Deficit at Minnesota Historical Society spurs layoffs as nonprofit struggles financially after pandemic

Seven Minnesota Historical Society employees were laid off last week, totaling 10 employees who have lost their jobs this year, employee union leaders said. They added that these are the first layoffs at the St. Paul-based nonprofit since massive staff reductions in 2020 due to the COVID-19 pandemic.

In a statement, the Historical Society cited a $782,000 deficit for spurring the layoffs. The organization, which pledged in 2022 to rebuild its workforce and revenue, has struggled financially every year since the pandemic hit in 2020, but leaders said in the statement that they're on target to resolve the shortfall by 2026.

Colin Dunn, president of the employee union, said the nonprofit's leaders have told them that this may be the first wave of layoffs.

"This was just a shocker to us," Dunn said.

Nicole Tuescher, the Historical Society's vice president of people and culture, said in the statement that the deficit meant the organization needed to "rightsize."

"These difficult decisions were made through thoughtful and thorough analysis for the future of the institution," she wrote.

The Historical Society works across Minnesota, managing 26 museums and historic sites, from Split Rock Lighthouse on the North Shore to Historic Fort Snelling in the Twin Cities. The nonprofit, one of the largest state historical organizations in the U.S., currently has 419 employees, up from 324 employees in 2021 and just under the 430 employees it had in 2019.

Unlike most nonprofits, the Historical Society is largely supported by taxpayers, with state funding usually making up about two-thirds of its budget. About 20% of its budget is earned revenue, including admission fees.

In 2020, the Historical Society, like other museums and arts organizations, closed its doors to the public because of the pandemic. It cost the organization $3 million, spurring furloughs of roughly half of the workforce and then layoffs of more than 200 employees.

The organization said that funding hasn't kept pace with expenses since then, with staffing costs making up the largest part of its budget. In 2022, as visitor numbers and memberships lagged 2019 levels, Historical Society leaders said they were in a "reinvestment year" to rebuild staffing and revenue.

This past fiscal year, the Historical Society received $25 million in state funding, but leaders said in the statement that the increase didn't cover higher employee, maintenance, insurance and other costs that have risen with inflation and increased costs tied to the union contract.

The nonprofit also received $800,000 in federal COVID funding and $3.5 million last year under the Employee Retention Credit program, which helped offset significant revenue losses, leaders said.

The union representing employees, which formed after the 2020 layoffs and is part of AFSCME Council 5, condemned the seven recent layoffs, five of which were union employees who got two days' notice, Dunn said. He urged the nonprofit to rescind the layoffs, especially given that the organization has 14 job postings. Dunn said losing employees will affect visitors' experience at sites like Mill City Museum.

"We understand the need for the budget to be fixed, but surely there was another way to go about this that doesn't so negatively impact what we offer to the public," Dunn said. "They've said they've wanted to invest in staff ... paying staff well."

He said Historical Society leaders had blamed the pay raises employees won last year for the shortfall. The Historical Society is one of the largest nonprofits in Minnesota to unionize, part of a national trend of employees to do so at museums and arts organizations after COVID closures and layoffs.

Dunn said the Historical Society restructured staffing this summer, and has recently added management positions while grappling with workforce turnover.

Nonprofits across Minnesota have struggled to retain and attract employees. The nonprofit sector, which employs about 14% of the state's workforce, is short by about 5,000 workers from pre-pandemic levels, according to the Minnesota Council of Nonprofits' report last year, with nonprofit leaders citing workers' wage expectations as the No. 1 barrier to hiring and retaining employees.

"A lot of our sites have struggled to keep the staffing levels they need," Dunn said. "Even with the wages we were able to win at the bargaining table, I think you could still go to a McDonald's or Burger King and make more an hour."