Art Museum Study Reveals Trouble in Raising Money : Culture: LACMA’s small endowment and low trustee contributions could hurt its ability to weather cutbacks.

A confidential survey comparing the Los Angeles County Museum of Art to similar institutions across the country reveals endemic fund-raising problems at the museum that could hamper its ability to weather further cuts in county government support in the face of the region’s faltering economy.

In a period of fiscal distress that has resulted in slashed budgets, staff size and viewing hours, the survey reveals that LACMA’s fiscal woes are not limited to a loss of county funds.

The wide-ranging survey, commissioned by LACMA and conducted this spring by Boston Consulting Group, an international management firm, indicates shortcomings in several critical areas:

* LACMA’s $21-million, privately funded endowment is relatively small and the museum derives only about 2% of its operating budget from interest on it. Comparable museums depend on endowment income for up to 78% of their budgets.

* Gifts from LACMA’s trustees are comparatively low, particularly to the endowment and the unrestricted annual fund. In fact, in four of the last five years, the trustees gave no money to the endowment.

* The wealthiest segments of Los Angeles contribute far less to art and culture than their counterparts in other major cities.

* LACMA’s support from individuals comes largely from membership dues, a relatively expensive way to raise money because members are offered benefits such as exhibition catalogues and social events. Comparable museums attract more outright contributions from individuals.

These issues are of paramount importance at a time when the museum is struggling with cuts from its largest source of revenue: Los Angeles County.

The museum has traditionally derived about half its budget from the county, which has provided funds for the maintenance and operation of LACMA’s Wilshire Boulevard facility and paid about half of the staff salaries. The Museum Associates, a nonprofit corporation, pays for acquisitions, exhibitions, programs and the remaining salaries.

LACMA’s budget reached a peak of $31.5 million in 1991-92, when the county’s contribution was about $17.8 million. But the budget fell to about $28 million in 1992-93 with the loss of $2 million in county funds and $1.6 million in membership revenues.

A further cut of $3 million to $4.2 million in county funds was recommended for 1993-94 by county Administrative Officer Harry Hufford, prompting a plan to close the museum an additional day each week, on Tuesdays, starting Aug. 31. But the Tuesday closures would save only $230,000 a year.

(The Board of Supervisors on Thursday may have averted the closures by restoring $1.5 million in funding for the museum.)

In a 78-page synopsis of key points, obtained by The Times, the survey says that county support has masked weaknesses in the museum’s financial structure and advises the museum to clarify the county’s long-term position and plans for LACMA.

“The county has a contract that requires it to maintain and operate the museum,” Supervisor Ed Edelman said. “People have given their collections to the museum with the understanding that the county will maintain it. The question is, what level of support is necessary?

“There’s no doubt that there will have to be a reduction (in county support for LACMA), but I will try to minimize the reduction,” Edelman said. “Some people say that we should put the money into law enforcement and other services. I think that’s very shortsighted. You have to balance priorities. What good is it to feel protected if you have nowhere to go?”

The Boston Consulting Group refused to comment on its work for the museum or to release the full text of the survey. “Our work is extremely confidential,” said William Burnside, executive vice president of the Massachusetts-based firm’s Los Angeles office.

Established in 1963, the Boston Consulting Group has 19 offices worldwide and serves a broad client mix, largely in the business world. For the LACMA survey, the consultants interviewed 32 members of the museum staff, 60 administrators and curators at 14 other major U.S. museums, and used data from reports compiled by the Assn. of Art Museum Directors.

The study was commissioned in January by museum Director Michael E. Shapiro and board President Robert F. Maguire and was free, according to the museum’s press office. Although Shapiro and Maguire declined to discuss the survey in detail, they responded to questions in a written statement.

The survey was undertaken, according to the statement, “to assist the museum in identifying and analyzing our strengths as well as any areas for improvement in planning our future course. While the current financial crisis has forced us to examine ourselves even more closely than usual, the survey would have been done regardless of the present economic situation.”

The survey will be presented to the 46-member board of trustees at its next meeting, Sept. 1, the statement said. The board met Wednesday, but the survey reportedly was not discussed and several board members told The Times that they were unaware of its existence.

So far, the findings have been presented only to small groups of staff members. “This is very much an ongoing process and we are still analyzing the data,” the museum’s statement read. “However, we have already created three interdepartmental staff teams . . . (to assess) our past and current policies and methods as well as recommending any changes in order to better fulfill our mission.”

Because it is a relatively young museum, having split from the Los Angeles County Museum of Natural History and acquired its own building in 1965, it is unrealistic to expect LACMA to have as large a financial base as New York’s 123-year-old Metropolitan Museum of Art, with its $708-million endowment, or the 80-year-old Cleveland Museum of Art, which has a $406-million endowment.

Endowments are essentially savings accounts. Typically, only the interest is used as revenue, providing guaranteed annual funds for operations and acquisitions. The principal is almost never touched, but is built up to increase the interest revenue.

LACMA’s endowment grew from under $3 million to its current $21 million during the 12-year tenure of former Director Earl A. Powell III, who left in September to direct the National Gallery of Art in Washington.

Even though LACMA has gained a reputation as one of the country’s leading art museums, its endowment has not come close to those of many comparable institutions. The Art Institute of Chicago has a $190-million endowment; the Houston Museum of Fine Arts, $150 million; Minneapolis’ Walker Art Center, $85 million; the Philadelphia Museum of Art, $82 million, and the Minneapolis Institute of Arts, $53 million.

The survey indicates that one reason for LACMA’s paltry endowment is that the trustees rarely contribute to it. The last year trustees contributed anything to endowment was 1989. In contrast, trustees of the Houston Museum of Fine Arts in 1992 donated $1 million to their institution’s endowment, according to the study.

Increasing LACMA’s endowment will be a goal of an upcoming campaign, Maguire has said in interviews. He has denied any lack of foresight on the part of the board. “The trustees’ sense of reliance on the county was completely legitimate,” he said, because the county has always operated and maintained the building, according to an agreement with the Museum Associates.

“We have a heightened consciousness of the support we need,” he said. “That necessity didn’t exist in the past, but it does now. The situation must change and it will.”

LACMA trustees also rank low nationwide in their gifts to the museum’s unrestricted annual fund, which can provide for emergencies. In 1992, trustees for the Museum of Modern Art in New York raised $1.3 million for MOMA’s annual fund, the Art Institute of Chicago’s board brought in $1 million and trustees at the Houston Museum of Fine Arts raised more than $500,000. LACMA’s trustees came up with only $170,000, the survey says. (That same year, LACMA trustee-giving to the capital campaign, exhibitions and education and other restricted categories totaled $880,000.)

In an examination of Los Angeles’ fund-raising potential, the survey indicates that the region not only suffers from a depressed economy, but also has a comparatively poor track record of arts philanthropy.

“Los Angeles has more wealthy individuals than any other city except New York,” the study says, “but giving to museums by (the) wealthiest individuals is lower in Los Angeles than any other major U.S. city.”

Los Angeles households with an annual income of $500,000 in 1992 gave an average of $3,194 to museums each year, far less than the average donation of $8,081 in New York, $10,211 in Chicago, $8,491 in Minneapolis and $8,412 in San Francisco, according to the survey.

The survey also states that “Los Angeles raises less for arts/culture than other major cities.” Using 1990-91 as a point of comparison, the study says that Los Angeles raised a total of $47.5 million for arts and cultural organizations, and compares that figure to $170.9 million in New York, $50.4 million in Chicago and $48.2 in San Francisco.

LACMA trustees contacted by The Times said the museum faces a challenge in substituting private funds for lost public money.

“I don’t think it’s doable in the immediate future,” said Camilla Chandler Frost, a past president of the board, who has not seen the survey. (Frost is the daughter of Dorothy Buffum Chandler and the late Norman Chandler, former publisher of The Times.) “This is a time for hunkering down, collaborating and getting through it the best way we can.”

Advocating a policy of “give or get” for trustees, longtime LACMA board member Frederick R. Weisman said: “You can’t require board members to give more than they can afford, but damn it all, they can get the money. You want people to be proud to say, ‘I’m from Los Angeles.’ ”

One of the board’s newest members, Cleon T. Knapp, who recently sold his communications firm, which publishes Architectural Digest and Bon Appetit magazines, said he joined LACMA to help find support for the museum in the private sector.

“It won’t be easy,” he said. “It won’t happen overnight, but I’m optimistic. Los Angeles is too important.”

Comparing Endowments

The L.A. County Museum of Art’s endowment--the investment fund that generates interest to help run the facility--is way below that of other major American art museums. A comparison: N.Y. Met Cleveland AIC* Houston Walker Philadelphia MOMA** Minneapolis LACMA Whitney (N.Y.) Seattle Denver * Art Institute of Chicago ** Previous year’s figure Source: Times staff