Half the staff of the Contemporary Museum was laid off this week and the salary of its top administrator cut 15 percent in an effort to keep the Makiki Heights art museum open in the face of a slumping economy.

The museum told 11 full-time and 14 part-time employees on Monday that they would be laid off, said executive director Georgianna Lagoria. Their last day will be Oct. 15.

Severe cost cutting was needed to offset the fall in market value of the museum's endowment, she said.

"We had a drop that wiped out our operating revenues," she said. "We don't anticipate a whole lot of gains. Our endowment is worth about $5 million. We want to keep it intact. We want to be fiscally responsible and that is why we are taking this very difficult step right now."

Eighteen full-time and five part-time employees remain on staff.

The poor economy could easily produce similar cuts at other nonprofits, said Ronald Yamakawa, executive director of the state Foundation on Culture and the Arts.

"Offhand, I think it's just the beginning," he said. "I hope that people don't think they can do without the arts. In this kind of dire-straits times, that's when I think you need the arts the most."

Lagoria, who earned $75,217 in 2006, will be giving back a raise she got last year. She has been executive director since 1995.

"I think it is the responsible thing to do," she said. "It is not an easy thing to do. But it is not an easy thing to lose your job. I feel for my employees. We have a family here."

The museum also canceled "Japan Fantastic," a $200,000 exhibit scheduled for the fall of next year, placed a freeze on new hires and put a temporary freeze on other traveling shows.

Based on its 2006 financial statement — the most recent financial information available — the museum had total operating expenses of $2.8 million. It also received $1.9 million in public donations.

Lagoria said the museum "is committed to playing a vital role in creating more vibrant, diverse and dynamic art experiences through its education programs, particularly in light of budget cuts in the Department of Education which will virtually eliminate the inclusion of art programs in lower grades."

Last year, the museum completed renovations to its galleries and replaced an aging air conditioning system.

The cuts represent an about-face for Lagoria and the museum. As recently as June, she told The Advertiser she had "no plans at this time to make any cutbacks in staff or programming. What we are doing is brainstorming about ways to bring in new dollars and to be proactive in that department. When you're small, I guess you're used to taking small steps all the time."

But the financial crisis on Wall Street this month triggered alarm bells for Lagoria and her staff, she said.

"Usually you calculate an endowment drop based on past performance," she said. "But what is going on is unprecedented. You can't depend on things you depended on in the past. We wanted to be prudent. We didn't want to put ourselves or the institution at risk."

Violet Loo, president of the museum's board, called the measures "unprecedented in our 20-year history." In a written statement, she said they are needed "to ensure the viability and long-term future" of the museum.

Located on nearly five acres above the city, the Contemporary Museum is the state's only museum devoted exclusively to modern art. It holds more than 2,800 pieces by contemporary masters and emerging artists. The site gets some 40,000 visitors a year, about 4,000 of whom are schoolchildren on field trips.

Lagoria said the public will see fewer exhibitions, especially ones that are complicated to arrange, ship and install. She calls the museum's current plan a "crisis opportunity."

"It is very expensive to bring art to the middle of the Pacific," she said. "What the public is going to see from us is a drawing on our own resources. And also, rather than bringing art across the ocean, we will probably bring in artists from across the ocean to do work here."

More than 5,200 people statewide have lost their jobs since the start of the year and the layoffs at this nonprofit reflect the state's economic problems.

The economy has been shaky for months, with unemployment spiking to 4.2 percent in August, the highest it has been in more than six years, according to figures from the state Department of Labor and Industrial Relations.

Among the many local job cuts: the shutdown of Aloha Airlines, ATA Airlines and Molokai Ranch; the loss of two of NCL America's Honolulu-based cruise ships; and, more recently, Maui Land & Pineapple Co.'s layoff of 274 workers.