News and analysis
January 02, 2009

Recession Hits Arts Groups Especially Hard

Despite generally strong attendance at many nonprofit museums and theaters in recent months, many arts charities around the country are laying off workers or adopting hiring freezes and cutting other expenses in response to a falloff in donations from companies, individuals, and governments. And most are bracing for much tougher times ahead.

For some cultural groups, the strain has already reached a crisis point. Since September, several arts institutions have closed or come close to closing, including the Baltimore Opera; the Bead Museum, in Washington; Santa Clarita Symphony, in California; Opera Pacific, in Santa Ana, Calif.;and the Los Angeles Museum of Contemporary Art.

And as the economy worsens, philanthropy experts say arts groups could have a harder and harder time competing for donations against social-service groups.

“We know that in American society there is strain of thinking that there are bottom-line issues of life, health, and security that are more important than any other kind of issues,” says Randall Bourscheidt, president of the Alliance for the Arts, in New York. Donors “want to know that their money is going to meet people’s needs.”

But arts experts worry that the cumulative effect on arts organizations might not be realized by the general public until the situation gets especially dire.

“Arts organizations are so small that society at large doesn’t feel the impact of any one organization having problems,” says Michael M. Kaiser, president of the John F. Kennedy Center for the Performing Arts, in Washington. “It’s when you take them across the whole country and you add them up that it is so difficult.”

Cuts a ‘Shock’

The Santa Cruz Museum of Natural History, in California, for example, is scrambling to keep its doors open as city managers, faced with a budget shortfall, made the decision to discontinue financial support. The musuem says it could close as early as February.

City support has accounted for one half of the museum’s $500,000 budget, while the other half has come from donations to the Santa Cruz Museum Association, according to Jennifer Lienau-Thompson, the museum’s director.

She says the museum has been experiencing cuts since 2002 when the bust hit central California, but the severity of these latest cuts were a “shock.”

The Santa Cruz Museum Association is currently working to negotiate a deal with the city to keep the museum open beyond February, but even if some of the money is restored, Ms. Lienau-Thompson says the museum probably will have to undergo major changes to its operations.

Groups that rely heavily on government or corporate support, like the Santa Cruz museum, have been especially hard hit.

“It is how you manage yourself when things are good that helps you get through when things are bad,” says Mr. Kaiser, author of The Art of the Turnaround: Creating and Maintaining Healthy Arts Organizations.

“If you are a well-managed organization, if you were earning surpluses in the past few years, which was possible, and if you didn’t necessarily spend it but rather put together a cash reserve, this helps you weather this storm,” he says. “Many organizations did this in a wonderful way and other organizations did not.”

Taking a ‘Hard Look’

Even those organizations that managed to set aside some extra cash, or diversify their income sources, have felt the financial squeeze.

“Government and corporate funding are the problem,” says Ford W. Bell, president of the American Association of Museums, in Washington.

He says cuts in such donations — combined with individuals who may have to take longer to pay pledges or donors who cut back on contributions-create deficits that can’t be made up through attendance alone.

“All arts and culture groups are having to take a good hard look at their budgets,” says Mr. Bell. “ They will have to make it up through funding cuts, cutting back on travel, purchases, or furloughs.”

The New York Botanical Garden is doing just that. Despite an 8-percent increase in attendance in 2008, state and city budget cuts have the institution facing losses of $2-million a year, a 12-percent budget shortfall. “We won’t be able to replace government funding with visitation,” says J.V. Cossaboom, the charity’s chief operating officer.

In addition, “people are flocking to the Holiday Train Show but they aren’t spending at the shop,” Mr. Cossaboom says. He adds that income from online gift-shop sales is also down.

Through a hiring freeze and attrition the botanical garden is reducing its staff size by 10 percent. Forty-nine of 480 full-time positions the charity had at the beginning of 2008 will not be filled.

The museum’s exhibits have also suffered as a result of the financial crunch. Officials at the garden have decided to cancel the 2009 summer art exhibit, despite the popularity of its 2008 exhibit, which featured the sculptures of Henry Moore and drew so many visitors that it was extended through March of 2009. The program even made Time magazine’s list of Top 10 museum exhibits of 2008.

“We’ve decided we can’t afford the financial risk to do another summer program,” says Karl Lauby, vice president of communications.

Reducing Risks

Such assessments are becoming more common among arts groups.

The St. Louis Art Museum decided in November to delay the groundbreaking of a major renovation and expansion project, for which more than $120-million of the $125-million needed had already been pledged.

The museum’s director, Brent R. Benjamin, says officials are monitoring the credit markets closely and will go forward when they feel it is prudent. They are also watching to see what happens with wealthy donors, some of whom have asked to delay payments on pledges.

Even groups that have had recent financial successes are looking for ways to rein in expenses.

The Phillips Collection, in Washington, announced significant donations at the end of 2008 that more than doubled its endowment, to $38-million.

Despite the good news, the organization made an across-the-board 4-percent budget cut for this fiscal year, put a hold on filling on some key curatorial positions, and has decided to pass on a 2010 international collaboration, according to the art museum’s director, Dorothy Kosinski.

“We have to have a plan now and demonstrate to our trustees that we are thoughtful,” says Ms. Kosinski.

Other groups are also taking a more conservative approach to programs. “We take a lot of risks in our business, presenting new work, emerging artists, and unfamiliar work,” says Ken Fischer, president of the University Musical Society, in Ann Arbor, Mich. “We’ll still do some of it, but less than what we would normally do given the economy.”

Mr. Fischer speculates that audiences, too, may be looking for more comfort than risk these days from their entertainment. As an example he cites the record attendance at performances of Handel’s “Messiah” that his group presented in early December.

Even so, Mr. Fischer says the organization is likely to reduce its number of performances in the coming season, and will have to be open to discussions about staff reductions, as well as the possibility of tapping into reserves. “The rainy day is upon us,” he says.

Michigan has been particular hard hit by the recession, and arts groups have been feeling the impact for some time. In the last two years, the University Musical Society has dealt with the loss of major corporate support from Pfizer, which left the region; a drop in funds from the troubled automotive industry; and state cuts.

For the first time in its 130-year history, the music society has cancelled a planned performance. By cutting the play, which had been scheduled for March, the group will save more than $100,000.

Mr. Fischer stresses that it was not an easy decision, but one that enables the organization to have a positive bottom line at the end of the year. “We would rather make one difficult programmatic decision than make a lot of administrative and personnel cuts that really are debilitating,” he says. “We’ve had our challenges in past seasons and felt this was a preferable alternative.”

Closed on Mondays

In addition to scaling back programs, some arts groups are cutting their hours of operation.

The Virginia Air and Space Center, in Hampton, has decided to close one day a week to save money. As of now the organization plans to close on Mondays from January until early March, excluding holidays. It is also considering continuing the practice in the fall after the busy summer season.

The center has attracted higher-than-normal attendance, but cuts in corporate giving, as well as cuts to state funds for school field trips, have taken a toll.

“We are trying to be proactive rather than reactive and are making little adjustments along the way, says Kim Hinson, the center’s deputy director.

She says the Monday closure is on top of reductions to the advertising budget and the loss of one staff position. The decision has also been made to cancel a fund-raising event planned for 2009. “No one is going to a party when they are worried about feeding themselves right now,” Ms. Hinson says.

Free Passes

As social-service needs become more pressing during these tight economic times, many arts groups are looking for ways new ways they can work with such groups.

Mr. Bourscheidt, of the Alliance for the Arts, says arts groups need to foster the idea that “the deeper values of society that are in education and the arts are also important, and that these activities are not competing with basic needs, but compliment them.”

The Idaho Museum of Natural History, in Boise, for example, formed a partnership with Toys for Tots during the holiday season, offering free admission to anyone who brought a toy to the museum to donate to the program.

Teresa Nelson, the charity’s marketing manager, says the idea grew out of a desire to do something to help, as well as bring more people into the museum and the museum shop.

To stay in touch with its city residents, the Schenectady Museum and Planetarium, in New York, began selling memberships for public use to libraries and schools.

For every membership a library or school purchases, the museum gives them two. Library patrons can then check out the membership pass from the school or library, giving individuals who might not otherwise be able to go to the planetarium the ability to visit it at no fee.

“We do a great deal of work in the community to make business and legislators see us as critical to their area,” says Erin Breslin, a spokeswoman for the Schenectady museum.