Regardless of your feelings on the Rose (in)decision, its obvious that the ridiculous fashion by which it was made was, in Reinharz’s own words, “screwed up.” But when you start talking about the actual idea of selling art to close our budget deficit, things get a bit murkier. We need to find $79 million fast, and no matter how you spin it, that ain’t too easy.
Some say this shortfall was unavoidable. But even given the current recession and the Madoff scandal, the University should not be in as tough a spot as it now is. Our assets were overextended before the crash – we took out long-term debt in the middle of a fundraising campaign, over-relied on gifts, and added operating expenses to our budget faster than we could devise sustainable ways to pay for them. Like many institutions, our endowment investments were in funds that gave good returns but were overly risky in retrospect; our swift losses are a testament to that.
In short, the Administration’s financial strategy was ambitious at the expense of prudence, and now the shit’s hit the fan. They need to own up to that, and hopefully learn from it in the future. But enough pointing fingers – what do we do now, if not sell the Rose?
Most alternatives are completely infeasible. We aren’t going to cut need-based aid. We aren’t going to drastically hike tuition. We aren’t going to cut 200 hundred more staff, or 275 additional faculty. We aren’t going to close half the buildings on campus. Our student services have been cut to the bone.
In my mind, the only feasible alternative would be to draw from the principle of the University endowment. If we were to so choose, we could make up our budget deficit this way, completely. However, such a decision would not be without consequence. The effects of the current shortfall would linger for longer. It would take several more years for our endowment to grow back to its previous levels. Its unlikely that we’d be able to begin hiring faculty again for some time. The primary financial vision of the current Brandeis Administration – to expand and improve the University by growing the endowment as quickly as possible – would suffer a major setback.
But, we could avoid selling any of the Rose’s collection – a decision many find immoral, unprincipled, and in flagrant disregard of the ethical agreements the University entered into with donors and the American Association of Museums.
However, right now, such a path is impossible. Massachussets law follows the provisions of UMIFA, the Universal Management of Institutional Funds Act. This law prohibits charitable institutions from dipping into the endowment below “the historic dollar value of the [endowment] fund.” Since Brandeis’ endowment has been recently built, most of it is composed of original gifts, not interest on those gifts reinvested into the endowment (this is often the case at older, richer universities). Because of the sudden depreciation in our investments, we have already fallen below the level where we are legally allowed to draw from the endowment.
But, an updated version of the act, UPMIFA (the P stands for prudent), was drafted after the dot com bubble burst tied the hands of charities whose investments had suddenly dropped. UPMIFA allows charitable institutions greater flexibility in their expenditures, and permits them to draw below the principal of their endowment. Since its introduction 2 years ago, UPMIFA has been ratified in 26 states, and has been recently introduced in the Massachussets legislature by a coalition spearheaded by the Massachussets Audobon Society, which lost 26% of its endowment last year. (see the Wall Street Journal article for more details). COO French, in a letter to the Justice quoted in their recent editorial, stated,
UPMIFA … establishes a sounder and more unified basis for management of charitable funds.
But so far, Brandeis has not joined the coalition pushing for the new law. Reinharz and French have also failed to pursue other means of accessing the endowment principle. Charity Governance Consulting provides a primer on these alternative avenues. Essentially, the University could petition the Attorney General’s office to use the doctrine of cy pres to grant the University an exemption from spending restrictions. In fact, this path is explicitly endorsed as a possiblity in current Massachussets law –
If the [Attorney General] finds that the restriction is obsolete, inappropriate, or impracticable, it may by order release the restriction in whole or in part.
Which leads to an intriguing question: If the Administration supposedly endorses the premise of UPMIFA, why has it neither joined the coalition lobbying for its passage nor petitioned the Attorney General’s office to allow us to draw additional funds from our endowment?
Through either path, we’d be released from a financial bind. We’d have more options. But through inaction, the Administration is able to force our hand. Without being able to draw from the endowment, there are no other available options but to sell the Rose’s art, as soon as possible. Since this is the path settled on by the higher-ups in the Administration, it is against their strategic interest to open up viable alternatives.
Now, some would have us believe that drawing from the endowment would threaten the future stability of Brandeis. In the recent student press conference, President Reinharz said something to this effect, via goofy metaphor:
“You can eat your corn seed today. But somebody’s going to suffer in the future. You and I will not be here.”
But in the event that we are suffering an undue amount in the future due to any hypothetical increased endowment draw, the same possibility of selling art still exists. Actually, the pieces will even be worth more, as art markets continue to recover. The only difference is that our crisis mentality will have settled down. It will be even more difficult to sell the idea to the Brandeis community when we aren’t freaking out quite as much. But if we are to make such a permanent and momentous decision, we shouldn’t be shock-doctrined into doing it hastily in crisis mode.
In short – Drawing from the endowment gives us a good alternative and still allows the possibility of selling art (at a probable higher price) if the University is still in desperate need of money. So if you want a solid argument to keep the Rose, start lobbying the Massachussets legislature to review and pass the UPMIFA legislation. Pressure the University Administration to go to the Attorney General and ask if cy pres can be implemented. There is little incentive for the University to act on this without significant pressure. Very soon, I expect a coordinated campaign on campus and among concerned alumni to this effect. Its the obvious next step.
