Nonprofits get relief from endowment law
Under a measure signed into law by Governor Deval Patrick, nonprofit organizations may now be able to spend more of their endowments, helping some avoid cutting programs and staff because of the recession.
“In these difficult economic times this law will be a helpful tool for nonprofits across the Commonwealth,’’ said Kimberly Haberlin, a spokeswoman for Patrick.
The measure updates decades-old endowment laws governing how organizations manage and use donations.
Such funds usually have restrictions governing how they are spent, said Jennifer Ryan, legislative director for the Massachusetts Audubon Society. Her organization helped push the measure, which is officially known as the Uniform Prudent Management of Institutional Funds Act, but which many have been calling the “nonprofit sustainability act.’’
Those who work in the state’s nonprofit sector hope the updated law will aid organizations that might otherwise have had to drop programs or pare staff because of the recession.
For instance, at the Audubon Society, Ryan said, about a third of the group’s endowments are “underwater,’’ or depreciated, and thus unusable. As a result, the organization, like others, is feeling “the financial pinch,’’ she said.
Until now, nonprofits could only spend a portion of an endowment’s appreciated value, but could not touch the endowment’s core assets without receiving donor approval. Under the new law, organizations can, when prudent, dip into that previously untouchable money - though there are tight restrictions on when and how that can happen.
Dozens of states have passed similar legislation.
“It’s a little bit of relief,’’ said Ryan, “but a little bit of relief can mean a lot right now.’’
At The Boston Foundation, a large philanthropic organization that helps fund nonprofits, director of public affairs James D. Rooney called the new law a “relief valve.’’
“What it means is that when there is great volatility in the marketplace, as there has been this past year, not-for-profit organizations have a little more latitude to dip into principle to maintain services and, in turn, continue to support good works,’’ Rooney said.
He said the flexibility is important in Massachusetts, where, the foundation estimates, nearly 14 percent of the state’s workforce is employed by nonprofit groups. As of 2007, there were an estimated 36,748 nonprofit organizations in the state - a roughly 88 percent increase from two decades ago. The Boston Foundation recently began urging those with similar or complementary missions to merge as a way to survive the economic downturn.
Erin Ailworth can be reached at eailworth@globe.com. 
