TL;DR the endowment payout policy says we should be spending more of the endowment and the need to lay off staff the board has named would be avoided if we followed the policy as written.
The board statement says they will be forced to lay off seven staff if the resolution passes. Let’s take a look at the budget to better understand. budget_fy22-fy23.pdf (uua.org) this is a UUA budget overview published in April of 2021, if you look at the “Endowment Income” (called “Investment Income” but with the same numbers on another version at the top of the document) you’ll see numbers ranging across the years from $2,498,000 (it says 2,498 but these are multiplied by a thousand) to $2,368,000.
The Endowment Payout Policy states: The amount made available for expenditure from the Association’s endowment in a fiscal year shall be a weighted average of:
- the prior year’s spending adjusted for inflation (weighted at 70%), and
- 5.5% of the trailing four-quarter average market value of the endowment as of the previous December (weighted at 30%).
However, the spending rate must be at least 4.5% and not more than 6.25% of the trailing four-quarter average market value of the endowment as of the previous December.
However, we do not see the use of even the minimum 4.5% of the endowments value reflected in the budget report. If the UUCEF were to add 4.5% of the value of the UUA’s endowment, that would be at least four million dollars additional to the 1% charged to the value of the full endowment each year for managing the funds.
While I agree that mathematically doing the first formula (averaging prior years spending and 5.5% of the average market value of the endowment) does arrive at numbers closer to what is put up there, the payout policy actually states the UUCEF must spend more from the endowment than we are shown.
If we are to believe the Chief Financial Officer and investment committee that the UUA’s endowment is about half the value of the UUCEF (the UUCEF is valued at over 242 million) then even at a conservative estimate of a $100,000,000 (likely closer to 110-120 million dollars) value of the endowment, the UUA should be spending at least 4.5 million, rather than 2.5 million. After The Endowment income is not mentioned in the budget report as being incorporated into other lines either.
So while the loss of 14 million dollars would impact the total funds available for a given year, it the impact is not significant enough to lay off staff if UUA policies are actually followed. If the UUA endowment value was taken down to 86 million dollars, following the policy would bring us to at least 3,870,000 dollars in the annual budget. Well over how much is budgeted now.