On September 17, 2010, the New York State Prudent Management of
Institutional Funds Act (NYPMIFA) was signed into law by Governor
David Paterson. NYPMIFA contains important updates and changes to
the law governing the use of endowed funds by charitable
institutions, including colleges and universities like St. John’s.
The following Frequently Asked Questions are provided to assist you
in better understanding NYPMIFA and its impact on endowed
gifts.
Why did I receive a letter regarding
NYPMIFA?
If you received a letter, you have donated to an endowed fund at
St. John’s prior to September 17, 2010. NYPMIFA changed the rules
on how endowed funds can be used and requires that the University
notify all living donors that have given to an endowed fund with
directions as to the maintenance and/or use of their gifts, and
advise them of the change.
Why didn’t I receive a letter regarding
NYPMIFA?
If you did not receive a letter, you did not make a donation to
an endowed fund prior to September 17, 2010.
What is an Endowment?
An Endowment is a fund in which the original dollar value or
principal are invested and reinvested as part of the general
investment funds of the University with the intent that the income
generated will be used to support the intended purpose, most often
scholarship awards. The Board of Trustees determines the
University’s investment strategy and endowment management policies,
which may be amended from time to time at the University’s
discretion, to further the educational and fiscal goals of the
Endowment Fund and the University.
How does the change in the law affect
my fund?
Prior to NYPMIFA, when a donor established or contributed to an
endowed fund, only the income and capital appreciation generated by
the assets in the fund were permitted to be spent for the purpose
that the donor intended the endowed fund to support (i.e., program,
scholarship, etc.). The University was not permitted to spend below
the original value of the gift (otherwise known as the "historic
dollar value," “principal” or "contributed value"). Under the new
law, unless the donor indicates otherwise, the University is
allowed to spend endowment funds below their original dollar amount
(i.e., the University may spend from an endowment fund when the
market value of the endowment fund is below the historic dollar
value) if the University’s Board of Trustees concludes that such
spending is prudent. Before expending any amounts from an endowment
fund (including amounts from historic dollar value), the University
must consider specific factors set forth in the new law. These
factors are designed to balance the need for current funding
against the need to ensure that a fund is available for the benefit
of future generations, thereby ensuring that current students are
not disproportionately advantaged or disadvantaged relative to
future students due to temporary circumstances. What will not
change is that any allocation of funds will have to be prudent and
consistent with St. John’s spending policy.
What other changes are included in
NYPMIFA?
NYPMIFA governs many aspects of the management and investment of
endowments. Other sections of NYPMIFA relate to the prudent
management and investment of funds, the delegation of management
and investment functions to outside advisors St. John’s has always
and continues to maintain the highest standards for the prudent
management of all University funds. The University’s current
policies meet these new standards.
What is St. John’s endowed funds
spending policy?
The University's current spending policy is to appropriate for
distribution each year 5% of each endowment fund's average market
value over the prior three years. This spending policy is designed
to provide a predictable stream of funding to support endowment
funds, as intended by the donor, while allowing the fund to
maintain the purchasing power of the endowment assets. This
spending policy allows the University to minimize fluctuations in
earnings thereby, reducing the impact of difficult market
conditions in which an endowment may lose value over the
short-term.
How will St. John’s spending policy
change as a result of this new law?
At the present time, the University does not plan to change its
spending policy unless its analysis of the factors described above
dictates a different spending level with respect to particular
endowed funds. However, under the new law, absent any donor
restrictions, the University is permitted to spend endowment funds
below their original dollar amount (i.e., when the market value of
the endowment fund is below the historic dollar value) if the
University's Board of Trustees concludes that such spending is
prudent.
Here is an example of how the Spending
Policy might work under the new law.
Let's assume a donor established an endowment fund in 2008 with
a gift of $100,000 and that as of May 31, 2011, the market value of
the fund is $95,000. Under the prior law, earnings for this fund
would be retained and reinvested into the fund until such time as
the market value exceeded the gift value of $100,000. Under the new
law, the University would be permitted to spend the endowment fund
below its gift value of $100,000 if the University's Board of
Trustees concluded that such spending was prudent and the donor did
not indicate that the University could not spend below the gift
value.
Why do I want the new law to apply to
my fund?
By applying the new law to your fund, the University will be
able to continue to meet your intent and make awards in the most
difficult financial times when our students and the University are
in greater need. If the new law is not applied, the University will
be prohibited from spending from the historic dollar value of your
fund which can cause significant difficulties for St. John’s based
on temporary economic conditions. While difficult economic times
can cause temporary declines in the value of endowed funds, the
needs of the University and our students remain constant and in
some cases (e.g., financial aid to needy students) increase during
these periods. Under the new law, the University can continue to
draw on its endowed funds under such circumstances, provided that
the spending levels are prudent and calculated (among other things)
to ensure the continuing availability of the funds for the benefit
of future generations.
What do I need to do if I agree with
having the new law apply to my fund?
No additional action is required on your part. Under the new law
if you do not respond within 90 days from the date notice is given,
the new law will apply to your fund. Of course, you can mail back
the form signed with box #1 checked in the envelope provided, but
such action is not necessary if you want the new law to apply to
your fund.
What do I do if I don't want my fund to
be spent below the amount of the historical dollar
value?
If you do not want the University to spend below the original
dollar value of your gift just check box #2 on the form that was
sent to you and return the signed form in the envelope provided. We
will update our records regarding your fund. The letter needs to be
returned within 90 days from when it was mailed to you otherwise
the new law will be applied to your fund.
Who can I call if I have other
questions about the new law or about my fund?
Call Jeanne Umland at (718) 990-6776 or e-mail umlandj@stjohns.edu, if you
have any questions about your specific fund or how the new law
might apply. Or, send us an email at with your question(s) and a
member of the Office of Development will get back to you as quickly
as possible.