Continuing Crisis: When the Council appealed to the membership last December for voluntary contributions, it made plain to all of us that the association's finances had reached a critical state. This appeal has brought in more than $10,000-just enough money to avert another deficit in the fiscal year ending last June. Members who for three years past have read the treasurer's reports, noting his cautions and warnings, cannot forget that the association barely scraped through fiscal 1969 with an operating surplus of $3,955, and then ran into the red with deficits of $17,332 in 1970 and $62,317 in 1871.
Consequently, the membership was reconciled to an increase in regular dues, from $15 to $20, that the Council put into effect in July 1971. But even with this increase, which has earned additional revenue of $74,140 or 35 per cent more than total dues for the previous year, the association is still suffering chronic financial stringencies that threaten to curtail its services and prohibit any expansion of its activities. Now in the current fiscal year of 1973, after painfully tight budgeting, the association can at best break even and is actually headed for another deficit of about $10,000.
Expenses Outrun Income: Many of our members are bound to ask why we are in these financial straits when the annual income of the association has almost doubled over the last five years, increasing by 92 per cent to be exact, from $384,000 in fiscal 1967 to $736,000 in 1972. The obvious explanation, of course, is that expenses have increased more than income by 10.5 per cent, going up from $345,000 in 1967 to $740,000 in 1972. To understand this financial stalemate, let us compare the principal expenses of the association with their offsetting income for the beginning and end of this five-year period, fiscal 1967 and 1972.
Staff: Next to the cost of printing and mailing publications of the association, which we will examine in discussing the AHR, the largest dollar increase in our expenses has been due to a growing staff at the Washington office. Their total salaries, which account today for 36.5 per cent of all expenses, have more than doubled, going up from $112,657 in 1967 to $272,199 -not because of any undue increase in individual salaries, of course, but rather because of the increase in size of staff.
The association now has a Washington staff of twenty-three people, twenty working full time, three part time. Nearly half of this staff, or ten, are professional, four with doctoral degrees in history. Association affairs are the exclusive concern of fourteen people on the staff while the other nine look after the AHR and other publications.
A more precise way of understanding what keeps the Washington staff busy is to consider the allocation of salaries (exclusive of benefits) according to their activities, which it is possible to do from the new budget analysis provided this year by the staff and their accountants
Staff Functions and Salaries 100%
General & Business Office 15.0
Council & Committees 14.5
Annual Meeting 5.4
Professional Register 2.5
Other Publications 2.4
This table shows at a glance that editing and publishing the AHR requires the largest proportion of staff salaries, which is no surprise in view of the fact that in 1969 the association took over from the Macmillan Company of New York all the work of publishing this journal.
It may suffice to point out that income from membership dues last year barely met salary costs in a ratio of 1.05:1.00. This ratio shows a marked deterioration from the happier circumstances of the association in 1967, when dues income exceeded salaries in a ratio of 1.86: 1.00. This is a specific example of how far increasing expenses have outrun income in the last five years.
Printing and Mailing accounts for the largest dollar increase in association expenses during this period, going up 18o per cent from $87,883 in 1967 to $252,619 in 1972, and now amounting to 34 per cent of all expenses. Many of our members may jump to the conclusion that this increase is due to the fact that we now pay for printing the AHR instead of letting the Macmillan Company handle it as before.
They are in error if they assume this to be the case because they overlook two facts. First, as the editor made perfectly clear in his editorial in the October 1972 issue of the AHR (p. 971), the printing cost per copy (to which the association contributed a good share when Macmillan paid it) has been reduced from $1.25 in 1968 to $1.04 in 1972. The cost of printing and mailing the AHR, moreover, now amounts to only $150,000, or just about three-fifths of the association’s total printing and mailing expenses. Most important to remember is the fact that the association now collects for itself all advertising revenue and library-subscription income, whereas in the years that Macmillan collected these revenues, they took from the association a 10 per cent commission on advertising and one-third of the net advertising and subscription income of the AHR, paying to the AHA a traditional fee of $2,400 per year for editing. This combined revenue brought the association only $53,569 in 1967. Last year, by virtue of receiving all advertising and library-subscription income, the AHR earned an estimated gross income of $235,000 for the association, only 17.8 per cent short of its entire dues income. It is worth noting that the AHR, financially the association’s largest single enterprise, is almost self-sustaining, with the gross income of $235,000 cited above nearly matching its combined staff salaries and printing-mailing costs of $245330. If we add to these operating expenses, as budgeted this year, its share of overhead costs in the Washington office, the AHR will incur a net deficit of $52,383, no more than 7 per cent of the association’s total expenses for the current year. Given this financial picture, the Review Board sees no reason to cut back on the costs of the AHR; it should be maintained and supported as the distinguished publication it is, even if additional subsidy is required, and in the near future some reasonable proportion of membership dues should be allocated for this purpose.
Other printing and mailing costs are itemized for the first time in this year’s budget, which reduces the total spent last year, $253,000, to an appropriation of $216,000. Keeping an allowance of $150,000 for the AHR, the reduced balance is to be spent as follows:
Annual Meeting Program $22,000
Professional Register $8,000
Since advertising paid for printing the annual program in 1971, the Review Board believes that more could be spent on its substantive improvement. Likewise, with pamphlet sales amounting to $21,591 last year, the board would hope that more can be appropriated in coming years for the writing and printing of the new “Historical Studies Series” paperbacks that we recommend elsewhere in this report. If these studies were treated as paperbacks, sold to college bookstores at a necessary discount, their sales income would provide the association with a self-sustaining revolving fund for these publications.
Annual Meeting: Returning to our analysis of the principal increases in association expenses over the last five years, nobody should be surprised that the costs of conducting our annual meeting have quadrupled, going up from $24,760 in 1967 to an estimated $95,437 for the convention that will be held this December. Although a large part of this increased expense has been met by income from publishers’ book exhibits and program advertising, the Review Board believes that it is no longer equitable or financially prudent to charge members a nominal registration fee that bears no visible relation to what they must pay for their travel, rooms, and meals. With income from registration fees amounting to only about one-fourth of expenses for the last two annual meetings, we believe that these fees should be increased to defray a larger proportion of convention expenses. Therefore we recommend fees of $10 for regular members, $5 for student members, and $15 for non-members who are not graduate students.
Council and Committees: To conclude this brief survey of how association expenses have more than doubled in the last five years, it should be observed that direct costs for meetings of the Council and committees, which together with the staff do all the work of the association, have quintupled from $10,835 in 1967 to $50,049 in 1972. That is one reason why the Review Board is recommending a reduction in the number of standing and ad hoc committees, and in their place the creation of three broader divisional committees. Yet the board notes and is concerned about the Council’s wisdom in budgeting direct expenses for meetings of the Council and committees this year at no more than $30,000 when the total cost of work for these bodies, when staff assistance and office overhead are added will amount to $98,000. It does not seem necessary for staff work to cost more than the travel expenses of members who serve on the Council and committees and do their work voluntarily. In any case, it is evident to the Review Board from this survey of increasing association expenses that we stand in dire need of more income, a problem we will try to solve in the next section of this report dealing with dues.
In the remainder of this particular section on finances, we must examine other problems that involve money.
Accountancy: The board was glad to have for the first time this year an itemized budget, with distributed overhead, that not only shows what association expenses actually are, but also provides Council and staff with the data essential to controlling them and avoiding unpredictable deficits. Further refinements of our cost-accounting are in order, especially to distinguish between printing and mailing costs, to identify all income and expenses of the annual meeting, and to make sure that the association’s cash-flow is sufficient to meet its budgeted expenses on a regular monthly basis. Finally, in this connection, the board repeats its recommendation that a reasonable proportion of members’ dues should be appropriated for support of the AHR because this journal goes to all members in partial recompense for the dues they pay.
Washington Offices: Members who have had occasion in recent years to visit these offices must be painfully aware that the staff has long ago outgrown them. It is difficult to understand how the staff has managed to work efficiently in these crowded quarters. The housing properties now owned by the association at a depreciated value (with equipment) of $193,762 could probably be sold on today’s market, according to the treasurer, without sustaining any loss. The board recommends that this be done as soon as practicable, and that adequate and modern offices be rented, even at an additional annual expense, in the more convenient neighborhood of Dupont Circle where other educational organizations have built or established their headquarters.
Investment Funds of the association are managed, according to Article VIII of our constitution, by a board of trustees, whose primary concern has not been speculative income, but the safety and capital appreciation of the association’s endowment. These objectives they have consistently achieved over the past several years. The Regular Fund of $904,651 is currently invested as follows:
Cash and Bonds 38.2%
Preferred Stocks 6.6
Common Stocks 55.2
In addition, the Matteson fund of $123,276 is invested in nearly the same proportions:
Cash and Bonds 46.6%
Common Stocks 53.4
The Regular Fund earned an income of $35,945 at the rate of 4 per cent and the Matteson Fund, $7,116 at 5.8 per cent in the fiscal year ending June 1972. It should be noted that a loss of $6,246 in 1971 sale of securities has been more than offset by a gain of $11,490 in 1972. More important is a fact that all members should take notice of, pointing up again the need for increased dues: the association would have incurred a deficit of nearly $54,000 this past year but for its non-operating revenue of investment income and members’ contributions.
This marginal fiscal balance should be overcome in the next few years, not only by increasing dues income but by having the Finance Committee consult with the trustees managing our invested funds about ways of making these funds yield more income without jeopardizing their security. But for operating funds, as distinct from capital endowment, the association, like any non-profit, tax-exempt educational organization, legally barred from engaging in profit-making activities, must rely chiefly on its in come from membership dues. Serious examination should be given to worthy proposals for association activities without dismissing them out of hand because of the specter of possible tax problems.
Benefactions: An important element in the financial health of the association’s endowment is the way it has been nourished and increased over the years by the generous benefactions of members and of friends of history. We believe that the association should be more active than it has been in attempting to increase the size of this endowment through the search for prospective donors and the encouragement of gifts and bequests. First and simplest, a standard bequest form which now appears occasionally in the publications of the association should be printed as a matter of course in the Newsletter. Second, for an occasional association project, special financial support should be sought to defray its costs. Finally, we believe that the association should more actively seek to identify potential donors among members and non-members and, through approaches by association members, seek to attract further benefactions.