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   View from the Hermitage. This is Another Type
of Economy Based More on Emotional Result Director of the State Hermitage, Mikhail Piotrovsky, is telling Vremya Novostey in his interview about features of museum economy. - What share in the total amount of financing of the State Hermitage is accounted for extra-budgetary income? What is, in your opinion, the optimal ratio between budgetary financing and proprietary earnings of a federal museum? - In the last few years the ratio of budgetary funds to proprietary funds of the museum is around 70% to 30% (though in some years that were especially hard for the federal budget the share of our own earnings reached up to 40-50%). Now we began to include financial and capital investments into the consolidated budget of the State Hermitage, that’s why the share of extra-budgetary funds appears to be smaller. Following the results of the year 2008 they accounted for 21.4%. In my opinion, the optimal share of the earned money for the museums of the State Hermitage level should be 20-30%. This part of the museum's budget is extremely important; it is the basis of our freedom and autonomy. We need to have an opportunity to take prompt decisions independently, when, for example, it is necessary to transfer money quickly from capital repairs to purchasing of equipment or to direct additional funds to an interesting and opportune exhibition project or to develop publishing programme. Of course, there should be a control over the expenditure of these funds and strict financial discipline. However, if the government makes extra-budgetary income an item of its own expenses and pays us money that we earn or replaces government financing with this money, then it will be a big mistake disastrous for museums. Another extremity is a transformation of museums that are exclusively non-profit organisations in their essence to business structures whose main task will be receiving income and gaining profit. Consequences of such commercialisation will be terrible for museum sector and field of culture as a whole! I will note that museum economy of the State Hermitage is necessary for the implementation of our large social programme. It is extra-budgetary funds that cover the costs of free entrance to the museum for children, students, pensioners and other categories of Russian citizens and the costs of providing other benefits. There is no state system of benefits monetisation for museums, we do not receive any compensation. The procedure of compensation for free tickets is established only for Heroes of the Russian Federation, however, it is so bureaucratised that it does not work in practice. - What brings primary income to the Hermitage? - Basically the amount of our extra-budgetary income turns out to be quite constant - around 10 million dollars per year. It includes earnings from tickets sale and organising exhibitions, sponsors’ contributions, earnings from granting licenses to use Hermitage brand and property rentals. Our opportunities to earn money are limited because there is a number of things that the Hermitage can not do under any circumstances for acquisition of income (letting banquets, presentations and weddings be held in museum halls and commercial billboards be placed on scaffolding when repair works are being conducted in the museum, etc.) Revenue structure can change slightly every year, particularly, when big sponsors appear, and share of donations increases substantially. Nowadays four-fifths of proprietary income consists of earnings from visits to the museum and our exhibitions abroad. - Hasn’t the crisis affected visits to the museum? - On the contrary, the flow of visitors to the museum has increased (on the average around 2.5 million people visit us every year). After another round of wrangles with tourist companies we decided not to raise prices for tourists, moreover, we reduced them from 10 euros to 7.5 euros. Our joint decision with tourist business is quite a good example of anti-crisis economic measures. The Hermitage appeared to be in a more advantageous position in comparison with other museums of the city, because as our prices are higher than in other museums some tourists could have chosen to visit a different museum. However, it does not mean that in future we will not increase ticket prices. Moreover, it is even a bit improper when indexation of utility rates is considered to be a normal practice, but, in the opinion of some officials and representatives of tourist business, museums can not raise fees for their services, We hope that our income will increase also due to different special programmes for museum visitors. - There is an opinion that conduction of exhibitions abroad brings huge profits to the State Hermitage, that 'foreign economic turnover' of the museum is hundred millions dollars. - We are constantly come under attack because of our exhibition activity. Only due to the imperfection of customs legislation the works from the collections of state museums that are to be exhibited abroad are specified as "goods" whose insurance valuation is assumed as their cost (though insurance valuation is many times higher than the cost of similar items offered at world auctions). That is why it is inappropriate to speak of some "foreign economic turnover" of the museum in money equivalent. Conduction of exhibitions is not a business, it is social and cultural activity in which, of course, money is also taken into account, but it is not economy in which income and revenue are important. Or let's say it is another type of economy based more on emotional result. We carry out exhibition activity not for the purpose of earning money. This is an active work of the museum in the world culture field. It is a necessary communication with other museums: we bring exhibits to them, and they give us theirs. When preparing and conducting exhibitions in other countries, the museum suggests its own interpretation of the world culture and history and represents collections through the prism of our vision. The Hermitage exhibitions are a constant tale of the Russian history. I compare exhibitions with a coming of warships: it is always beautiful and grand, in this way all our power is displayed, and then the ships return home, and everyone is content. Foreign exhibitions may also be very important from political point of view as well as for credibility of the country and from a perspective of the presence of the museum. - What is the economic model of the Hermitage exhibition activity? - Of course, an economic aspect exists, but it should not be too influential. Basically exhibition is an investment of money and often of a substantial sum of money. Sometimes exhibitions bring in some income, which, however, is not supposed to be big. In other words, if an exhibition is made for the purpose of gaining profit, museum stops being a social and cultural institution and turns into a commercial enterprise. When organising an exhibition the key factor should be not the amount of money involved, but the importance of the exhibition and the interest it arouses. Over a period from January, 2006 to August, 2009 the State Hermitage received 4.8 million dollars and 570 thousand euros from conduction of exhibitions in foreign museums and spent 1.7 million rubles. Exhibitions in Russian museums never bring us profit, only put us to expenses. Foreign museums want to hold Hermitage exhibitions, and almost all the expenses are paid by the host party, i.e. by museums and their sponsors. Our museum committee plans all the exhibitions, and museum’s authorities take final decisions on their conduction and on what we can receive in return: exchange of items, training, money, etc. It is determined by the status of an exhibition. For example, if it is a scientific exhibition, then money is not supposed to be received. If an exhibition is held in the Metropolitan Museum of Art in New York, this museum never pays money for admission of exhibitions, and, by the way, the Hermitage does the same. In some cases we can pay a part of the expenses if we really need to show a certain exhibition in the Hermitage. Sometimes we are paid a compensation for exhibition given by the Hermitage, for our work and intellectual potential that we contribute to the preparation of these exhibitions. Enormous sums that are paid by foreign partners who take our exhibitions abroad are received not by the Hermitage, but by Russian companies specialising in compulsory insurance of the exhibits, their transportation, etc. Part of this money is received by Russian companies specialising in insurance of the exhibits. Finally we do not spend any money on external branches. In Amsterdam the project is financed by the Hermitage-on-the-Amstel Foundation that collects charitable and government money, in Ferrara, Italy - by the municipality of Ferrara Province, in London - by UK Friends of the Hermitage. However, we hardly earn anything (in Amsterdam we receive 1 euro from every ticket that costs 12 euros). The key factor of opening an external branch (apart from financial support) is the desire of seeing the Hermitage. And this desire should not be an attempt to follow the fashion or a way of solving tourist problems on the assumption of the fact that the presence of the Hermitage will be an important part of cultural development of this place. - Does government regulation of exhibition activity create any problems for the museum? - In general I have nothing against the existing system of control when conformations and permissions on taking exhibitions abroad are given by the Ministry of Culture of the Russian Federation and the Russian Federal Surveillance Service for Compliance with the Law in Mass Communications and Cultural Heritage Protection (though the procedure is quite long and complicated). Bureaucratic difficulties emerge when we try to receive permissions of taking items made of ivory and weapons abroad, but it is rather a universal problem of all museums. The sore point that complicates exhibition activity is absence of a system of state guarantees in our country (whereas when organising exhibitions the biggest expenses are due on commercial insurance of exhibits). It is necessary to secure the creation of this tool that exists in many countries; however, there it was also hard for museum organisations to make the government take necessary decisions. Fortunately, there are only few examples of ideological influence on exhibition activity. I hope that these certain cases will not repeat in Moscow. Sometimes it happens that we are told that due to some political considerations it is necessary to hold a certain exhibition, but we have managed to explain that we consider it to be unnecessary or that it should be done in some other way. However, there is a tendency to give commands. There are actually some ideas of creating structures that would stand over museums and would control the exhibition activity, and museums would only give their items. This is an old soviet system which, by the way, encouraged bribery. It is no coincidence that at that time money that we now receive as compensation for holding exhibitions never reached museums. I would not wish to have such bureaucratic comebacks to the USSR... -Interview conducted by Igor Arkhipov Article: Museum trap in the newspaper Vremya Novostey, September 29th, 2009. Federal authorities force restructuring of the system of state (municipal) institutions. The bill prepared by the Ministry of Economic Development and Trade within the framework of the reform of public sector was submitted for consideration to the Government of the Russian Federation, and, as officials suppose, after the law is adopted by the State Duma and the Council of Federation, it will come into force on January 1st, 2010. The structure that is being planned assumes that all the budgetary organisations will be divided into three categories: autonomous, state-owned and budgetary institutions of a new type. Special concern is expressed by the representatives of museum community in connection with the consequences of the reform that affects functioning of cultural institutions. They fear that innovations will deprive museums of their present independence (of their economic, administrative and creative independence) and will correspondingly deprive of incentives to further development, and in some cases these innovations may even lead to bankruptcy of museums and loss of collections and property. These questions that are sensitive to museum community will be discussed today in the Public Chamber at the 'round table' "Preservation of Museum Fund of the Russian Federation as the most important part of cultural and intangible heritage of the peoples of the Russian Federation. Law enforcement issues". Cultural Counter-Reform The bill "Concerning the Introduction of Changes to the Separate Legislative Acts of the Russian Federation in Connection with the Improvement of the Legal Status of State (Municipal) Institutions" provides for the amendment of a number of basic laws. These laws include Civil and Budgetary Codes, laws "Concerning Non-profit Organisations", "Concerning Autonomous Institutions", "Concerning the Placing of Orders for Supplies of Goods, the Performance of Work and the Rendering of Services for State and Municipal Requirements". The revision of the current legislation which establishes three organisational legal forms of state institutions is dictated by failure of reform based on the law "Concerning Autonomous Institutions". Very few organisations obtained the status of autonomy. To a considerable degree it is connected with the fact that the transition into such category (provided on a voluntary basis) has faced negative attitude on the part of not only budgetary organisations, but also of many federal authorities and some federal departments. According to the results of work conducted by the Council for Culture and Arts at the Seat of the President of the Russian Federation for the period of almost a year amendments were introduced to the law; these amendments leveled a number of apparent imperfections, nevertheless, the form of autonomous institutions has not become more convenient and popular for cultural organisations. "Our legislation as a whole and all the system of reforms carried out by the Ministry of Economic Development and Trade are hostile to culture in their essence," convinced the President of the Union of Russian Museums, Vice Chairman of the Council for Culture and Arts at the Seat of the President of the Russian Federation, Director of the State Hermitage Mikhail Piotrovsky. "Culture makes a pretence to some sort of privilege, to the fact that the government should provide preservation and development of culture. However, the legislation does not consider the sphere of culture as well as cultural institutions to be something different from small and medium-sized businesses which it claims to support. Such notions as 'goods', 'services' and 'goods turnover' appear in the legislation with regard to cultural institutions. It is also mentioned that conditions for ‘competitive equality’ favourable for business should be created (further competition of state museums with private galleries is also implied). Hence comes ideology of the Ministry of Economic Development and Trade: reduction of the budget of cultural institutions, leveling, limitation of powers of directors, desire to deprive museums of the right to use their earnings." General tendency is obvious - in recent years the legislation has become increasingly less favorable for the cultural institutions. "During the period of perestroika when basically the government avoided its responsibility, what helped us to survive was the legislation that appeared in the late Soviet period," noted Mikhail Piotrovsky. “The authorities understood that there was not enough money for the cultural sphere, that the lack of budgetary financing was great, and the way out of this tangled situation was the emergence of a system that allowed cultural and scientific institutions to keep all the earned money and to use it freely for their development. These ideas also corresponded with, as I call it, the "romantic" legislation that appeared at the beginning and in the middle of 1990s - such laws as "Concerning Fundamental Principles of Legislation of the Russian Federation on Culture", "Concerning the Museum Fund of the Russian Federation and Museums in the Russian Federation" and others. The independence of cultural institutions was confirmed, and museums received much more opportunities for development. Liberal charters of museums were adopted (some of them still exist). A system of high-value objects of cultural heritage appeared that gave advantages from the point of view of not only appropriation of money but also of higher degree of freedom." But then the preferences for cultural institutions began to disappear gradually from the legislation with adoption of Budget and Customs Codes, the Procurement law, etc. For example, Customs Code has practically given museums the same status as trading and commercial enterprises, because supposedly museums have their own "goods turnover" (determined on the basis of insurance valuation of cost of the items that cross the border when exhibitions are held). Thereby, museums were put into less advantageous position in comparison with private individuals unlike whom museums had to pay custom duties and value added tax when transporting purchased objects of art to Russia. "State Function, and not Services" The most important problem for museums is determination of procedure, terms and financial parameters of government task. The ideology of the bill presupposes that in relations with museums the state proceeds to placing an order for rendering services and correspondingly determines their financing. However, as it is noted by the lawyers of the Union of Russian Museums, the mechanism of estimation of museum services and order placement is not specified. The task of solving these crucial questions that determine the possibility of museums' existence is passed on to federal and regional executive bodies and municipal authorities. Obscure wording of amendments to the federal legislation does not contribute to predictability and economic feasibility of future decisions. Meanwhile understandable fears appear - how adequately expenditures connected with fulfillment of government task by museums will be determined. These fears are already justified by concrete legal prerequisites. In January, 2009 order of the Ministry of Economic Development and Trade concerning approval of standard form of agreement between founder and federal autonomous institution, concerning terms of granting a subsidy for "compensation of regulatory expenditures on rendering services". However, this order still has neither distinct definition of the notion "regulatory expenditures" nor criteria or methods of their determination and of performing the corresponding calculations. Moreover, it is crucially important that museums expenditures on fulfillment of government task should not be only confined to rendering services to physical and juristic persons. The law "Concerning the Museum Fund of the Russian Federation and Museums in the Russian Federation" states clearly that purposes of creation of museums are in storing, identification, analysis and publication of museum items and collections as well as educating activities. "Preservation of cultural heritage is the key state function, only external and internal security protection can be more important," emphasised Mikhail Piotrovsky. "Museums do not render services, but fulfill a state function of preservation of cultural heritage, and this function should be adequately provided for by the government. Our amendments provide that the expenditures on fulfillment of this function should be thoroughly and accurately calculated by museums themselves. By the way, selling of tickets can not be classified as services - with these tickets visitors only buy a right of access to the repository ( as they buy a book or permission to copy images from the Internet). An example of a pure service is an excursion, you can either use this service or go without it when visiting museum". Besides the uncertainty connected with calculation of subsidies legislative innovations deprive museums of guarantees that the funds which are due to them will be appropriated in time. Subsidiary responsibility of proprietor of budgetary institutions of the new type for their obligations is revoked. Accordingly founders are not responsible for delay in providing or even failure to provide subsidies that accounts for all the expenses on maintaining movable and high-value immovable property and tax expenses. Now all the responsibility (including even responsibility for payments to the government!) is laid on budgetary institution that is at the same time deprived of an opportunity to influence the amount of subsidies and dates of receiving them. As far as autonomous institutions are concerned, as Mikhail Piotrovsky notices it, the fact that the government shifts all the risks onto them creates a threat of bankruptcy: "Museum collections will probably still stay with the government, but buildings can well be taken away. It follows from the bill, and we can see the catch". Another problem is connected with a possibility for budgetary institution to dispose of property. The existing law "Concerning Non-profit Organisations" provides that a budgetary institution has no right without the consent of the owner to dispose of high-value immovable property assigned to them or purchased using the appropriated funds. Naturally criteria and procedure of classifying the property as "high-value" property are of great importance. However, the bill only says that in such case "high-value property is movable things with fixed cost without which the conduction of charter activities by budgetary institutions will be considerably impeded". From the point of view of the lawyers of the Union of Russian Museums such uncertainty is aggravated by the lack of clear directions of who determines the procedure of assigning property to the category "high-value property" (federal government or government bodies of a constituent entity of the Russian Federation and local authorities). At the same time one can not eliminate the possibility that minimum rate of this "fixed cost" will be set arbitrarily. In the end it will mean for museums as budgetary institutions of the new type that a large part of the property will turn out to be basically withdrawn from independent disposal. Among probable consequences of interpretation of the notion "high-value property" Mikhail Piotrovsky sees such danger: "Let us suppose that the officials may decide that museum items classified for the Hermitage as not of high value must be of the same category for some provincial museums. What threat can it constitute? Ideas of integration have been expressed before. For example, repositories of ten museums are united within a region, so it turns out that there are many duplicate items - sabers, guns, shakos, etc. It is not hard to imagine the reaction of the officials: "What for do you need so many similar items?!" Similar opinions are constantly voiced by different committees inspecting museum funds. Antique market will readily accept a huge amount of museum items if they come to be taken away from museums. If once on the pretext of "optimisation" items of the 4th and 5th category come to be withdrawn and sold, then it will very soon come to the items of the 1st category - we already lived through that in 1920s! Thus, a serious threat is created for such treasure as provincial museums (more than 1800 museums, 77 million visitors) that are practically the only cultural centres throughout Russia!" Bureaucratic Illusion Museum community has serious misgivings connected with possible decline in financing and especially with attempts of additional limitation (or even complete elimination) of freedom of cultural institutions to administer their earned "extra-budgetary" income (that is de jure considered to be state income, but is spent independently by museums). State-owned institutions will have the least independence. Federal institutions whose amount of "extra-budgetary" income is less than 10% of the total annual amount of financial support are supposed to fall into this category. The limit value for cultural institutions of constituent entities of the Russian Federation and municipal entities is raised to 30% that allows involving a wider range of organisations into "governmentalisation". All the income received by state-owned enterprises from rendering paid services, gratuitous receipts from physical and juristic persons, international organisations and governments of foreign states and other income-generating activities are included into the income of the corresponding budget. When analysing the text of the bill the lawyers of the Union of Russian Museums assume that some plan of receiving "extra-budgetary" income will be set for state-owned institutions: if there is a decrease in the amount of such income, amount of budgetary financing can also be reduced. At the same time opportunities for bureaucratic outrage and corruption are created: the bill does not set objective criteria for making decisions concerning the amount of budgetary appropriations. Increase in budgetary financing will be determined not by the effective work of state-owned institutions, in this case we refer to a museum, but solely by the attitude of officials to a certain institution and/or its director. "This is an illusion that financing of budgetary institutions will be a 100% responsibility of the government," convinced Mikhail Piotrovsky. "When giving away all the earnings to the government, they will be back to square one in case of budget reduction. At the same time cultural institutions will be absolutely uninterested in the effective work. Why do we need to make efforts, to look for something new, to be engaged in new projects that allow earning money if we can just go to work, open the museum and sell tickets – let’s make free entrance to the museum!" Another limitation of museums’ independence in administering "extra-budgetary" income is a regulation that "big deals" can be closed only with the consent of the founder. The price of a "big deal" is more that 10% of book value of assets of a state-owned institution. However, the bill makes an important reservation that state-owned institutions charters approved by the founder can set a smaller amount. From the point of view of the lawyers of the Union of Russian Museums in this way the independence of budgetary institutions declared by the bill is being lost. In practice their ability to spend their earnings can be even more modest than the ability of state-owned institutions. Mikhail Piotrovsky notes that in its ideology the bill additionally confirms the tendency outlined earlier in the legislation: "Everything is coming to the situation when earnings of cultural institutions appear to be at hazard and become a part of budget expenditures. Money that we have earned will be taken away, and then be given to us by the government to live on". What can be the consequences of such actions? Museums will lose the opportunity to spend "extra-budgetary" earnings promptly and flexibly on settling the most urgent issues. "A big blow will be given to scientific and research activities - to the museums opportunity to provide their workers with academic trips, giving grants and publishing scientific literature," stated Mikhail Piotrovsky. There will be a considerable reduction in museums’ abilities to create incentives for their workers with the help of salary increments and employee bonuses. Deprivation of financial independence will have a negative effect on conduction of restoration works by museums. It can have a particularly harmful effect on attraction of financial resources of sponsors and art patrons. "We keep on explaining to sponsors: the government gives us this amount of money and we need additional financing in this amount," says Mikhail Piotrovsky. "But if the system changes, then sponsors and our partners will start saying: why do we have to fulfill government obligations, why does the government just shift its obligations onto us?!" The Union of Russian Museums suggests a package of amendments to the draft of legislation, and different opportunities are used for their promotion, including discussions at the Presidium of the State Council, the Council for Culture and Arts at the Seat of the President of the Russian Federation, in the Public Chamber and the State Duma. There have been precedents before when museum community managed to influence the decisions on the most acute issues concerning museums. In particular, some requirements that did not take into account the specific character of cultural institutions were excluded from the Procurement law; museums preserved their right to conduct scientific activities, etc. Alongside with influencing certain regulations of the legislation museum community, as Mikhail Piotrovsky convinced, should promote the idea of creating a culture legislation system. "We need a Culture Code or Culture Constitution where privileges of culture will be determined. In certain way the Declaration of the Rights of Culture by academician Dmitry Likhachev can become the basis of such legislation," believes the President of the Union of Russian Museums. "The government should clearly define that culture is the highest priority, and then following this ideology it will be easier to achieve the creation of legal framework that will meet the interests of culture. Nowadays because of some officials and politicians the public starts to see museums as something useless, as a place where people only steal and earn huge sums of money. Not least of all it gives rise to temptations for officials and potential raiders: how can we get a grip of this honey pie? Indeed, nowadays only cultural institutions, first of all museums, and the Academy of Sciences have preserved public property, all other property has been privatized and redivided many times. Moreover, museums keep on being some kind of a white crow; they are the cause of irritation because they have not been divided into pieces yet, because they still can conduct some types of activities independently and because they are just conspicuous. Besides, it is understood that directors of museums are also more respected in Russia and abroad than billionaires and high-ranking officials!" By Igor Arkhipov |
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