In its sixth year of a capital campaign, the Martha’s Vineyard Museum is carrying an operating deficit from 2007 as it considers a different location for a future museum campus.

Keith Gorman, executive director of the museum since January of this year, has taken control of the nonprofit business at a difficult time. Determined to avoid a repeat financial performance in 2008, he is also presiding over a reassessment of the campaign to expand the museum which began in 2002 with a $27 million price tag and is currently undergoing a period of major reassessment.

On both issues, Mr. Gorman is unerringly positive.

“We have been running a sound business,” he said. “Looking at this through the lens of a contracting economy it makes sense. We’re staffing up and I think we’re doing okay.”

Debt from 2007 operating budget amounts to $135,000 — a significant number for a business with annual operating expenses of under $1 million. The deficit accounts for 15 per cent of the budget.

Mr. Gorman blames the deficit on unexpected withdrawals of funding intended to pay for staff increases, as the museum moves from volunteer to professional staffing. And he puts the shrinking revenues down to the poor state of the economy. This is the first deficit for the museum in five years, he said.

According to a financial statement published in the annual report, in 2007 total operating income was $769,055, while total expenses were $903,468, leaving the museum $134,413 in the red. The bulk of the museum’s operating income comes from gifts, special events and contributions. Most of its expenses go to pay for salaries, administration and programs.

Last year $132,897 of temporarily restricted gift money was added to the operating income to help offset the deficit. Mr. Gorman said the money was properly used to pay for a portion of expenses, including salaries, associated with the capital campaign.

“The auditor is very comfortable; we were completely above-board about this. We want to be completely transparent with donors, particularly in this [economic] climate,” he said.

Though property rich — the museum currently owns a complex which covers half a block on School street in Edgartown. Formerly named the historical society, the museum has always operated on a relatively small budget. The museum has a 26-member board of directors, 11 full-time staff and at least five volunteers at any one time during the summer. Historically many staff have operated on a volunteer basis.

Mr. Gorman said he inherited the deficit from the previous executive director, but was surprised at the results of a March audit, revealing the extent of the debt.

“I didn’t know the full extent of the deficit,” he said. “I was disappointed we weren’t able to close that [deficit] down.”

Last year three hires came into effect. John Walter took over as interim editor of the Dukes County Intelligencer. (He replaced Arthur Railton who retired in 2006, after editing the quarterly on a voluntary basis for almost 30 years.)

Nancy Cole became education director in June, replacing Lynne Whiting. Posie Haeger was hired as marketing and development manager.

“Grant money, supposed to cover the editor position, was never received,” Mr. Gorman said, “The museum is committed to ending the year in the black,” he added. He said the 2008 operating budget reflects that, although he declined to provide a breakdown of numbers. Operating expenses are projected at $937,000 for the year and the museum aims for a modest revenue surplus.

Last year’s deficit will be approached as a separate issue, he said..

“We’re addressing it right now. I don’t want to carry this debt,” Mr. Gorman said, adding in an e-mail message: “We are getting assistance in our efforts from our development committee and finance committee. There is a plan to pay it off. We are taking active steps to achieving that goal.”

At the same time, the museum has a space problem. Over 90 per cent of the museum collection is in storage, areas of which are not climate controlled. The capital campaign was conceived in the light of this problem as well as in the general spirit of expansion — and one goal is to achieve national accreditation.

Until recently the capital campaign was centered around plans for a new campus at a site in West Tisbury. The society paid $1 million to buy a 10-acre parcel of land on State Road between the Polly Hill Arboretum and the Agricultural Society in 2003. It also paid $75,000 to purchase, dismantle and relocate a 150 year-old dairy barn from the town of Shirley.

According to Amy Houghton, director of development, the capital campaign has raised just over $3 million to date, starting with one gift the end of 2001.

The campaign has been in a silent phase since 2002, and the board was reconsidering goals in light of changes to the economy when the idea of using the old Edgartown School surfaced.

Chris Scott, executive director of the Martha’s Vineyard Preservation Trust, came up with the idea early this year. The museum set up a task force to assess the viability of the school as an alternative expansion site. The questions were first, is the building structurally sound; second, is it possible to retrofit it for use as the museum; and third, how much would it cost?

The task force answered yes to the first two questions. They then presented a range of cost models. “Either way it’s a sizable difference compared to West Tisbury,” he said.

A planning committee will make a presentation to the board later this month. There is no date for a final decision, Mr. Gorman said.

The museum has not considered what will happen to the West Tisbury land if a decision is made to move to the Edgartown school.

“We’re not there yet,” he said. Mr. Gorman said he is anxious not to rush a decision.

“This happens once every several centuries, we have a responsibility to ensure it’s sustainable. Or else you’re not being a responsible steward,” he said. Meanwhile, gate receipts are up both at the museum and the East Chop and Edgartown lighthouses, and fund-raising has not halted.

Next Thursday the museum will host its annual gala event and hopes to raise $300,000. “We’re definitely cultivating donors, we’re definitely taking people out to lunch,” Mr. Gorman said.