The NCInnovation (NCI) investments committee voted Monday to keep the organization’s $500 million endowment fully in cash for the next 30 days, maintaining maximum flexibility as lawmakers consider legislation that could repeal the nonprofit’s authorizing statute and shift its funding model.
In addition to reaffirming its conservative investment strategy, the board’s investment committee recommended awarding up to $16 million in research grants during the upcoming spring 2025 cycle—while emphasizing caution amid the unsettled legislative landscape.
Legislative pressure builds
Two bills now pending in the General Assembly could significantly alter NCInnovation’s future. House Bill 154 would repeal its authorizing statute altogether, and the Senate’s budget proposal would end the organization’s self-funded endowment model, replacing it with annual legislative appropriations beginning in fiscal year 2026.
The Senate budget proposal directs NCI to return $100 million to the State Treasury and reallocates the remaining $400 million to the UNC Board of Governors to support North Carolina Children’s Health, Inc. This nonprofit 501(c)(3) organization was established through a partnership between the public UNC Health system and the private Duke Health system, with the goal of building a stand-alone, 500-bed children’s hospital in the Triangle region. Additionally, the Senate plan includes $25 million in annual appropriations over four years for a newly established NCInnovation Reserve Fund.
“Obviously, it would change if the legislation changed,” said Linda Hall, chief financial officer for NCI, referencing the possibility of budget-dependent operations in the near future. “We don’t want to make any decisions as a committee today for future [cycles] because we can’t really kick off this grant cycle without looking at how it impacts future grant cycles.”
The Senate passed its version of the budget last week, while the House prepares its version. A final budget agreement between the House and Senate is expected later this summer.
Endowment still liquid, strategy on hold
As of April 9, NCI’s endowment was valued at $517.1 million, fully invested in money market funds and earning approximately $1.8 million per month. Rob Harrington, a Wells Fargo portfolio manager, said the portfolio remains shielded from market risk and is highly liquid—ready to be returned to the state if required by law.
“These are highly liquid securities… We can transition to wherever they have to go back to… very close to the price that we paid for them,” Harrington said.
Despite proposals to diversify into short-term treasury or corporate bonds, the committee passed a motion to stay in cash for 30 days, awaiting further legislative clarity.
“My suggestion is that we stay in cash for 30 days,” recommended committee chair Stan Kelly. “See how this movie plays out a little bit… and then give Rob and his team an update to continue in cash or to begin a very slow investment of the funds.”
Board recommends $16M in spring grants, new spending model
Though cautious about the future, the committee moved forward with two key recommendations: a revised spend policy and a $16 million not-to-exceed allocation for the spring FY25 grant cycle, both pending full board approval.
NCI’s updated spend policy formalizes a board-approved cap of 5% on a rolling 12-quarter basis and transitions from quarterly to monthly reimbursements for hub and programmatic expenses.
Monthly reimbursements, committee members said, reflect best practices among nonprofit endowments, enabling real-time budgeting and reducing the need for the four planned hubs to front program costs.
$18.6M available
Hall updated previous projections, clarifying that $18.6 million in funding is available for the upcoming spring grant cycle. The committee recommended awarding 85% of that total—or $16 million—split across two years.
“Where we are projected to end up prior to making the decision on available funding for the May slate of grants is $18.6 million,” Hall said. “If we did award 16 million on a spring cycle for FY25, that would be $10 million in June of 25… and then $6 million in June of 26.”
The model assumes a conservative baseline using the average fair market value of the endowment ($425.7 million, not $500 million), and includes a 2% reserve to account for uncertainty.
“One lever of conservatism that’s in your model is we’re using the average fair market value versus the full 500 million,” explained Kelly to the committee following Hall’s report . “The 16 million that you’re suggesting is 85% of the 18 million five, so we’re kind of recommending as a placeholder 85% of the total discretionary grant availability fund.”
If approved, the FY25 spend rate would be 3.52%, with future projections for FY26 between $18.4 million and $23 million—roughly 4.56% of the endowment value—including $5 million in funding for regional innovation hubs.
A committee member also recommended that the program committee consider a range of low, medium, and high-spend options to balance geographic distribution and proposal quality during the review process.
Under the Senate’s version of the budget, the state legislature would no longer have appointments to NCI’s board of directors. NCI would still be required to submit an annual report to the legislature detailing its finances, activities, and strategic direction. It would also remain subject to audits by the North Carolina State Auditor.
The post NCInnovation committee votes to freeze investment plans as lawmakers weigh budget clawback first appeared on Carolina Journal.