Museums’ Money Machinations


NRPLUS MEMBER ARTICLE D uring the ongoing Chinese coronavirus lockdown, a spooked leadership class put hundreds of millions of healthy people in quarantine on the basis of dodgy research by bureaucrats and airy academics. “Obey science,” which is an ideology and a superstition, replaced “use science,” which means taking data […]

NRPLUS MEMBER ARTICLE D uring the ongoing Chinese coronavirus lockdown, a spooked leadership class put hundreds of millions of healthy people in quarantine on the basis of dodgy research by bureaucrats and airy academics. “Obey science,” which is an ideology and a superstition, replaced “use science,” which means taking data defining what we know and don’t know, looking at competing interpretations, balancing costs and benefits, and, in the case of a new disease, absorbing new data and new ideas.

What we have is a huge, real-life, real-time mess, though the science lemmings are still getting their hefty government and university paychecks. About those 33 million unemployed, most of them low-income workers? Boo hoo. A leading federal economics official just predicted that national unemployment will peak in June at 20 percent. When asked how long it will take to drop, he said, “Nobody knows.” Is that good policy? It’s where the “obey science” crowd leads us. “Nobody knows, but trust us” isn’t a zeppelin I care to take.

In the museum world, we see this mess in a mega money crunch. No admissions income, tanked investments, and no shop or restaurant income make for big budget holes. It’s big money. What to do?

The new climate has exposed a “desperate times mean desperate measures” crowd among the Association of Art Museum Directors (AAMD), the high-end museum world’s professional organization.

AAMD has 227 members and a code of ethics that doesn’t have the force of law but, rather, the force of humiliation. AAMD’s board passed two resolutions last month amending its ethical standards. First, it won’t punish museums that tap restricted endowment funds to pay for operating expenses. Second, it won’t punish museums that sell art and use the money to pay for collection-care expenses.

I’ll look at the first resolution in today’s story and the de-accession money grab in my next story on Saturday.

I was an AAMD member for ten years when I was a museum director. On tapping restricted endowments creatively — museums do this all the time. An endowment that funds, say, a curator job, especially if it’s an old endowment, might generate more than the given curator’s salary and benefits. Museum bean-counters use the overage for expenses such as the curator’s travel or research but also for prorated expenses such as the share of time the office secretary spends supporting that curator’s work.

In established civic museums such as the Met or college and university museums, most of the curatorial positions are probably endowed, so this kind of expansive accounting makes for real budget relief. There are many other restricted endowments. Nobody outside the museum knows how this “clip, clip here, snip, snip there” happens. The donors of the endowments are usually dead. It would take a motivated snoop to follow the money trail.

AAMD has looked the other way before when it comes to using restricted endowment funds for purposes unrelated to the fund’s intent. During the 2008–09 financial crisis, the Cleveland Museum of Art went to court to authorize taking $75 million from four restricted endowments to pay for the second phase of its museum-expansion plan. Two of the funds were dedicated by their donors to acquisitions. The court agreed, contending that the long-dead donors would have been fine with it. That judge tucks a Ouija board under his robe, it seems.

I felt at the time that Cleveland shouldn’t have planned to build such an expensive addition in the first place. I also thought that the big-enchilada, well-connected Cleveland museum got a pass that AAMD wouldn’t have given a smaller, less consequential museum with fewer AAMD buddies.

Five Pound coin, 1893, designed by Thomas Brock. Gold.
Five Pound coin, 1893, designed by Thomas Brock. Gold.

If a museum looking to tap an endowed, restricted fund for general operating expenses gets court permission, or an attorney general’s permission, then that’s that. A court needs to look at the fund’s original intent, though, and look at it with a gimlet eye. I’d prefer a strict rather than speculative reading. The founders of the Toledo Art Museum, for instance, required a third of its endowment income to go to acquisitions. This explicitly shows donor intent to focus the museum on collection-building, not new additions, not big staff, and not feel-good fads like the equity, inclusion, and diversity movement.

I hate what happened to the Barnes, as another example. There, a court, pressured by two big Philadelphia foundations and the governor of Pennsylvania, gutted Dr. Barnes’s clearly stated trust terms and decided to move the place to downtown Philadelphia — a move that Barnes clearly would have deplored, since he deliberately put the school in the suburbs to snub Philadelphia’s art elite.

The court didn’t even bother to speculate. It took Barnes’s explicit instructions and tossed them to the curb. The place is easier to visit, but that’s it. At the old Barnes, a visitor was so enchanted by the eccentricity of the place and of Barnes himself that he or she overlooked Barnes’s spotty taste and tiresome design strategy. In the new, now-a-museum in Philadelphia, divorced from its oddball setting and with its new, tidy, clean spaces and perfect lighting, these shortcomings are clear.

The big target here is acquisitions endowments. That’s long been considered sacred money, and taking it by stealth is a no-no. When I was a curator and, later, a director, I knew to the dime how much acquisitions money I had. Woe to anyone who diverted that money to pay the phone bill. Curators whose acquisitions money is swiped will convey the news to their state AG’s office, by smoke signals if they must.

Museums such as the Wadsworth Atheneum in Hartford and the Worcester Art Museum have hefty endowment funds to buy art but not to operate the museum. They often have budget crunches since their donor bases have shrunk, but they can buy great art. The big museums have these funds, too. They’ll all still need to go either to court or to the state attorney general to get permission to raid acquisitions funds. That’s a legal requirement.

Museums will probably need the acquisition fund’s donor or his or her immediate family to make some sympathetic cluckings, but most museum acquisition funds are old. Establishing funds to buy art hasn’t been a philanthropic vogue for years. Prospective donors today tend to think art is too expensive, so they’re not inclined to give for that purpose. They’d rather see their names in big letters on named gallery spaces, not on tiny wall labels saying “Purchased by the Joe Sixpack IV Art Endowment Fund.”

Fundraisers and directors want money to build buildings and to run their museums. So the big acquisitions funds tend to be longstanding ones, and that means the donors are dead but so are their kids. The more generations between the original donor and today, the less family sentiment matters.

There’s one unappealing trend at work here. When I was a director, I felt acquisitions were my most important accomplishments. They were the legacy that endured, and they give me the most pride today. I don’t think all museum directors feel this way anymore. They’re too invested in marketing, inclusion, building additions, and the public’s amusement. Part of my own feeling was the love of the chase, which all directors and curators ought to have. Most of it was sheer love of art. Overall, though, it’s my belief in the primacy of the permanent collection, and that’s gone out of style.

The big change is that AAMD won’t rebuke museums that want to divert this money. Its reprimands have bite, and they do more than embarrass. AAMD can order its members to shun an offending museum by banning loans to its shows, or by barring museums for renting its shows, or by forbidding partnerships to organize shows. Going it alone isn’t pretty.

I’d rather museums with restricted endowments limit the money grab to borrowing from these endowments and then paying the money back. It also makes sense to increase the draw on unrestricted funds for a two- or three-year period. The standard draw, the draw considered prudent, is 5 percent. Given that a decently run endowment has done extraordinarily well over the past ten years, a higher draw is hardly fatal.

<i>Imitation</i>, 1887, by John Haberle. Oil on canvas.
Imitation, 1887, by John Haberle. Oil on canvas.

One problem is that museums, like much else, have evolved into a world of “haves” and “have-nots.” Big museums such as the Met — I love it, but it’s the best example — spend too much money. That’s why the Met had a deficit. They’ve wandered from interpreting their art and caring for it to the realm of community and entertainment center. Non-program staff — professional fundraisers, PR people, HR people, classroom teachers, and shop, restaurant, and admissions staff — have swelled budgets. Many big museums, including the Met, do too many loan exhibitions as well.

Since I became a curator nearly 25 years ago, the only essential, new place at the table in museums is for tech staff. The rest of the new staff army? If they went away, the sun would still come up. Museums made many budget and staff reductions in 2009, but that was years ago. Most, like the Clark, my local museum, in Williamstown, Mass., targeted low-paid support staff, which I thought was scandalous.

Before museums raid savings, they need to look at budget reduction, painful as that will be. Maybe they should have lived within their budgets, which is what I had to do as a director.

Tapping these restricted endowments to support the bloat is too easy a raid. They’re punch bowls that trustees are more likely to take away. It would be far more sobering for trustees to borrow the money or raise the draw. Grabbing money from lots of restricted pots isn’t going to hit them in the face. But two simple numbers — endowment draw percentage and debt — will appear on balance sheets in stark relief, and big numbers will make them uneasy and also more likely to demand cost-cutting.

A visitor walks down the steps of the Metropolitan Museum of Art in New York in 2006.
A visitor walks down the steps of the Metropolitan Museum of Art in New York in 2006.

Where is the impetus for tapping restricted endowments? AAMD is a big group, with large and small museums, but nothing happened in my day without the major museums advancing it. I was very small-fry, but at meeting after meeting, if something controversial was on the docket, everyone looked at the directors of the Met, the National Gallery, and the Art Institute of Chicago for guidance. If they wanted something, it happened. They’re the ones with the big restricted endowments, especially acquisition endowments. The biggest deficit I’ve seen is the Met’s projected $150 million hole.

I suspect that the Met is pushing this. The last time the Met had a deficit, two or three years ago, it pulled its political strings in New York to impose a fat $25 admission fee, overturning a nearly 150-year policy of free admission. Now that the city has no tourists, it’s got a budget hole, and I think it hopes to close it through income from its acquisitions funds.

I’d suggest that museum directors and trustees write to their elected leaders, asking, “What the hell are you doing?” They’ve created the current depression by recklessly crashing their economies for the first time in history based on failed models, fear, hubris, and naïveté.

Last week, I wrote about foot-dragging, navel-gazing Texas museums that are taking not real, tick-tock time but geological, even biblical, time to reopen. If they needed the money so badly, you’d think they’d bring some urgency to the job of opening their doors as well as the money spigot.

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