When Christy Coleman, executive director of the Jamestown-Yorktown Foundation in Virginia, tweeted an explainer about museum layoffs and budget shortfalls due to COVID-19, she was not prepared for the amount of attention it would receive.
“I posted that first tweet for people who are outside of the industry, to explain to them why museums are closing,” she told Hyperallergic, adding that even her own peers reached out to thank her. “I had no idea people would respond to it the way they did.”
That some institutions could amass endowments in the tens or hundreds of millions and still decide to slash their staff during a crisis strikes some as a puzzling case of cognitive dissonance at best; an unexplainable act of cruelty at worst. With their cool, neat rows of zeros, these many-digit figures loom over staff like taunting reminders of the paychecks they might not receive. In New York City, the Guggenheim furloughed 92 staff members last Friday; the Whitney laid off 76 employees a week prior. The Museum of Modern Art (MoMA), with its endowment of over $1 billion, terminated all freelance educator contracts, acknowledging that it could be years before the museum returns to “budget and operations levels to require educator services.” Citing the Guggenheim’s $85 million endowment, a union worker at the museum described its decision to let go of staff as “a moral failure.”
The coronavirus pandemic has made wealth inequalities salient across all industries, and in the case of the cultural sector, vulnerable arts workers are justly clamoring for answers. Coleman’s timely tweet proves that there is an urgent conversation still to be had about museum finances. The crisis may provide such an opportunity: to look transparently at the ways in which institutions are funded, at the purpose and limitations of endowments, and the need for increased and alternative sources of support in the months to come.
The paradox of endowments is that their primary function is not to be spent but to grow. Coleman defines them as “a pool of money that has been given or set aside to use the interest earned on it to support operations or special initiatives.”
“Restrictions suggest that you cannot use the principal, the core amount, you can only draw down what it earns in the market,” she adds.
While turning to these funds in times of crisis seems like a natural inclination, crises usually also impact the economy at large — the very apparatus that nurtures and feeds them. Market volatility, such as that observed during the pandemic, will deepen any gashes institutions have already made to endowments by making larger-than-usual emergency withdrawals.
Coleman says the Jamestown-Yorktown Foundation lost 19 percent of its endowment value through the end of March. “Even taking the four or five percent that we would normally take is going to decrease that principal that remains,” said Coleman.
Further restrictions are imposed by donors, who may designate their gifts for specific purposes, and by state governments. (Since it was approved in 2006, most states have adopted a version of the Uniform Prudent Management of Institutional Funds Act (UPMIFA), a multifaceted law that loosens some restrictions on nonprofits’ endowment draws.) This week, the Association of Art Museum Directors (AAMD) announced it would stop penalizing institutions choosing to tap into restricted assets, including income from endowments, to cover operating expenses in the next two years. Still, that resolution does not lift donor- or state-imposed restrictions, only AAMD-related sanctions; institutions must still seek approval to access and use restricted funding.
In the cases of museums, economic uncertainty during COVID-19 is compounded by a looming fear of thinned out revenues for years to come, even once the curve flattens. Coleman, who has led institutions through two prior financial crises — the Charles H. Wright Museum of African American History in Michigan during the fallout after September 11 and the American Civil War Center in Virginia during the Great Recession — believes the current pandemic is uncharted territory even by these standards.
“The problem is, we don’t know what this is going to look like on the other side. We have no idea,” she says.
“If we knew for a fact that three months from now everything’s going to return to normal, that we’ll still see the same number of visitors we had before … But it takes longer than that. You’re talking about at least an 18-24 month event horizon.”
Institutions are implementing a variety of strategies to deal with present budget shortfalls. The Metropolitan Museum of Art pulls roughly half of its $320 million annual operating budget from its $3.4 billion endowment. Although it projects a $100 million shortfall caused by the pandemic-related closure, the museum does not expect its endowment draw to be larger this year.
Instead, in order to pay its staff of 2,200 through May 2, the Met turned to a combination of means: cutting programming, imposing a hiring freeze, deferring infrastructure spending, and fundraising.
Even with all these contingency measures in place, the museum foresees that the extension of pay during a period of no revenue sources to add significantly to its operating deficit.
“Endowment gifts are inter-generational gifts — they are a profoundly generous and important way that donors of one era ensure that an institution’s mission can be everlasting. Here at The Met, literally half of all we do — the dozens of exhibitions, the welcoming of hundreds of thousands of students, the publishing of scholarly work, the global scientific research – is funded by our endowment, which was slowly, and assiduously built, one gift at a time for over a century,” Kenneth Weine, Chief Communications Officer at the Met, told Hyperallergic.
“If an institution spends from its endowment corpus, it is literally taking funds from every subsequent year of its operating budget,” added Weine.
The vast majority of museums, however, have minimal or no endowments to speak of, and are in critical need of public support. Last month, the Met launched its campaign #CongressSaveCulture to advocate for $4 billion to be allotted to financially at-risk arts nonprofits in the $2 trillion stimulus package.
“We’ve got 35,000 museums in the United States. Only about 4 percent of those are art museums to start with. And the wealthiest of our institutions are art museums, that’s where you see the huge endowments,” said Coleman.
“They’re not in the local historical society, they’re not at the children’s museums. Most of those are operating on very tight margins. So when you cut off the primary means for us to operate, like admission and attendance, like any business, we’re struggling.”
While museums are vital parts of public life, public funding falls far short of need. According to the American Alliance of Museums, most museums are treading water, losing $33 million a day due to closures and in dire need of federal support to cover basic expenses.
The COVID-19 crisis has brought additional scrutiny to other aspects of cultural institutions’ financial infrastructure. Disparities in staff salaries have become the subject of renewed attention; last year, collective Art + Museum Transparency (AMT) identified sharp divides in compensation with its crowdsourced museum salary spreadsheet. Leadership at several institutions have announced they will be taking pay cuts in recent weeks, including the Guggenheim, where employees making more than $80,000 will see a cut.
“We understand the argument is usually that you have to pay well to attract superlative talent, including to directorships, but we all work with some supremely talented people who, last time we checked, work for a lot less than six or seven figures,” said Michelle Millar Fisher of AMT in a presentation co-authored by the group for an online webinar last last week.
“Instead of taking 10, 20, or 30 percent pay cuts for a few months, just go without, period, or give up a much larger chunk for a more extended period of time,” Millar Fisher continued. She cited MoMA’s decision to terminate educator contracts; director Glenn Lowry, she said, earned $1,288,527 as a base salary and around $2.3 million in bonuses in 2018.
For struggling institutions, the formula for survival may depend on factors including but not limited to endowment size and draw restrictions, such as funding model. Museums heavily dependent on earned revenue, like admissions costs and gift shop sales, will have to amp up fundraising efforts. The Centre Pompidou in Paris, for example, projects losses of €1.2 million (~$1.3 million) per month from stalled admissions and retail revenue, according to Peter Keller, Director of the International Council of Museums (ICOM).
Or, if they’re lucky enough to have them, museums could pull from reserve funds. Blair Murphy, curator of exhibitions at Arlington Arts Center (AAC) in Virginia, cites best practices for nonprofits as suggesting a three to six months reserve, therefore bypassing the need to dip into endowments in unforeseen circumstances.
“It is difficult to hear that institutions have a certain amount of money on paper and they’re laying off workers,” said Murphy. “But sometimes endowments are tied up in restrictions, in a vehicle where you can’t just get the money back, and really reserve funds are the cash on hand for emergencies.”
In the past, AAC has maintained a reserve fund equal to only one month’s expenses; last year, the organization was able to bolster the fund to the recommended six months of expenses thanks to an unexpected bequest. Still, Murphy says even the recommended amount of backup savings may prove insufficient in a crisis the scale of COVID-19.
AAC was fortunate to receive a gift that could be allocated to operations. In many cases, donor-imposed restrictions mean funds can only be used to cover certain expenses; sexier asks, such as art acquisitions, are typically easier to fundraise for than, say, an institution’s HVAC costs.
Could board members step in to save sinking staff? “When you have billionaires on your board, that may be a logical thing to do,” said Coleman, stressing that the bulk of museums do not. “One board member might say, ‘I’ll put down the $100 million to cover this.’ They could. But will they? Probably not. Not without getting their name on something.”
If there ever was a time for the walls to come down between a museum’s trustees and top leadership and its staff, it is now, as the present public health crisis makes distinctions in access and privilege permanently more stark.
Carin Kuoni, director and chief curator of the Vera List Center for Art and Politics, suggests exchanges between employees and leaders as a way to forge stronger connections among different tiers of staff. In a conversation with Hyperallergic, she cited German artist Christian Jankowski’s “Dienstbesprechung” (“Briefing”), a 35-minute film that documents the day-to-day operations of the Kunstmuseum Stuttgart in preparation for his 2008 retrospective. But in Jankowski’s piece, each museum staffer has switched jobs with another employee: the Kunstmuseum’s technical director, normally tasked with art installation, writes a catalogue essay; a security guard becomes a curator.
Kuoni believes Jankowski’s role reversal model could be a “provocative invitation” for museum staff to shadow leaders and trustees. “It seems important to understand what other people’s responsibilities actually entail,” she said. “The current situation, where we are forced for better or worse to look into each others’ offices or homes, reinforces that desire to know more about these individuals who are part of what we are as institutions.”
Coleman thinks museum leaders could start by having candid conversations about finances with their front-line staff, rather than offering limited explanations for decisions like furloughing workers.
“That’s all a part of transparent leadership to me, but I know there’s tons of other places where that doesn’t happen,” she told Hyperallergic. “We talk about stuff in the open, rather than just saying, ‘budgets are tight.’ I’m more inclined to have that conversation with every level of my organization versus just senior leadership or the board.”
The decision to communicate with staff is a variation of management style, says Coleman, and factors such as generation and gender have an impact on how leaders perceive what transparency means.
“There are some leaders who are like, ‘People will know what I need them to know when I need them to know it,’” she said. “But how do you get people invested in what’s happening if you’re treating them like they don’t need to know?”
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Thank you Valentina for your insightful and informative piece. A better understanding of the ring fencing and conditions of drawing down endowments is very appreciated. And indeed, those conditions mentioned seem to make sense largely. Those mechanisms in fact could inform how ‘bail outs’ whether from the NEA, other federally funded streams or state and local streams could be defined. This moment is a great opportunity for publicly funded agencies to up their influence on the operational and strategic elements of these institutions. Two areas to be promoted within this context come into mind – a widening of the audience / visitor to better reflect the community and sustainability. Both of these elements can be addressed through technologies – think how Net A Porter has impacted the luxury goods sector for instance. And in another evolving scenario the publicly funded bail outs being presented by the airline sector could come attached with requirements to seriously within a defined time period deal with climate change and fossil fuel issues. With all these sectors wanting public funding its time to put the public’s agendas further up the to do list.
It is entirely within most museum boards’ capacity to approve temporary increases on endowment drawdowns for exactly this kind of crisis situation. Assuming there will be anyone to staff or attend a museum in the future that purges its human capital now, is the kind of financier thinking that has ruined the nonprofit culture sector. Don’t let them off the hook. Understand and follow the money. MOCA for example, whose board members are no doubt still favorably disposed toward their onetime compadre, Treasury Secretary Steven Mnuchin. The point is, a comprehensive though small drawdown on museum endowments would affect the stock market unfavorably.
The continued high-minded rationalizations on why money (like endowment funds ) CAN’T be spent, means very little to museum workers losing their jobs. Why not write an article about positive examples of museum leaders thinking about what they CAN do for workers, like The Oakland Museum and The Walters Art Museum?
Dr. Julia Marciari-Alexander, director of the Walters Museum has committed to continuing to employ all staff. “We think it’s our duty as a civic institution not to contribute to the unemployment crisis.”
How did you go broke? Slowly, and all at once (F. Scott Firzgerald).
Fragile, thinly capitalized cultural organizations of all stripes saddled with weak balance sheets and weaker boards will disappear. The non-profit model has systemic problems. It will 7-10 years to rebuild in the best of economic rebounds.
Take a look at the cultural institutions that went bankrupt during the last recession. Or ANY organization that has gone under in the past. And then worked to Phoenix itself back into being. I watched the failed Florida Symphony morph into The Orlando Philharmonic. A brutal but successful rebuild. Then Orlando Opera went bankrupt and passion-driven opera lovers are still working to create a stable organization and market.
Donors and audiences need wooing. The transactional trend (what do I get for my donation?) for cultural organizations that are constantly told to “act like businesses” has its downside. The lack of government support has its downside. We are in the same boat as the restaurant on the corner. Those of us in non-public facing cultural organizations (I run an artist residency program) that support artists are also on the brink.
The future may be uncertain but it will certainly be a rough slog. There is no time in human history when art has not been created. The cultural institutions created to support, package, and present the work of artists are being battered. I trust artists to be a major cornerstone of better days ahead. I trusts historians to preserve our pasts in better days ahead. I trust my fellow cultural workers to create better days ahead. In the meantime, as one of my donors said, “we need to stick around long enough to get lucky”.
Much like how tax cuts to the poor and middle class have a greater impact on the economy than tax cuts to the wealthy, endowment principle spent on staff retention would have a far greater impact than having it sit in a bloated trustfund to fund market investments. Additionally, much of the money being donated to large art museums that go into these trustfunds in the first place is being questioned on the ethics how it was made (the Sackler family just being the tip of the iceberg).
I am curious when all is said and done how transparent the federal funds to help nonprofit museums and cultural organizations will be. Or if, like loans that were meant to go to “small businesses” but some how found their way to large corporations, will find that most of the money went to “4 percent”.
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