Getty slashes operating budget after severe investment losses
The J. Paul Getty Trust, envied as the economic Goliath of the museum world, is slashing its operating budget nearly 25% for the coming fiscal year, an emergency response to investment losses that have totaled $1.5 billion since July and nearly $2 billion since mid-2007.
President James Wood said the financial stability of the Getty, the world’s richest arts institution, could “fall off a huge cliff” if it delayed drastic cuts and hard times continued.
The Getty relies almost exclusively on investment earnings to cover expenses for its two Los Angeles art museums as well as the research, art conservation and grant-making operations that extend the trust’s reach around the world.
Its portfolio dropped 25% during the last half of 2008, from $6 billion to $4.5 billion. That still dwarfs the $2.1-billion endowment of New York’s Metropolitan Museum of Art, which announced plans Thursday to lay off 10% of its workforce, partly because of an endowment loss approaching 28%.
The reductions at the Getty should focus on operations that can easily expand again, Wood said Friday. Cuts may well be in store for temporary exhibitions, which have totaled more than 20 a year. The Getty may also defer buying new works for its collections of ancient art, European art from before the 20th century, illuminated manuscripts and photography.
Wood said the core operating budget for the fiscal year starting July 1 would be $216 million, compared with the current year’s budget of $284 million.
The Getty’s financial statements show that overall spending has reached as high as $339 million in recent years, when added costs such as interest on $627 million in construction and art acquisition bonds are factored in.
The Getty Trust was established as an operating foundation in 1976 with a $700-million bequest (the equivalent of $2.6 billion today) from oil magnate J. Paul Getty. Since then, it barely has lifted a fundraising finger while covering 93% or more of expenses with its portfolio’s earnings.
Its diminished nest egg is now about where it stood in 2002, at the height of the last recession. Then, however, the trust was operating only one site, the hilltop Getty Center in Brentwood, where the Getty Museum is the attraction. In 2006, the renovated Getty Villa reopened near Malibu.
Together, the museums drew 1.6 million visitors in 2008. Admission is free, although parking costs $10.
Wood said the Getty’s leaders and trustees would decide by the end of May what reductions to make. Although declining to specify possible cuts, he said that maintaining free admission was “a terribly important priority” because charging would be “a nasty socioeconomic curve” to throw to the less-affluent visitors the Getty aims to include.
Also, Wood said, he is against the wholesale lopping off of any of the trust’s nonmuseum limbs -- the scholarship, conservation and grant programs that he said magnify the Getty’s global influence in ways not available to other art institutions.
It would be a mistake “to simplistically say we’re going to stop doing that” and just run the museums, he said during an interview in his sparsely furnished office, which commands a panoramic view of the city. “I don’t think that would be the best thing for the Getty or Los Angeles, because it’s one of the many things that makes L.A. a cosmopolitan, exciting place.”
The Getty’s biggest expense by far is the combination of salaries and benefits, which totaled $124.6 million in 2006-07, according to its most recent available federal tax return.
Wood said it was an “absolute priority” to keep staffers who have special expertise, including curators, researchers, art conservators and even the gardeners who tend the spectacular grounds at the Getty Center and the Villa. But in a December memo about the investment losses, he warned employees that staff cuts were coming.
In a separate interview, James Williams, the Getty’s chief investment officer since 2002, said there was no plan to change the investment strategy the trust has pursued since the middle of this decade, betting heavily on “alternative investments” such as hedge funds, private partnerships, raw materials and “distressed” companies trying to emerge from Chapter 11 reorganization. Williams said the Getty’s approach, which de-emphasizes holdings in publicly traded stocks and bonds, was safer because it allows greater investment diversity.
The strategy is known as the endowment model or the Yale model, in deference to the university that pioneered it in the 1980s, reaping huge returns and begetting many imitators among universities and other nonprofit institutions that could afford to invest huge sums over a long term.
Williams said that over the last year and a half, the Getty had tried to minimize what he considered the approach’s two pitfalls: investing in ventures that are loaded with debt and tying up too much money in assets that are hard to sell quickly.
The human factor in this unhappy numbers game is apparent at www.silencedogetty.blogspot.com, where nervous and sometimes angry Getty staffers have been venting anonymously since Feb. 21. “The frustration and fear was palpable” after a round of layoffs last spring, the blog’s pseudonymous founder wrote then, and had intensified since December, when Wood issued his memo that further cuts were coming. Wood said Friday that the layoff of 47 workers then, plus the elimination of 77 vacant positions, wasn’t done to save money but to “reallocate” resources after a yearlong examination of the trust’s priorities.
Staffing now stands at 1,395 full-time and 101 part-time positions.
Wood said he empathized with the anxieties evident on the blog. “I’m anxious myself, to some degree, although we’re on the right path, hard as it is.” He said he was bothered by the blog’s “innuendo that people don’t dare ask questions or they would suffer for that. That is not the operation we run.”
The blog has suggested alternatives to layoffs, including asking the 11 volunteer trustees to contribute money and cutting the pay of top executives.
Wood, at $1.11 million, and Williams, at $1.28 million, were last year’s top earners, with seven others making from $397,000 to $906,000, according to documents posted on the Getty website in keeping with the trust’s policy, adopted in the wake of a mid-decade scandal over improper spending, of being unusually open and detailed about its finances.
“Everything is on the table,” Wood said of the blog’s calls for lower executive salaries and a toll on board membership, but he added that the Getty’s problem was too big to be solved by such “piecemeal” measures.
A respected art historian and museum director, Wood ran the Art Institute of Chicago from 1980 to 2004.
The Getty lured him out of retirement two years ago to bring a steadying hand to an institution that had been racked by back-to-back scandals.
In 2004 and 2005, morale sank as allegations surfaced about financial impropriety and cronyism under then-president Barry Munitz. Munitz was ousted early in 2006, and his departure was followed by extensive turnover on a board that had been widely seen as unresponsive and out of touch.
It wasn’t until September 2007 that the Getty emerged from the second scandal -- its past acquisitions of looted antiquities -- by returning 40 objects to Italy.
In a prosecution that has moved forward at a sluggish pace, Marion True, the museum’s former antiquities curator, remains charged by the Italian government with conspiring to acquire looted items.