Kaiser: Endowments are not safety valves

Posted on: August 24, 2011

Monday (8/22) on Huffington Post, Kennedy Center President Michael Kaiser writes, “I have often argued that endowments are not the cure-alls many people, especially board members, believe them to be. Endowment enthusiasts believe when an organization creates an endowment it reduces the amount of money that has to be raised annually. This is very attractive to board members (and staff members) because fundraising feels scary and uncontrollable to many. ‘Guaranteed’ income from an endowment makes everyone feel safer. … In fact, this makes the organization less safe because the budget is now predicated on endowment earnings which, we learned during the past several years, are not always guaranteed. … Recently I have heard a different argument coming from pro-endowment board members: we need an endowment so that when things get bad we can raid it and cover our deficit. This is clearly NOT what donors to endowments have in mind. Endowments are meant to be permanent. Donors contribute to an endowment, often in amounts that far exceed their normal annual gifts, because they want to ensure the long-term health of the institution. … If too many boards think of endowments as a bank account that can be drawn from, most donors will no longer be willing to make extraordinary gifts to endowment campaigns.”

Posted August 24, 2011