Newseum Using Endowment to Cover Operating Costs

Although it has become a major tourist attraction since moving to its current location on Pennsylvania Avenue five years ago, the Newseum in Washington, D.C., has become more reliant over the same period on a shrinking endowment to cover its operating costs, the Associated Press reports.

An AP review of the Newseum's finances found that the museum's parent organization, the Freedom Forum, a nonpartisan foundation that champions the First Amendment as a cornerstone of democracy, has used its endowment to provide the bulk of the museum's operating revenue since its creation in 1997, and that the value of the forum's endowment had declined steadily, to about $373 million, by the end of 2011. While experts in the field are concerned about the museum's reliance on the forum to make ends meet, Newseum president and CEO James Duff told the AP he feels confident the museum is not in financial trouble. "We've certainly worked on tightening up on expenditures," said Duff. "We certainly are going to be working on additional fundraising initiatives....I think we're making good progress. And certainly our numbers are very, very encouraging."

Since moving from a $50 million facility in Arlington, Virginia, to its current, much larger space in 2008, the museum has had to adopt a number of belt-tightening measures to balance its budget, including four rounds of staff layoffs — the most recent in January — as well as cuts to its employee retirement contributions and a reorganization of its educational programs. In 2011, the forum's endowment provided nearly half the museum's $63.7 million in revenues, and in 2010 it was more than half.

Attendance at many museums around the country has suffered since the economic downturn in 2008, and most are struggling to balance rising expenses with stagnant revenue growth. To address that problem, the Newseum created and launched an institute to bring its programs to schools nationwide and create additional fundraising excitement around its First Amendment initiatives.

Still, the museum, which paid Duff about $1.6 million in 2011 — including $133,000 in salary, a $50,000 bonus, and $1.4 million in deferred retirement compensation — received about $30 million from the Freedom Forum that year, or about 8 percent of its endowment. "That I would consider a red flag because they are basically using the principal of the endowment, to some degree, to pay for operations," David Ellis, former president of the Museum of Science in Boston, told the AP. "To be sustainable, it's crucial that the draw on the endowment, the amount that is spent...needs to be realistic in terms of the endowment maintaining its purchasing power."