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Arts Funding Feels Squeeze of Economic Downturn

January 2, 2009 at 6:35 PM EDT
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Many arts organizations that depend on endowments and both individual and corporate donations are struggling to cope with budget shortfalls in the midst of the economic downturn. Analysts discuss the recession's impact on arts and cultural organizations.
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JEFFREY BROWN: The financial crisis of the last months has had all kinds of spillover effects throughout the American economy. Cultural institutions often get less front-page attention, but are feeling the pain in many places and in many ways.

We look at this now with Sue Hoye, freelance writer and contributor to the Chronicle of Philanthropy, and Michael Kaiser, president of the John F. Kennedy Center for the Performing Arts in Washington and author of the recent book “The Art of the Turnaround: Creating and Maintaining Healthy Arts Organizations.”

Welcome to both of you.

Michael Kaiser, what are the most direct ways? How do arts institutions feel what’s happening in the economy?

MICHAEL KAISER, The Kennedy Center: Well, they see a real reduction in their contribution levels, primarily from government agencies which are hard-hit from foundations whose endowments have been hard-hit, from corporations who are suffering, and from individual donors. And this forces many arts organizations to make vast reductions in their budgets.

JEFFREY BROWN: And you’re seeing that now?

MICHAEL KAISER: We see this across the country. In fact, we’ve seen many high-profile arts organization either close or threaten to close over the last several months.

JEFFREY BROWN: Sue Hoye, you’ve been documenting this for the Chronicle of Philanthropy. Give us some examples of what you’ve seen.

SUE HOYE, Contributor, The Chronicle of Philanthropy: Well, across the board, everyone I spoke with has reduced their budget or is planning on reducing their budget different percentages, anything from the New York Botanical Garden, which is looking at a 10 percent reduction in staff, which they’re doing through attrition at this point, but have 48 less staff at the end of this year than they had at the beginning, are looking at changes in programming for next year because of budget and reducing risk, to the Santa Cruz Natural History Museum in California…

JEFFREY BROWN: In California.

SUE HOYE: … which is possibly closing in February. They’ve lost half their funding, which came from the city, which can no longer fund them. So they’re running around trying to figure out whether or not they can find a way to survive and are pretty sure that they might come up with something, but it won’t be anything nearly the same as it was when they started.

Huge drop in corporate donations

JEFFREY BROWN: Is it all kinds of arts or is any different type of art particularly hit harder?

SUE HOYE: It didn't seem to be. I mean, performing arts and museums may face different challenges, but they both depend a lot on corporations and government support, and their patronage actually seems to be up in many cases, but not enough to make up for the losses that they're feeling, and all of this happening at once, you know, with governments having a problem at the same time as corporations left a lot of them, you know, pretty hard-hit.

JEFFREY BROWN: Now, hard times for cultural institutions are always with us, right, even in a good economy. We've talked about this before on this program.

MICHAEL KAISER: Absolutely.

JEFFREY BROWN: And you've dealt with many. So what's different now? And what do you see institutions doing?

MICHAEL KAISER: What's different now is even those organizations that are very well managed are really suffering in ways that they can't control because of a huge drop-off in corporate contributions -- many corporations don't exist anymore or have merged -- and by their own endowments, which they spent so many years to build, are now decimated...

JEFFREY BROWN: Because they've been using them?

MICHAEL KAISER: No, because, in this economy, loss in the stock market...

JEFFREY BROWN: Oh, they've just disappeared, I'm sorry.

MICHAEL KAISER: Harvard University lost, what is it, a quarter of its endowment, so -- since September -- so the arts organizations are not immune to that, as well.

So we see this very quick reduction in our income sources and have to -- and don't know when it's going to end or how deep it's going to get. And those of us that are trying to run our organizations in a responsible fashion have to make cuts in advance of knowing how bad the problem's going to be.

Deep cuts in programming

JEFFREY BROWN: Well, how else do you cope or how else do you see others coping?

MICHAEL KAISER: I see many organizations cutting their programming very substantially and, unfortunately, in many cases, cutting their art and their education programs rather than what I always propose, which is your back-office projects, which I think have less impact on your future earning capacity.

JEFFREY BROWN: Keep the art, you mean, is...

MICHAEL KAISER: Keep the art. Keep the education. Get rid of what's going on behind the scenes, because, when the recovery starts to happen, it's those organizations who have done interesting work that are going to compete well for the resources.

JEFFREY BROWN: Do you see organizations doing, taking what he thinks is the wrong approach?

SUE HOYE: I talk to organizations who are making staff cuts and who -- but they were also making program cuts. And I spoke to Ford Bell at the American Association of Museums who said he really cautioned people about cutting vital staff, so maybe -- you know, maybe cutting programs that are back-office programs, but not staff necessarily, because once things get better, you need to have that staff to do what you need to do to get up and running again. And that was, you know, a big point that he made.

JEFFREY BROWN: Because institutions require -- I mean, need a kind of long-term commitment?

MICHAEL KAISER: And because training staff is very expensive. And so if you lose your best people, it really can hurt you in the long term.

Patronage up for many organizations

JEFFREY BROWN: I was just wondering, counterintuitively, are there any good examples out there where perhaps people aren't going on vacations, so they might buy a ticket at the local arts organization rather than...

SUE HOYE: That's happening everywhere. In Ann Arbor, the University Musical Society had a record attendance for their Handel's "Messiah" in December. And the director speculated that people wanted comfort, you know, that they wanted to feel good, that they wanted entertainment, and they wanted something that made them feel good during very difficult times.

And I've heard that from other people, too. Attendance is not the problem. It's that attendance can't make up for the income that they've lost, even if they fill every seat.

MICHAEL KAISER: Absolutely. Entertainment tends to do well in a recession or depression. Movies do well in a recession or depression. People want to be entertained, and they're traveling less and spending less in other ways.

But it's the contribution base which makes up for many arts organizations, 40 or 50 percent of their income. That is what's really being hit so hard right now.

Questions on government action

JEFFREY BROWN: Now, you had an op-ed piece in yesterday's or recent Washington Post, and it was titled, "No Bailout for the Arts?" You're making a case that this, too, is an area that government should pay attention to.

MICHAEL KAISER: Pay attention to, not necessarily with direct funding, although that's wonderful, but also in other ways. There could be a relaxation of the laws about how one can spend one endowment during this kind of time.

We need some central leadership to encourage corporations to continue their giving during this period. We need foundations to be encouraged to increase their spending rates during this period. And it would be wonderful to have some central government encouragement for this, because the arts do employ almost 6 million people in this country.

So it's not a small sector. It's just a very fragmented sector, so none of us get a lot of publicity.

JEFFREY BROWN: But that's the response -- because a lot of people will say, "Well, there's limited government dollars. There's limited government energy. Why this sector, when you've got so many others?"

MICHAEL KAISER: We're a large sector in terms of employment, so that's one immediate reason, but also we teach our children to think creatively. And as we think about how our economy needs to change to a more creative economy, that when you don't educate children in the arts, you're making it more difficult for our economy to mature in a successful way.

JEFFREY BROWN: And when you've been documenting some of these local institutions, they're clearly reaching out to local governments and state governments, which are hurting?

SUE HOYE: They are. They are. And that's difficult for them. But, you know, as Michael pointed out, they are also serving their communities, you know, particularly in smaller communities, lots of museums, libraries are places where people go for classes. It's where they have meetings. It's where they use the computer to -- you know, particularly for immigrant populations -- to communicate with their homes.

There are social services being provided by some of these artistic and cultural institutions that I think that people forget about sometimes. And art directors maybe haven't been so good about making that case, but they're trying to more now, and to remind people that arts are the way that we express ourselves, and that it's probably something that we need even more now.

JEFFREY BROWN: Well, I sort of hate to end on what might be a negative answer from you, but are you expecting that, in the coming year, we may see a number of arts institutions shut down and close?

MICHAEL KAISER: We've already seen many shut down over the last four months, and we're going to see more shut down over the next 12 months.

JEFFREY BROWN: All right, we are ending on a negative note.

MICHAEL KAISER: I'm sorry.

JEFFREY BROWN: I'm sorry I asked, but thanks very much. Michael Kaiser and Sue Hoye, thanks very much.

SUE HOYE: Thank you.

MICHAEL KAISER: Thank you.