The General Fund Crisis Is Only Beginning

Good Morning.

“And the beat goes on……………………….”

Question: How many people can share the same pie before the share for each is so small it simply isn’t worth the effort to claim your piece?

One of the pieces of the arts organization income pie – along with earned income, corporate / foundation support and individual contributions / donations – is government money (be that money local, state or federal). Some organizations get more than others; some quite a bit; some hardly anything. Everybody knows that the total of all government funding has been shrinking, at least in part because of the down economy (though there are people who would argue that the economic downturn isn’t even the major reason for government cutbacks to arts funding).

Assuming for the moment though that it is the weakened economy that is the principal cause of the precipitous cutbacks at the local and state levels (Federal money, even in the aggregate, is only a large piece of the pie in predominantly small population states). Arts funding comes largely from the "general fund" (and not as the dedicated recipient of special taxes, fees or other revenue sources), and therein lies the biggest problem for us – because while fixed, mandated expenses (from health care, to education, to retirement funds) are soaring, tax and other revenue that feeds the “general fund” is shrinking. Even if the economy were healthier, the rise in fixed costs of government would still continue to climb, leaving ever decreasing discretionary money in the “general funds” – and arts funding usually comes from the discretionary part of the state, county or city budget (discretionary money is whatever is left after the government pays for all those things it is required by law, or contractually, to pay for (overhead, bond interest and the aforesaid mandated items etc).

And because of that growth in obligations and decline in income (all income), legislators and the executive branch of local and state governments are ever more jealously guarding that small pot of discretionary funds left in the general fund – for that pool of money has to pay for everything else that anybody and everybody wants – from infrastructure repair, to new programs for the needy; from higher education to beloved “pork” projects that make the legislator look good to his constituents. And that is the pool of money from which arts funding comes. Of course, it’s easy to cut arts funding as we have no political clout, no lobbyists, no relationships to protect us. And don’t forget we are still largely regarded as a "non-essential" – the proverbial frill and luxury. Put all these realities together and it doesn’t take Nostradamus to see that the local and state government sliver of the funding pie will likely continue to drop.

Take California as the example. Everyone knows we know rank dead last of the 50 states (behind even Guam for goodness sakes) in per capita support. When I was the Director of the CAC, the agency has a $32 million annual grants budget. That was five years ago. That’s $150 million less that has gone to the arts in that time span. This would be less of a devastating blow were the other sources of income rising – but foundation and corporate support, and for many anyway, individual contributions and earned income are also down. Factor in that decline, and it's more like $225 million less over the past five years.  Pretty soon we'll be talking "real" money, huh?  The size of the cuts may differ, but the scenario is playing out more frequently in states and cities across the country.  How many times are we going to be able to rally the troops to defend ourselves against efforts to simply end government funding support for the arts?  Does anyone seriously believe those efforts won't continue and even increase?  Does anyone seriously argue it will never happen?

Several years ago the arts education community in California was successful in getting the Governor to include $105 million for arts education as part of the Department of Education budget. But changes in budget language have now allowed local school districts to use their share of that money for whatever purpose they want – and in these cash strapped times, most of those local districts are using their share for any and everything (from base teacher salaries to equipment) but the arts. You know the rant – and what it has done to our sector. So even where there is seemingly definitive language in budgets that insure the money goes to a particular use, as long as that money originates from the general fund, and there is no language limiting the flow of the money to the designated use, it is not safe.

The government piece of our income pie is likely to take a further beating if, as many economists and others believe, we are now at the beginning of an untenable income / expenses crossroads where expenses will continue to grow unchecked, and income will not come anywhere near keeping pace. Something will obviously have to give – and it will be much simpler for elected officials – not the bravest and future thinking among us – to simply stop funding certain discretionary (general fund) areas - especially the ones who really haven’t the voice to do anything about it. That’s us.

The likely reality will be that “general fund” local and state government funding is going to continue to shrink – in many jurisdictions quite dramatically - and become more problematic across the board.

So what do we do about it?

To the extent we can figure out how to get it done – what we must do is get ourselves out of the discretionary funding pool side and onto the mandated / dedicated funding side. No easy task.  Things like the current attempt in New York City to pass a one percent for the arts bill – where, by law, one percent of the city budget would have to be allocated to the arts. Or California’s failed attempt to get a bill passed and signed authorizing a percentage of the state sales tax on art be allocated back to the CAC. Things like ballot measures that mandate income from certain sources be used to support the arts and arts education. The trick is to at least have statutory language in any measures authorizing and mandating allocation of specific source income to us – so that it is harder for future legislators to re-appropriate the money back to the general fund and then, of course, away from us. Better still are voter approved measures that require voter approval to repeal – or in California’s case voter approved ballot initiatives that are Constitutional amendments (like many states California’s Constitution is a huge tome – not the brief document of the Federal government).  Easier to defend against future attacks to get the voters to repeal, AND easier to defend against court challenges as well.

There are isolated examples across the country where the arts have been successful in these efforts, and though each venue is governed by vastly differing sets of circumstances, we need to learn from what worked and we need to continue to push for dedicated, mandated revenue allocated to us and no one else -- our piece of the hotel tax, or the sin tax on cigarettes or booze, or the general sales tax, or whatever. 

This will, of course, be difficult to achieve - but not necessarily impossible. And there are no really good alternatives - for the government piece of our pie remains yet a critical component of our overall revenue model.

No means of allocation of funds to support the arts or arts education will likely ever be completely safe. As long as we are thought of as a “frill”, people will justify efforts to appropriate our funding. As long as the economy is hurting, we will have to compete against a host of legitimate and worthy needs and causes. But if we don’t recognize the threat to the little bit of general fund money we do still get, and act to protect it, then we need to be prepared for much of it to disappear. That may not impact everyone in our sector, but because government is a principal source for many of us, it will impact us all; if for no other reason than if it disappears, the competition for other sources will increase.

The whole sector should be talking about the future state of general fund income for the arts at the state and local levels with some sense of urgency.

Have a great week.

Don’t Quit
Barry