2 replies to this topic

[caliban]

I had missed this very interesting appraisal of ALCOR's funding model. Thanks for sharing!

Looks like budget stability is not currently secured and a drastic fees hike might be on the cards.

What do people think about the different projections and business models being discussed here?



Robert A. Freitas Jr.
Scenario Analysis using a Simple Econometric Model of Alcor Finances
Version 2.6, 15 October 2010

 EconometricModelOfAlcorFinances.pdf   361.35KB   4 downloads

[caliban]

http://www.alcor.org/blog/?p=1432

Alcor has received seven million dollars following final settlement of the estate of a confidential member who was cryopreserved several years ago. The bequest will be divided equally between Alcor’s Patient Care Trust and a new Endowment Fund to be created with a maximum legally allowed annual distribution of 2% per year.
This will double the value of the Patient Care Trust to approximately $7 million, increasing the security of all 100 patients in Alcor’s care.
[...]
This is a marked departure from past Alcor practice, which has been to place windfalls into either the Alcor general or reserve fund accounts. The funds would then be gradually depleted to cover operating deficits, with the hope that an additional windfall would arrive prior to the depletion of funds. Alcor is instead now seeking to eliminate structural operating deficits so that it is no longer dependent upon these unpredictable events. Consequently, this bequest will not make a large difference in Alcor’s budget next year: it will only contribute an extra $70,000. While $70,000 will help close next year’s deficit, it must be combined with other difficult measures.

[bgwowk]

It's ironic and instructive that the 7 million dollar bequest came so closely on the heels of the Freitas analysis. It helps illustrate the nature of Alcor finances over the past forty years. Alcor has always done more than just membership dues and cryopreservation minimums pay for. It's been able to do that because of donations and bequests. Historically there have been large bequests every decade or so. This recent bequest, like previously bequests, could likely have sustained Alcor for many years without Alcor having to raise membership dues or fees. However the board was of a different mind this time, and chose to establish an Endowment. The Endowment is to fund Alcor operations by analogy to how Alcor's Patient Care Trust funds long-term patient care without being spent down. This means that dues increases will be necessary in the short term. However in the long term growth of the Endowment, and the revenue it provides, should help reduce the need for dues increases in the future. Also, some regular large donors have made it known that they prefer to see Alcor eliminate structural deficits.

One thing the Freitas analysis makes clear is that there is choice between

1) Paying very high membership dues, and having a guaranteed cryopreservation decades in the future without having to increase your cryopreservation funding for inflation ("grandfathering")

or

2) Paying lower membership dues, but being prepared to have either very large cryopreservation funding, or increasing cryopreservation funding as you age to compensate for inflation.

The cost of Alcor cryopreservations has approximately doubled in nominal dollars every 20 years. CI has amazingly held its minimums steady for decades through cost reductions and increasing subsidizes by bequests and better-funded members. They almost certainly won't be able to continue that indefinitely.

Edited by bgwowk, 02 December 2010 - 06:01 AM.