Budget Fudgit: Being the Getty Means Never Having to Say You Ran a Deficit

And now, after a whole month of National Academy deaccessions, LA MOCA rescue plans, and reckless New Year's frivolity...we finally return to our regular programming:

You may remember that a couple of weeks ago, when we perused the Getty Trust's 2008 financials, we discovered that, unlike the statements for prior years, this year's account omitted both the amount of the deficit and amount of endowment money that was used to fund operations. I then promised that I'd report to you the amount of last year's deficit, "if and when I have that information."

Sorry. That's not going to happen. Here's the response that I received from Ron Hartwig, the Getty's vice president for communications:

For what ever reason, those preparing our financial statements in the past used to list an "operating deficit." Interestingly, your question last year triggered Patti [Patricia Woodworth, vice president, CFO and COO] to look into why this was happening, and we have now correctly removed that line.

The Getty does not have an operating deficit. This is because we are an operating trust and because we do not spend more than our Trustees authorize us to spend. That was true in FY '07 as well, which is why showing an operating deficit was not correct.

As Patti pointed out..., the only limit on expenditures is what our trustees impose, and they approve the level of expenditures reported in the financial statement, which includes revenue from all sources (e.g. endowment, parking, book store, food operations, publishing, etc.).

Going forward, you will not see "operating deficit" listed in our financial statements because a deficit doesn't exist.

That was certainly not my intended effect in reporting the deficit figure that did exist in last year's report. The incredible disappearing deficits, reported in the statements for 2007, 2006 and 2005, were $49.36 million, $18.29 million and $47.85 million, respectively.

It now appears that when it comes to spending down the endowment, anything goes, so long as the trustees say it's okay. Nonprofit art institutions customarily designate a fixed rate of annual endowment spending, and if they've got to kick in more than that to meet expenses, they call it a deficit. At the Getty (because it's an operating trust and not a 501(c)(3), according to Hartwig), it's called an expenditure authorized by the trustees.

That's not to say that the Getty is unconcerned about its eroding endowment, which declined some 30% since June 30, 2007: As I reported last month, it is instituting a job freeze and other cost reductions in an attempt to address the problem. Just don't call it a deficit.