WSJ: states’ adoption of UPMIFA reflects the dire straits of endowed charities

In an article entitled “BatteredNonprofits Seek to Tap Nest Eggs,” the WSJ reports that the current crisis has added urgency to state adoption of the Uniform PrudentManagement of Institutional Funds Act (UPMIFA). “Universities, museums andother nonprofits battered by investment losses are pushing states to ease legallimits on spending so they can tap their endowments to avoid imminent layoffsand deep cuts to programs.” But the real story here is theprescience of the Uniform Law Commissioners (ULC), which completed UPMIFA in2006, to replace the Uniform Management of Institutional Funds Act of 1972 (UMIFA).  A majority of states adopted UPMIFAbefore the current crisis. UPMIFA, explains itsdrafters, permits the “prudent expenditure of both appreciation andincome and replac[es] the old trust law concept that only income (e.g., interestand dividends) could be spent,” and also eliminates “the rule that a fundcould not be spent below `historic dollar value.’”   UPMIFA permitsinstitutions to spend “so much of an endowment fund as the institutiondetermines to be prudent for the uses, benefits, purposes and duration forwhich the endowment fund is established.”   Criteria for settingspending include “general economic conditions,” “expected totalreturn from income and the appreciation of investments, and “otherresources of the institution.” 
   
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