Ward and Smith attorney Steve Long recently weighed in on one of academia's most hotly debated financial questions: Why can't universities just tap into their massive endowments when budgets tighten?
He tackled the question in the June edition of The Quad, a higher education-focused newsletter from The Assembly. The article delves into renewed scrutiny of endowment funds, particularly at private institutions like Duke University, where protests over layoffs have prompted questions about why more of the school's $12 billion endowment can't be used to prevent job cuts.
Steve, who leads the firm's Tax and Employee Benefits practice group, explained that it's not as simple as dipping into a rainy-day fund. Most endowment dollars are legally restricted for specific uses, and those restrictions are hard to undo.
“Courts have been very hesitant to overturn a donor restriction,” Long said. “Particularly one that is expressed in a gift agreement. So if you’re trying to overturn a donor restriction, you better have a very strong argument.”
He also noted that courts may not find current financial pressures sufficient to meet the legal standard needed to lift those restrictions.
“The question is, how much staff do they need?” Long added. “Do you really need the staff if you’ve got all these funding cuts? Because you’re not going to be doing the research that you were previously doing.”
The article outlines the limited legal avenues universities can take to modify or remove donor restrictions, most of which involve lengthy processes or strict conditions under the Uniform Prudent Management of Institutional Funds Act (UPMIFA). Read the full article in The Quad newsletter from The Assembly: https://www.theassemblync.com/newsletter/the-quad-unc-chs-restructuring-plan.
