HJR 285

Commission Studying Public-Private Partnerships for the Operation of Nonstate Museums and Other Entities

October 30, 2000, Richmond

Adopted by the 2000 Session of the General Assembly, HJR 285 directed the 10-member commission to examine:

public-private partnerships in other states;

the feasibility and appropriateness of implementing any such partnerships in the Commonwealth on a pilot project basis;

current state and nonstate museum funding and operational practices; and

such other issues as it deems appropriate.

In addition, the commission may want to explore other concepts, such as any relevant constitutional, financial, and policy issues regarding the creation of "hybrid" public-private cultural entities through the transformation of existing private institutions or through the establishment of new entities; the governance and funding of existing public-private state entities in the Commonwealth; and appropriate revenue sources for nonstate or "hybrid" agencies. The commission is to complete its work in time to submit its written findings and recommendations to the Governor and the 2001 Session of the General Assembly.

State Funding for Museums

A variety of public sources supplement private donations to nonstate museums nationwide. Federal support may be derived indirectly through tax deductions and other benefits or directly through government agencies such as the National Endowment for the Arts (NEA). The states themselves model their support of these institutions similarly; tax deductions and appropriations--whether funneled through a state arts agency or directly to the institution--support countless private educational and cultural entities. Designated revenue streams provide additional stability for this funding in some states.

Accountability and consistency in state funding for nonstate museums are evidenced in a number of states' initiatives. In New Jersey, the Educational Research and Museum Development Act empowers both the Department of Education and the Division of the State Museum to "cooperate and assist" public and nonprofit entities "within the limits of available appropriations and resources…." The act incorporates accountability for this public support and assistance, as the state may enter into agreements "providing for the cooperation and assistance of the department and the division with any public or nonprofit agency, foundation or organization engaging in some or all of the activities set forth in … this act." Finally, the act permits the state to actually "acquire" a museum or museum activity with approval by the commissioner and the Governor. Interestingly, the statute does not contemplate legislative approval for any such acquisition.

In addition, local school boards in New Jersey are statutorily authorized to "provide by contract and appropriate funds for the support and maintenance of existing museum facilities and services for the educational or recreational use and benefit of pupils in the public schools." Localities enjoy the same contractual and fiscal authority.

The Colorado General Assembly authorized the creation of scientific and cultural facilities districts. Modeled after a St. Louis, Missouri, district, the Colorado initiative established a special tax district in the Denver area and created a sales tax of 0.1 percent. Distribution of this designated revenue source is determined by "tiers" of organizations, characterized by size.

Cultural trusts have been created in several states. The Missouri Cultural Trust is funded by 50 percent of state income taxes paid by nonresident performers and athletes working in the state and is designed to provide "seed money" to attract private donations, and will support the Missouri arts. The state set a goal of $200 million for the fund in 10 years; ultimately, the Arts Council plans to remain a state agency, but be "self-sufficient." The Texas Cultural Endowment Fund is supported by an initial appropriation of $2.2 million, special license plate fees, and a joint committee examining a designated revenue stream. Similar to the Missouri initiative, the Texas program also plans to become financially self-sufficient by attaining a $200 million funding goal by 2005. Other methods of supporting museums in sister states include corporate filing fees, income tax check-offs, bond issues, and lottery funds.

Supporting Nonstate Institutions in Virginia

Virginia's longstanding commitment to supporting the multi-faceted missions of its educational and cultural institutions is evidenced by many legislative and executive branch initiatives spanning the past two decades. Direct appropriations to nonstate museums, legislative enactments and studies, tax credits and exemptions, and funding from the Virginia Commission for the Arts, as well as specific study initiatives, have supported the missions of many nonstate cultural and educational institutions.

The past decade has witnessed renewed interest in state support for Virginia's nonstate cultural entities at the legislative and executive branch levels. In 1992, the Governor's Task Force on Promotion of the Arts reaffirmed support for the Commission for the Arts, articulating a state-funding goal of $1 per citizen for the commission. In 1993, the General Assembly created a joint legislative study committee to "conduct a comprehensive study of educational museums and the appropriate level of public support to be provided to such institutions" (HJR 453). The study continued for two additional years. The 1996 Session considered, and carried over, the study's proposed legislation, HB 642, that would have established the Virginia Educational and Cultural Entities Fund. Comprised of 10 percent of the Commonwealth's annual interest earnings credited to the general fund, gifts, and other moneys, the fund would supply grants for operating costs, special projects, and reserve funds for nonstate educational and cultural entities specified in the Code and others as may be designated in the Appropriations Act. Amounts awarded from the fund would have been designated in the budget.

Although this measure failed to be recommended for consideration by the 1997 Session, the recommendations of a subsequent study committee were adopted in 1997, reaffirming the General Assembly's goal to appropriate $1 per capita for the support of the Virginia Commission for the Arts and creating the Virginia Arts Foundation. Special license plates support this foundation.

Line-Item Appropriations

During the past 10 years, line item appropriations to nonstate agencies have continued to be a staple of the Commonwealth's budget. Appropriations to these entities must be supported by certification to the Secretary of Finance that cash or in-kind contributions are available to match equally all or part of the appropriation. This past Session, the General Assembly adopted a biennial budget appropriating $33,989,834 in general funds to nonstate agencies in 2000-2002 (see Table 1). With limited exceptions, these applicant organizations must provide matching funds in the form of cash or in-kind contributions.

Table 1: State Appropriations to Nonstate Agencies in Virginia

Year

1st year of biennium

2nd year of biennium

Number of nonstate agencies served

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

$ 3,679,350

2,707,640

4,616,439

7,096,056

7,226,056

28,867,700

28,912,700

33,989,834

$ 3,043,100

2,324,025

3,488,389

7,096,056

9,016,710

17,675,558

33,730,688

>100*

>200*

* Combined historic landmarks and nonstate agencies.

Considered only in even-numbered years, requests for state appropriations by nonstate agencies must comport with a specific process detailed in the Code of Virginia. Defined to include "any public or private foundation, authority, institute, museum, corporation or similar organization which is not a unit of state government or a political subdivision of the Commonwealth as established by general law or special act," nonstate agencies do not include those entities receiving state funds as "a subgrantee of a state agency or through a state grant-in-aid program authorized by law." The nonstate entity must (i) file a request for state aid with the Department of Planning and Budget (DPB); (ii) certify to DPB that matching funds are available from local or private sources in amounts equal to the funds requested; and (iii) provide documentation of federal tax exempt status. The Appropriations Act provides that matching funds may be in-kind or cash contributions; occasionally the budget will waive the matching fund requirement for specific entities.

Administered by the Department of Historic Resources, these grants are contingent upon submission of an application by the particular entity indicating whether the funds will support capital costs or operations. With limited exceptions, these applicant organizations must provide matching funds in the form of cash or in-kind contributions.

Issues for Study

Examination of public-private partnerships for the operation of nonstate museums and other educational and cultural entities in the Commonwealth necessitates consideration of a plethora of fiscal and policy issues. Whether exploring the acquisition of existing museums, the creation of "hybrid" entities, or other unique public-private ventures, the committee may wish to examine any state constitutional debt requirements that may be implicated. Further, the adequacy of current state funding levels for nonstate museums and for the Virginia Commission for the Arts and the designation of a specific revenue source for nonstate educational entities may merit committee consideration.

Acknowledging that for nonstate museums and other cultural and educational entities, "funding for operations as well as capital projects must come from diverse sources," the executive director of the Virginia Association of Museums noted that admission fees, memberships, earned income, facility rentals, shop sales, and food services have supported many museums. She cited various public-private partnerships among Virginia's cultural and educational entities that also enhance resources.

A Virginia Association of Museums survey conducted in 1999 (193 of 400 responding) indicated that public sources--federal, state, and local--accounted for about 26 percent of funding ($61 million of $235 million). Private individual, foundation, and corporate contributions added another 14 percent to museum coffers. Earned income accounted for 60 percent of total revenues.

Stability of revenue sources remains a concern for museums nationwide, as does the method of procuring public funds; some entities rely on funds from state re-granting agencies, while others may be able to secure budget appropriations through legislative requests. This duality has prompted concern among some entities that funds may be awarded not necessarily on the basis of need or merit, but on the relative influence of a particular legislator. Fairness of access and accountability for funds received were cited as key considerations in examining how to fund nonstate agency museums. The challenge of maintaining public access to museum programs and services while setting appropriate admissions fees was also noted.

The director of the Science Museum of Virginia also shared perspectives regarding collaborations between state agency and nonstate agency museums. Noting that state support for and collaborations with nonstate museums amplify the cultural and educational resources available to Virginians, he stated that the work of nonstate science centers in the Tidewater and Roanoke areas and state entities in Richmond, Danville, and Martinsville allows the Science Museum of Virginia to address underserved areas in Northern Virginia, the Blue Ridge, and Bristol.

Offered as suggestions for increasing accountability in museum funding were (i) using state museums as peer review agencies to assist in oversight and liaison efforts; (ii) distinguishing between annual, recurring state grants and one-time appropriations (possibly differentiating between funding for operations and funding for capital projects and identifying those entities relying on each type of grant); and (iii) considering how the particular nonstate entity requesting funds supports state initiatives, such as the Standards of Learning.

Other state support for nonstate museums is largely undocumented, but may include consulting services, joint programming, exhibit fabrication, educational materials, website hosting, and traveling exhibits.

Commission discussion focused on funding stability, capping the state contribution to any nonstate agency operating budget to encourage continued diversification in funding sources, and examining state policy regarding recurring applications. The commission will meet again on December 18, 2000.

The Honorable Ward L. Armstrong, Chairman
Legislative Services contact: Kathleen G. Harris

THE RECORD