By April 1988, Cambridge Associates had completed its study and had developed, in collaboration with Bell and his staff, a restructuring plan for the Society, which was presented at the April 27, 1988 board meeting. In a memo to the board, Cambridge Associates pointed out that the Society's fiscal 1988 deficit was projected to be $2.5 million:
The deficit, quite simply, is a result of expenses that are far out of proportion to reasonable expectations for revenues. . . . Of greater significance, however, is the structural nature of this deficit. This fiscal year's deficit is not an aberration but will continue, since recurring, unrestricted expenses are projected to exceed recurring, unrestricted revenues. Annual operating deficits of $3.8 million to $4.5 million are forecasted. ... To compensate for these shortfalls in the past, the . .. Society has relied heavily upon spending from the endowment. . . . When the unrestricted endowment is exhausted, the . . . Society loses its ability to fund these deficits. Thus, under present levels of activity, the Society may anticipate only about 18 more months of solvent operations.
The report went on to outline the steps to correct this problem. It described a series of drastic cuts in staffing and programmatic activity that would have to be enacted to begin to address the Society's financial predicament. It then explained that the purpose of the cuts was "to 'buy time' for the Historical Society to recapitalize itself." It identified five potential sources of near-term capital available to the Society:
- Transfer of approximately $2.4 million from the Bryan Fund to the unrestricted endowment to pay for past conservation support
- Sale of the Forty-Second Street property for $1.5 million
- Sale of the Cadin paintings for $5 million
- Sale of the real estate adjacent to the Society's building for $7.8 million
- Sale of other items from the collections for $10 million.
Owing to the drastic nature of the recommendations, no decision was reached on how they ought to be implemented. At the May 11, 1988, board meeting, there was extensive discussion about how the Society should carry out the plan. At that meeting, the board unanimously resolved that "in the light of the Society's continuing severe financial deficits the board as soon as possible adopt a budget for fiscal year 1988-1989 which will produce an operating deficit not to exceed $750,000." But the board could not hold to that resolution. At the June meeting, the resolution was amended to read that the operating deficit would not exceed $1.2 million.
During June, the board's decision on the restructuring plan for the Society became known. The plan called for the Society to cut 21 of its 133 employees, close two of its four floors of galleries, and sell parts of its collections, including duplicate rare books, most of what remained of the Bryan Collection of European paintings, and other objects. It was hoped that such sales would yield between $15 and $20 million. Key stated that proceeds from the sales would be used primarily for the purchase of other works but that interest income could be used for some operating costs. In addition, the plan called for the board to raise $ 10 million for endowment over ten years and to mount a campaign to raise funds to pay for capital needs such as roof repair and building modernization.