Regional Research on Arts Funding

Published in: GIA Reader, Vol 14, No 2 (Summer 2003)

Moy Eng, Cynthia A. Gehrig, and Ann McQueen

Recently, several studies of arts funding have been conducted in specific cities and regions. We report on a few of these here. In the winter 2002 issue of the GIA Reader Vol. 13, No. 1, Lisa Cremin and Kathie de Nobriga reported on a comparative study of arts funding in Atlanta and nineteen other cities. The report was both an inspiring and a cautionary tale for Ann McQueen and others in Boston as they planned the study that Cindy Gehrig reviews below. If you know of or produce regional studies, we would welcome information about them or review copies.

Funding Cultural Organizations in Boston
Cynthia A. Gehrig

Dallas, Minneapolis-St. Paul, New York, Chicago, Cleveland, San Francisco, Pittsburgh, Charlotte, and Seattle owe a debt of gratitude to The Boston Foundation for the recently published Understanding Boston: Funding for Cultural Organizations in Boston and Nine Other Metropolitan Areas. In assessing Boston's cultural community as it compares to nine other metropolitan areas, The Boston Foundation has presented data that those nine metropolitan areas can quickly and appropriately use. Furthermore, the method of analysis is such that other metropolitan areas will also find this book informative, useful, and a base for advocacy.

The author is Susan Nelson, principal of TDC, a nonprofit provider of technical assistance and management consulting services. In early 2002, The Boston Foundation asked itself and its community two questions. The first had to do with financial support available for metropolitan Boston's arts and cultural sector compared to other regions of the country, and the second was what impact that support had on the sector. The study components assessed cultural financing on a per capita and per organization basis, government funding at three levels (federal, state, and local), private and corporate foundation giving, and individual philanthropy. The study also examined, in limited terms, the financial stability of arts and cultural nonprofits for different budget levels.

In the several available sources that can be comparatively examined, the study focused on the National Center for Charitable Statistics at the Urban Institutes' Center for Nonprofits in Philanthropy. The Center compiles information on all nonprofits reporting financial information on IRS Forms 990. Since the most complete data available was for 1999, that was the base year for the Boston study. TDC used 1992 as the comparison year for growth trends. Select data from 2000 was used to confirm trends, and 2002 information was used when appropriate. Additional data sources were the census, the National Assembly of State Arts Agencies, Americans for the Arts, and the Foundation Center.

A six-page executive summary provides an excellent and thorough presentation of the facts and assessments. Boston, on a per capita basis, has the highest number of arts and cultural nonprofits in the study group, outpacing even New York. In addition, its cultural community grew at the fastest rate over the course of the 1990s. Not unlike other metropolitan areas, the largest rates of growth tended to be in the number of organizations with smaller annual budgets. In fact, the bedrock on which the comparisons are based, has to do with budget size. Arts and cultural organizations were divided into five categories: those with annual budget ranges of under $500,000, $500,000 to $1.5 million, $1.5 million to $5 million, $5 million to $20 million, and over $20 million. In Boston, over 80 percent of the organizations in the study fell in the smallest budget range.

Interesting comparisons of earned and contributed income were drawn in each of the ten metropolitan areas, and within each of the five budget-size categories. This yielded data about the particularities of those two primary income streams that could be useful to the other metropolitan areas. While Boston, for example, enjoys a fairly strong base of individual contributors, it does not have the depth and breadth of support from foundation and government resources that other areas have. Foundation and government support is particularly important for small and mid-sized organizations. Larger cultural institutions have more highly developed and loyal networks of individual supporters as well as the ability to command regular subsidies from foundation and government donors.

The charts and graphs that fill the published document present in a clear way the comparative data that is at the heart of the report. There are fascinating comparisons among the ten metropolitan areas of the growth in cultural nonprofits by budget category, of contributed income per capita and per cultural nonprofit, and of the growth in the number of nonprofits relative to the growth of contributed income.

Chapter 2 raises the important question of how financial resources are distributed across the sector. While the information would not be surprising to someone who has worked in the field for several years, it nonetheless affirms the particularly difficult positions of small and mid-sized arts and cultural organizations as the economy declines and sources of support most essential to them are weakened by declining state commitments and foundation endowments. In Boston, 65 percent of total contributed income in 1999 went to organizations with budgets greater than $20 million. Because the sources of this study's data did not differentiate among endowment, capital building projects, operating support, and project support, it's very possible that the percentage might be skewed by the selection of a particular year and the timing of capital and endowment campaigns of larger institutions. The same potential for skewed data certainly exists in the other nine metropolitan areas. One of the weaknesses of the source of data is that this kind of differentiation is not possible. Similarly, the study does not differentiate by arts discipline or type of organization, so one cannot infer, for example, that the dance community might be particularly at risk as compared to the museum community in Boston.

Also drawn from the Form 990s is data on net worth positions. Boston's mid-sized arts and cultural organizations have the second highest total negative net worth next to New York and the third highest rate of negative net worth per capita after New York and Minneapolis-St. Paul. Boston ties with Minneapolis-St. Paul and is second to Dallas in its percentage of mid-sized nonprofits with negative unrestricted assets. Net worth comparisons are drawn in each of the budget categories. This raises questions of under, adequately, and over funding different segments of an arts and cultural community. Factoring in the current economic situation raises real questions about organizational stability and viability moving forward.

The report includes a descriptive chapter covering the types of contributed resources available to cultural organizations. It contains interesting comparisons of average state arts agency grants per nonprofit and per capita in the ten metropolitan areas. It also presents comparative data on the funding from in-state and out-of-state foundations giving more than $500,000 to arts and culture. There is a brief discussion on corporate funding and local arts agency support.

Chapter 4 sets forth the implications of the findings, noting the pressing need to address the inherent weaknesses in Boston's current funding structure. It argues for leadership in developing a consensus about strategies for action and mentions advocating for a dedicated revenue stream or tax, encouraging new foundations to support arts and culture, promoting increased corporate philanthropy, developing additional mechanisms to build and renovate cultural facilities helping smaller groups benefit more from individual giving perhaps through united fundraising, and helping all agencies optimize the potential for earned income.

When it comes to building resources for an arts community, a key factor in forward movement is public will. This report is designed to appeal to Boston leaders who want their metropolitan area to compare favorably with other areas. It is about attracting and keeping residents, and attracting and retaining new businesses, as well as building a vibrant cultural community. The Boston Foundation asserts through this study that strengthening the arts and cultural community environment in Boston is a complex matter. The data collected becomes a basis on which Boston can articulate a more vibrant vision of its community.

Cynthia A. Gehrig is president, Jerome Foundation.

Minnesota Arts Funding: Observations and Reflections
Ann McQueen

Minnesota must surely be a paradise for grantseekers and funders alike... or so anyone listening to conversations here in Boston, Massachusetts would think! As we reviewed the state of our own cultural funding, we had a few early warnings that not all is well in Minnesota. Yes, we know some details about the decline of Minnesota's corporate funding. In fact, this corner of New England may already have experienced that loss over the last decade as the number of leading corporations declined significantly with mergers and acquisitions. But, when Bostonians look at Minnesota we see a place where even the corporate leaders worry about the implications of mergers on philanthropy, something we've not experienced. And, where else but in Minnesota could we expect to find an organization like the Center for Ethical Business Cultures?

Indeed, the cultural contrast between the two regions is sometimes so stark as to make a Bostonian's customary envy and cynicism feel justified. But today it is clear that both states are facing the same economic downturn and similar declines in all sources of funding without any retrenchment on the demand side, especially as both funding communities face very ambitious capital agendas. It is clearly time to put aside cynicism and envy to pay closer attention to how our Minnesota colleagues are thinking about and dealing with these challenges.

When Anne Focke proposed that Boston and Minneapolis review each other's funding reports, I didn't realize how hard it would be to leave the Boston Foundation's own Understanding Boston effort behind. Funding for Cultural Organizations in Boston and Nine Other Metropolitan Areas was our region's first attempt at quantifying the underlying malaise felt by leaders of cultural organizations both large and small. What started as a “show me” question from a new foundation president is now a publication that puts real numbers to the surprising breadth of our cultural community, the somewhat startling lack of local foundation and government support, and the sector's subsequent reliance on individual donors and national foundations. We looked at a lot of IRS and Foundation Center data to discover, for example, that in 1999 there were only eight foundations in metro Boston making grants totaling more than $500,000 a year to cultural organizations, while metro Minneapolis-St. Paul had seventeen such foundations. (Yes, we should be so lucky!)

In comparison, I am asked to consider the Minnesota Council on Foundation's first qualitative report, Minnesota Arts Funding: Observations and Reflections. After twenty years of quantitative research, MCF has temporarily put aside its hard data analysis in favor of interviews and surveys. Noting “perceptions influence how people interact with each other, how they make decisions, and how they plan for the future,” MCF asks grantmakers and grantseekers to speak about their current conditions and challenges.

Their voices are very familiar to this Boston-tuned ear. The report characterizes the arts funders — a strong cohort of private, public, and corporate grantmakers, including many that are directly involved in supporting artists and the creation of new, cutting-edge work — as thoughtful and reflective, yet at the same time isolated and not necessarily responsive to changing needs. And, by the way, these funders are not always forthcoming about their grantmaking priorities. Ouch.

The grantees, too, are instantly recognizable — the small organizations feel marginalized compared to the majors who feel that funding is pitched only to new emerging agencies, ignoring their more mature institutions, which don't need “to change directions or find new avenues for responding to changing audience needs.” Even, apparently, in Minnesota, everyone is convinced that the other guy is getting funding at their agency's expense. This is strong stuff. Precisely because the individual voices are so clear, this report comes close to philanthropy's version of reality journalism.

The report is elegantly and concisely written, yet in only ten pages it covers at least as many topics, from the perceived lack (or not?) of general operating support to concerns over organizational capacity, capital campaigns, and art in the suburbs. Only the government voice seemed to be missing, but a check of the interviewed funders included a representative of the Minnesota State Arts Board, so I assume that in Minnesota public funders don't differ significantly from their private counterparts.

The report seems a completely accurate reflection of Minnesota's cultural funding system. And, state cultural differences aside, it seems to reflect the feelings and perceptions of funders and grantseekers beyond Minnesota as well.

As I collect comments about Funding for Cultural Organizations in Boston... and watch the understanding of its findings spread from the hundred or so people we engaged at the start to a broader state-wide and even national audience, I am particularly aware that the full impact of this kind of work may only be felt long after its publication date. In this light, I wonder how the Minnesota study was received upon its release and how its impact will play out over the next several years. Will the Minnesota Council on Foundations repeat this survey format? Will the funders and grantees be interested in participating again? For my part, I hope that the Boston Foundation and others in this city will continue to conduct quantitative studies. As a cultural community, it's only been in the last few years that we've begun to aggregate the kind of hard data that Minnesota and MCF track so regularly. For MCF to add this excellent qualitative report on top of such a solid foundation of data is the icing on the cake. Yes, I am envious.

Ann McQueen is program officer, The Boston Foundation.

San Francisco Bay Area
Moy Eng

The San Francisco Bay area funding environment has become increasingly grim over the past two years, with substantial reductions in arts grantmaking budgets by major area funders. In a recent survey conducted by the Hewlett Foundation, foundation arts grantmaking by Bay area foundations in 2003 was down by approximately 37 percent from 2001.1 The California Arts Council budget was reduced by more than 60 percent for FY03 and municipal funding sources are down 10 to 20 percent. Hewlett Foundation grantees report that individual giving is down substantially, in the realm of 20 to 50 percent, and corporate support varies drastically, from a 25 percent reduction to, in some cases, zero funding. While grantee reports about ticket revenues also vary, the general trend has been downward. At the end of 2002, the total net loss was more than $25 million from reductions by the California Arts Council and Packard Foundation alone, and unfortunately more are on the way.

The impacts are profound, affecting not only the quality of our lives, but the economy as well. In California, the arts are a $16.75 billion a year industry and that figure does not include any aspect of the entertainment industry or private-sector arts fields, from high tech to architectural design. The nonprofit arts sector is directly responsible for over $830 million in revenue and more than 400,000 jobs in California. In terms of jobs, that means this sector accounts for more jobs “...than the legal profession, corrections and police officers, forestry and fishing (sectors) combined.”2 As a result of the decline in support, there has been “...a 14 to 22 percent reduction in performances, concerts, festivals, and other cultural events. The impact is an economic loss of $3.63 billion in economic activity and... as many as 20,000 jobs.”3

In response, many San Francisco Bay area arts organizations are scaling back budgets by 20 to 60 percent in order to survive. The most dramatic example is the San Francisco Opera (SFO) that ended its 2002 fiscal year with a $7.2 million deficit. As a result, the SFO leadership intensively scrutinized its operations and is downsizing its organization by 25 percent over the next three years by reducing its overall budget from $63 million to $47 million.

What's ahead? Overall, while artists and arts managers are besieged and challenged to stay alive, a number are looking at the longer-term challenges of strengthening the arts infrastructure. With the impetus of the recently released study, Investing in Creativity: A Study of the Support Structure for U.S. Artists, conversations are beginning among artists, managers of artist-centered organizations, and funders about how to increase visibility and support for employment, insurance, and space for area artists. Concurrently, Bay area grantmakers have been meeting in various forums to share and identify areas of greatest concern, while focusing their presently reduced grantmaking budgets on their core priorities. For instance, to help alleviate the impacts of widespread funding cuts, the Hewlett Foundation made supplemental grants to two programs targeted to small and mid-sized arts companies. The Cultural Council of Santa Cruz County, a local arts council, received a $50,000 supplemental grant to keep its regranting program intact. The Northern California Grantmakers' Arts Loan Fund received a $100,000 supplemental grant to increase its loan pool and enable the Fund to better respond to the increased demand for cash-flow bridge loans from small and mid-sized arts organizations.
Footnotes
1. Arts Grantmaking: Budgets of Largest San Francisco Bay Area Foundations, 2001-2003
2. Testimony to the Joint Committee on the Arts by Barry Hessenius, executive director, California Arts Council, February 7, 2003
3. Ibid.

Moy Eng is program director, performing arts, The William and Flora Hewlett Foundation.

New York Metropolitan Area

Earlier in 2003, the Foundation Center and the New York Regional Association of Grantmakers (NYRAG) released a report on trends in foundation giving in the New York Metropolitan Area from 1992 to 2000. As with the Foundation Center's study of foundation arts giving, the report is based on data from grants of $10,000 or more awarded by slightly more than 1,000 of the leading private and community foundations, 173 of which were from New York.

Consistent with national trends, in 2000 education ranked as the top funding area among New York area foundations, accounting for 21.2 percent of all foundation grant dollars; this compared with 25.5 percent nationally. Perhaps more interesting for arts grantmakers is the fact that in the same year New York area foundations diverged from their national counterparts and gave the second largest share of their grant dollars to arts and culture, or 16.3 percent. This compared to a national arts and culture share that year of 12.0 percent, representing the fourth largest share after education, health, and human services. It is important to note that, in New York as in the U.S. overall, these percentages change — in 1992 arts and culture received 15.1 percent of New York area foundation grant dollars and in 1996 the percentage was 12.4. Although it is likely that a study done today would present a somewhat different picture, the substance and gross ratios of New York area foundation giving have probably stayed fairly stable within this range — 12 to 16 percent.

Reporting to the NYRAG Times (spring 2003), Darcy Hector (Robert Sterling Clark Foundation) observed that a principal reason for the relatively high level of support for the arts is New York's history as a cultural center. “New York City, being the cultural capital of this country and perhaps the world, has many large institutions with very large budgets,” she said. Pointing to the American Museum of Natural History, the Metropolitan Museum, Museum of Modern Art, and Metropolitan Opera, she noted, “these are flagship organizations for our nation and require a lot of support. And unlike similar national institutions in D.C. — like the Smithsonian and Kennedy Center — they receive little federal money.”

Hector also added that not all the arts money from New York foundations is spent in New York City. Because the area is home to many of the largest foundations, a significant portion of foundation grantmaking supports national and international arts programs and institutions.

Regional Research References

Understanding Boston: Funding for Cultural Organizations in Boston and Nine Other Metropolitan Areas, Susan Nelson. 2003. 58 pages plus 28 pages of appendices. The Boston Foundation, 75 Arlington Street, Boston, MA 02116, 617-338-1700, www.tbf.org.

Minnesota Arts Funding: Observations and Reflections, November 2002. 10 pages. Minnesota Council on Foundations, 612-338-1989. The report is available online at www.wcf.org (select “Trends & Analysis”).

New York Metropolitan Area Foundations. 2003, 64 pages, The Foundation Center 79 Fifth Avenue, New York, NY 10003-3076, www.fdncenter.org.