Battered Nonprofits Seek to Tap Nest Eggs

In the years before the 2000 stock-market peak, endowments generally soared, with the restriction posing no problem. But as the market soured over the past year, more endowments have gift funds that are "under water," or below their original worth -- and by law, frozen.

The little-known state spending limits figure in the high-profile controversy on the suburban Boston campus of Brandeis University. In part blaming steep endowment losses, the school announced late last month it was closing its Rose Art Museum and selling a collection valued at $350 million. Brandeis says Massachusetts law made it difficult to use much of its endowment, which recently totaled $549 million after posting a 25% decline since June.