the endowment took a hit from the recession, and as donors became less able to contribute.
That increased borrowing while students also needed more financial aid.
“During that period, so much money was borrowed, injudiciously, that it would have taken a huge feat to dig out,” Willimon said.
The budget for 2010-11 showed a projected $13 million deficit. The board report said cutbacks in expenses put the college “much closer to a sound operating budget, the best in at least 10 years.”
That $13 million deficit turned to “almost a balanced budget thanks to expense reductions and new unrestricted gifts,” the board report said in 2010 as Pollick resigned.
In 2011, revenue and expenses roughly evened out at about $75.5 million.
Birmingham-Southern College had dramatically increased its tuition assistance by 85 percent from 2004 to 2008, increasing enrollment by offering 95 percent of incoming freshmen an average of $15,353 in financial aid in 2007-08.
According to an analysis of information from the National Center for Education Statistics, the school’s dramatic shift toward giving larger discounts off the school’s $26,000-a-year tuition price was at the core of revenue problems.
Pell grants were received by only 16 percent of BSC students in 2007-08. Only 73 of 450 incoming freshmen in 2007-08 received Pell grants, a total of $365,803.
By contrast, 427 of 450 incoming freshmen in 2010 received a total of more than $6.55 million in tuition relief from the school.
That was up dramatically from 2004-05, when the school awarded about $3.55 million in institutional financial aid, with 347 students receiving an average of $10,231 each.
The amount accelerated in 2006-07, when 266 of 292 freshmen -- 91 percent -- received an average of $14,637 in institutional aid from the school.
That shift toward paying students more to attend BSC reduced the college’s net tuition and revenue, at the same time the school was building a football stadium and dipping into a rapidly declining endowment.
“To have a front row seat on watching it all go down was bad,” Bishop Willimon said. “From the beginning, I said I thought it was important to realize this was not simply the malfeasance of one man, Pollick. It was a governance failure … When we got a president who did some bad things, the board was caught by surprise.”
The General
General Charles Krulak, a retired commandant of the U.S. Marine Corps, took over as president of Birmingham-Southern College in 2011.
Krulak bonded with students, tirelessly raised funds, declined a salary, and the college operated in the black in 2013 and 2014.
BSC was seemingly back closer to solid ground by the time Krulak retired as president on June 1, 2015.
In 2015, revenues slipped to $66.6 million, with expenses edging up to $70.7 million. “This school is very strong,” Krulak said as he left. “Do we still have issues? Yes.”
Among the issues Birmingham-Southern College struggled with was its nature as a religious institution.
The college formed from a 1918 merger of Southern University, which was founded in 1856, and Birmingham College, which was founded in 1898, both Methodist schools.
“It’s sad because in many ways, Birmingham-Southern and faculty tried to distance itself from the church, but in the end the church proved to be its only friend,” Willimon said. “Alabama United Methodists were very proud of it.”
During Pollick’s tenure, the campus chaplain was dismissed and Willimon, a tenured Duke University faculty member, was asked to stop teaching a religion class on Jesus, which he had taught without pay. Relations with churches suffered overall, Willimon said.
Under Krulak, a chaplain was reinstated as he tried to rebuild bridges with the church.
The board in 2010 had at least 20 Methodist lay and clergy members and the college drew about a quarter of its students from Methodist churches, and the North Alabama Conference contributed $300,000 per year to the budget.
Coleman also emphasized the college’s historic ties to the Methodist Church, but in 2019 dipped his toe into church politics, issuing a statement of concern about the United Methodist Church’s decision to keep its stance against same-sex marriage and ordaining openly homosexual clergy.
Coleman said the college fully embraced LGBTQ rights, which was perceived by some as taking sides with the progressive wing of the United Methodist Church.
The denomination has since undergone a massive conservative exodus in which more than half of the United Methodist churches in Alabama left the denomination, citing efforts to undermine the church’s traditional teaching that marriage is between a man and a woman.
“That has deep theological roots to back when Birmingham-Southern was more explicitly religious,” Raines said.
“Its educational tradition in training young ministerial students for seminary was very much rooted in the social gospel and Reinhold Neibuhr’s theology, that is to say, the test of Christianity is how Christians act in the world. What Daniel did is very much in keeping with what was very much the theological history of Birmingham-Southern.”
It’s not clear if the perception of being too liberal may have played a role in the reluctance of politicians who balked on a $30 million loan to keep the college afloat.
“In a sense, it’s the revenge of the conservative establishment on a liberal citadel,” Raines said.
From 2016-2018, former BSC Chief of Staff Linda Flaherty-Goldsmith took over as president.
In 2017, the school was in the black, with $86.2 million in revenue and $76.5 million in expenses. It would be the last year the college had more incoming revenue than expenses. In 2018, it was back in the red, with $71.8 million revenue and $76.8 million in expenses.
Move to suburbs rejected
Looking back on the school’s history, there were setbacks that exacerbated financial problems.
A key inflection point in the college’s history came in the 1970s.
Three years of unsuccessful negotiations to sell the campus to Miles College had been underway before Neal Berte became president on Feb. 1, 1976.
The school had been considering moving to Shelby County but committed to stay on its west Birmingham campus.
Raines said Birmingham-Southern should have made the move to Shelby County and let Miles College take over its Birmingham campus.
“That would have been the salvation, because the growth of Birmingham was moving that way,” Raines said. “That would have given it a reach. It would have been a great plus for Birmingham and its civil rights history to have Miles ensconced in that campus.”
The college did not want to emulate Samford University’s “white flight” move from East Lake to Homewood in the 1950s.
“But if you look at the overall metropolitan growth pattern of Birmingham, it was inevitable that both the population and institutional base of the economy was shifting in that direction,” Raines said.
Tragic days
The move was abandoned. Then came one of the college’s most tragic days.
Student Quenette Shehane was kidnapped on Dec. 20, 1976, when she left campus to buy salad dressing at a Graymont Avenue convenience store. She was brutally killed and three men were convicted of her murder.
The murder reinforced fears that the neighborhood surrounding the campus was dangerous. Security was heightened, and a fence was built around campus.
Still committed to stay on 192 acres overlooking Interstate 59 at Arkadelphia Road, Berte worked to bring the college out of its nightmare years.
By 1979, Berte gave the college its first balanced budget in a decade.
He raised the endowment from $11 million to $136 million. Enrollment grew from 727 to about 1,500 by 2000. Berte oversaw construction of 10 major buildings.
But some point to his effort to start a Division I sports program, including awarding athletic scholarships, as a problem that got the school off track.
Birmingham-Southern College football (BSC athletics)
In 2003, Moody’s cut its ratings on bonds issued by BSC to one step above junk bond status.
The school raised faculty salaries and substantially rebuilt the campus, adding to ongoing costs.
Pollick became president in July 2004 and embarked on his own building plan.
In May 2006, the college’s board voted to abandon Division I sports and move the school to non-athletic scholarship Division III.
The move was promoted as a way to save money by discontinuing athletic scholarships, but the Division III plan included starting a football team and building a $13 million football stadium, which required dipping into endowment funds.
Other expenditures included a new $3.4 million welcome center and a large pond built on campus as a water feature.
In 2006, three college students who had met at BSC went on an arson spree, burning nine rural churches with predominantly Black congregations.
It caused a national panic, then a public relations nightmare for the college.
Pollick led an effort to raise money to rebuild the burned churches and is generally credited with providing admirable leadership during that time of crisis.
But the time spent raising money for churches burned down by students took the administration’s focus off raising money for the college budget.
The school’s deficit rose to $11.5 million in 2006, $18.8 million in 2007 and $22.1 million in 2008.
Meanwhile, Pollick’s total pay rose between 2004 and 2008, up to $495,461, making him one of the highest paid liberal arts college presidents in the nation.
The school had to borrow operating funds from Regions Bank and dip into its endowment fund, already battered by a declining stock market. Between 2004 and 2009, the endowment fell from $114 million to $73 million.
A death spiral had begun.
Coleman is generally credited with staking out a workable plan and selling it well.
“Daniel was a financial whiz,” said Charles Gaines, who met with Coleman when the president was seeking alumni donations. “Under his stewardship, BSC had a reasonably good chance of escaping its debt and becoming financially viable.”
In the end, Birmingham-Southern may have produced proportionally more poets, artists and clergy than billionaire industrialists who could rescue it financially.
“It was the place in Alabama where young Alabamians from middle-class families who had great artistic, literary, musical or theatrical talent could be prepared for the big leagues,” Raines said.
“Southern sent a lot of people to Broadway, sent a lot of people to the world-class operas. It sent some people to Hollywood.”
For alumni, there were hopes a wealthy donor who could afford it would arrive on the scene and save the college, negating the need for a public bailout. “Nobody stepped forward at the end,” Raines said. “That’s a loss to the Birmingham cultural life that can’t be made up easily.”