HD63 - Report of the Joint Subcommittee Studying Educational Museums and the Appropriate Level of Public Support to be Provided Such Institutions Pursuant to HJR 75

Executive Summary:

Authority and Study Objectives

Adopted by the 1993 Session of the General Assembly, House Joint Resolution No. 453 established a nine-member joint study committee to examine Virginia's educational museums and the appropriate level of public funding for these institutions. Acknowledging the significant value of museums as educational and cultural institutions, the resolution noted the Commonwealth's traditional financial support for these institutions and cited the "lean financial times" that may have prompted reductions in appropriations to various educational museums. The joint subcommittee was directed to conduct a comprehensive study of educational museums, to develop criteria for eligibility for receipt of public funds as well as guidelines for state appropriations, and to examine "ways in which the Commonwealth might encourage and promote the arts." The committee's work has included a review of a variety of complex financial and policy issues, including museum patronage, geographic location, impact on other activities promoting tourism and economic development, and state and local ability to support these institutions.

Responding to the charge of HJR 453, the joint subcommittee conducted five meetings to examine the missions and services of non-state museums across the Commonwealth. The joint subcommittee sought the input of representatives of the Virginia Commission for the Arts, the Virginia Department of Taxation, museum associations, and the institutions themselves to explore the use and availability of funding sources for public and private museums, including federal, state, local, and private funds. In pursuing its study, the joint subcommittee visited non-state educational museums across the Commonwealth to witness the valuable programs and resources offered by these institutions. The joint subcommittee continued its work in 1994 pursuant to House Joint Resolution No. 75. Committee membership remained as appointed in 1993. Seeking to identify those priorities that must be reflected in any legislative recommendations for funding non-state education and cultural institutions, the joint subcommittee held three meetings in its second year of study.

Funding Museums and Other Cultural Institutions

Museums are recognized today not only as cultural and educational institutions, but also as catalysts for economic growth. Offering educational programs, exhibits, and cultural events, these institutions may promote a locality's image as a center of learning and creativity. Whether established by governments or private entities, museums and other cultural institutions operate as nonprofit enterprises, relying on public and private funding to support their cultural and educational missions.

Although private contributions comprise approximately 97 percent of all arts funding, museums and other cultural institutions are nevertheless dependent on federal, state, and local funding for their continued operation. Federal support for the arts is provided either directly through government agencies and programs or indirectly through tax deductions and other benefits. Major sources of direct federal support are the National Endowment for the Arts (NEA), the National Endowment for the Humanities (NEH), the Institute of Museum Services (lMS), and the Smithsonian Institution.

States support museums and arts organizations in much the same manner as the federal government. Direct appropriations and tax benefits provide much-needed fiscal support, while arts councils in every state and territory provide a range of services. Continuing economic challenges, however, have prompted many states to develop new strategies for arts and museum funding. While some states have designated specific revenue sources for arts funding, others have expressed concern that earmarking may encourage legislatures to reduce regular appropriations. Lottery moneys and state income tax check-offs generate modest arts funding in several states. Special local taxes, such as hotel occupancy taxes, and percent-for-art legislation have also provided support for museums and arts organizations.

Virginia's Museums: Funding for Multifaceted Missions

The Commonwealth boasts over 400 history, science, art, and children's museums. Sustained by public and private dollars, these cultural and educational institutions attracted more than 15.2 million visitors in fiscal year 1993. It is estimated that private funding surpasses government support for these institutions by a two-to-one margin. The recent national economic downturn has tested museum budgets throughout the Commonwealth, where as many as 40 museums rely heavily on state support. To combat fiscal challenges, institutions have eliminated positions, altered benefits packages, reduced employee wages, and modified their programming.

Like the federal government, the Commonwealth provides indirect funding for museums through a variety of tax deductions and exemptions. Specific property tax exemptions and exemptions from state retail sales and use taxes benefit many museums. Donations to these organizations are also exempt from Virginia income taxation, to the extent these same donations are exempt or deductible from federal income taxation.

Direct funding for Virginia's museums-whether publicly or privately operated -- is typically supplied through direct legislative appropriations or by the Virginia Commission for the Arts. Claiming top priority for Virginia's direct appropriations for museums and arts organizations are those seven institutions that have been established by the Commonwealth as state agencies -- the Virginia Museum of Fine Arts, The Science Museum of Virginia, the Frontier Culture Museum, the Jamestown-Yorktown Foundation, the Board of Regents of Gunston Hall, the Virginia Museum of Natural History, and the Chippokes Plantation Farm Foundation.

Virginia also provides direct appropriations to several non-state museums and cultural organizations. Like any state museum seeking a direct appropriation, "non-state agencies" -- defined as any public or private foundation, authority, institute, museum, corporation or other entity that is not a part of state government or a political subdivision as established by law -- must file a request for aid with the Department of Planning and Budget in odd-numbered years. The entity must certify that local or private matching funds are available and provide documentation of its tax-exempt status in the Internal Revenue Code. In 1994, the General Assembly provided $4,616,439 in direct appropriations for financial assistance for cultural and artistic affairs to 38 non-state agencies.

Conclusions and Recommendations

Non-state museums must compete not only with state institutions for appropriations, but also with the pressing demands that education, social services, transportation, and other programs place on the Commonwealth's budget. Dependent on stable, consistent funding to support their daily operations, non-state museums must also rely on steady fiscal support to provide seed money for other grants and awards. Although each non-state museum seeking an appropriation must comply with a defined applications process, no clear criteria exist for awarding state funds to these entities.

The development of any specific criteria for funding non-state museums necessitates consideration of a variety of complex policy and fiscal concerns. While objective standards for funding may provide needed guidance in lean fiscal times, strict criteria may preclude consideration of a number of deserving organizations. A museum's access -- or lack of access -- to other funding sources, such as federal, local, and private funds, may prove a significant factor in determining appropriate levels of state support. The establishment of specific funding criteria for non-state museums in Virginia necessarily requires the careful balancing of fiscal responsibility, continuity, fairness, and flexibility.

Although the joint subcommittee does not propose a final recommendation for a specific funding mechanism at this time, it nonetheless agrees that any state funding mechanism for non-state museums should:

• Acknowledge the Commonwealth's commitment to the existing "hierarchy" of state and non-state educational and cultural organizations;

• Create. a stable funding source for those identified non-state institutions that demonstrate a clear educational mission as well as a strong impact on regional economic development;

• Provide funding for those institutions that have come to rely on state assistance:

• Identify an agency or organization to administer state support;

• Designate a portion of an existing general fund revenue source to support these non-state entities;

• Preserve legislative oversight; and

• Ensure continuity in the administration of state support.