The Problem with Endowments
Tuesday, October 13, 2009 at 9:42AM Q. When is planning for the future not a good idea?
A. When doing so makes it less likely you will have one.
Endowments are about planning for the future. In order to ensure there will be money for the next year, the next decade, the next generation, an institution can create an endowment. As long as the institution is careful to spend down only the interest produced by the endowment, it will always have the principal of the endowment and it will never run out of money. You will always have something for tomorrow.
Endowments sound like a great idea for ensuring continuity, and since we are all talking about Jewish continuity these days, it makes sense to talk about and encourage endowments. But endowments are at odds with the Jewish mitzvah of tzedakah. Tzedakah means “justice,” and there is an awkward conflict between endowments and justice. Justice implies justice for those in the here‐and‐now, not for hypothetical people in the future. Endowments are all about ensuring justice for the future, but they make no promises about adequate resources for the present.
When a farmer observes the Torah‐obligated mitzvah of peah, leaving a corner of his field for the poor, he cannot choose to gather the unharvested remains, sell them, and set aside the money for future generations of poor people. If he and his peers do that, what do the poor of their generation do for food? They starve.
When a hedge fund manager tithes his earnings for the year, he cannot choose to hold onto that tenth, invest it, preserve the principal, and only give away to his less fortunate peers the proceeds of those investments. If he and his peers do that, what do the poor of their generation do for money? They starve.
If a community philanthropist allocates a portion of his tzedakah to community religious projects, like improving his synagogue or improving access to Jewish education, he cannot hide his contributions away in an investment pool, giving out only the interest that is spawned from those investments. If he and his peers do that, what happens to those community projects? They are diminished due to lack of resources. And what happens to their neighbors who depend on the success of those projects? Spiritually, intellectually, Jewishly, they starve.
I am not discrediting the long-term benefits of endowments. There are valid reasons to grow endowments naturally. It makes sense to set aside up to ten percent of every gift given to an institution to save for the future, just as it makes sense for a family to set aside savings for a rainy day. Endowments also make sense as a temporary repository for unexpected lump sum donations, like estates and stock grants, a place to keep money until an appropriate use can be found for it (and one has to be looking).
But endowments are increasingly being raised as a sine qua non of any institution that wants to exist into the next generation, regardless of how vital that money might be in the present. They are attracting tzedakah that should be doing justice in our time, not being saved to allow subsistence justice for current and future generations. If we found that we had more than enough money to satisfy every need in every part of every Jewish community, then it might make sense to talk about putting the excess in an endowment. But we must be willing to spend it. And no one can argue that we are in that situation now. Endowments are being accumulated while we are starving for resources in the here‐and‐now. We are willing to let our children starve and die so that we can feed our unborn grandchildren.
There are other difficult problems to address with endowments: they should be invested wisely; they limit accountability; they are inflexible to changes in a community’s needs. But these problems are surmountable. The biggest problem with endowments, which cannot be overcome, is that they represent a travesty of justice, of tzedakah. Until we have enough to nourish this generation, physically, educationally, nutritionally, and spiritually, we cannot allow ourselves to direct our tzedakah exclusively to endowments.
Planning for the future is one thing. Jeopardizing it while we are doing so is another.
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