Economic Uncertainty Spreads to Library Endowments
The stock market losses that have recently hit global markets might be taking some carefully stewarded library endowments along for the ride.
Even as the market began its dramatic mid-September seesaw of alarming drops and partial recoveries, two public library executives lost their jobs at one of the few libraries ever endowed personally by Andrew Carnegie. “It wasn’t a layoff due to performance. It was just purely a money thing. We miss them,” explained Dan Lloyd, board president of Carnegie Library of Homestead, Pennsylvania, of the elimination of the positions of Executive Director Kate Granneman and Library Director Tyrone Ward in order to save $100,000 after the library realized a $300,000 loss to its endowment over the past year. “This is our 110th year and we are charged with making sure this library is there for the next 110 years, and that means putting fiscal responsibilities first,” Lloyd said in the September 18 Pittsburgh Post-Gazette, explaining that “had the market stayed where it was, the revenue would have been there to maintain our budget as is.”
The board’s action, as harsh as it was, seems to dovetail with the advice of Rick Schwieterman, chief financial officer at OCLC and former ALA Endowment trustee. In a time of diminished funding from investments and other sources, Schwieterman told American Libraries, “Management of a library needs to follow similar best practices of the business world,” which means “prudent use of all resources, capital resources as well as human resources.” In slashing the Homestead library budget, the trustees are seeking to end a practice of drawing on the endowment for an undisclosed portion of the annual operating budget. Lloyd told the Post-Gazette that “the rate at which money was coming from the endowment, it wasn’t going to be there for a long time.”
The collapse of Lehman Brothers on September 30, followed by panicked stock-market sell-offs and a bank run that forced the sale of Washington Mutual to JP Morgan Chase, paralyzed credit lines and bond markets at the state and municipal levels and only made a bad situation worse for libraries from Oregon to New Jersey that have been struggling for years to make ends meet. “It’s not just the bad economy, it’s the fact that the bad economy goes right to the heart of one of the most traditional supporters of library programs—banks, financial institutions,” Patricia Martin, consultant and former director of the American Library Association’s Development Office, told AL. She explained that bank CEOs often decided unilaterally to fund such programs “through lots of discretionary dollars,” sometimes wielding control over as much as $250,000. The bad news, she added, is that those discretionary budgets “are being slashed left and right.”
“Organizations and people who are in a position to be generous toward the philanthropic community are going to have to be a bit more cautious about their resources,” agreed Schwieterman. Samuel Huang, associate dean for development at the University of Florida Libraries in Gainesville, told AL that he has already experienced donors “reducing the amount of giving they had previously promised,” including one man who “promised to give the library $15,000 in September but who gave $1,000 instead.”
At the University of California at Berkeley library, Director of Development and External Relations David Duer advocated a wait-and-see attitude. Likening potential donors to someone who is in shock after an accident, Duer told AL, “Even though, indeed, people are losing value in their investments, they have no idea what is real or long-lasting.” Under such circumstances, he advised “treating the shock and seeing where we are in six months” before reassessing development goals.
“In both the library world and any board in which I’m involved, we’re all anticipating that private philanthropy will be a little tighter,” Chicago Public Library Commissioner Mary Dempsey told AL. “Everyone is feeling the pain right now.” Nonetheless, Dempsey expressed delight at the ticket sales for the library foundation’s October 15 Sandburg Award presentation to author Tom Wolfe. “We were sold out before the invitations even hit the street,” she said, although the proceeds will be foundation gravy since the endowment is not used for day-to-day operations.
That is not the case for New York Public Library, however, where the annual Library Lions black-tie gala slated for November 3 had raised more than $2.7 million for acquisitions by mid-October, according to library Press Director Herb Scher. Characterizing the event as “our most important fundraiser of the year,” NYPL board Chairman Catherine C. Marron lauded the “dedicated co-chairs,” who include former Lehman Brothers CEO Richard S. Fuld Jr. and his wife Kathy Fuld, for helping to “generate crucial support for our collections and operations.”
For the foreseeable future, a perfect storm of financial turmoil may roil the public sector as well. “This is the first time for at least two decades that all three major general tax sources—property, income, and sales—have all declined at the same time,” Michael Pagano, dean of the College of Urban Planning and Public Affairs at the University of Illinois at Chicago, said in the October 7 New York Times. Coauthor of a survey of 300 municipalities released in September by the National League of Cities, Pagano cautioned that this downturn “is not like the 2000 or 1991 recessions [because] this one doesn’t differentiate between high-tech and low-tech cities, manufacturing towns or new exurbs.” The 1–2-year lag in collecting property taxes for a given year’s home values means “we’re going to be feeling the lingering effects of the real estate decline” until at least FY 2010, he added.
In Massachusetts, California, and Florida, where property-tax caps and rollbacks continue to decimate library budgets, state officials began exploring how to borrow billions in short-term loans from the federal government until interest rates make it viable to begin issuing tax-exempt bonds again, the October 8 New York Times and October 5 Sarasota Herald Tribune reported. Colleges and universities around the country also saw their ready cash dry up: Nearly 1,000 investors from higher education in the short-term nonprofit Commonfund discovered they were unable to withdraw more than 10% of their assets September 29 when fund trustee Wachovia froze access to accounts many academic institutions used as checking accounts. By October 13, Commonfund had increased liquidity to 39.5% and was promising to have a new fund trustee in place by mid-December.
However, there is good news amid the ongoing financial turbulence, consultant Patricia Martin asserted. “In an economic crisis, libraries become relevant for economic development and support of small business and job searching and retraining opportunities. There are just a lot of ways that you can characterize the work of the library and be flexible to stand out in what is going to be a very cluttered, very frenzied fundraising market.”
At the University of Tennessee Libraries in Knoxville, Director of Development Amy Yancey also finds comfort in the research on philanthropic patterns. “Our central development team has been sharing stories and statistics showing that philanthropy to higher education continues in recession,” she told AL. Yancey added that even though donors close to retirement “are asking us to wait to make our asks,” she recently had one donor fulfill his pledge early, telling Yancey, “I know I’ve got the money now, but who knows what next year will be like? Let’s go ahead and get this taken care of.”
Posted on October 14, 2008; corrected October 20, 2008. Discuss.