Author: Amy Paterson

Restricted Funds – Why the Endowment Can’t Save a Budget – Johns Hopkins University Case Study

Following federal funding cuts, Johns Hopkins University (“JHU”) announced that they will repurpose a portion of its existing spend from their $13.1B endowment to help fill their c. $1B research funding gap. The cuts hit JHU particularly hard, as JHU is the largest recipient of NIH (National Institute of Health) grants, and over 50% of its revenue comes from federal funding.1 JHU has already lost over 100 federal research grants and cut 2,200 jobs following the USAID cuts.2

Why can’t JHU take more out of the endowment to support the gap? Why can it only repurpose existing funds?

JHU’s endowment, which has 78% of its AUM in donor-restricted funds, highlights the nuances of endowments that add a layer of complexity when trying to solve budget issues.

What are restricted funds?

Endowments are often made up of many underlying gifts. A portion of these gifts are unrestricted, meaning the institution can use those funds for any purpose it sees fit. However, there are also restricted funds, which occurs when the donor provided stipulations about how those funds can be spent. Examples could include financial aid for specific criteria (e.g., geographic focus, major focus), faculty support (e.g., endowed chairs), specific school funding (e.g., library books only), among a number of other purposes. An institution can decline any gift with overly stringent stipulations. These stipulations are legally binding and therefore not easily changed.

To change a restricted fund stipulation, institutions either need the original donor to change the legal document, or, if the original donor is now deceased, the institution can petition its state’s Attorney General to change it. A revision is likely a broader application of the original intent, not to unrestricted purpose.

Why can’t restricted funds be used to fill any funding gap?

Restricted funds can only be used for their designated purpose, meaning the endowment is not a carte blanche savings account for the institution. Only unrestricted funds can be used for these emergency purposes, reducing the funds available for special appropriations.

Johns Hopkins University: A Case Study on Restricted Funds

JHU has a $13.1B endowment, 78% ($10.2B) of which represents restricted funds. JHU notes that its endowment is comprised of approximately 4,700 individual funds, including both restricted and unrestricted funds. JHU’s endowment supported 6% of its budget in FY24, while federal contracts represented more than 50%. JHU withdrew 4.2% from its endowment in FY24.3

JHU’s high allocation to restricted funds provides the university with less flexibility in how the organization can use its endowment. Of those restricted funds, only 7% are designated for research and the stipulations may be too narrow for funding cut-related projects.  To entirely replace lost funding, JHU would be required to use one-third of its unrestricted funds ($2.9B). Covering the entire funding cuts would deplete all of the unrestricted funds in 3 years. Because endowed funds must exist in perpetuity per the Uniform Prudent Management of Institutional Funds Act (UPMIFA), this solution is not feasible, which is why JHU ultimately repurposed the existing endowment payout instead of taking more from the endowment.

Johns Hopkins University Endowment Details

The Baltimore Banner reported on JHU’s statement on the issue of restricted funds: “It’s a common misconception that universities can simply “use the endowment” in moments like this. The reality is that most of our endowment is made up of legally restricted funds designated by donors for specific purposes. The principal of the endowment must legally be preserved in perpetuity — to support Johns Hopkins’ mission now and for future generations — and cannot be drawn down like a reserve fund. That said, we are using flexible resources — some of which are tied to endowment earnings — to help sustain critical research in this moment of uncertainty.”4

Conclusion

Higher education institutions face many challenges today with federal funding cuts. The nuances of endowments make it hard for institutions to utilize just the endowment to solve budget issues. In addition to the “in perpetuity” requirement for endowed funds (meaning taking out too much continuously will ultimately drain the endowment), the restricted vs. unrestricted funds dynamic is another factor institutions contend with.

For its clients, TIFF is focused on ensuring each client’s Strategic Asset Allocation, in particular, liquidity, is tailored to the unique circumstances of each institution. Understanding the structure of your endowed funds, and broader institution’s financial circumstances, can help any institution weather a challenging time such as we are in currently.

The materials are being provided for informational purposes only and constitute neither an offer to sell nor a solicitation of an offer to buy securities. These materials also do not constitute an offer or advertisement of TIFF’s investment advisory services or investment, legal or tax advice. Opinions expressed herein are those of TIFF and are not a recommendation to buy or sell any securities.

These materials may contain forward-looking statements relating to future events. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” the negative of such terms or other comparable terminology. Although TIFF believes the expectations reflected in the forward-looking statements are reasonable, future results cannot be guaranteed.

On Wednesday, May 7th, TIFF Investment Management and The Do Good Institute hosted a webinar on fundraising in a time of uncertainty. TIFF’s Chief Client Officer Jessica Portis was joined by Ebonie Johnson Cooper, Faculty Director at The Do Good Institute, and Martin Sanders, Adjunct Faculty at the University of Maryland’s School of Public Policy, to discuss how nonprofit organizations can navigate financial uncertainty and ensure their programs and services continue uninterrupted.

Key takeaways from the discussion include:

• Understanding the Policy Landscape: Ebonie opened with an overview of current federal policy developments and how they affect nonprofit organizations.
• Tools for Financial Preparedness: Martin shared practical resources for scenario planning and financial forecasting to help nonprofits make informed decisions.
• Fundraising Strategies in Uncertain Times: Ebonie emphasized the importance of:
  • Using storytelling to communicate impact,
  • Leveraging technology to reach and engage supporters,
  • Strengthening and activating existing donor relationships.
• Mindset Shift: Ebonie encouraged organizations to move their fundraising approach “from scarcity to possibility.”

Watch the full webinar recording

Explore additional resources on policy shifts, financial strategy, and fundraising tools in The Do Good Institute’s Fundraising in a Time of Uncertainty Tool Kit.

The materials are being provided for informational purposes only and constitute neither an offer to sell nor a solicitation of an offer to buy securities. These materials also do not constitute an offer or advertisement of TIFF’s investment advisory services or investment, legal or tax advice. Opinions expressed herein are those of TIFF and are not a recommendation to buy or sell any securities.

These materials may contain forward-looking statements relating to future events. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” the negative of such terms or other comparable terminology. Although TIFF believes the expectations reflected in the forward-looking statements are reasonable, future results cannot be guaranteed.

Anne Duggan, Managing Director, Client CIO Group of TIFF Investment Management, offers a key perspective on how proposed endowment tax hikes could force universities to rethink investment strategies amid rising liquidity pressures.

Read the full article

The materials are being provided for informational purposes only and constitute neither an offer to sell nor a solicitation of an offer to buy securities. These materials also do not constitute an offer or advertisement of TIFF’s investment advisory services or investment, legal or tax advice. Opinions expressed herein are those of TIFF and are not a recommendation to buy or sell any securities.

These materials may contain forward-looking statements relating to future events. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” the negative of such terms or other comparable terminology. Although TIFF believes the expectations reflected in the forward-looking statements are reasonable, future results cannot be guaranteed.

Nonprofits in the United States are facing unprecedented financial hardship. Swift federal policy changes have left organizations in a state of urgency and confusion as the government grants and contracts they have regularly relied on have been canceled or held in limbo. How does the changing policy landscape impact nonprofits’ ability to deliver their services? What can fundraisers do to ensure they can secure funding to continue to deliver their services?

How did we get here?

The federal government has used the nonprofit sector to provide services to address poverty and social issues since the Johnson administration. The sector has also seen tremendous growth over time, with the number of nonprofits increasing by 60% between 1998-2023. The government’s investment in the sector is critical: as an Urban Institute report shows “[i]n every state, every congressional district, and more than 95% of counties in the United States, public charities receive government grants” which totals to $267B.  As the Trump administration moves away from providing government grants to nonprofits, fundraisers are left with a huge gap to fill.

How can fundraisers address this moment?

While the sheer size of this funding gap is daunting, there are strategies leaders can take to educate their teams, engage existing supporters, and secure funding to maintain services:

• Stay up to date: Organizations like the National Council of Nonprofits regularly provide updates and resources on policy changes that impact nonprofits. By finding similar resources for your industry, fundraisers can keep abreast of changes without overwhelming themselves.
• Mobilize your donor base: If organizations are transparent with supporters about the financial risk they face, donors may step up to invest in your organization in new and meaningful ways. Consider how you can solicit your individual donors differently to fund programs or build up your corporate partnerships.
• Connect with fellow fundraisers: No individual or organization should address uncertainty in isolation. Find avenues to connect with professional development groups and attend conferences to both learn from and support your peers.
• Access emergency funding: Foundations and philanthropists are providing emergency funding to nonprofits during this turbulent time. The Chronicle of Philanthropy is regularly updating its website with information on the different funds available to organizations

To learn more about how you can help your organization navigate financial uncertainty, register for the webinar Fundraising in a Time of Uncertainty on Wednesday, May 7, 2025, from 10-11AM ET. This webinar will feature Jessica Portis, Chief Client Officer at TIFF in conversation with Ebonie Johnson Cooper, Faculty Director, Do Good Institute at the University of Maryland’s School of Public Policy and Martin Sanders, Adjunct Faculty at the University of Maryland’s School of Public Policy.

The materials are being provided for informational purposes only and constitute neither an offer to sell nor a solicitation of an offer to buy securities. These materials also do not constitute an offer or advertisement of TIFF’s investment advisory services or investment, legal or tax advice. Opinions expressed herein are those of TIFF and are not a recommendation to buy or sell any securities.

These materials may contain forward-looking statements relating to future events. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” the negative of such terms or other comparable terminology. Although TIFF believes the expectations reflected in the forward-looking statements are reasonable, future results cannot be guaranteed.