Spendable Income is the portion of your accumulated earnings of your endowment accounts that you are

allowed to spend each year. Each year the Spending Policy Committee of our Board recommends a

spending rate to the Executive Committee. In determining the spending rate the Board is required by Maryland law to take many factors into account, but the overall goal is to strike a balance between preserving the purchasing power of the endowment and providing a reliable stream of income to the account holders. Typically, the spending rate has ranged from 3.5% to 5%. Here is a link to our full spending policy.

The spending rate is finalized in February and is applied against your Dec. 31st market values to determine your spendable income for the following fiscal year that begins on July 1. These calculations are done in February so that you have your spendable income amounts in time for your budgeting and planning process for the next year.

All endowment accounts that have a balance over the account's minimum threshold (can vary by account), which have been in existence for at least one year as of June 30, and which are not underwater (market value is below total gifts received) are eligible for a spending calculation. Also, any unspent spendable income from the prior two years can generally be carried forward.

Not all endowments follow these rules, however. Some endowments are structured to allow for spending even when the endowment is underwater and others might dictate a unique rule for how much should be spent from the fund. It is important to review the memorandum of understanding or other document which governs your endowment fund(s) to make sure the terms are being complied with. Moreover, if you feel you can justify spending from an underwater fund, a request can be made. 

For more information, send us an e-mail.  

Here are some examples of how the spendable income is determined:

Example 1: Account A had $10,000 deposited on Sept 30, 2011. This account would not be eligible for a spendable income calculation for FY13 because it will not have been in existence for one year by June 30, 2012.

Example 2: Account B had a balance of $10,100 on June 30, 2011, its MV on Dec. 31, 2011 was $11,000 and its original gift amount was $9,000. This fund would be eligible for FY 13 spendable income. If the rate was 4% the spendable income amount would be $440 ($11,000 x 4%).

Example 3: Account C had a MV on Dec. 31, 2011 of $8,900 and its original gift was $9,000. This account would be ineligible for FY13 spendable income because it is underwater ($8,900 MV less than the $9,000 gifts).