Endowment restrictions causes Massachusetts SPCA to close three shelters

From ANIMAL PEOPLE, March 2009:
BOSTON–Downsizing for the second time in five years, the
Massachusetts SPCA on February 5, 2009 announced the closure of
shelters in Brockton, Martha’s Vineyard, and Springfield,
effective May 1. Thirty-eight staff will be laid off and eight
vacant positions will be eliminated.
The MSPCA will continue to operate shelters and animal
hospitals in Boston, Centerville, Methuen, and Nantucket.
MSPCA spokesperson Brian Adams told media that any animals
who are not adopted from the Brockton, Martha’s Vineyard, and
Springfield shelters before they close will be transferred to the
shelters that remain open.

But that left unanswered who will shelter animals in the
parts of Massachusetts that the MSPCA will no longer serve. The
MSPCA–which for most of the 20th century had a shelter in Pittsfield
as well as Springfield –will no longer have any presence in the
western part of the state.
The shelter closings came after animal surrenders to the
MSPCA soared from 574 in 2007 to 836 in 2008, coinciding with the
onset of the present national economic slump. Altogether, the
Springfield shelter handled about 6,000 animals in 2008, and the
Brockton and Martha’s Vineyard shelters handled about 5,000 between
them.
Service gap
“There just aren’t other facilities that can bear the burden
of thousands of animals in need of shelter,” acknowledged
Springfield MSPCA spokesperson Candy Lash to Patrick Johnson of the
Springfield Republican.
The Thomas J. O’Connor Animal Control & Adoption Center in
Springfield received 4,000 animals in 2008, executive director
Barbara L. Hays told Peter Goonan of the Springfield Republican, and
accepts animals only from Springfield plus four suburbs. Hays was
earlier warned to expect a $96,000 budget cut, due to reduced state
aid to cities, and expected to lay off three workers.
“It’s terrifying right now, not only from an animal lovers
view, but for public health,” Hays told Goonan. “There are not
enough resources in the area to handle the number of dogs, cats,
and other animals in need of shelter and adoption,” Hays said.
Springfield mayor Dominic J. Sarno said that the animal
control budget cut “may need to be revisited,” reported Goonan.
The next largest shelter serving the Springfield area, the
Dakin Pioneer Valley Humane Society, keeps a waiting list for
incoming animals, and houses just 10 dogs and 40 cats. “Last year,
Dakin placed about 1,300 animals, with 1,100 being cats and
kittens,” wrote Goonan. “This included 300 cats and kittens from
the MSPCA adoption center.”
The MSPCA had operated in Spring-field since 1933, in
Brockton since 1945, and in Martha’s Vineyard since 1947. The
current Martha’s Vineyard shelter opened in 1989, the present
Brockton shelter in 1993, and the present Springfield shelter in 1996.
Martha’s Vineyard shelter director Ronald Whitney, a 31-year
MSPA employee, is looking into founding a locally administrated
humane society, he told Sam Bungey of the Vineyard Gazette. The new
organization might lease the MSPCA property.
Anna Bell Washburn, 82, who led the eight-year fundraising
campign that built the present Martha’s Vinyard shelter, told ANIMAL
PEOPLE that MSPCA president Carter Luke gave her advance notice of
the closure. Washburn said she hoped that a new charity can take
over and run the shelter, but added that she could do little more to
help. “I can’t pick up the torch again,” Washburn said.
Falling assets
A freeze on hiring and administrative salaries was already in
effect before the shelter closures were decided upon, Luke told
ANIMAL PEOPLE. “About the only words that come to my mind,” Luke
said, “are what I am feeling– heartbreaking, gut-wrenching,
devastating, a horrible terrible ache, etc. etc.”
Ascending to the presidency in June 2006, Luke served in
various capacities under every MSPCA president since Eric H. Hansen,
the fourth president of the 141-year-old organization, who was hired
in 1942. MSPCA founder George Angell served from 1868 until his
death in 1909. His chosen successor, Francis Rowley, served for 25
years.
Luke said the MSPCA lost more than $11.5 million in assets in
2008, amounting to 26% of its endowment.
The term “endowment” is used by charities to describe
financial assets held in reserve. Older and larger charities
typically hold endowments built from bequests. Often they invest the
interest and dividends from their endowments in fundraising from the
public, so that endowment income is in effect the engine driving
their operations. When endowments become especially large,
endowment income may also underwrite program service.
Still among the 10 wealthiest humane societies worldwide,
the MSPCA laid off 20 people and eliminated 32 vacant positions in
2003, soon after Luke’s predecessor Larry Hawk was hired away from
his previous post as president of the American SPCA. The MSPCA
financial assets had already declined by about a third from their
peak value.
“For years the MSPCA has been violating its own spending
policy by bypassing limits on the percentage of endowment gains that
may be used to pay operating expenses,” reported Sacha Pfeiffer of
the Boston Globe when Hawk departed.
The $6 million Springfield facility proved to be much bigger
than the community was willing to support. Luke closed the MSPCA
veterinary hospital in Springfield in 2007, but kept the adoption
center open.
“Springfield is a complex situation,” Luke told ANIMAL
PEOPLE. “We’re in a building that is two-thirds empty, and costs a
lot of money to occupy. We lose $1 million a year in Springfield,
and are still paying off a debt there. Some time ago, discussions
began in Springfield about combining resources. There is another
shelter in the community, and another non-profit. So the
discussions are happening now, urgently. We’ll help as much as we
can. Something new may come out of it.”
The gist of the crisis, Luke said, is that “We spend more
money than we make. We fill the gap with income generated from our
endowment. In 2008, we thought we’d generate about $3.5 million to
fund our programs,” but instead the endowment losses and the
shortfall in expected revenue produced an operating loss of $15
million.
Endowment rules
“A key issue,” Luke explained, “is that nearly 70% of our
endowment is permanently restricted, so we can’t touch the principle
at all. And no matter what happens to the investments, or how much
they lose, we cannot,” by state law, “allow the principle of our
permanent endowment to fall below its initial value. So all losses
to our endowment become unrestricted cash losses. In other words,
30% of our endowment,” the unrestricted portion, “has to cover 100%
of the losses,” to keep the permanent endowment “intact and full.
So we’ve run into a cash flow situation that requires that we very
quickly balance our income and expenses.
“I don’t think anyone is assuming that there will be any
significant income off any investments this year,” Luke added. “In
the future, once things turn around, it will be a smaller pool. We
had to make difficult and very painful choices.”
“Gift-spending restrictions on nonprofits were enacted across
the country in the 1970s,” clarified Wall Street Journal reporters
John Hechinger and Jennifer Levitz. “State legislators passed a raft
of rules that let charities–which traditionally favored bonds–put
their savings in stocks and other growth-oriented investments. But a
key proviso protected an institution’s long-term health: An
endowment couldn’t spend a dime if a gift fund fell below its initial
dollar value.”
Since early 2007, Hechinger and Levitz wrote, 26 states
have eased restrictions on the use of endowments.
“In Massachusetts,” they said, “the repeal effort is led by
the Massachusetts Audubon Society, whose endowment lost 28% in 2008,
ending the year at $85 million. More than a third of the 265 gift
funds that make up the Massachusetts Audubon endowment can’t be
tapped for spending.”

Pennsylvania SPCA

Under media scrutiny after making unpopular budget cuts,
Pennsylvania SPCA chief executive officer Howard Nelson resigned “due
to health reasons and an environment no longer conducive to my
success or the success of the organization” in a February 11, 2009
e-mail to the PSPCA board. By February 13 the “resignation” had
become an indefinite leave of absence.
The PSPCA in January 2008 closed its former shelter in
Clarion County, and closed its Monroe County shelter in Stroudsburg
at the end of January 2009.
Said a Pennsylvania SPCA press release, “The PSPCA board of
directors cited a lack of community support, the bad economy, poor
support from the local media, and inability to hire staff and
managers that met the organization’s high standards of care as
reasons why the decision was made to close the shelter. All animals
remaining at the shelter will be taken to the PSPCA’s Philadelphia
Adoption Center.”
The PSPCA said that Monroe County direct costs for 2008 were
about $350,000. Revenue from fees and donations was about $225,000.
Monroe County Vector/Litter Control director Jacquelyn Hakim
told Pocono Record staff writer Beth Brelje that the shelter closure
would leave a “dangerous void,” Brelje wrote. “The rabies threat
alone from unvaccinated feral cats makes this a public health
problem,” Hakim said. “We need a trap-neuter-vaccinate-release
program here in Monroe County and we needed it yesterday.”
The Monroe County PSPCA shelter had changed directors four
times in 19 months, reported Brelje. Barbara Balsama, the director
for nearly 20 years, exited in June 2007, after months of friction
with present PSPCA executive director Howard Nelson. Nelson in March
2007 succeeded Erik Hendricks, the PSPCA executive director for 27
years.
The PSPCA complaint about local media appeared to be directed
at Brelje, who has handled the Pocono Record humane beat since 2007.
In September 2008 Brelje covered the resignation of Doylestown
attorney Richard H. Elliot from the PSPCA board, after Elliot had
served as volunteer and board member for 44 years. On December 21,
2008 Brelje published a three-part exploration of controversies about
PSPCA law enforcement and euthanasia methods under Nelson.
E-mailed Nelson to the Pocono Record, “I do hope you
highlight the Record’s success and important part in getting this
shelter closed.”
Hendricks took a different view. “I would suspect this is a
sad result of the general economic malaise,” he told Brelje. “At
one time, the PSPCA had six shelters. They were all carried by
donations in Philadelphia.”
The Monroe County shelter was partially subsidized by income
of about $72,000 a year from the Ryman Foundation, created by the
estate of a Monroe County resident. That funding “was left for the
operation of a shelter in Monroe County and must be used for that
purpose,” Nelson told the Pocono Record.

Oasis to close

Eddie Lama, cofounder of the Oasis Sanctuary in Callicoon
Center, New York, also announced impending closure, after 10 years
of operation and five years of falling donations, after the 2004
death of founding partner Eddie Rizzo.
“Lama began rescuing animals after doing time in state
prison, where he met Rizzo,” wrote Victor Whitman of the Middletown
Times Herald-Record. “He and Rizzo started FaunaVision,” the
nonprofit umbrella for the Oasis Sanctuary, “driving around New York
City in a multimedia van,” airing video about animal issues.
Their work was the subject of a 1999 video, The Witness,
often aired at animal rights events in the next several years.