The Economic Crisis: How will it affect arts funding?

BY Carrie L. Kaufman

It’s the best of times and the worst of times. On the one hand, grants seem to be flying around like crazy. Steppenwolf and 10 other arts groups got $1 million each from the Doris Duke Foundation , and Jackie Taylor picked up a cool quarter of a mil towards Black Ensemble’s new digs. Even playwrights have been getting money. In addition to its Doris Duke cash, Steppenwolf landed a grant from the Mellon Foundation. It’s part of a $10 million national grant to playwriting organizations and theatres to break the “workshop hell” cycle and get new plays produced.

On the other hand, Milwaukee Shakespeare announced it was closing it’s doors for good, just after it’s first production of the season. Over $900,000 of their $1.3 million budget was supposed to come from one foundation, the Argosy Foundation. But Argosy was hit hard in the financial meltdown, and had to pull funding.

Closer to home, the Oak Park Area Arts Council has been hit with a 15 percent cut for 2009 from the Village of Oak Park. And it might turn into 50 percent. The arts council is a partial regranting organization, and has given money to a number of arts groups, including Circle Theatre, Village Players, Oak Park Festival Theatre and A Sense of Urgency.

All of this leaves arts organizations large and small wondering, What’s going on here?

The short answer is that nobody knows. We are seeing the end of a boom era and the beginning of a recession, if not worse. Problem is, foundations can’t put the breaks on that fast. They must give 5 percent of their income based on a 3-year rolling average. The average for the last few years has been great, and organizations like the Mellon Foundation and Doris Duke must give that money away, even though their endowments have gotten substantially lower in the last couple of months.

But what happens after the beginning of the year? That depends. If the foundation has a fiscal year start in June, and the economy bounces back, then there should only be a small dip in funding, as the last couple of months will be averaged into three years. But if the economy doesn’t bounce back for a while—or if the foundation must close out its yearly books on Dec. 31—then the last couple of months could have long-term affects.

“As scary as this is, it ain’t nothin’ like what we’re going to see two and three years down the road,” said one arts funder.

What makes the funding downturn worse is that state and city budgets are affected, too. And remember, this all started when the real estate market collapsed, so even that once “safe” investment is now pulling things down.

“What we’re seeing now is the ripple effect of state funding cuts on municipal support of the arts,” said Ra Joy, executive director of the Illinois Arts Alliance arts advocacy organization.

The Oak Park Area Arts Council seems to have gotten hit from all sides. They suffered a 33 percent hit on their budget last year when Gov. Blagojovich slashed the Illinois Arts Council budget for political reasons. At the same time, the Village of Oak Park was looking at a $3 million deficit, which led to an 18 percent cut in their funding for the arts council. And Oak Park just built two new parking garages, which are now not generating expected income but have generated a great deal of debt. In August, the Village informed the arts council (and other Oak Park area not-for-profits) that they would be cutting an additional 10 percent for the fourth quarter of 2008, and 15 percent for 2009. And, according to Camille Wilson White, executive director of the arts council, there was mention of a possible 50 percent reduction.

White is adjusting her programming to the 15 percent cut, including halting a Gallery 37-type program called “Off the Wall” that was put in place just four years ago.

“We’re looking at programs and trying to save as much as possible,” White said. “It’s very difficult. It’s very emotional.”

Goodman executive director Roche Schulfer is not getting emotional about the economy, but he is being cautious. Schulfer has weathered recessions before.

“It’s important not to panic when you get into difficult times,” said Schulfer. “You have to stay ahead of the curve. Organizations that are facing other challenges right now—leadership challenges, funding challenges—they won’t fare as well” as those that are in good shape.

Joy feels that budget size may also be a factor in who survives and how well.

“We believe there will be an impact for all organizations, but we are confident that larger institutions will be able to weather this storm,” said Joy. “We need to provide support for small to mid-size organizations to help them.

“It’s like waiting for the other shoe to drop” Joy added. “We know there will be an impact, but we don’t know what it will be.”

“There’s always some anecdotal evidence that suggests that some people have done well in troubled times,” said Jason Heeney, executive director of the Mayer and Morris Family Kaplan Foundation. “This is really a question about individual giving. People who give from their salary are still giving because they’re still employed. People who give from their assets are not giving as much, because their assets are down.”

And many individuals have regular charitable contributions taken right out of their paychecks. Corporations like the Boeing Company encourage employees to give to the company’s employee community fund. If people already have money being taken out of their checks, and they still have their jobs, they won’t likely stop giving.

Boeing also defines giving as much by intellectual capital as dollars. The company has employees in leadership positions in over 66 non-profits in Chicago alone. And that intellectual capital is, according to Angel Ysaguirre of Boeing’s Global Corporate Citizenship group, hard to put a value on.

“When we think about how we respond to community needs, cash is only one way,” said Ysaguirre.

“It’s pretty comprehensive,” added Nora Moreno Cargie, Boeing’s Global Corporate Citizenship director. “We just don’t talk about the dollar.”

As much as arts organizations benefit from leadership, they do need dollars. More to the point, they need to know how to plan their budgets. Heeney is being cautiously optimistic about the next year and a half or so. He said he literally does not know how much is in the Kaplan endowment because it is fluctuating so much with the stock market turmoil.

“The month of October has been the most volatile the market has been,” said Heeney “It’s entirely possible the market will rebound to some pretty significant levels.”

By the beginning of the year, Joy hopes to have some more information, at least, on the affects of funding cuts. The IAA and IAC are launching a study “to assess the impact of this perfect storm that seems to be building on our arts sector.” They’re looking at state funding, energy costs and the economy, and how that is all affecting arts groups. Then they’ll start trying to get some of that money back.

At the very least, said Joy, “Our goal is to fully fund the Illinois Arts Council at $24 million.”

Oddly, as non-profits and foundations are scrambling, there is one organization that seems to be giving away more money. The MacArthur Foundation announced last month a stunning $68 million initiative aimed at helping, mostly low income, people stave off foreclosure. And they’re giving more to arts groups, too, through their regranting programs in association with the Driehaus Foundation and Prince Charitable Trusts.

MacArthur raised funding for their Driehaus Small Theatre and Dance Funding Program in 2008 to $300,000. That’s money Driehaus can give away to arts groups with budgets under $150,000.

MacArthur also increased funding for Driehaus’ Arts and Culture Funding Program, which targets groups with budgets between $150,000 and $500,000. At the beginning of the 2008, it went from $500,000 a year to $750,000 a year.

Then, said Driehaus’ Peter Handler, “just last month, they approved an increase for both of those programs,” bringing the small theatre program to $330,000 and the midsize program to $896,000. MacArthur also increased funding last month for the Prince program, which targets arts groups with budgets between $500,000 and $2 million.

Just last month. In the midst of the stock market dive and the collapse of Lehman Brothers and the $750 billion government bailout, MacArthur increased funding for the arts and low income home owners.

That’s fallback that no one in a Dickens novel ever had.