St. Michael’s College Obtains Permission From Judge to Use Restricted Funds
“If the College is unable to access its endowment funds to meet operating expenses, it would face a serious and credible risk of being forced to cease operations”
The school is tapping its endowment to stay afloat. Never a good sign.
Vermont Public reports:
Faced with a cash crisis, St. Michael’s gets judge’s approval to tap restricted funds
St. Michael’s College has quietly obtained a judge’s permission to raid tens of millions of dollars from its restricted endowment to keep the struggling university afloat.
The extraordinary move this month allows university leaders to cover ongoing budget deficits by using as much as $30 million that donors had previously gifted St. Michael’s for specific purposes, such as scholarships or endowed professorships.
It follows a public notice from the college’s accrediting body in June warning that the private Catholic institution was running dangerously low on cash.
Restricted endowments are among private universities’ most precious assets, and the decision by St. Michael’s to access those funds reveals the depth of its financial distress. Repurposing restricted gifts can jeopardize trust with donors and will reduce the long-term financial support that the investment funds are designed to provide, experts say.
But St. Michaels had no other option, President Richard Plumb said in a state court filing.
“If the College is unable to access its endowment funds to meet operating expenses, it would face a serious and credible risk of being forced to cease operations,” Plumb wrote.
St. Michael’s has already taken large draws from its endowment in recent years in response to widely publicized enrollment declines.
However, the earlier drawdowns tapped the unrestricted portion of the college endowment, reducing it from $37 million in 2021 to $9.8 million, as of June.
The remaining balance isn’t enough to cover the additional losses that St. Michael’s expects to incur as it implements a broader turnaround plan, according to its recent court petition.
So university leaders are biting into the other, roughly $70 million portion that had been gifted to the college with specific strings attached.
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Comments
They’ve had 5 years to get their financial house in order and they still can’t manage their budget?
The Vatican is rich. Where’s the bailout?
St. Michaels needs their Saint Iococca.