endowment – Innermost Parts

Event: Sustainable Endowments Director speaks TOMORROW

Susan Paykin of SEA renown fills us in on a great event. I’m going… hope to see you there!

The College Sustainability Report Card 2010 was released this week, revealing that our overall grade rose from last year’s report from a “B-” to a “B”! The Report Card, published by the Sustainable Endowments Institute and available at www.GreenReportCard.org, grades over 300 colleges and universities across the U.S. and Canada on their campus and endowment sustainability activities. The categories evaluated are: Administration, Climate Change & Energy, Food & Recycling, Green Building, Student Involvement, Transportation, Endowment Transparency, Investment Priorities, and Shareholder Engagement.

Mark Orlowski, Founder and Executive Director of the Sustainable Endowments Institute and creator of the College Sustainability Report Card, will be on campus tomorrow, speaking in Lown Auditorium at 7:30. He will speak on sustainability and environmental awareness in higher education, the Report Card, and specifically Brandeis’ newest grades. I know him personally, and he is an incredible speaker and a brilliant man. Check out the Facebook event for more info.

This year, as in every single year past, the only category that Brandeis flat-out failed was Endowment Transparency. You may be asking, why and how is our endowment relevant to sustainability (and other social issues)? In short, schools across the country have a combined total of over $400 BILLION invested in the market through their endowments. As substantial investors, colleges and universities can be incredibly influential in improving corporate policies (some great examples are Bard College, Swarthmore College, and Dartmouth College). Where is Brandeis’ endowment invested? What are we supporting? How can we, as an institution, sustain strong returns while upholding our values of social justice?

Students have taken initiative on improving our endowment practices in terms of not only making our endowment holdings and asset classes more transparent to the school community, but also harnessing our power as a shareholders to engage in dialogue with companies and corporations. However, we need to get this conversation started again. We hope to see you at the event tomorrow.

Will Brandeis Get a Mystery Gift?

Colleges across the country are getting mysterious donations numbering in the millions of dollars from secret donors.

NPR:

A mystery is unfolding in the world of college fundraising: During the past few weeks, at least eight universities have received gifts totaling nearly $45 million, and the schools had to promise not to try to find out the giver’s identity.

Now, while I definitely wish that Brandeis would receive some anonymous angel donation, I appreciate that the money is going to colleges such as Norfolk State University, University of Iowa, University of Southern Mississippi, and so on.

I don’t have the time to round up smart people pithily making this point, but I think it’s pretty obvious that a 4 million dollar donation to a State University is significantly better for society than paying Harvard 4 million dollars to name a building after you. It’s great that schools who actually need the help the most are getting it.

Which reminds me:
An angel concerned about funding higher education where it needs help should consider the Washington Monthly College Rankings:

this guide asks not what colleges can do for you, but what colleges are doing for the country. It’s a guide for all Americans who are concerned about our institutions of higher learning. Are our colleges making good use of our tax dollars? Are they producing graduates who can keep our nation competitive in a changing world? Are they, in short, doing well by doing good? This is the guide that tells you.

The most recent rankings I could find are from 2007. In terms of the social benefit it produces, Brandeis is a measly 98

Anyways, kudos to these colleges. Hopefully Brandeis is next in receiving “miracle savior money.” We need it, after all.

Building a Wider Donor Base

It’s no secret that Brandeis’s fundraising is much too slow right now and that the Madoff scheme is a big reason why. The failing economy would be a huge handicap on it’s own, but dealing with the greatest theft in history targeted mostly toward our greatest donor base has made our situation critical. We know that the University already has an excellent fundraising department — it was only last August that we were hearing about the record amounts of money we were taking in. Yet the obvious questions are being asked. Is Brandeis too reliant on the wealthy Jewish community for fundraising, and if so, how can we diversify our base of support?

Jewish sponsorship has always been fundamental to Brandeis’s identity. It is one of our four pillars, and it connects us to the Jewish community in a way that I deeply appreciate, even as someone with no Jewish background. Thus, any steps we would take to diversification should never come at the expense of our Jewish connection. Indeed, it is just as important to ask ourselves how we can ensure this connection stays strong. I’ve heard that many more conservative Jewish groups have grown somewhat suspicious of Brandeis for various reasons (most notably for Jimmy Carter’s visit), and we cannot afford to lose them as supporters and donors. Obviously, we have to balance our Jewish sponsorship with our non-sectarianism, and I’m certainly not suggesting that Carter should not have been allowed to come. However, we must always be clear that our goal is to expand and not to replace our current base of support.

Honestly, all of these questions are far beyond my level of expertise, and I assume that any suggestions I could offer have already been thoroughly explored. In fact, I think it’s very possible that we’re doing everything we can to expand and that the only way to grow a larger donor base is through the passage of time. As the University matures, more families and organizations will develop personal connections with Brandeis through our alumni. Targeted campaigns might draw donations for people or groups who want to further specific missions, but overall I imagine that it’s difficult to find communities willing to donate to a college to which they have no personal connections.

The biggest immediate concern might be the waves of negative press coming from the Rose decision. Many alumni seem to have rallied for the Rose, and let’s hope that they still view us as worth their donations. Still, if you subscribe to the view that any publicity is good publicity, perhaps we can use this as an opportunity in a very public forum to ask for help from donors. We don’t want to scare off new recruits by appearing too desperate (if it’s not too late for that already), but hopefully the Rose will prove to potential donors that the stakes we are facing are very high. I don’t think we can construct a fundraising campaign around the Rose without looking bad; people won’t like the idea of art used as cajolery any more than art used as a slush fund. Still, it’s not every day that Brandeis draws so much national attention, and if we can use it to point out all that we have worth giving to, perhaps we can find a silver lining.

UP my MIFA: the only viable way to save the Rose?

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.

Madoff Investor List released (Brandeis is sort of on it)

A former editor of the Justice pointed this out to us:

A list of investors and interested parties in the Bernie Madoff bankruptcy case has been released. Brandeis University, along with important donors like the Shapiros, are on the list.

At first glance, this would seem to indicate that the University did indeed invest with Madoff, contrary to claims by Pres. Reinharz to the contrary. But all listed parties might not have been directly affected. According to NY Times Dealbook,

The list includes anyone who responded to advertisements placed by the trustee overseeing the bankruptcy of the firm. Not every name on the list is necessarily a victim of Mr. Madoff’s reputed $50 billion Ponzi scheme, but the list includes “everyone who might have an interest in the bankruptcy case,” according to a person briefed on the document.

Probably, Brandeis is one of those who “might have an interest in the bankruptcy case,” for the obvious reason that the richest members of our donor base were severely affected. But I’d like to have that verified, to clarify again that we were not directly invested with Madoff.