Redefining the Meaning of ‘C’ in LACMA : Art: The county’s role in funding the museum is at issue as the two sides reexamine a 35-year-old contract.

The Los Angeles County Museum of Art and its primary benefactor are coming to a showdown over the county government’s responsibility to support one of its major cultural assets.

A 35-year-old contract that has provided public support for the museum since its inception is expected to be reviewed, according to Raymond G. Fortner, senior assistant to the County Counsel.

The planned review follows a devastating decrease in the museum’s public funding for the second consecutive year. Faced with a shortfall in 1992-93, the county reduced its support of LACMA by $2 million. For 1993-94, supervisors voted a further $2.7-million cut, reducing the county’s 1993-94 contribution to about $13.1 million. As a result, museum director Michael E. Shapiro has said LACMA must close an additional day of the week, on Tuesdays, beginning Aug. 31. (It already closes on Mondays.)

Predicting that the fiscal situation will get worse next year, Supervisor Gloria Molina has asked the Chief Administrative Officer and County Counsel to examine the existing contract and to develop a new one that more clearly spells out the responsibilities and rights of both sides.

“We need a clearer understanding of the agreement,” Molina said. “We need to establish a more concrete document. And hold (the museum) more accountable.”

“They need to do some things differently,” Supervisor Yvonne Brathwaite Burke said of the museum. New sources of revenue must be found, she said.

The museum’s trustees agree that more private funding will be required if the museum is to grow and develop, but they insist that the county is obliged to pay for LACMA’s operation and maintenance.

“I do think, from the museum’s standpoint, the contract needs to be clarified,” museum Board President Robert F. Maguire said. “There must be a simpler way (to work out the budget). But the contract needs to be honored. The county has a contractual obligation. It isn’t discretionary.”

Emphasizing that the Museum Associates has kept its part of the agreement, Maguire said the county must do the same. “We raised a $48-million bond issue through the county in 1985 to build the Robert O. Anderson Building (for modern and contemporary art) and the Pavilion for Japanese Art. So we’re saying to the county, ‘Look, we raised $48 million. We gave the buildings to you. You expected us to pay off the bond issue and we did. We expect you to do what you are contracted to do under the agreement.’ ”

The museum should not be treated like county departments that do not produce revenue, Maguire said. “The revenue-producing end of the museum has a profound impact on the community,” he said.

LACMA was established in 1958 under an agreement that required the county to “bear the cost and expense of the maintenance and operation” of the museum. The Museum Associates, a nonprofit organization that built the museum with private funds and donated it to the county, was delegated “ in perpetuo “ to manage, operate, maintain and regulate the Wilshire Boulevard facility.

Some LACMA trustees have hinted that the Museum Associates may sue the county to restore funds lost in the past two years’ cuts. “It’s important to get the contractual obligation clarified. Hopefully, we won’t have to go through litigation to accomplish that,” Maguire said. But he declined to comment on the possibility of a lawsuit.

The simple, nine-point agreement between the county and the Museum Associates does not set monetary limitations on the county’s support for LACMA or establish a ratio of public and private funding, but it prevents the use of county funds for the purchase of art. Over the years, the contract has been amended to provide for county maintenance of additions to the original museum complex.

The county’s annual contribution to the museum grew from about $1 million in 1965, when LACMA opened, to $17.8 million in 1991-92, when the museum’s operating budget reached an all-time high of $31.5 million.

In 1992-93, along with the county’s $2 million cut, the museum also suffered a loss of $1.6 million in membership revenues. The combined cuts lowered the 1992-93 operating budget to about $28 million, leading to reductions in staff and programs and a rotating schedule of gallery closures.

This year’s additional loss of $2.7 million in county funds has reduced the 1993-94 budget to about $25.3 million, without accounting for a possible drop in membership revenue.

The issue of how much support the county is obliged to provide for the museum became more complicated when a confidential survey comparing the museum to similar institutions across the country was made public. The survey, reported in The Times on July 30, was conducted this spring by the Boston Consulting Group, an international management firm, and was commissioned by Maguire and Shapiro to help plan the museum’s long-range strategy.

While LACMA ranks high in government support, it falls far short of its peers in endowment and trustee giving, according to the document. The museum derives only about 2% of its operating budget from interest on its relatively small $21-million endowment, while comparable museums depend on endowment income for up to 78% of their budgets. The survey also revealed that LACMA trustees give relatively little to the endowment and other unrestricted funds.

The trustees say comparisons in the survey are unfair. “It was always assumed that the museum essentially had an endowment, which was the contract with the county,” said longtime trustee Franklin D. Murphy, who is director emeritus of Times Mirror, the parent company of The Times. “The belief that the museum didn’t need an endowment was based on a signed, legally binding contract. Members of the board have been generous, but their generosity has gone for buildings and objects of art.”

Several trustees noted that the study, which draws comparisons from 1988-92, does not include the fact that they responded to the fiscal crisis earlier this year by contributing a total of $1.8 million to support operations and long-range programs.

Museum director Shapiro went on vacation immediately after the county budget was passed. In his absence, Chief Deputy Director Ronald B. Bratton sent a letter to the supervisors responding to The Times’ coverage of the survey.

“Since Proposition 13 was passed in 1978 and county funding became less certain, Museum Associates has provided $576 million in private support for operations, art acquisitions and expanded museum buildings,” the letter says.

The largest contribution, in the amount of $304 million, is for art acquisitions, according to the letter. That figure includes $74 million in cash donated for acquisitions and $230 million worth of artworks that have been donated or promised to the museum during the past 15 years. The dollar value of artworks is based on appreciated market values at the time that outright gifts and legally binding promises were made.

Although the county has provided around 50% of the museum’s operating budget in recent years, public money only accounts for 20%-30% of the museum’s support when the value of donated artworks and money given for exhibitions and programs is included, Maguire said.

All the supervisors say that the museum has to take its share of cuts when times are hard, but several have expressed support for the museum.

The county chief administrator had originally recommended a $4.2 million cut for 1993-94, but the supervisors reduced the cut to $2.7 million. Burke said she endorsed the last-minute restoration of some funds to the museum in part to assure the completion of negotiations for such major exhibitions as “Great French Paintings From the Barnes Foundation,” which closed on Sunday at the National Gallery of Art in Washington and is headed for Paris, Tokyo and Philadelphia. “That’s what they need to really make some money,” she said.

In the short term, the museum will have to make do with what it has, Supervisor Deane Dana said. At the same time, he recognized the unusual nature of the art museum’s financial needs. “Their collection is worth tens or hundreds of millions of dollars. That needs to be safe and secure or in the long run, it can no longer be one of the top art museums in the nation,” Dana said.