The Playgoer: Scenes From The Crunch

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Sunday, March 01, 2009

Scenes From The Crunch

From an AP report on struggling nonprofits and their useless endowments:

The North Carolina Symphony has all the money it needs. But in this economy, the orchestra isn't allowed to touch it.The value of its endowment stands at nearly $6.9 million, a fund the symphony planned to tap this year to help pay its musicians and put on concerts. But because of the slump on Wall Street, the endowment is worth less than the original donations that created it. That means, under North Carolina law, that the money is off limits.


Rules governing how nonprofits in North Carolina and 23 other states use their endowments date to the 1970s, when most states adopted a uniform law that prohibits withdrawing money from endowments that fall below their ''historic dollar value'' -- the money given to create the endowment, plus any later gifts.

The law is designed to protect endowments by preventing institutions from dipping into the principal. An endowment is supposed to be a perpetual source of revenue, with institutions drawing off only the earnings.

The rule affects newer funds most severely, since they have had less time to invest a gift and build the endowment's value.


Since early 2007, 26 states and the District of Columbia have passed laws that give nonprofit organizations more flexibility in using money from endowments that are underwater. Because of the economic meltdown, 12 other states are considering such laws, according to the National Conference of Commissioners of Uniform State Laws.
So, any theatres experiencing this, you ask? You betcha!

The American Conservatory Theater in San Francisco has watched its endowment, with a historic dollar value of about $22 million, drop to $18 million. It decided to focus on raising money to rebuild the endowment, rather than draw it down to pay salaries.

Two theater employees were laid off in January and four other positions remain unfilled, said theater executive director Heather Kitchen.

''Making the endowment even smaller wasn't the key,'' Kitchen said. ''It might be worth $13 million when the recession is over, and it would take even longer to get it back where we want it to be.''

Am I right in inferring from the ACT example that a staffer may be more likely to laid off from a big company than a small one?

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