0.10 Chapter eight: facing tough choices today  (Page 8/11)

The Ross advisory committee in March 1993 outlined a plan for how the Society could begin to generate a sound capital base through sales of some of its collections and development of a part of its real estate. Whether such a plan can be a success depends on many factors, not the least of which is the time it will actually take to generate money from these initiatives. No one knows whether fol­lowing these recommendations will allow the Society to remain independent, but regardless of the specifics of its plan for survival, there is one hurdle the Society must clear if it is going to pursue this course.

The Society must balance its budget. For a quarter of a century, Society lead­ership has justified deficits with claims that excess expenditures were an invest­ment in the future, that they were necessary to show that the Society was an institution worth supporting. The Society is suffering the effects of those invest­ments. Today, not only is the endowment almost gone, but $1.8 million in loans remains outstanding. No single thing the Society can do will go further to restor­ing public confidence in the institution and its leadership than a balanced budget.

A stable and viable financial plan will require involvement from each and every one of the Society's many constituencies, but the single most important par­ticipant is the public sector. Lack of timely public support was one of the key rea­sons for the failure of the Society's bridge plan in the late 1980s. Significant public support is the one variable that has changed that makes considering an indepen­dent path for the Society possible.

It must be understood, however, that the type of public sector support mat­ters a great deal. The Society must convince the city and state to provide unrestricted general operating support. What brought the Society to the brink of bankruptcy was not so much lack of support—the Society raised more than $20 million dur­ing the Debs administration, much of it in the form of restricted program grants—it was the lack of unrestricted support. As the Society's unrestricted cash balances dwindled, so did its ability to make payroll and pay bills for such basics as utilities. Unfortunately, because of the heightened publicity surrounding the Society, there is some risk that government support could be linked to new programs of community outreach. Such a linkage would be self-defeating; designing and manag­ing such initiatives is expensive and is unlikely to result in any new net income to operate the institution.

Barring significant annual support from the public sector, the Society would once again have to depend on private contributions. Given its recent history, how­ever, it is unlikely that the Society can raise the substantial sums required through annual appeals. If the Society is to be successful in such a scenario, it will re­quire an extremely large donation from a private benefactor to replenish its unrestricted endowment.

Option 2: dissolve the society and distribute the collections

The most drastic alternative the Society could choose would be to dissolve itself and sell or otherwise distribute its collections. Choosing this option would amount to an admission that the Society does not have a sufficiently broad support base to justify keeping its collections together and in a single independent institution. In addition, to argue for such an alternative, one must put aside one's concern for the institution and instead place more emphasis on the collections and on what maximizes the use of the limited public resources available to care for them. Put simply, it says that the Society as a whole is worth less than the sum of its parts.