Five months into the pandemic shutdown, the state’s cultural leaders have moved aggressively to shore up their institutions’ finances, scrapping long-planned shows, migrating programs online, borrowing money, and laying off workers.
But as they look toward what’s sure to be a bruising fall season, some are beginning to ponder the once unthinkable: tapping their endowments. These huge troves of money, some valued in the hundreds of millions, often generate a good portion of a nonprofit’s annual budget.
Amassed over generations, endowments are often viewed as inviolable trusts — intended not simply to help make ends meet, but as a down payment on an organization’s future. Proceeds from the funds are often dedicated to a specific purpose, their customary 5 percent “draw” going to support activities such as acquisitions or education. An organization that raids these coffers in a crisis, the thinking goes, does so at the expense of its future prosperity.
But that notion is being put to the test as many of Boston’s best-known cultural organizations begin to emerge from a viral deep freeze, having already suffered massive financial losses while anticipating millions more in revenue declines.
“I think every organization is looking at their endowments and saying, what’s the most responsible use of these limited resources,” said Vikki Spruill, president and CEO of the New England Aquarium. “This is the judgment: Is this moment apocalyptic [enough] to use those very precious resources.”
Perhaps no organization has been harder hit than the Aquarium, where Spruill moved early to stave off financial distress with a painful mix of layoffs, furloughs, and salary reductions that affected nearly half the Aquarium’s full-time workforce.
Nevertheless, for an organization that earns roughly 80 percent of its revenue through ticket sales and events, the closure was devastating. Specially-trained staff had to care for its roughly 20,000 animals during the four-month closure. And although the aquarium has since re-opened, Spruill said the aquarium lost about $2.6 million each month it was closed — roughly $90,000 per day — to end the fiscal year with an operating loss as high as $10 million.
A Payroll Protection Program loan helped soften the blow. The board also launched the Mission Forward Fund that now sits at about $3.6 million, and the board has granted Spruill access to a portion of the Aquarium’s $20 million endowment, a relatively modest war chest for an institution that welcomes more than a million visitors in a typical year.
“We are dipping into it,” said Spruill, who added the board has freed up $4 million of its designated endowment funds to help weather the crisis. “That fund contributes significantly to extending our runway, but it’s not enough given our institution’s size.”
Like the aquarium, the Museum of Science moved quickly to shore up its financials, working to increase donations, laying off or furloughing some 370 staffers, and borrowing $10 million from the bank.
“That’s what we did immediately, rather than taking from the endowment,” said Museum of Science President Tim Ritchie. “It’s just all about preserving some options.”
Nevertheless, ticket sales, events, and other earnings account for more than half the museum’s revenue, and Ritchie said the extended closure will mean a loss of between $6 and $7 million last fiscal year.
One thing he did not do, however, was touch the museum’s roughly $170 million endowment.
“Endowments are tricky,” said Ritchie, who added that income from many of the funds is donor-restricted, which often places strict limitations on how it can be used. “Future givers to the endowment would not want to do so if they believe their contribution can be wiped away easily.”
And while the science museum re-opened last month, uncertainty about the length and severity of the pandemic has prompted its leadership to create various models for the coming year. In the worst case scenario, Ritchie said the museum could be facing significantly bigger losses, which has him thinking hard about using a portion of the endowment’s unrestricted principal.
“We’ll have to assess to what extent we will use our endowment to go forward; that’s an ongoing conversation,” he said, adding they would only do so to “preserve the institution.”
But even in the worst-case scenario, Ritchie said he was confident the 190-year-old museum would survive to celebrate its bicentennial.
“We can get through this,” he said. “We won’t go out of business, unlike some peer institutions.”
Indeed, a report released last month estimated that fully one-third of the country’s museum’s may close due to the pandemic and the associated economic collapse. Similarly, a survey conducted in June by the Mass Cultural Council indicated that the state’s cultural nonprofits had lost some $425 million in revenue, affecting roughly 17,000 jobs.
To help ameliorate the crisis, the board of the Association of Art Museum Directors passed a series of resolutions last April giving art museums greater leeway to use restricted endowment funds toward general operating expenses.
Even so, leaders at Boston’s Institute of Contemporary Art, the Isabella Stewart Gardner Museum, and the Clark Art Institute in Williamstown said that although they’ll have to work with smaller budgets next year, they’ve so far managed to weather the crisis without resorting to staff reductions, though some donors have allowed their restricted gifts to be reallocated for general operations.
All three museums have since re-opened, but Gardner Director Peggy Fogelman said that given the fluid state of the pandemic, they’ve had to “constantly recalibrate” their budgetary expectations.
“Whatever budget we approve, we can be sure it’s going to be wrong because there’s so many unknowns,” she said, adding that the museum would strive not to touch the principal on its roughly $180 million endowment. “We would do everything we could to avoid it.”
Other museums have not been so lucky.
Joseph Thompson, director of Mass MoCA in North Adams, said he had little choice but to layoff nearly three-quarters of his staff last April. With an endowment of just $25 million, the museum derives some 70 percent of its total income from earned revenue such as ticket sales, events, and rentals.
“When most of that goes to zero, you’ve got to act fast,” Thompson said. The museum’s board of directors also freed up as much as $2 million in endowment funds for Thompson to do “whatever needed to be done to survive.”
He added that although many of Mass MoCA’s lost jobs have returned since the museum re-opened in July, “we didn’t call it a furlough. It was just sheer tuck and roll.”
In a guidance memo released last spring, Massachusetts Attorney General Maura Healey advised that in many cases, institutions seeking to access donor-restricted funds must first have approval from either the donor or Healey’s office and the courts before spending them on coronavirus-related revenue shortfalls.
At the Museum of Fine Arts, which managed to balance its budget last fiscal year despite facing a $12 million deficit, director Matthew Teitelbaum said the institution has approached some donors about freeing up their restricted endowment income during the crisis.
“What we haven’t done is gone into the principal of the endowment,” said Teitelbaum, who recently eliminated more than 100 positions through a mix of early retirements and layoffs.
Looking forward, he said, the MFA, whose endowment totaled $605 million in fiscal year 2019, will be a different institution, smaller, but with the same mission.
As for repurposing additional endowment income, Teitelbaum said he has not approached Healey’s office.
“Might we?” he asked. “For sure we might: This is still evolving.”
Malcolm Gay can be reached at email@example.com. Follow him on Twitter at @malcolmgay.