Birmingham-Southern College has pulled back from an abyss, but the institution now faces a moment that will very likely define it for years to come.
Turmoil set in at the private college in Alabama last summer, when disclosures about years of financial mismanagement undid a presidency and prompted layoffs, program eliminations, and salary reductions. Much will be riding on the soon-to-be named new president, who will immediately be called upon to pull the college out of debt, stabilize its enrollment, and, perhaps most important, convince faculty, alumni, donors, and bond-rating agencies that a steady hand is guiding a campus weary of controversy.
“Clearly, we are looking for someone who embraces a challenge, who wants to be a transformational leader,” says Wayne W. Killion Jr., chair of the presidential search committee and vice chair of the Board of Trustees. “This individual will have to be a conciliator, someone who can inspire confidence and look into the future—and not into the past so much.”
Yet the college’s past looms large in its present.
As a result of what current and former officials describe as the overawarding of financial aid, extensive borrowing, and budgets derived from inaccurate financial data, Birmingham-Southern faces an $8.5-million shortfall, about 17 percent of its $49-million annual budget. The college is also weaning itself off of years of overly aggressive endowment spending, which will require belt-tightening well into the future.
Now in the final stages of its presidential search, the college is interviewing two finalists, neither of whom has held a presidential post before.
They are J. William Berry, provost and executive vice president at the University of Dallas, and Rodney K. Ferguson, a partner at the Brunswick Group, a public-relations company in Washington that often deals with crisis communications. Mr. Ferguson has worked with educational organizations, and he has ties to Birmingham-Southern, having earned a bachelor’s degree there. Both he and Mr. Berry declined to elaborate on their candidacies.
Underlying the presidential search is the continuing scrutiny by bond-rating agencies of Birmingham-Southern, whose credit rating has suffered as a result of concerns about its fiscal health. Downgraded to a B1 rating in October by Moody’s Investors Service, the college’s credit rating is already classified as high risk, falling within a category investors commonly describe as “junk bonds.” In January the college was placed on a watch list for another possible downgrade.
Moody’s typically keeps colleges on a watch list for three months before making a downgrade decision, but the agency declared last month that it would extend its monitoring for about one more month to watch events unfold at Birmingham-Southern. Among other factors, the presidential selection could affect the rating, says John Nelson, managing director of Moody’s ratings for health care and higher education.
“When an organization is in a situation where it clearly needs financial stabilization and improvement in the short term, then the background and the plan” of a new president are two big issues, he says. “The background of the leaders, their experience, as well as the plan they come up with for stabilization and growth, is key.”
Birmingham-Southern wrapped up on-campus interviews with the two finalists last week. Professors there believe each candidate brings different strengths, says Natalie Davis, a member of the search committee.
“We have one person who comes under the general umbrella of being a nontraditional candidate. He’s got experience in higher education and experience in the business community, but not an academic in the traditional sense. That’s one side of the ledger,” says Ms. Davis, chair of the department of political science, economics, and sociology. “The other side of the ledger is the traditional academic, who came up through the academic ranks. How do you go about figuring that out when maybe we see an upside to both? That’s what the search committee is going to be wrestling with.”
Despite difficult choices ahead, Ms. Davis says the mood on campus has changed even in the past few months. All of the college’s trustees have pledged to participate in a campaign that would cover the $8.5-million budget shortfall for the next fiscal year, aiming to put the college back in the black within three years through a combination of donations, enrollment growth, and tuition increases.
“We are more hopeful now than we have ever been,” Ms. Davis says.
‘What Should I Have Done?’
The months that followed G. David Pollick’s resignation in August as president of Birmingham-Southern were a period of soul-searching and analysis on the campus, as administrators, auditors, trustees, and faculty members worked to piece together what exactly had led to the college’s financial crisis. Not surprisingly, that question resonates for Mr. Pollick himself, who says he learned early in his presidency that the institution had not been on terra firma for some time.
“It’s extremely important that we understand that the fiscal problems that BSC had been wrestling with had been there for years in different ways,” he says. “It’s certainly a matter of public record now that the institution had been downgraded by Moody’s three times before I arrived on the scene, and the reason for that downgrading was that they had to dig into the endowment or emergency fund-raise each year to balance the budget. Those are things that a few months after I arrived became apparent.”
Indeed, Moody’s reports on Birmingham-Southern had raised concerns for years, well before the financial issues boiled over last summer. When the college issued bonds in 1997, Moody’s classified them A3, a low credit risk. Since then, however, those bonds have been downgraded six times.
When Mr. Pollick began to see the fissures at Birmingham-Southern during the first year of his presidency, in the summer of 2004, he did not advocate a policy of retrenchment. On the contrary, he pushed for a long-term growth plan designed to increase enrollment from about 1,200 to 1,800. While enrollment did grow to about 1,500 this year, officials expect it to fall by 100 or more next year, an indication that the loss of majors and the negative publicity have had an effect.
Significant construction was part of the college’s growth strategy, adding a major debt burden just as the national economy plummeted in 2008. The recession crippled a fund-raising operation that was crucial to the plan, and the college’s debt grew to its current level of $67-million, from $28-million, in just a few years.
As Mr. Pollick absorbed the fiscal reality, he says, officials began to take a more liberal view of how “restricted” gifts provided by donors could be used to plug budget holes. Asked if any gift agreements were overtly broken, he says no. Even so, though, the college became increasingly preoccupied with honoring the letter of agreements rather than the spirit, he says.
“There was enough softness [in the language of agreements] in many cases that allowed for some flexibility,” he says.
Mr. Pollick is careful not to tie Birmingham-Southern’s financial woes to a single factor, blaming instead a systemic breakdown of communication among the vice president for finance, financial-aid officials, and the president. By way of example, he notes that the college failed to reduce institutional aid when students qualified for Pell Grants.
Most important, Mr. Pollick and others, including a financial consultant hired after his departure, say the president and trustees were provided financial information by the college’s vice president for finance, Kim Thrasher, that was simply inaccurate. Ms. Thrasher, who has left Birmingham-Southern, could not be reached for comment.
As auditors tried to discern what had gone wrong, Mr. Pollick says he asked, “What did I miss? What should I have done?”
“I mean that with all my heart,” he says. “And the response from the auditor in that meeting was that you have to be able to rely on the numbers you’re given. You have to be able to trust them. What could I have done? I could not have trusted.”
Loss of Trust
There remains no shortage of regret on the campus about misplaced trust. Ms. Davis, a former co-chair and current member of the college’s Faculty Advisory Committee, says she felt duped by a president who either withheld information or exercised insufficient oversight.
“I’ve never felt so betrayed,” says Ms. Davis, who has been on the faculty for nearly 40 years. “I was on the Pollick team. I believed in this guy.”
It was the loss of trust among faculty members that Mr. Pollick says led him in August to an unusual meeting with the trustees’ chairman and another trustee he considered a close friend. Weeks earlier, the college had moved to eliminate five majors and 29 faculty positions, while cutting faculty and staff salaries by a total of 10 percent and suspending contributions to retirement plans.
Mr. Pollick says he questioned his own ability to lead a faculty that had lost faith in him. Moreover, he says, he felt that enemies he had made because of other decisions as president were now “sharpening their knives” against him. Indeed, he says, he thought venomous, anonymous attacks made against him on local blogs had little to do with the tumult over finances.
Instead, he thought, much of the criticism was fueled by people who had questioned his decision in 2007 to move Birmingham-Southern down to Division III athletics, following an expensive eight-year stint in Division I. The college’s sports fans had been enraged, and Mr. Pollick believed they were now determined to bring his presidency to an end.
“If I were a consultant,” he told the two trustees at the August meeting, “I’d be telling you that this may be time to send somebody out into the desert.”
The trustees accepted his resignation, replacing him on an interim basis with Mark Schantz, who had become provost a year earlier.
Mr. Pollick is now a senior adviser with the College Success Awards Program of the Council on Independent Colleges, which helps first-generation students. He says he has no regrets about stepping aside at Birmingham-Southern
“I just don’t think we ought to make these decisions on the basis of ‘How do I keep my job?,” he says. “We have too much of that in college presidencies now.”
The Path Ahead
While Birmingham-Southern’s presidential search is the most visible sign of its efforts to move forward, much has transpired behind the scenes. Trustees have vowed to dig into their own pockets to help bail out the college, and a veteran financial officer has been hired as a consultant to revamp a financial-management system that all agree was sorely lacking in controls.
The consultant, Linda Flaherty-Goldsmith, a former vice chancellor for financial affairs at the University of Alabama, has put in place a series of policies that she says will add more layers of oversight. Chief among the changes is the creation of a controller position, which she says will allow for communication between the financial-aid office and the chief financial officer on matters as fundamental as ensuring that there are sufficient funds available to award aid dollars to students before they are promised.
“I know you think that’s pretty basic, and it is,” says Ms. Flaherty-Goldsmith, who also has been the University of Connecticut’s vice president and chief operating officer. “But it wasn’t happening before.”
Although an independent audit found no evidence of fraudulent practices at Birmingham-Southern, there is no question, she says, that trustees received financial numbers that were “massaged” in a manner that made the college appear to be on better financial footing than it was.
Even with improved financial controls and the imminent selection of a new leader, the campus’s past continues to bring pain. Pending program cuts will cost more than a dozen faculty members their jobs at year’s end. Professors are dealing with that and other somber realities through a mix of gallows humor and a sincere belief that better days are ahead, says Randall Law, co-chairman of the Faculty Advisory Committee and an associate professor of history.
“There’s always that mix of black humor and sarcasm both by those who are left and [those who] know they will be gone,” he says. “By and large it’s been a testament to the professionalism of members of the faculty, including those who have been identified as leaving or who will stay on in a limited role as adjuncts. They’ve kept working hard, and I think everybody has tried hard.”
The next president, however, will have the difficult task of persuading skeptical professors, staff, and alumni that they can again trust campus leaders to be good stewards of the institution, Mr. Law says.
Like Ms. Davis, he sees positives in both finalists for the presidency: “I don’t think we’re looking for somebody to lead us out of the wilderness,” but someone who understands the college’s mission and who “does a better job of selling us to the world.”
