How Museums are Funded, and Why They’re Vulnerable

I'm Jill Medvedao, I am the director of the Institute of Contemporary Art in Boston, and I'm a fellow at the Harvard Divinity School. From David's Werner, this is Dialogues, a podcast about artists and the way they think. That feeling when you stand before a powerful work of art, have an encounter with it and actually feel your heart get bigger in your chest, swell in your chest, or a gorgeous landscape. I mean, but that feeling of being part of something, being connected to something. I want more and more and more and more people and for me, especially young people, to have what we had. I'm Helen Molesworth, your host for this season. Every episode features a conversation with artists, curators, writers, designers, philosophers, filmmakers and musicians about what it means to make things today. Hey everybody, it's Helen. Last week, the New York Times reported that the Trump administration sharply escalated its impossible demands on the Smithsonian Institute, going so far as to request wall labels to ensure that they comply with the recent executive order calling for, quote, "restoring truth and sanity to American history." It's hard not to wonder when, rather than if, this administration will come for the rest of our museums, similar to the way they have been attacking the universities. I say when, but in reality, the cuts have already begun. The American Alliance of Museums is reporting that out of the 35,000 arts institutions across the United States, 10,000 of them have already lost their government funding. That means nearly one-third of museums nationwide have had their NEH and their IMLS grants rescinded. Those grants fund everything from digitizing collections to repairing climate and security systems, basically the seriously unsexy stuff that makes these places run. If you'll allow me just a moment of editorializing, I spent most of my professional life in museums because I love them dearly. I love them so much I wanted them to be better. That's why I acted as an irritant in every museum I ever worked in. But now that their survival is in question, I feel the need to argue for their existence. Caring for culture is their primary role. A curator is many things, but first and foremost, they are a custodian. And truth be told, most museum labor is not unlike housework, endless, repetitive, hidden, and when done well, it's invisible. But invisible things are hard to understand, and I have found that most folks, even art worlds and ciders, have a fairly tenuous grasp on how museums work. I think we need to get back to basics. We need to be on the same page. So in order to save and preserve our cultural heritage, we need to plan for worst-case scenarios. And to do that, we need to understand the legal and financial underpinnings of how our museums function. In that spirit, I called up Jill Medvedow, the former director of the ICA Boston, for a refresher course on how museums are funded. I hope you find the information useful, and as always, thanks for listening. Now here's Jill Medvedow. Good morning, Jill Medvedow. Good morning, Helen Molesworth. So Jill, it's my understanding that almost all of the museums in the United States except for the Smithsonian is the major exception. Our public private hybrid. The private part is that museums are run by boards of trustees. The public part is that the trustees and the museums enjoy tax benefits for their participation in this system. So I wanted to start with you, because you've always been very good on the basics and connecting the basics to our higher aspirations. What is a 501(c)(3), which is basically my asking you, what is a not-for-profit organization? A not-for-profit organization, a 501(c)(3), so that's as opposed to other 501s, is an organization that is one of three primary mission-driven institutions. It is religious. They're all considered to be charitable. And they are religious, dealing with poverty or dealing with education. So art are not singled out for their status. I would say lumped under the educational umbrella for not-for-profits. And what it means is that you don't distribute your profits. It isn't that non-profits are sort of a misnomeric because most museums, for example, are non-profits strive to generate a profit that they can either hold or use, but that they aren't distributed to an individual or individuals for their personal benefit. So you're not in it to make the money, to have your museum generate lots and lots of revenue so you walk away, distributing that revenue to individuals. So that's what a non-profit does. And they've been around now a long time. And one thing I think important to note is that non-profit status is granted by state governments. So the non-for-profit status is not a federally given status, but the tax exemption is federal. And so the tax exemption means that when the museum does make a profit, let's say it turns you have a huge show and you make more than you budgeted for and it's great. It means that the government does not tax that money. Correct. What basically justifies a museum having a non-for-profit tax status? Well I've thought for a long time that what justifies it is that it provides something that the market can't bear at a price that most people can afford. So I've often thought of it like as distinct from Broadway. So Broadway puts on fabulous plays and musicals and things people want to attend, but a ticket costs 152, a thousand dollars. That is not making it available to the general public, to a broad public. It doesn't have access. It doesn't have a primary educational focus to interpret the work. It's not stewarding. The plays that it presents that come and go, museums have a stewardship quality to if they have collections to care for, interpret, present, protect, works of art for, posterity for generations to come. Responsibility to actually provide context and meaning and shape narratives that move forward or can be challenged or embraced. And I'd say it has an access responsibility which is to invite the public in to welcome the public in through what is a very reasonable price for most museums. So I'd like to talk a little bit about the governance and funding structures of museums. And I think one of the things I have found the most remarkable about being in the art world after all these years is how few people actually understand what a museum trustee is. What is their role and what are they doing? And I wonder if we could just like what are their responsibilities? Do they pay dues? Do they fund museums? Are their contributions tax deductible? Could we break down? What is a trustee? A trustee is somebody who has fiduciary responsibility for the institution to provide for its financial well-being, oversee it and for its policies. It's not to make decisions about programs or exhibitions. Those are the work of the professional staff. It is a volunteer position. M trustees are not paid and most museum trustees are asked to contribute financially as well as intellectually and their contributions are tax deductible. So any money that a trustee gives to a museum, which I'm assuming takes the form of like what an annual do, they're not dues typically, but an annual contribution. Okay, so all of those contributions that they make are tax deductible for them. So trustees get a tax benefit for their service. Correct. They are in most cases asked, invited to make a contribution. It's not required. It's not contractual. And many trustees bring things other than or in addition to financial support. They bring ideas. They bring connections. They bring civic leadership. They bring representation from communities that are served by the museum. So it's not one across the board, one size fits all. Right. So it's my understanding that staff, professional staff report to the director and the director reports to the board of trustees. Who is the board of trustees responsible to? That's a very, very good question. But that way I would answer that the board of trustees is responsible not to a person, but to a mission. So they're responsible to the mission of the institution which in essence is overseen. by the attorney generals of the states. Right. That's why, like, so when you were saying earlier that states give 501 C3s, when you close out a 501 C3, it's the state's attorney general's office. So you mentioned endowments before, and endowments seem to me to be a huge part of the museum funding puzzle. For two reasons, one, museums have endowments, and they also get money from large foundations, and those foundations are also endowment driven. So could you just explain what is an endowment? An endowment is funds that are protected. They are restricted as actually the more appropriate word. They are spent for specific purposes in many cases, or if they're, so for example, in a museum, it might be for acquisitions to purchase works of art. It might be restricted to exhibitions or publications. It may fund a position, and, or can be given to a general unrestricted endowment. There is codes of ethics and best practice, and these are things also overseen by auditors and the attorney generals, generally restricts spending from that endowment to 5% of the value, which will then flow into be used for operations of the institution. So if you have a million dollar endowment, $50,000 is generated by income from the endowment that can be used to operate the museum. So let's say it's a banner year on the stock market, and that million dollars makes $175,000 instead of 50. Does the 25,000, do you get to take the cream off the top? Or does that 25,000 go back into the principle? Typically it goes back in. And again, that's not a firm number. There are institutions who are fortunate enough in some ways to spend less than the five percent so their money continues to grow, and similarly for foundation as well. One of the things I think is so important right now is the significance of endowment funds at a time when federal funding is at risk or actually vanished is critically important to be able to maintain the operations of a museum or a cultural institution or place. You were the first person to build a new museum in Boston in 100 years and you got the museum built, but then the second big campaign you did was to create an endowment for the ICA Boston. As I'm assuming you're getting trustees and other stakeholders to donate large amounts of money, so that basically you've got a pot of money that's always throwing off interest that you can rely on all the time and in hard times. Correct. And there are practices that try to help stabilize that money so you're not totally at the whim of the stock market and you know, most museums follow that practice because typically it's frequently the only predictable source of revenue one might have because the rest is so dependent on admissions, which isn't usually a large percentage of a museum's revenue. Right. So it's also my understanding that the income generated by endowments is also not taxed. Correct. Okay. And endowments are also a way that donors can sort of put their finger on the scale of what they want the institution to be doing because they can say I restrict this money only for whatever. Let's say something fun like you can only buy toilet paper with this money in perpetuity. How does it work when you have a lot of restricted funds? I would argue about the tipping the scales about that. First of all, I think so important to remember that most trustees who are philanthropic leaders as well are the are mostly the good guys. They're the people who have wealth and are choosing to share it with museums and institutions that I deeply love and believe in. It's an impossibly very unnatural act to give away large sums of your money even with the tax break. So that's one thing. I think that the really great directors and directors of development and the great trustees work together to try to create those restricted endowments that provide the most flexibility and that are on point. So somebody giving a endowment to name positions. I mean, that's a wonderful thing. So this philanthropic model seems to favor high net worth individuals, folks who have a lot of money and the folks who are as you so rightly say just now, generous enough to be willing to part with large sums of money. What role do everyday people play in the support of a museum? Oh, such an important role and such a really good question. First of all, they're the people who are typically in the museums. That's an amazing thing because they are really the demonstration of impact. Membership, these are not the biggest dollar amounts, but they are central to the engine that keeps museums going. So growing memberships are gifts to an annual fund. You know, an annual fund that might fund, let's say teen programs. Those are so critical because again, they tend to fund the things that are necessary and not often the most attractive or even the most needy for a large large gift. They show up. They are the audience. So I think they're central. So this is an administration interested in playing around with the tax code. And so now that we sort of understand like basic governance and the not-for-profit status of museums, what do you think are the biggest potential risks to the philanthropic model that you've just described, which really is the philanthropic model for so much of American cultural life and especially what are the threats given this administration's antipathy towards DEI, which museums have tended to champion as a value. And this administration is seasoned that as a weakness rather than as a strength. I think that the risks are certainly federal funding. We've seen that already at risk. And that really does, that covers a pretty big gamut because all money matters when you're running a museum. But for many museums, the NEA grant was relatively small relative to the total budget. But may I interject for a second? I too, like, you know, I can't remember the last NEA grant I applied for. But you and I applied for an NEH grant. And it was a huge chunk of money. And let us make the black mountain college show. Yes, that was one and provided some of my identity too, which is another area that is for many museums will be a not only huge financial hit, but may make certain shows. I can say for our listeners, what indemnity is it is a kind of insurance guarantor when you're dealing with valuable works of art that where the again, the museum on its own terms couldn't be able to afford. So if you're doing, let's say, even a Basquiat show, you would need indemnity. Yeah, I think also at risk is personal attack, right, attacks on individual directors, curators, artists, right? So that is something that and that implies that if that was to happen or when that happens, huge legal fees, which for many institutions, you know, is incredibly onerous cost and responsibility. And all of that derails you from your primary purpose if you're managing that. So that's something. I think, and I wonder in this as to your first question, does it have implications for tax status? Will certain states challenge the not-for-profit status as a charitable organization of their institutions? Will they tax endowments? You know, over a certain amount. And for some museums as with some foundations or universities, their endowments are at that level. So these are some other ways. And then if they're not for profit, if their charitable status is revoked, then they would be subject to taxes. I think I'm probably naive, but I'm not willing to concede yet. I've asked donors, okay, let's say the tax laws got rewritten and your donations were no longer deductible. Would you still give at this level? And what are people saying? I think a lot of people will still give. I don't know if they would give at the same level, and I don't. or what happens when push comes to shove. Right. But so those are a lot of things to worry about. Now one of the things that I would say is those are coming probably period. And one of my big soap boxes for back of a better word, I don't know about you, but I stood up and cheered when MIT and then Brown, you know, said we are not capitulating. Absolutely. I've absolutely stood up and cheered. And of course, when certain institutions, universities did not do that or when certain law firms did not do that, the opposite. And so I do think that cultural institutions, this includes museums, but it's certainly not restricted to museums, need to work collectively and try to think about what it means to stand up together. Because I am pretty sure that on the road we're on, our only strength is in numbers and in the law. What are the obstacles for museums acting together? Because as a field, we have tended to be a little competitive with one another and that might have been down to personalities and positions and an ideology around competition at large. We're not great at collaborating. One of the things that I think is an obstacle that is real and I live in a blue state. I live in Massachusetts. But for colleagues who live in red states or purple states, they do have more at risk, you know, especially as we've been talking about the role of state government. Bords are less homogenous politically than I think people tend to think. And you know, in a diverse and lively board, not everyone will agree. And frequently the question is, what if this is, we stick our neck out and we go down. Most people who work in museums do so from a great passion and commitment that what we do matters. And for the people and the artists and the audiences and the teens and the kids and the families and the elders, like it really matters that we are there with our open arms and so many free days and discounts that it's a place, a rare place where people can convene these days. I mean, and it does put it at risk. And so I think there's big obstacles and that's ego aside. Right. That's ego aside. So one of the things you're kind of implicitly saying is maybe some of the big blue state institutions have to put their necks out first sort of to act as shelter for the smaller red state institutions. I think I think of that in the same way that when we are, you know, all, let's say, showing up for for no Kings March that we don't expect immigrants to have to go show up at the March because they are absolutely at risk for being picked off by I.C. It's our job to stand up. We did hear what was going to happen in this next administration. It is still pretty hard to completely absorb the depth of what is going on. I know I feel that. I see that. What I do think is that, you know, we all have an obligation to stand up to the institutions where we belong to try to encourage the places where we do belong to have a moral backbone to stand up to do what's right to stand together. But people don't all come to it at the same moment and we know that from history too. Right. Is there one thing that you're particularly worried about field wide in our museums that haven't, that we haven't touched on? Is there something that keeps you up at night? I mean, it, one of the things that I've thought about for a long, long time is how to make the changes within the museum that actually make more and more people seal, both welcome but that it's a place that represents them. And so how do we broaden? How do we broaden our institutions? This may be more about contemporary art than encyclopedic museums because there's really nothing that throws me more than to go to a museum where my biggest complaint is that it's so crowded I can barely see the art. That makes me overjoyed that people pour in and whether they're tourists or residents or kids, I mean, you know what it does. You know what it means to all of us that stand before a work of art and be like, oh my God, how did that person think of that? This is touching me so deeply inside. I literally think my heart might have gotten bigger. So to me, that feeling is love. That is a version of love, that feeling. When you stand before a powerful work of art, have an encounter with it and actually feel your heart, get bigger in your chest, swell in your chest or gorgeous landscape. I mean, but that feeling of like being part of something, being connected to something, I want more and more and more and more people and for me, especially young people, to have what we had and we both did it as kids who went, you know, on the bus or the subway to the museums that we could get into for free. Right. For me, it was the Yale University Art Gallery, right? For you, it was the New York museums. Yep. So I don't want that part to be sacrificed. That's, I guess, my great fear. I want to keep our eyes on that prize. Mmm. That's so beautiful. Um, I want to do a lightning round with you. You know what a lightning round is? Well, I do. I don't know what you do, but I know what it is, generally, yes. Okay. Renaissance or Rococo? Renaissance? Museum or Kunsthalla? Museum. For sure. Golden girls are sex in the city. Oh, sex in the city. Carry on or check luggage. Carry on. Jane Austen or Virginia Wolf? Oh, I mean, I'm a Jane Austen. Die hard. Last one. When it comes to the matter of Bobka. Chocolate or cinnamon? Well, I think chocolate. There you go. Yeah. So much Jill Medvedow. I really appreciate you coming on tonight. So glad to be with you, Helen. Always a great joy. Dialogues is produced by David's Werner. If you like this episode, please follow, rate, and review us on Apple, Spotify, or wherever you listen. It really does help the show. Thanks so much for tuning in. I hope you join us here next time. [BLANK_AUDIO]