Museum of Art cutting its staff

Facing a startling $90 million-plus downturn in its endowment and waning city financial support, the Philadelphia Museum of Art is cutting staff, deferring exhibitions, curtailing programs, trimming salaries and - subject to city approval - increasing admission fees.

The cuts will reduce the museum's operating budget by about $1.7 million to $52 million for the fiscal year ending June 30, and, the museum hopes, will help stave off a deficit the next year forecast as high as $5 million.

The museum is eliminating 30 positions in all areas, about seven percent of its staff, though no curators are being let go. Of the 30 slots, 16 are layoffs of current personnel; the rest are vacant positions that will not be filled.

Senior staff will take salary cuts of five to 10 percent depending on seniority, interim CEO Gail M. Harrity said yesterday.

"We are committed to a balanced budget, and in order to achieve that we need to make changes this year that will help us out next year," said Harrity, calling the times "challenging."

Painful as the reductions are, they might not be the last.

"If endowment keeps being reduced in value, there are going to be further steps taken," said chairman H.F. "Gerry" Lenfest. A balanced budget is projected for this year, but if the situation continues, "we would anticipate further reductions in personnel and operating," he said.

The museum is highly dependent on its endowment, using the interest and income it generates to cover about 25 percent of operating costs each year. But like the markets generally, the endowment has taken a big hit. At its high in July, the market value was $346 million, the largest of any local arts group; as of Dec. 31 it had contracted to $256 million. "And it has been further reduced since," said Lenfest.

City funding has fallen in tandem with reductions for other city and quasi-city agencies. This year the museum will receive $2.4 million from the city, down from $3 million, and it is facing the prospect of another cut next year.

"We have already been told that fiscal year 2010 at best will be $2.4 million, but that all city departments and agencies were asked to consider the impact of an additional 10, 20 or 30 percent cut," said Harrity.

The museum anticipates balancing its budget next year with the help of an as-yet-undetermined increase in admission - it now ranges from $10 to $14 - after July, and the postponement of "The Crown of Aragón: The Art of Barcelona, Mallorca, Valencia and Zaragoza," previously slated for next February. Organized by the museum, the show is now expected to debut in 2011.

Not all of the Art Museum's income sources are flagging. Membership is up to 64,000 from 50,000 in 2006. Attendance is steady, Harrity said.

Annual giving so far has been unaffected by the downturn, but Harrity said she was worried about drops in individual and foundation giving as investment portfolios continue to plunge.

"Corporate giving will definitely be down," said Lenfest.

The museum is carrying a good deal of debt, according to tax returns. A $10.8 million loan to acquire the museum's share in Thomas Eakins' The Gross Clinic and other works shows up on tax returns for the museum's fiscal year ending June 2007, but that debt has been paid off through donations and the museum's sale of other works (including Eakins' Cowboy Singing), according to Lenfest.

About $60 million in loans for the museum's expansion remains, though Lenfest called the debt service "manageable."

The staff cuts come across all departments of the museum, Harrity said. Department heads are being asked to make a 10 percent cut in expenses in their respective areas to determine "how we can reduce programs and yet still have a wonderful array of activities for the public."

In a statement to staff, the museum wrote that "the pain of making the decision about staff positions was compounded by our awareness that this is a very difficult environment in which to seek a new job. We appreciate that reality, and in an effort to help each person make a successful transition, we have offered severance pay, as well as outplacement services."

No curators were laid off in the current round of reductions. "They're our bread and butter," said Lenfest. The philanthropist is challenging others to think similarly: Lenfest says he will match every $1 million gift to endow curatorial staff with $1 million of his own money. Five other donors have taken Lenfest up on the challenge so far, and he is offering up to $27 million through the challenge.

As for how the current economic crisis affects the museum's ongoing expansion program - including a 10-year master plan being developed by a team led by Gehry Partners - Harrity said pieces would be implemented on an as-paid-for basis.

"The board has chosen to move forward with the planning of the expansion. I think we're quite fortunate in that there have been multiple years of planning and it was always conceived as a phased project, so we have the ability to pause between phases."

A new parking garage on the museum grounds opened this month; receipts will be applied to loans used for its construction.

Museum leaders are taking aim, if gingerly, at proposed cuts in city money, saying that with 80 percent of its visitors coming from elsewhere, the museum is a major source of economic stimulus for Philadelphia.

A three-month exhibition at the Art Museum generally spins off $20 million to $50 million in economic impact, Harrity says. The Salvador Dalí show in 2005 was responsible for selling 20,000 hotel room nights, she noted.

"An exhibition such as 'Cézanne and Beyond' [which opens tomorrow] generates tax revenue for the city and commonwealth which far outweigh the contribution the city is making to our operating budget. What we've said is every dollar invested returns four dollars in benefit for the region."

Says Lenfest: "If the city further cuts their support it could affect the exhibitions and hours we're open."

In another cultural tourism mission, the museum is continuing with plans with artist Bruce Nauman to curate the U.S. Pavilion at the 2009 Venice Biennale in June. The economy has not killed the idea of bringing a version of the Nauman show to the United States after it closes in Venice.

"Our hope is that it would come to Philadelphia if we're able to fund it as planned," said Harrity.

In general, she said, the museum is working hard to preserve its core mission in hard times.

"The severity of the economic climate requires reducing some of the programs and delaying others, but this is when people need the museum the most."