Some Nonprofits Can't Touch Their Money

But "anecdotally, it is a serious problem. And if the current financial downturn continues, the problem will only get worse," said Harvey Dale, director of the National Center on Philanthropy and the Law at New York University.

The North Carolina Symphony started 2008 with an endowment of $9.3 million, well above its historic dollar value of $7.25 million and enough to allow for a planned withdrawal of $600,000. But with the endowment now underwater, the orchestra is looking for new ways to make money to cover than gap, including scheduling four June performances with the visiting Bolshoi Ballet that should bring in $100,000.

Among the hardest hit are colleges and universities. In the University of North Carolina system, where as many as 70 percent of the endowments at one campus are underwater, some of the system's 16 schools are going back to donors and asking them for one-time donations to pay for what would normally be covered by the endowment.

The University of Wisconsin system suspended payments this month from 38 underwater endowments, taking away $700,000 that would have gone for scholarships and other programs at campuses across the state. At New York University, about $10 million of $16 million in scholarship endowments is untouchable.

"Our primary mission is to hold our students harmless," said Martin Dorph, NYU's senior vice president for finance and budget. "As a result, we may have to make choices about other things we may have to eliminate or reduce. By implication, the problem then shifts somewhere else."

That's what happened at Brandeis University, which originally planned to close its Rose Art Museum and sell its more than 7,000 works, including pieces by Willem de Kooning and Jasper Johns. After much criticism, the school backed off.

There are ways to get around the law. In creating an endowment, nonprofits can enter into an agreement with the donor that allows for the use of principal in emergencies. They can also ask the donor to change the endowment's terms retroactively, which requires a trip to court if the donor has died.