G. David Pollick resigned Wednesday as president of Birmingham-Southern College, which is reeling from fiscal mismanagement that led to deficits and risky debt. Mr. Pollick’s resignation came during a meeting of the college’s governing board, which also offered an explanation of how the institution dug its financial hole and how it plans to recover.
This fiscal year the Alabama college had a projected deficit of $13-million, with a total operating budget of about $50-million, according to its Board of Trustees. The problem was exacerbated by the college’s finance department, which overstated revenues and understated expenses. Several high-ranking employees in that department resigned in June.
After the faulty accounting was discovered this spring, the college slashed $10-million in expenses. Those cuts include layoffs of 29 faculty members, reductions in salaries and benefits, and the elimination of five majors. Trustees said that the college’s budget was now close to being balanced, but that a heavy debt load remained a problem. The recent money woes follow the college’s struggles in previous years with an expensive athletic department.
Mr. Pollick, in a written statement, said his presidency had become a distraction.
“The focus is presently on me and not on the creative and constructive process that must rapidly take place in order to protect Birmingham-Southern’s future,” he said.
Sloppy Finances
When Mr. Pollick arrived six years ago, he and the board agreed on a strategy to improve the college’s finances by bringing in more students and, as a result, more tuition revenue. In a lengthy statement, trustees today explained what went wrong with that approach.
The college began improving facilities to increase enrollment. But then the recession hit, and administrators increased borrowing to pay for those upgrades. The college’s enrollment did increase, and now stands at about 1,500.
Then Birmingham-Southern began spending more on tuition discounts—scholarships and grant aid—than it disclosed in internal financial reports. Discounting went over budget, and in the past year the college’s financial department borrowed to cover the costs. College officials did not report those developments to the board, and financial statements were not audited.
College financial officers were directly responsible for the errors, according to trustees, not Mr. Pollick, who has said that no fraud was committed.
In June, after the internal mismanagement was revealed, Moody’s Investors Service downgraded the college’s bond rating. Net tuition per student is down 6 percent since 2008, according to Moody’s.
“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,” trustees said.
Governance Review
The board did not pull its punches in criticizing the college’s response to the recession.
“Many colleges and universities over the past several years, especially since the ‘great recession’ began, have been forced to reduce budgets,” the statement said. “Birmingham-Southern did not do this over the past few years—it actually increased salaries every year and increased spending levels every year, all based on a plan of growing enrollment.”
C. Dowd Ritter, chair of the board, called for a review of governance at the college. He said the board’s large size, with 61 members and 12 committees, was part of the problem.
Mr. Pollick’s resignation was immediate. He was replaced on an interim basis by Mark S. Schantz, the college’s provost.
While the financial mess ended Mr. Pollick’s tenure at Birmingham-Southern, it was not the first serious challenge he faced. In 1999, before he was hired, the college moved up to the NCAA’s Division I. But that decision proved disastrous, as the athletic department ran deficits of $6-million a year.
Mr. Pollick led the college’s 2007 transition to Division III. Fierce criticism followed, on campus and beyond. Students and fans protested, newspapers published negative editorials, and the college’s enrollment dipped.
In a 2007 interview with The Chronicle, Mr. Pollick defended his decision.
“You can’t keep going on without any regard for the overall health of the institution from a financial perspective,” he said. “If you don’t financially structure an institution so that it’s stable and healthy, you can expect your rating agency to keep coming at you.”
