The WSJ has a good article today on the UMIFA vs UPMIFA endowment debate, although it sensibly avoids even mentioning the acronyms. In case you're not a non-profit legislation nerd, it basically comes down to when you can spend your endowment and when you can't: under UMIFA, which is the law in Massachusetts, non-profits are barred from spending endowment funds if they're worth less than their initial dollar value. Under UPMIFA, which is rapidly being adopted nationwide but hasn't yet made it into Massachusetts law, they're not.

Of course there's a big Brandeis/Rose angle here. Brandeis's stated reason for needing to close the Rose and sell off its art is that it's not allowed, under Massachusetts law, to spend most of the money in its endowment. Therefore, it says, it has no choice but to liquidate its art museum. At the same time, however, it has not joined the group of non-profits, led by the Massachusetts Audubon Society, who are lobbying to get Massachusetts to make the switch.

Joe Baerlein, a Brandeis spokesman, says much of the Brandeis endowment is under water because it was founded in 1948, making it relatively young for a top-tier university. But Mr. Baerlein says the school doesn't want to spend endowment principal. "You want to deal in a prudent manner with any deficit," he says. Brandeis hasn't joined the effort to ease endowment restrictions but is reviewing the Massachusetts legislation.

UMIFA on its face makes little sense. Why should a young endowment which has dropped by 10% be constrained from spending any money, while an old endowment which has dropped by 70% can still spend away merrily, even if the real value of that endowment is a fraction of what it was worth at gift? And in any case, why is the base case that endowments should always exist in perpetuity? Shouldn't the world have more people like Bill Gates, who want to see their money spent quite quickly?