By Ed Wyatt
Published April 29, 2009
New York Times
LOS ANGELES — The value of the J. Paul Getty Trust’s endowment has fallen so sharply and quickly — and its recovery is so uncertain — that the Getty has taken the unusual step of abandoning its traditional budgeting formula, adding to its layoffs and cutting back plans for museum programs and acquisIn a summary of the budget cuts that will affect all four of the Getty Trust’s divisions, most severely the J. Paul Getty Museum, trust officials said on Wednesday that the institution had suspended its usual practice of basing its annual budget on an average of the endowment’s value over the last 36 months. Instead, it will use the $4.2 billion current value of the endowment, which has declined by 27 percent since the end of the last fiscal yeaAs a result, the trust’s overall budget will decline by 24 percent, to $220 million, with 97 employees being laid off and another 108 budgeted positions eliminated. The cuts will fall most harshly on the Getty Museum, the largest component of the trust, which will lose 62 positions and 25 percent of its James N. Wood, the president and chief executive of the Getty Trust, said that while limiting layoffs was a priority, “we also felt strongly that it was essential to preserve free entrance and existing public hours for our visitors.”
Museum visitors are not going to be fully spared the pain of the Getty’s budget squeeze, however. Fees for parking at the Getty Museum and the Getty Villa will increase on July 1 to $15 from $10. For a hilltop museum with no public parking nearby and in a city with limited public transportation, the parking increase is practically the same as an admission fee.
To some degree the cuts can also be traced to the trust’s longstanding policy of relying on earnings from its endowment, rather than fund-raising, to pay for operations. In recent years the trust adopted an investment policy that like that of many foundations, emphasized investments in illiquid assets like real estate, private equity and hedge funds.
Last June 30, “alternative investments,” which also include things like venture capital and distressed debt, made up 62 percent of the Getty’s holdings, with stocks at 24 percent. A recent prospectus for a Getty bond offering noted that the trust’s investment policy called for about 48 percent of its portfolio to be allocated to alternative investments, raising the question of whether the trust had been pushing the boundaries of its rules.
In June 2007 the trust’s endowment totaled more than $6 billion.
James Williams, the chief investment officer at the Getty Trust, said in an interview that the recent declines in the endowment’s value were “basically in line with the performance of other endowments” at universities and other nonprofit institutions and that asset allocations were “within the approved range” of the trust’s investment policy. He declined to comment on the specific current allocations.
“We have more than ample liquidity,” Mr. Williams said. “I would strongly disagree with any suggestion that this is a riskier portfolio. It is consistent with the best institutional funds out there.”
Mr. Wood, the chief executive, said that the trust’s board had decided to abandon the three-year-average formula to set its budget because, while it would ease the pain of budget cuts this year, “it would be setting ourselves up for a very big drop down the road.”
When he was appointed the Getty’s chief executive in December 2006, the institution was embroiled in a different type of crisis. The previous president, Barry Munitz, was forced out amid criticism of his leadership and questions about his use of the trust’s money.
The California attorney general appointed an independent monitor to oversee reforms at the institution, which in addition to the museum includes a conservation institute, a grant-giving foundation and a research arm. The Getty Museum was also the subject of inquiries into whether it had purchased stolen antiquities; the museum has in recent years been making agreements to return some works to their native countries.
“The immediate issues that we addressed were governance issues,” Mr. Wood said on Wednesday, but shortly after he turned to a strategic study that led to some minor administrative restructurings last year.
The new budget cuts mean that the Getty Conservation Institute will close 16 current projects and eliminate public programming. The Getty Foundation will slow its grant making, cut internships and reduce its gift-matching program, and the Getty Research Institute will cut library hours and acquisitions and transfer some databases to other institutions.
The Getty Museum will also reduce the number and scope of its temporary exhibitions and collection rotations, although no major exhibitions that have already been publicized have been canceled.
Michael Brand, the museum director, said the museum would withdraw from some larger exhibitions that had not yet been publicized, but he declined to specify which shows.
Mr. Brand said the museum had also considered instituting an admission fee but had decided against it. “In an environment like this, one is obliged to look at all ideas. But we concluded that maintaining our free-admission policy is absolutely what we should be doing.”
And while the trust’s board raised the parking fee, Mr. Wood said, the museum hoped that the move would not discourage visitors. “We desperately need the income, but we had to look at what would help us the most without making ourselves uncompetitive with other entertainment and high-art venues.”
For $15, he noted, “you can put as many people in the car as you want.” In other words, unlike the drive-ins of another era, the Getty will not be checking the trunk for stowaways.
This article has been revised to reflect the following correction:
Correction: May 5, 2009
An article on Thursday about budget cuts at the J. Paul Getty Trust misidentified the objects that the Getty Research Institute, one of the trust’s divisions, will be transferring to other institutions, in addition to cutting library hours and acquisitions. They are databases, not collections.