Milwaukee Public Library Foundation could be short-term solution for library’s funding challenges, report says

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The Milwaukee Public Library may need to lean more heavily on its private foundation to sustain its operations as it faces mounting financial headwinds, a new Wisconsin Policy Forum study suggests.

As city funding support for MPL’s operating budget remains flat, branch closures or program reductions could be at stake if MPL doesn’t find new funding sources, the policy forum’s “Balancing the Books” report said.

A short-term solution could be to seek increased contributions from the MPL Foundation. That was one of the main recommendations from a task force, commissioned by the MPL board of trustees and facilitated by WPF, that is grappling with the organization’s intensifying financial challenges.

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In 2019, $23 million in city funding made up 70% of MPL’s total operating revenue, while contributions from the independent MPL Foundation represented 6% of total operating revenues, or $1.8 million. Under the current terms, foundation funds may only be used to supplement existing programming and not for MPL’s general operations.

City funding grew by $686,000 (3.1%) from 2011 to 2019, which equites to a $2.5 million – or 10% – decrease when adjusted for inflation. During that time, MPL has had to cut staff and reduce services. In 2011, MPL had 322.6 full-time equivalent employees, which dropped to 298.7 in 2018 before rising to 314.6 in 2019.

Compared to eight peer cities, MPL’s annual operating budget is lower than average. The average budget for peer city libraries – including Cleveland, Charlotte and Raleigh and others– was $29.8 million, about $4.5 million more than Milwaukee’s in 2019.

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While the city has maintained level appropriations for MPL over the past decade, it may not be possible moving forward considering the city’s rising pension obligation and overall fiscal challenges, WPF said. The study showed a scenario in which MPL’s city appropriation declines by 2% annually white its costs continue to grow by 2% annually, leading to a $9.5 million funding gap by 2030.

According to the report, the MPL Foundation could play an important role in making up some of those gaps moving forward, if the library and foundation agreed to eliminate the prohibition on using foundation resources for general operating costs. Over the past four years, foundation contributions to MPL have grown each year, rising from $1.1 million in 2016 to $1.8 million in 2019.

“Facing serious financial headwinds, the Milwaukee Public Library should consider opportunities to enhance the partnership with its private foundation as an immediate strategy to prevent severe budget cuts that could hamper its mission,” the WPF report said.

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The report cautioned that strategy could create some negative ramifications, however, such as lagging donor support, diminished city support, potentially inconsistent revenue and the need to grow the foundation’s fundraising capacity.

Potential long-term solutions presented in the WPF study included converting to a public-private model, in which MPL would continue to function as a department of city government but contract an outside organization to manage and staff its branches; gaining statutory authority to levy its own tax, create a cultural/special taxing district; or seeking 501(c)(3) status. The library’s financial sustainability task force members didn’t support the public-private and nonprofit status options, however.

“Conversely, creation of a dedicated revenue source for MPL received widespread support, either by granting it the authority to levy a dedicated tax as an independent district or by housing it in a larger cultural district with similar authority,” the report said. “However, the task force decided not to deliberate over the details of each option nor to recommend a preferred approach given its consensus that state approval to pursue either option was highly unlikely for the foreseeable future.”

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