Peter Jones: College endowments serve specific purposes

Published: 5/4/2021 10:27:49 AM

Letters from Gazette readers frequently refer to the value of endowments at local colleges: Smith, at just under $2 billion and Amherst, at slightly more than $2.5 billion — impressively large amounts.

The writers presume that this wealth could be used for some current purpose — to plug holes in a budget, forestall staff layoffs, fund new programs, etc. In fact, not a penny of those funds can be spent. They are invested to grow and produce income, and that income only can be spent for the purposes specified by the donor of each fund. That can sometimes be problematic. Let me cite a modest example.

Many years ago, I was on the faculty of a well-known private school. Among its endowment funds, there was a small one given by a friend of the school. The fund’s purpose was to enable and require the school to purchase a dictionary each year. The dictionary was a commencement prize. Apparently, the fund was wisely invested; it just grew and grew, year after year. We faculty were obliged to purchase one dictionary a year — only one — and nothing else. As time went on, it became impossible to use all of the income for its only permissible purpose. The donor having died years earlier, the terms of the endowment could only have been changed by a court order.

When a college holds an endowment, its trustees are obliged to preserve it, invest it wisely, and use the income only as the donor intended. They are powerless to spend it or reallocate it for other purposes.

Peter Jones

Florence

The writer is the volunteer treasurer of several nonprofit organizations.

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