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Brandeis University's Community Newspaper — Waltham, Mass.

Editorial: UPMIFA is not a panacea

Published: February 6, 2009
Section: Opinions

As news of the university’s worsening financial straits surfaced, thoughts turned to the endowment. Currently, the laws in the Commonwealth of Massachusetts prohibit the spending of endowment principal and instead restrict endowment spending to gains. In light of the current economic climate, some Massachusetts organizations are supporting a change from UMIFA, the Uniform Management of Institutional Funds Act, to UPMIFA, the Uniform Prudent Management of Institutional Funds Act, which would allow organizations to spend their principal under certain circumstances.

At a time when organizations are watching their endowment gains shrink and their donations wither, it is no surprise that the Uniform Law Commission, the organization which first developed and approved UPMIFA and which follows its enactment, is fielding numerous calls from all across the country.

The adoption of UPMIFA by the Massachusetts State Legislature would calm fears and soothe anxieties in a time of economic crisis. And while the act would surely increase the options open to not for profit organizations facing deficits, it is important for all to remember that UPMIFA is in no way a panacea. UPMIFA will not increase the number of students at Brandeis able to pay full tuition, nor will it undo the Madoff Ponzi scheme.

At best, spending endowment principal is a temporary solution to a continuing problem. And unless the economy miraculously turns around in the next year, the university should not expect any large gifts to the endowment to replace whatever portion of principal it might spend were UPMIFA passed. As Executive Vice President and Chief Operating Officer Peter French said, if we spend the endowment principal today, we do not have it for tomorrow. If the act is passed, the university should explore the options it opens fully and aggressively, but ultimately, our viability ‘in perpetuity’ must take precedence.