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On June 9, Gov. Jon S. Corzine codified S2583, the Uniform Prudent Management of Investment Funds Act (UPMIFA), which replaced earlier legislation that had proven a hurdle for endowment managers wanting to dole out funds.

The Uniform Management of Investment Funds Act (UMIFA), first enacted in New Jersey in 1975, provided guidance to charitable organizations with respect to their investment, management, and spending of endowment funds. UMIFA included, among other things, rules dealing with the use of endowment fund assets and guidelines for the release of restrictions on use and the management of endowment funds.

One key problem, however, has been the ability for charitable organizations to distribute these endowments should they go below their original value.

"If you had created an endowment of $500,000, if the value of that for some reason plummeted and was now worth $250,000, you cannot use any of the proceeds of that endowment until such time that you bring it back up to its original amount of investment," said Jacob Toporek, executive director of the New Jersey State Association of Jewish Federations, based in Union. "The new law, based on years of experience, said basically the cautionary provision was not necessary."

UPMIFA also modernizes the standards for management of funds. In limited cases, it would allow the release or modifications of donor restrictions on older (at least 20 years old) and smaller (no greater than $250,000) endowments where those practices were illegal or impractical under UMIFA.

UPMIFA, which has now been enacted or introduced in every state except Florida, Louisiana, and Pennsylvania, was shaped with consideration to the Uniform Prudent Investor Act (UPIA), from 1994, which updated rules on investment decision making for trusts, including charitable trusts, and imposed additional duties on trustees for the protection of beneficiaries, according to upmifa.org. UPMIFA applies these rules and duties to charities organized as nonprofit corporations, but does not apply to trusts managed by corporate and other fiduciaries that are not charities, because UPIA provides management and investment standards for those trusts, according to the Web site.

Roy Tanzman, president of the New Jersey State Association of Jewish Federations, said, "In our Jewish community, these endowment resources help bridge budget gaps allowing us to fund our camps, programs for the elderly, and, among other things, our day schools."

Toporek added that, "you can imagine with the downturn in the economy, all endowments were losing value.

"All of these non-profits and charities who had these endowments -- colleges like Princeton and Rutgers, for example -- were up against a wall," he said. "Not only was it difficult to raise money and motivate people to create these endowments, they couldn't use them."

Toporek noted the coalition for enacting UPMIFA stretched across the state and across various backgrounds, from the Jewish community, the Catholic community, hospitals, as well as the New Jersey Center for Non-Profits. "It's not only a New Jersey concern, it's a concern across the country. We certainly wanted to take advantage of this as well," he said.

The timing of Cozine's approval of UPMIFA could not be better, Toporek noted, as many groups anticipating the legislation's passage had already counted on endowment funds that would be available in their yearly budgets, which went into effect July 1.

"These could not be done without UPMIFA passage," Toporek said.

Toporek said enactment of UPMIFA is a step in the right direction for the state.

"It does not take money away from the state budget, and it helps non-profits," he said.