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Biggest institutions not yet following The Henry Ford in staff cutbacks

Michael H. Hodges
The Detroit News

Last week The Henry Ford furloughed 1,400 employees and cut pay for the rest. But most big cultural institutions in the metro area seem to be taking a wait-and-see approach to staff reductions in the face of the coronavirus crisis.

The Detroit Institute of Arts and the Detroit Symphony Orchestra are holding onto their staff for the moment. The Detroit Historical Society is doing the same but cutting salaries for its executive team, while the Detroit Zoo and the Charles H. Wright Museum of African American History have both let people go and reduced pay for those who remain. 

Most area cultural organizations are bidding for part of the $350 million in the Paycheck Protection Program that's part of the CARES stimulus passed by Congress on March 17, designed to keep employees on payroll with federal loans. Only businesses with fewer than 500 employees are eligible, however, which rules out The Henry Ford.

The Detroit Institute of Arts and the Detroit Symphony Orchestra are holding onto all their staff for the moment, but the Detroit Historical Society, the Detroit Zoo and The Henry Ford have all let people go and cut salaries for those who remain.

For its part, the sprawling Dearborn landmark -- which is closed to the public till June 1 -- is facing "at minimum" a $10 million deficit for 2020, on a projected operating budget of $77 million. Furloughed workers, about 80% of the museum's 1,700 employees, will be out till at least the end of May. They will, however, still get full health benefits.

Those still on the job saw pay reductions from 10-25% starting Monday, depending on salary.

"We acted quickly for a couple reasons," said President and CEO Patricia Mooradian. "We’re a large organization, and we get a lot of visitors. We believed it was in the best interest of our guests and staff to do what we could to help flatten the (coronavirus) curve."

Added Vice-President and CFO Brent Ott, "We’ve got a very large workforce, and we’re heavily dependent on earned revenue," which makes up about 65% of the institution's budget. "Those two considerations pushed us in a different direction than other organizations."

The Henry Ford, which closed on March 13, is also cushioned by the largest endowment among the area's cultural nonprofits, which at the end of 2019 stood at about $380 million. The organization is allowed to draw up to 5% of its value every year, about $19 million a year, or close to one-quarter of its operating budget.

In many ways, the Detroit Institute of Arts, which won renewal of its tax millage with large majorities on March 10, may be best placed among the cultural giants to survive the current downturn. As yet there have been no furloughs or pay cuts for its 394 employees, about a third of whom are part-time, though the museum has imposed a salary and hiring freeze.

"Our priority is to keep our talent and avoid layoffs at this time," said museum Director Salvador Salort-Pons in a statement provided to The Detroit News. "As the COVID-19 situation evolves," he added, "we will continue to monitor the museum's financial position and make adjustments if required."

Based on pre-crash property values, the tri-county, 0.2-mill property tax yields about $25 million a year, or roughly 65% of the museum's $38 million 2019 operating budget.

Before the stock market plunge, the DIA's endowment was about $242 million, but as it's trying to build the fund up as fast as possible, the museum doesn't draw money from it.

Nationally, 29% of museums polled in a 2017 survey reported they had dipped into reserves or endowment funds to cover operating costs, according to a study commissioned by the American Alliance of Museums.

"Ever since, or maybe even before the last recession over a decade ago, we've seen a lot of museums having financial challenges," said Laura Lott, president and CEO of the Washington, D.C.-based alliance. "They are extremely undercapitalized."

At the Detroit Historical Society, President and CEO Elana A. Rugh said, "Like all other mid-sized museum in Midtown, we've been economically challenged. This is not what we needed."

Like chief financial officers at cultural institutions nationwide, Rugh's CFO is looking into the Paycheck Protection Plan and its $350 million in federal forgivable loans designed to keep employees on payroll.

Rugh and her executive teammates have all taken 20% pay cuts. The museum has a staff of 60, of which 25 are part-time. Rugh has committed to paying the latter at least part of their regular salary for as long as she can.

"We're hopeful we'll be able to pay our staff for however long the federal program lasts," Rugh said. "But we’re up in the air and concerned like everyone, and are making contingency plans. I’ve spent such a large part of my 20 months on this job building the right team. And I don’t want to lose them."

Even before the recent crash, Rugh and Neil A. Barclay, CEO at the Charles H. Wright Museum of African American History, started exploring steps to win their institutions tax support similar to that enjoyed by the DIA and the Detroit Zoo.

In the meantime, the Wright Museum, with an operating budget of $7 million and an endowment of just $3.2 million, has furloughed "a third of its mostly public facing staff," said Neil A. Barclay, Wright CEO.

"The remainder of our staff have been placed on an 80/20 schedule," he said, "with the assistance of Michigan’s Work Share Program, whereby their hours have been reduced by 20%," but they're able to draw unemployment to cover part of that loss.

The Detroit Zoo has laid off 140 of its 300 employees, though will continue their health benefits for 30 days. The hope, said spokeswoman Alexandra Bahou, is that they will all be rehired in the coming months.

Remaining staff have all taken cuts in pay or hours to the tune of 10-30%.

At the Detroit Symphony Orchestra, which in December celebrated its seventh annual surplus in a row on an operating budget of $29.15 million, no layoffs or cutbacks have been planned for its 162 employees, despite being closed through June.

"The DSO is exploring every option available to us," said President and CEO Anne Parsons in an email to The News. "We are committed to protecting our DSO family to the best of our ability while ensuring that the DSO is well-positioned for the time when it’s possible to return to the stage."

The orchestra is applying for federal funds under the Paycheck Protection Program passed by Congress, according to spokesman Matthew Carlson.

The DSO's endowment stands at about $55.3 million, or a fraction of those at the DIA or The Henry Ford.


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Twitter: @mhodgesartguy