Eitan Arom: USAC endowment fund can provide stability

Boom-and-bust cycles are no fun. Just ask the one person in 10 who was unemployed at the height of the recent recession.

UCLA’s student body learned this lesson firsthand last year. The student government surplus, which had soared above half a million dollars in the 2010-2011 academic year, fell precipitously to about half that number.

Funding cutbacks crippled many student groups, even prompting the Undergraduate Students Association Council to install a 50 percent reduction in weekly allocations in fall 2011.

But a recent proposal under consideration by the council has the potential to make the student body recession-proof.

At its last meeting of fall quarter, the council discussed investing $100,000 into an endowment fund, whose returns could be used at the discretion of future student governments.

The fund would pay out 5 percent interest, or $5,000, every year, said USAC president and fourth-year economics student David Bocarsly, who crafted the proposal.

Future councils would be free to invest additional funds as they choose and every dollar added to the endowment would increase the next year’s payout.

With the endowment fund comes a promise of increased financial stability. Currently, student groups rely on a surplus that fluctuates over a range of about a quarter million dollars.

Before the numbers are crunched, nobody without a crystal ball can tell what the exact amount will be.

Thus, this investment would be a powerful tool in USAC’s financial arsenal, allowing the council to set a steady target for surplus funds.

Let’s say, for example, the council decides the surplus should be fixed at $300,000 dollars a year.

If the surplus total comes in at half a million dollars, USAC could channel the $200,000 difference into the endowment to earn interest.

When surplus falls below the target, the payout from the endowment would help cover the shortfall.

In that way, USAC can put to rest any future manic-depressive cycles like the one that produced last year’s shortfall.

The potential for surplus to grow every year is even more exciting. If each future government invests the same $100,000 this council is considering, USAC would be receiving annual payouts greater than its initial investment in 20 short years.

Of course, $100,000 is a fairly large sum to swear away in a fit of altruism.

At last quarter’s final meeting, Community Service Commissioner Anees Hasnain said that such a dramatic move should require input from the student body.

Hasnain, a fourth-year sociology student, is justified in her democratic enthusiasm. If the proposal were put to a vote, leaders of student groups might choose to use these funds in the short term rather than forswear them for future generations.

But if these leaders truly care for their respective causes, their best interests lie in paving a strong financial future for the students who will inherit their positions once they graduate.

From our first piggy bank, we are taught to save for the future.

The current student body will have long graduated before the endowment sees any real returns, but we need look no further than this conventional wisdom to see that the endowment proposal before USAC is a good one.

Email Arom at [email protected]. Send general comments to [email protected] or tweet us @DBOpinion.