Readers: Startlingly rich Milton Hershey School should expand mission with $12B

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With $12.5 billion in investments and land holdings, the Hershey School would rank seventh in the U.S. if its assets were compared with those of universities.

Tears came to the eyes of a retired Pennsylvania college president thinking about what could be done with Milton Hershey’s untapped billions of dollars.

A New Hope woman’s “blood boiled.”

A Center City real estate agent observed: “The money keeps going up in an upward funnel and doesn't seem to get out to do more public good.”

Online reactions and suggestions ran the gamut after a recent Inquirer and philly.com story on the surprisingly rich Milton Hershey School, which spent only 1.9 percent of its assets on its programs and overhead.

Readers said they were stunned by the boarding school’s vast $12.5 billion in investments and land holdings in a state with 500,000 poor children.

Flush with steady dividend payments from the iconic chocolate company, the Hershey School's endowment is now 10 times the size of Phillips Exeter Academy, the nation's second-richest private school. If Hershey were compared with universities, its holdings rank number seven in the nation, ahead of the University of Pennsylvania.     

The online story solicited suggestions as to what to do with these underused funds. Among them: Distribute college scholarships, open private schools around the state, rescue Girard College, fund programs for juvenile delinquents, train foster parents, and educate women prisoners.

Bill Crean, 41, of Wayne, wrote: “How about founding ... some well-funded schools in cities that could use them, starting with Philly? Imagine the potential impact!”

Milton and Catherine Hershey’s 1909 deed says the trade school and orphanage was to be located in Hershey and conservatively managed — which means it can use only stock dividends, interest, and rents for the school’s budget. The school currently has $800 million in a surplus rainy day fund that it says it needs for emergencies.  

But a late-1990s state law also says that charity trustees can override legacy mandates and spend up to 7 percent of a charitable institution’s assets -- which would be more than triple the Hershey School’s most recent publicly available budget of about $240 million.

Velma Redmond, the chair of the boards with responsibility over the Hershey School, said in a statement last week that the charity was considering expanding its “spending authority.”

Donald Kramer, a lawyer with the Montgomery McCracken law firm in Philadelphia and an expert on nonprofit law, said the Hershey School’s board or perhaps the attorney general could seek Orphans' Court approval to broaden the Hershey charity’s mission.

 One way would be to show that Hershey has failed its mission to educate poor children, and that’s not true, Kramer said.

A more modest and practical option would be to seek a "deviation" through the court that would allow changes to Hershey's original mission, such as opening schools outside Hershey, Kramer said.

Taking this route, the charity could tell the court that it has too much money to reasonably use for impoverished children in Hershey and could expand in other ways, Kramer said.

Hershey School president Peter Gurt and Redmond declined requests for interviews.

In the statement, Redmond said: “We have looked at Pennsylvania law for possibilities that would provide us some leeway, and we will continue to explore possible avenues to increase our spending authority.

“For now, we are confident that adhering to the terms of the Deed of Trust provides the soundest means of providing income needed to operate and grow the School in a responsible manner.” 

Seeking to add 300 students, the Hershey School is developing a former luxury golf course it bought a decade ago at an inflated price for additional student housing for $120 million, taking total enrollment to 2,300 over the next few years.

The Hersheys died with no heirs, leaving the charity, created as a trade school and orphanage, to self-perpetuating boards. The charity’s board members have been investigated twice by the attorney general since 2013 for excessive pay and travel costs.

Five of the nine board members were forced to resign by the attorney general to settle the latest investigation in late July. Three board members are expected to resign Dec. 31, and an additional two board members, including Redmond, are expected to resign a year later.

Readers' suggestions after the Nov. 6 story focused on social services and education for impoverished children or adults.

Richard Kneedler, a retired president of Franklin & Marshall College, said: "Milton Hershey was clearly concerned about education so that anything that could be done to broaden the focus of the trust should have education at its heart."

The Hershey School could preserve its current campus in Hershey but divert hundreds of millions of dollars into college scholarships for low-income Pennsylvania children, partnering with in-state colleges to help cover tuition and other costs, Kneedler suggested.

As an example, Kneedler said, the Hershey charity could spend $100 million by distributing $10,000 college scholarships. At that level, the charity could hand out 10,000 scholarships a year. At $200 million, it could be 20,000 scholarships a year, and so on.

“You are probably leveraging this three to four times. You will produce hundreds of thousands of college graduates in 20 or 30 years. These are graduates who could have a profound impact on the state,” said Kneedler, who said he was speaking for himself and not for Franklin & Marshall.

“It brings tears to my eyes as to what this would do for our inner-city schools.”

Ellen Melchiondo, a retired teacher and women’s prisoner advocate in New Hope, said “it’s a tragedy that this money is not being used” and “it makes my blood boil.” She said she would like Hershey money to educate female prisoners.

 Daniel Merin, 32, of Roxborough, said he believed that the Hershey charity could invest in impoverished neighborhoods instead of just recruiting students from those areas.

“There is a lot of unspent money, and they will only be able to do so much in Hershey,” Merin said. His suggestion was to fund training for foster parents — which he sees as a big need.

Albert Yee, 36, a Fishtown resident, wrote that he "would ... partner with other well-established groups" like Pew Charitable Trusts and William Penn Foundation "to create a plan to expand their reach in the state. There are plenty of areas from Erie to Pittsburgh to Philadelphia to Scranton that can benefit from the influx of resources and cash."

Yee noted the restriction in the 1909 deed that says the school has to be located in Hershey. But “you've already changed it [in other ways], so what's the big deal?”

Several readers said that the Hershey charity should throw a financial lifeline to Girard College, which also educates impoverished children on a boarding campus in Philadelphia.

“It seems like a natural fit for Hershey to take Girard College under its wing and deepen its commitment to Southeastern Pennsylvania,” said Will Herzog, 19, a sophomore at Haverford College.

Domenick Parris, 52, who lives in Glenolden and works as a Center City real estate agent, compared the school's assets to an “upward funnel” that doesn't benefit the public.

Parris suggested building five additional schools in needy areas around Pennsylvania, two of which would be in Philadelphia. Each of the five schools would enroll at least 1,000 students.

Parris believed that if Milton Hershey were alive or could have seen into the future, he would have changed his deed to “help other kids.”