The Future of the Arts In California

Critical Issues Facing the Arts in California, Excerpts from a Working Paper

The James Irvine Foundation and AEA Consulting

The cultural sector does not exist in a vacuum. It is being challenged by major demographic, economic, technological, and social factors outside its immediate control. While the commercial arts and individual artists are also struggling to adapt to these changes, for a variety of reasons the nonprofit arts sector has been particularly slow to respond effectively.

A preliminary look at trends suggests that the future of the arts is likely to be neither conclusively negative nor positive, but cer-tainly will be different than it has been in the past. In fact, the research suggests that nonprofit arts organizations, which are only one of many elements in California's complex system of arts and culture, are likely to become increasingly peripheral as the modes of creating, delivering, and consuming artistic content and experience are affected by large-scale changes in the broader environment. For the nonprofit arts sector, and its investors and stakeholders, to face these shifts honestly and develop a more sustainable cultural ecosystem, we need a process that is built on a common understanding of the larger environmental context and on the evolving dynamics of cultural provision and consumption. It is critical that future decisions by individual artists, cultural organizations, funders, and other policymakers be made in the context of global and local realities.

Even as they see audiences and funders pull away, many cultural nonprofit groups still insist that the current challenges are a result of a cyclical economic downturn. The evidence suggests that we are experiencing a permanent structural change. The environment for arts and culture in California and the rest of the U.S. has irreversibly changed, and the nonprofit arts sector has reached a breaking point where it must adapt to changing technologies and consumer demand or become increasingly irrelevant. Major external influences include:

• Changing demographics, which have implications for the way that culture is created and consumed, as well as for the types of creative work that are considered art;
• Increasing reluctance of government to spend money on public services, including culture, that are viewed as nonessential;
• Growing dominance of the market in all spheres of American life and the breakdown of the clear distinction between for- and non-profit sectors;
• New technologies, which are transforming the way people work, play, get information, connect with others, share resources, and create and participate in culture; and
• A shift in the way the public values art and culture, both in style and in substance.

Critical Challenges Facing the Arts
Our research has identified five major challenges to the nonprofit arts in California that serve as the starting point for further discus-sion. The challenges are outlined here in broad categories: Access, Cultural Policy, Arts Education, Nonprofit Business Model, and Preparing the Next Generation of Artists and Arts Managers.

1. Access
As a result, in large part, of the Internet and other communications technologies, there is wider and more democratic distribution of artistic offerings and a proliferation of ways to participate in culture. Affordable personal and home-media delivery mechanisms have spurred a corresponding growth in specialized products and cultural micro-markets. If we use a broad definition of cultural participation, including attending “low brow” cultural events such as movies and street fairs, playing in a garage band or painting on Sundays as well as attending museums, regional theaters, and other “high brow” institutions, people's engagement with the arts is healthy nationwide. Some estimates that include the “unincorporated arts” — defined as community, avocational, or folk arts — suggest that as many as 95 percent of adults in this country participate in some kind of cultural activity on a regular basis.

Faced with all this activity, the institutionalized nonprofit cultural sector and traditional corporate cultural providers are struggling to maintain their edge, yet artistic creation is flourishing. An increasing number of artists are successfully self-producing and self-marketing, building networks of audiences and supporters through inventive uses of communications technology. The vast amount of cultural content currently available intensifies competition for consumer attention, and increasingly audiences expect artistic crea-tors and distributors to be technologically literate, responsive to their personal interests, and constantly generating fresh content. As people's interest in participatory art and the pursuit of personal creativity grows, there appears to be a simultaneous decline in public appetite for traditional forms of nonprofit arts presentation and interpretation.

2. Cultural Policy
California, like most states in the U.S., lacks a unified cultural policy to guide the strategic development of the field and to maximize public and private investments at both state and local levels. Numerous California funders have supported policy development in the environment, health, education, and social services, but very few funders here have invested in cultural policy. Cultural policy should be based on a broad assessment of the value of the arts to the public and an analysis of the supports needed to build a healthy sector and provide broad-based public access. This requires informed research and reliable data, which is lacking in the arts. Nonprofit cul-tural organizations have grown exponentially in number and size over the past two decades, but the sector is fragmented, undercapi-talized, and disconnected from an understanding of its public value.

In California, the arts lack the essential policy instruments available to many other sectors, including: broad-based consensus over public value, understanding of the legitimacy of public support because of market failures, a solid causal model of the effects of in-vestments, and standardized evaluative measures for the success of investments. An effective cultural policy would not simply focus on increasing financial appropriations to nonprofit cultural organizations, but on creating a shared understanding and compelling argument about the public value of culture. It would invest in building the integrated and strategic array of institutional and non-institutional supports that are needed to provide wider access to the arts and to increase universal appreciation for the value of the arts and culture across diverse publics.

3. Arts Education
Multiple studies have shown that exposure to the arts at the elementary and high school levels is a primary determinant in adults' subsequent valuation of and participation in the arts. Arts education correlates with overall academic success because involvement in the arts has a positive impact on children's self-esteem, curiosity, creativity, and ability to collaborate and work in teams. Yet two generations after Proposition 13, most California school districts are strapped financially and have sparse, if any, resources to sup-port solid, sequential arts education. Even where such resources are available, school teachers and administrators are not well-equipped to integrate the arts into school curricula because they were not exposed to the arts during their own elementary, high school, and professional educations. While polls show that a vast majority of California adults (as many as 90 percent in the San Jose area, for example, and close to 99 percent in San Diego) would like to see their children receive three to four hours of arts in-struction per week, there has been no consistent, statewide effort to restore this vital element to the arts ecology. Governor Schwarzenegger's proposal to allocate $100 million to arts education in the FY 07 state budget is a positive step, but only a begin-ning in what needs to be a long-term, comprehensive, inventive, and energetic re-investment strategy. Because of its broad-based public support, arts education has great potential to be a galvanizing force.

4. Nonprofit Business Model
For the past four decades the nonprofit cultural sector has been encouraged to create new organizations and expand facilities, without a concomitant emphasis on building appetite and audiences for the products and services of these institutions. There are approxi-mately 50,000 nonprofit arts organizations in the U.S. today (up from a few thousand in 1960), and nearly 10,000 in California alone.2 As a result of this growth, many believe the sector is over-built and unsustainable at current levels of attendance and investment. The basic revenue model for nonprofit arts organizations is changing quickly. Whereas ten years ago, arts groups could rely on a combination of public funding, philanthropic resources, and audience fees, now public funding at federal, state, and local levels is declining (in some cases, such as California, very precipitously). Overall, philanthropic and corporate funding for the arts is not keeping up with the growth in nonprofits (and in many places is being reduced), and earned income from audiences is not likely to make up the difference as attendance, overall, is remaining static or declining. Yet few arts organizations are strategizing new business models in response to these trends. Many, in fact, are still increasing fixed costs (often with incentives from private and public funders) at a time when operating income is becoming increasingly difficult to generate. The vast majority of cultural organizations have spent little time or money on research to determine the motivations of either their traditional audiences or potential new markets. For an increasing number of nonprofit cultural groups, the income/expense sheet does not balance.

The changes in the environment for culture necessitate that artists and arts managers develop new skill sets to be successful, but so far the cultural sector has not made this a priority. Blurring the boundaries between the commercial and nonprofit arts means that artistic legitimacy is no longer the sole province of the nonprofit world. Many young artists and cultural workers are abandoning the 501(c)3 nonprofit sector for more nimble, flexible organizational models, and increasing numbers of talented young people are es-chewing employment in the nonprofit arts (with its poor salaries and few employment benefits) to take jobs in the more lucrative commercial sector. Young artists are not being prepared for the realities of the workplace into which they are moving; young arts managers and administrators, too, are not being adequately trained to understand the new context for nonprofit arts development and presentation. In addition, the cultural sector is not attracting sufficient numbers of talented young people capable of replacing the generation of leaders that will retire in the next ten to fifteen years, and boards are not being adequately prepared for requirements of leadership and service in the era of increased public scrutiny and accountability, as exemplified in the Sarbanes-Oxley legislation.

The Broader Context for Culture in California
These themes, while also present elsewhere, take on particular coloration in California, given evolving demographic, economic, and political conditions in the state. The popula-tion of California is both growing and becoming more ethnically diverse. California is experiencing the largest growth in Latino and Asian populations of any state in the U.S., and its white population is now a minority. Twenty-six percent of the state's residents are foreign born (compared to 11 percent of the U.S. population as a whole).

As well as growing faster, California's non-white population is proportionally much younger than its white counterpart. This is par-ticularly true for Latinos. Whereas approximately 20 percent of the white population in California is over 65, this is true for only 4 percent of the Latino population. About 36 percent of California's Latinos are under 18, compared to about 20 percent of the white population.

Income levels in California are widely disparate by demographic group. Income is tightly linked to educational attainment, and California's Latino population is significantly less likely to be college-educated than any other group. African-Americans fall behind in literacy and college readiness as well. California is facing a significant challenge in preparing its population with the skills and knowledge necessary to sustain itself in the twenty-first century.
These demographic trends hold many implications for the arts. Younger and more ethnically diverse populations will have different aesthetic tastes than previous generations, as well as different patterns of consumption and participation, and — perhaps — less money to spend on art and culture. The generation coming to maturity now is unlikely to have appetite or appreciation for the great works of the Western European canon that comprise the bulk of our cultural institutions' collections and repertoire. New content, and new strategies, will be needed to attract them. Young people's modes of participating in the arts are influenced by both global con-sciousness and new communications technologies. Increasingly, cultural institutions are competing with sophisticated commercial offerings and home-grown options. If the current trends in income disparity continue and ticket prices for the arts don't fall, large portions of California's population may not have the means to enjoy the offerings of the nonprofit arts sector.

Although the economy shows signs of improving, the state is in poor economic shape to address the challenges of rapid and massive technological and economic change. The government is in an extended fiscal crisis and is pursuing a combination of spending cuts and borrowing to avoid annual deficits and correct the enduring structural deficit. This has provided momentum for those who call for downsizing government's role in all sectors, including the arts. Lawmakers are increasingly reluctant to spend money on social serv-ices that are perceived as frills, restricting public appropriations to “basic needs.” As a result, the last few years have produced sig-nificant cuts to funding for higher education, child care, social programs, and the arts and culture.

The cuts derive partly from ideological opposition to government spending, but they are also a reaction to the blurring of lines be-tween the commercial and nonprofit sectors. The increasing influence of the market in all spheres of American life is forcing non-profit sectors traditionally shielded from the marketplace (such as academic institutions, cultural organizations, and nonprofit health providers) to compete with commercial enterprises for customers, societal validation, and resources. The traditional rationale for government support — to offset market failures and increase equitable access to public goods — no longer seems to apply compel-lingly to previously funded nonprofit sectors. This is particularly relevant in the arts, given the dominance of the entertainment in-dustry in the California economy.

The underlying causes of the California arts sector's current conditions are complex and many decades in the making. But the chal-lenges can be dealt with if people who care about the sector are given the tools and resources to do so. Innovative solutions can lever California's rich cultural and artistic assets. If investments and policies are shaped strategically, informed by solid information about key trends, there is every reason to believe that California, and other states that respond to these trends imaginatively, will be dynamic and generative environments for culture in the decades ahead.

1. Porter, Michael E. and Mark R. Kramer. “Philanthropy's New Agenda: Creating Value.” Harvard Business Review. November 1, 1999.
2. Urban Institute 990 datasets and University of San Francisco Institute for Nonprofit Management.

AEA Consulting is an international arts consulting firm with policy, business, economic, and cultural expertise. It has offices in New York and London.

Critical Issues Facing the Arts in California is available at The James Irvine Foundation web site.