Sandra Miniutti of Charity Navigator
August 4, 2003
After a decade of prosperity and relatively effortless fundraising, arts-related charities are faced with a new fundraising reality, and because of their unique funding strategies, have been hit harder than most charities. Across the country, arts-related charities are hastily implementing new strategies in an effort to evade looming deficits. The Brooklyn Museum of Art decided to close the museum for two weeks this summer and the Cleveland Museum of Art announced that it will lay off employees, freeze the salaries of the remaining staff and impose a pay cut on senior management's salaries. This spring the Houston Symphony musicians went on strike in response to the symphony's attempt to cut salaries, and things grew so bleak for the struggling Florida Philharmonic Orchestra that it filed for Chapter 11 bankruptcy protection.
Most of us expect such highly visible cultural institutions to be better prepared for economic downturns. Yet arts-related charities will continue to be vulnerable in times of economic weakness unless they diversify their funding sources. These charities rely on government grants, support from foundations and income from their own endowments, an inherently risky strategy. As the economy slows, so does support from each of these sources. The government is forced to cut its support of non-essential programs, including the arts, to compensate for shortages in tax revenue. Charities receive less income from their investments as the stock market tumbles. Similarly, foundations provide less substantial support in response to their own shrinking assets. During the last recession, the state of New Jersey was forced to cut funding for the arts by 60%. The implications were severe, resulting in 21 arts-related charities closing.
To reduce this level of risk, arts-related charities need to diversify their sources of income by growing contributions from individuals. Research from IUPUI's School of Philanthropy indicates that giving from individuals is relatively inelastic and less volatile than grant making from foundations, corporations and government agencies. Thus even in years of economic decline, individuals continue to donate to charities at comparatively the same level as years of economic prosperity. By growing support from individuals, arts-related charities would be better protected against fluctuations in the economy.
The New Jersey Performing Arts Center (NJPAC) is one art-related charity cognizant of the fact that there remain tremendous fundraising opportunities in cultivating the average individual donor. Jeffrey Norman, vice-president of public affairs at NJPAC, notes that "recent trends and the wave of the future show that individual giving is increasingly more important."
If individual donors are going to play a bigger role, then these charities must overcome the lingering perception that the arts are funded by and only exist for the pleasure of the wealthy. Historically, these charities positioned themselves out of the reach of the average citizen. If you had the financial means to visit a museum or attended a performance, you were expected to have the educational background to understand the value and historical context of the art. With the implementation of educational programming and the availability of discounted tickets, the arts today are accessible to the general population. Arts fundraisers need to share this success with the average individual donor. Once donors are convinced that the arts actually improve the lives of all members of the community, then they'll be more likely to support the arts.
In recent years, the level of sophistication among individual donors has grown. Beyond programmatic success, today's donor wants to understand the charity's financial performance. These donors know that their gifts make a bigger impact when directed towards efficient charities. Data from Charity Navigator's analysis of 2,500 charities shows that arts-related charities lag slightly in their fundraising efficiency. The median arts organization spends $0.04 more to raise a dollar and 1.4% more of their budget on fundraising efforts. By improving their fundraising efficiency and welcoming donors' interest in their finances, the arts are likely to experience an increase in support from individuals.
To overcome these challenges and be successful at articulating effective and appealing messages to the average individual donor, arts-related charities must attract and retain savvy CEOs. These charities need responsible leaders who pay attention to the bottom line and recognize the importance of diversifying revenue sources. It takes considerable expertise to balance the needs of the organization's artistic goals with the realities of its fiscal constraints.
The decline in contributions that arts-related charities are experiencing compels these organizations to reconsider their fundraising strategies. To reduce their risk to future economic downturns, these groups must diversify their revenue sources by cultivating more individual giving. Furthermore, they need to hire leaders that have a healthy dose of business sense in combination with their artistic knowledge. If arts-related charities implement these changes, they'll be better prepared to sustain their programs when the next economic slump hits.