Foundation Friday: Glub glub

Here’s a story about endowments that can’t be touched because they’re “underwater,” that is, now worth less than the contribution(s) that established them, and state law prohibits endowed nonprofits from touching the principal.  Though the Nonprofiteer is ordinarily a big fan of regulation, she notes that this statutory scheme harms the very agencies it intends to protect.

But more troubling still is the organization described in the article whose concern for the size of its endowment causes it to fire staff rather than dip into principal to pay their salaries.  Why is the perpetual existence of an organization more important than its ability to perform its mission now?

Nonprofits–whether operating charities or foundations–are not for perpetual existence; they’re for accomplishing their mission.  When perpetuity gets in the way of mission, it’s perpetuity that ought to give way.  And the Nonprofiteer would be willing to risk any unintended consequences of a regulatory scheme embodying that idea.

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