Jill R. Horwitz (Northwestern law; Northwestern University, Feinberg School of Medicine; University of California, Los Angeles (UCLA) – School of Law; National Bureau of Economic Research (NBER)) has posted Is the Endowment for Us? on SSRN. Here is the abstract:
Recent crises-the pandemic, natural disasters, and political targeting-have caused enormous suffering, sparing no one, including charitable nonprofits. Charities have faced severe revenue losses, leading to reductions in programming, staff layoffs, and even bankruptcy. Amid these crises, significant sums have remained locked in endowments, unavailable to mitigate harms to charities, their beneficiaries, employees, and purposes, and ultimately the public.
These rather inflexible restrictions raise serious questions about their justification. Were regulators right to remind charities that legal constraints on the use of endowment funds had to be observed? Even during the pandemic? Engaging decades of scholarly debate on the legal, economic, and moral justifications for restrictions on charitable assets, particularly endowment restrictions, this article uses recent crises as a stress test of charities law.
The article largely rejects the arguments for granting charities unilateral ability to release restrictions, even during a crisis. Moreover, it shows that existing law almost always provides sufficient tools for charities to respond to needs. Properly understood, charities law requires charitable assets to remain devoted to their legally mandated purposes, even if advancing those purposes is at odds with the survival of any particular charity. Nevertheless, there are exceptions, including existential risks to charitable purposes and the sector more generally. The article concludes by considering whether recent political targeting of universities and foundations poses such risks.