Crisis and Blessing?

Prospects for Arts Funding in Challenging Times

Kelly Barsdate, Cindy Gehrig, Marian Godfrey, and Ed Pauly

Editors of the Reader invited GIA's research advisors to reflect on challenges facing arts grantmakers in light of current research findings on arts funding trends.

What do recent research findings suggest about the prospect for the support of arts and culture in the years ahead?

Ed Pauly: After a decade of dramatic growth in foundations' support for the arts, the funding news is now somber. Yet the meaning we make from the most recent study of foundation funding for the arts depends, as always, on the perspective we choose.

The foundation-centered perspective draws our attention to two marker events: the decline of the U.S. macro-economy and the terrorist attacks of September 11, 2001. Arts groups and foundation leaders feared that in the wake of these events, there would be a major retrenchment in foundations' support for the arts. Was there a major retrenchment?

It depends on what you think is "major." The reductions in support for the arts have certainly been wrenching for a sizable, but limited, number of foundations and their grantees. Overall, foundation grants to arts organizations fell by 3.5 percent in 2002. That represents $150 million, a serious sum by any calculation, but perhaps a relatively modest sum in proportion to the total of foundations' arts grants — over four billion dollars in 2002, up from $1.6 billion in 1995.

Foundation support for other fields fell by 0.7 percent in 2002. This is less than the decline suffered by the arts, but it does not appear to represent the massive turning away from the arts that many feared. No one can say what the next decade holds, but if foundations' arts dollars stay close to $4 billion for a few years, it is difficult to conclude that a disaster has struck the arts.

At the same time there is another, much sadder, perspective that we must not fail to see and understand. It is a perspective centered on the whole ecology of funding for the arts. While foundations occupy a crucial niche (roughly 13 percent of total arts support, excluding corporate foundations' donations), they in no way dominate the arts funding ecosystem.

When the U.S. economy catches cold, the arts funding ecology gets pneumonia. Economic decline has already triggered major cuts in the budgets of many state arts agencies, and further cuts are, sad to say, likely. Earned income from ticket sales and other retail activities is also harmed by any economic downturn, and takes time to recover.

The big picture is one of falling revenues that considerably exceed the capacity of the foundation sector to remedy. Compared to relatively undependable government funding sources and cyclical earned income, foundations look surprisingly steady and stable as supporters of the arts.

Cindy Gehrig: I'll answer from a regional perspective since most arts grantmakers aren't national funders — most of us act on a regional level. Once every five years, in a formal way, and more frequently in an informal sense, the Jerome Foundation conducts environmental scans of our funding regions. Most recently, that scanning has focused on changes in the economic capacity to give and the effect of these changes on program focus and structure decisions. In a period of declining financial resources, when Minnesota, according to recent figures, has lost its edge in terms of the percent of the philanthropic dollar going to arts and culture (down from 18 percent to 13 percent, a bit above the national average reported by the Foundation Center), we are concerned. This may be a one-year “blip”, but, then again, it may signal a downturn of some duration.

Fewer philanthropic dollars for arts and culture, for a period of at least three years, seems probable. Many of us have been doing analysis on a regional level that is similar to the national analysis done by the Foundation Center. The Minnesota Council on Foundations, for example, is assessing the degree to which private sector grantmakers are experiencing reductions in the market value of their endowments and the related calculations of annual distributions for grantmaking purposes. Communicating that information, in the aggregate, is a service the Council provides to the larger community.

How can arts grantmakers respond to declining resources?

Cindy Gehrig: How did Jerome Foundation respond to its own reduced resources? Not unlike many of our colleagues. Our initial decision was to limit the number of new organizations the Foundation supported and to do our best to remain loyal and supportive of those programs and organizations with which the Foundation had a long history. That lasted for one year. By then, it was clear that the economic downturn would be a sustained one and that rebuilding would unfold on a gradual incline. By year two, the current fiscal year, the Foundation changed its approach. Its program focus on emerging artists demands that the Foundation remain open to new artists and new organizations. Therefore, the Foundation needed to restructure its grantmaking to make room, each year, for the new. We divided our approach into three strategies: identifying programs and organizations that would no longer receive support from the Foundation; identifying organizations and programs that could sustain modest reductions in the annual level of support; and identifying organizations and programs that could be delayed in implementation. The first category is, of course, the most difficult, because it involves the Foundation taking a very hard look at its priorities and drawing fine distinctions among strong programs. The second has to do with trimming programs to eliminate useful components while protecting essential core components. The third, primarily voluntary in our experience, relies on arts organizations to address the frequency of presentation and production.

Sometimes the greatest pressure points on a regional level are capital campaigns of larger arts organizations planned for and initiated when the market was riding high; and now, frankly, an albatross around the necks of some organizations and a perceived threat to small and mid-sized arts organizations struggling to maintain operating income in these times. Although difficult to derail, some capital campaigns might be put on hiatus or curtailed until we have some evidence of sustained recovery. Shifting a larger portion of these capital campaigns to individual donors, albeit struggling themselves, may be what is necessary for institutional philanthropy to maintain the safety net of operating income for key arts programs and organizations.

Foundations will have different strategies for how they are going to respond in a period of reduced resources. We do well to remember that our programs of five to six years ago had validity then, when they were of a size similar to what they are now. Retrenchment can be approached in a thoughtful manner, although it is intensely difficult.

One more thought about responding to these challenging times. I want to encourage discussion about the importance of direct support of cultural activity — the production and presentation of the arts, the basic operating expenses of creativity, production, and participation. For a few years, let's suspend large-scale research and reduce or delay capital campaigns. Let's focus on funding the making and receiving of art, where adventure, risk-taking, and growth occur.

Can we, or how can we, look beyond the somber outlook of the next few years?

Cindy Gehrig: Even in times of reduced resources, we cannot simply tread water; we have to look to the future of the art. The Minnesota Council's survey found that both grant seekers and grantmakers expressed a concern that young and experimental artists and small arts organizations would find it increasingly difficult to receive support in these times. Although a study by the RAND Corporation, The Performing Arts in a New Era, found that small organizations may survive hard times through their resilience and their reliance on voluntary service, I am very concerned about them and the artists associated with them. It's too easy for a grantmaker to decide that one way of coping with reduced funds is to make no grants to organizations it has not funded before, or to make no grants to small and/or young organizations, thereby eliminating the new energy that makes our culture vibrant and progressive. In addition, the vigorous enrichment of culturally diverse artistic communities is frequently, though not exclusively, provided by small organizations on a regional and local level. If we cut ourselves off from these new and diverse voices, we do a great disservice to our present and future.

Marian Godfrey: Long-term patterns in the distribution of foundation funds are as important a consideration as short-term trends in the level of arts funding from foundation (and other sources). Building on Cindy's comments, for example, when and how will this country's increasing demographic diversity begin to be seriously reflected in foundation support of artistic production and participation related to the full panoply of our many cultural heritages? How will trends in arts production and arts participation influence grantmaking decisions? How fast will the creation and production of art in new digital media and in the online environment develop, and how will foundations interact with new art forms, unfamiliar aesthetics, and complex new challenges posed by the intertwining of production and consumption of digital work? Will the “perfect storm” of across-the-board declines in arts funding, coupled with an unsupportive political environment for the arts, result in more foundation support of arts advocacy efforts?

Kelly Barsdate: To bring in a public agency perspective, I first would note that much has been written in the press about the current fiscal crisis at the state level and the effects of revenue shortfalls on government funding for the arts. Proposals in a number of states and cities would eliminate — or radically reduce — public arts funding. The story is being told about how counterproductive and short-sighted such proposals are, the devastating effects they can have, and the staunch resistance with which such schemes are being met.

But, in response to the question, Jonathan Katz, president of the National Assembly of State Arts Agencies (NASAA) and I have been paying attention to what public grantmakers are saying to one another. When we are done coping with today's headline, tomorrow's budget hearing, and how best to allocate this quarter's shrinking funding pie, what collective wisdom and long-term perspective do we bring to this work? And is there any good news to be found? As we speak with colleague grantmakers across the country, a few themes are beginning to crystallize:

“We've been here before and know what it takes to rebound.” In response to cutbacks in the early 1990s, our field learned many survival lessons: We learned how to align ourselves with broader public policy goals. We learned the necessity of bipartisan support. We organized advocacy networks, and began discussing the impact of arts funding in factual terms. We pursued partnerships (especially in the areas of arts education, cultural tourism, and community development) that broadened the impact of our programs, brought in new resources, and captured the imaginations and enthusiasm of elected officials. Despite the persistent myth of the erosion of public funding for the arts over the last decade, these strategies worked. Yes, a robust economy and budget surpluses helped boost all areas of government spending. But the mere availability of public dollars hardly guaranteed that they would go to the arts. State and local arts agencies nevertheless made a compelling case for this investment. Spending on state arts agencies more than doubled between 1992 and 2001, while county and municipal spending on the arts grew rapidly, as well, reaching $800 million. This is a new environment, and the underlying fiscal stresses shaping all government spending decisions are more severe. But we have a platform of applicable skills, knowledge, and experience upon which to draw. Years of budget ups and downs have taught us how to adapt strategically and how to capitalize on new resources as they become available.

“Putting us under scrutiny only spotlights our accomplishments and support.” As policy makers consider where best to invest increasingly scarce resources, they assess the public benefits of those investments. In the process, many are learning for the first time about the scope and impact of arts funding. The media, too, has played a role in profiling how public arts dollars are used, how cutting one part of the interconnected arts funding web destabilizes the whole, and how large cuts negatively affect not only the arts community, but the average citizen. In some places, public officials are learning that targeting the arts is a political liability. States and cities that have cultivated this kind of support — the state of Louisiana and the city of Charlotte are just two examples — are the nation's learning laboratories.

“This may be the best time to put into practice what we've always known is necessary for long-term support.” In the last eighteen months we've seen the emergence of multi-sector advocacy coalitions, the building of which is facilitated when the pressure to combine and protect resources is greatest. We're seeing a redoubling of efforts to unite disparate voices (such as urban and rural groups, or artists and businessmen) around shared goals. Some grantees who in years past have called to ask “Where is my check?” are now phoning to ask “What can I do to help?” Our current need for a united — and motivated — cultural constituency is pressing, and the risks of not acting are clear. Now may be the best opportunity we've had in years to galvanize our advocacy, to hone our rationale, to increase the quality of our evidence, and to educate policy makers about the value of the arts to the United States electorate.

In spite of financial difficulties, enlightened elected officials continue to invest in the arts because they understand the benefits it returns. And in spite of shrinking resources, public arts grantmakers understand that the decisions they make now are just as important and influential as the decisions they make when resources are plentiful.

Do you have observations or advice about how we share information and use research?

Kelly Barsdate: The decisions made by public arts grantmakers are aided by the forums provided by GIA and NASAA. These are valuable networks where grantmakers can share triumphs and disappointments, pool what we learn, and set the stage for future success.

Cindy Gehrig: At a recent annual conference at the Minnesota Council on Foundations, foundation grantmakers spoke about the necessity of knowing what other grantmakers are planning to do and what the choices before us are. If we make our decisions without consulting one another, there is a danger that cuts or trims might adversely affect one segment of the arts community more than another. A collective effort to insure a basic web of support that sustains the cultural community in difficult times is advisable. Communication, without collusion, should be encouraged.

Marian Godfrey: I am very interested in the ways research can help guide foundation decision-making. For example, GIA and the Foundation Center have tracked patterns of foundation support for general operations since the first Arts Funding benchmark study, published in 1993. The first study included surveys of both arts funders and cultural organizations. Both groups identified grants for general operations as the most important type of support (compared to program or capital grants). At the same time, Foundation Center data showed actual foundation dollars going to general operations — including funding exclusively for unrestricted support and annual campaigns, — at a low ebb of 13 percent of total grant dollars in 1989. Since then, subsequent editions of the report have tracked increases in grants for operating support to 18 percent in 2001. Although it is impossible to draw any firm conclusions about whether the research findings led to the increases in operating support, it is certainly the case that the research illuminated a discontinuity between foundations' values and their behavior, and that patterns of giving subsequently shifted somewhat.

Other recent research offers foundations and other arts funders the opportunity to re-assess their goals and strategies for the distribution of resources. For example, will foundations develop new approaches for supporting participation in the arts based on the emerging data and research that documents, for the first time, the remarkable extent of Americans' hands-on, avocational creative practices? (See, for example, RAND's The Performing Arts in a New Era which cites two federal government surveys indicating that in 1990 between 30 million and 50 million people identified themselves as pursuing some kind of personal creative practice.) Will the research findings soon to be published by the Urban Institute as a result of the three-year Investing in Creativity study result in either increased funding for individual artists or new approaches to sustaining artists' career and professional development?

Research can be used by grantmakers for several purposes:

• To enhance our ability to describe and define our own activities and those of our constituencies (e.g., how many foundations support the arts and what is the aggregate level of giving; how many nonprofit arts organizations are there and how are their numbers distributed across disciplines?) — a basic requirement of professional practice.

• To track trends and patterns by gathering comparative information over time, as do the GIA/Foundation Center Arts Funding studies. This type of research asks and answers questions along the lines of “how are we doing (e.g. compared to last year, or compared to others)?”

• To help guide philanthropic policies and practices, as described previously. Research for this purpose asks value-based questions such as, is our field providing enough, or the right kind of, support for community-based arts organizations or for individual artists?

• To support advocacy activities such as arguing for support by others of the things we value (e.g., pressing the case for more local or state or federal government support of cultural activity). To be effective in advocacy, data and research findings may require significant stratification, as well as fine-grained analysis. For example, to argue for more local government support of culture in my community, I may need specific comparable data about local government support for culture in other similar communities, along with indications of what that support has accomplished.

Research can be an effective tool for grantmaking when it answers specific questions we have posed for ourselves, and when we have a concrete sense of why we are asking those questions and what we can do with the answers.

Any final comments?

Ed Pauly: The fundamental question for foundations that support the arts, it seems to me, is: If foundations cannot make up for the economic losses exacted by other funding sources — and they surely cannot — what can they do? Because they are unable to turn back the tide (which will rise again in its own good time), foundations must build above the waterline. How best to do that is not a question of funding's magnitude or distribution; an influx of a few hundred million foundation dollars, no matter how broadly spread, would not fundamentally change the ecology of arts organizations. Building above the waterline requires every funder to interrogate and assess its purposes, its contribution to the long-term development of the arts, and its effectiveness.