East Lyme - When the executive director of the Children's Museum of Southeastern Connecticut went before the Board of Selectmen earlier this month, she spoke of how spending even $200 on an attorney's fee for a storage-space lease with the town would be difficult for the tiny museum.

The museum's budget was frozen, Christy Hammond said, and she was down to just one full-time staff member - herself.

The situation sounded dire, so dire that Rob Wilson, a selectman and founding member of the museum, offered at the meeting to pay the bill himself.

"I just think it's probably, unfortunately, like anything else, they're trying to do it between a combination of donations and fundraising and admission prices," Wilson said afterwards of his offer. "And just that combination of things (has) slowed down for everyone. I didn't realize that she was the only full-time employee left. That shocked me a little bit."

Rumors that the museum, at 409 Main St., was on the brink of collapse have abounded since late last year. But Hammond and museum trustees said recently that the museum isn't going anywhere.

"Those are just rumors," board president Carla Barone, a local attorney, said. "We're not closing."

And the situation isn't as bad as it may sound, Hammond said. The only other full-time employee, Michael Neville, left recently for graduate school, and the museum has decided to return Neville's old job to part-time to save money.

Ten part-timers and a number of volunteers help keep the museum running, Hammond said.

There are no plans to reduce staff or shrink the program offerings, she said. And the museum is planning a big 20th anniversary celebration later this year - a birthday party in August and a "$20 for 20" fundraiser where the museum will ask supporters to donate $20 each to celebrate the milestone.

Hit hard by the recession

But as with many nonprofits, the recession undeniably has slowed the Children's Museum down. It's not uncommon - while museums are beginning to report a turnaround in finances, small and mid-size museums are still struggling, said Dan Yaeger, executive director of the New England Museum Association.

That's because in trying times, donations tend to go to nonprofits with humanitarian causes that directly help those in need, Yaeger said.

"There's sort of a perception out there that museums stand on their own," he said. "In recessions, museum giving does tend to trend downwards."

The Children's Museum's 2009 tax return for nonprofits - the most recent available, as the museum's fiscal year begins Oct. 1 - shows a $34,126 deficit as of September 2010. The deficit in the 2008-09 fiscal year was $34,987, according to the 990 form. Other children's museums in Connecticut also showed deficits on their 2009 tax returns.

"Yes, we've had some challenges," Barone said. "But we don't feel our challenges are different from other children's museums in the country, and certainly, nonprofits in our area."

Adding to the financial challenges the museum saw late last year was the fact that the museum did not hold its popular Fairy Tale Ball fundraiser because the board member in charge of the event had left the board, Barone said.

With no local, state or federal funding, the museum depends on corporate sponsors, local grants and donations from such fundraisers to finance its annual budget. Since 2008, the ball, expected to return this year, has been responsible for generating about 85 percent of the museum's annual fundraising goal, Barone said.

Educational programs, admission, membership and off-site classes make up about 80 percent of the museum's earned income, according to Hammond.

While admission - 38,880 people visited the museum during the 2010-11 fiscal year - and low-income families taking advantage of discounted 25-cent admission fee are up, the number of visitors who pay full-price at the door is down, Barone said.

"People have less discretionary cash to pay that paid admission," she said.

But programs, especially the free 1st Friday Nights and inclusive programs for children with special needs, remain popular. In January and February, the 1st Friday Nights program reached capacity at around 140 people, and the museum found itself having to turn people away, Hammond said.

The museum is continuing to "watch the pennies" but is also positioning itself for the future, said board member Holly Cheeseman, also an East Lyme selectman.

In September, the museum switched its heat source from an outdated electric heater to a $50,000 geothermal heating-and-cooling system, thanks to donations, rebates and donated labor. The move already has cut the heating bill nearly in half since the system went online in November, though Hammond acknowledged this has been an uncharacteristically mild winter.

The board is also working on a new strategic plan, Cheeseman said.

"We are dedicated to remaining in Niantic," she said. "This is our home."

j.cho@theday.com