By- Kate Gunn

“There is no better indicator of the spiritual health of our city, its neighborhoods and the larger region than the state of the arts.  The arts deepen our understanding of the human spirit, extend our capacity to comprehend the lives of others, allow us to imagine a more just and humane world.  Through their diversity of feeling, their variety of form, their multiplicity of inspiration, the arts make our culture richer and more reflective.” 

These words spoken by Jonathan Fanton, of the MacArthur Foundation, eloquently describe the arts and their far reaching impact on the whole of society.  The arts community, domestically speaking, has recently enjoyed a vibrant period with a steady surge in museum acquisition and expansion, art production and sales, growth in film and theatre production, and the acceleration of interest in the performing arts such as music, dance and even community theatre.  Even small communities have turned their focus to the art industry to help drive the economic condition of their towns.  Missoula, Montana, with a population just over 64,000, boasts is own symphony orchestra, two ballet companies, a prize-winning repertory theatre, and even an International Choral Festival.[1]

            Only recently has the art industry been considered an economic driver of communities because of its ability to facilitate jobs, generate government revenues and provide a cornerstone for tourism.  Nationally, the nonprofits arts industry creates 5.7 million jobs and $166.2 billion dollars in total economic activity each year, resulting in $29.6 billion dollars in local, state, and federal tax revenue, a 24 percent increase in the past five years[2].   In the United States, the performing arts industry includes over 9,000 companies such as theatre, opera, dance, musical groups, and symphonies, creating nearly $14 billion dollars in combined income.[3] 

Even greater than their own sustainably, is the arts unique ability to leverage a significant amount of revenue for other industries such as restaurants, hotels, retail stores, and city revenue such as parking or transit income.  Americans for the Arts, a Washington, D.C.-based nonprofit group conducted the largest economic impact study of arts organizations in 156 communities and regions nationwide. This study confirms that often patrons attending a cultural or art-related event, will generally pay for parking, and go out for dinner.  The average attendee spends $27.79 dollars per person, per event, not including the price of admission for their show[4].  In Pennsylvania’s Allegheny County, nonprofit arts industry generates $341.5 million dollars annually in economic income.  This total breaks down into $230.6 million spent by arts organizations and $110.8 million dollars in event related spending., excluding the cost of admission, which reflects an average of $17.45 dollars per person spent on hotels, restaurants, parking, souvenirs, refreshments, and other similar costs. 

Artistic events which are able to attract audiences from surrounding areas generate even more income for the hosting community.  Out of town participants spent significantly more in the categories of lodging, meals, and transportation than their local counterparts.  Non-local attendees spend twice as much as local attendees averaging $40.19 dollars to $19.53 dollars, respectively.[5]  A research study by the Travel Industry Association and Partners in Tourism found 65 percent of all adult travelers attended an art event while on a trip fifty miles away or more from their homes, 32 percent prolonging their stay due to the event[6].  These results challenge a common misconception that spending on arts and culture comes at the expense of economic development.  Arts organizations are businesses, much like other industries such as automakers or retailers.  They hire staff, purchase products and services, pay rent and utility bills, and provide government revenue.

            U.S. Representative Louise Slaughter (D-NY), states, “They [the arts] create a hub of economic activity that helps an area become an appealing place to live, visit and conduct business.  These industries also create jobs, attract investments, generate tax revenues and stimulate local economies through tourism and urban renewal”.  Similarly in Florida, in Miami-Dade County alone, more than 1,000 arts businesses help to employ 23,000 workers and 12 million attendees spend more than half a billion dollars in ticket prices and event-related spending annually[7]. 

Another such example of the ability of the arts to generate local revenue is The Utah Shakespearean Festival which produces more than 35 million dollars through lodging, dining and other local activities.  Michael Bahr, director of the festival Art in Cedar City, proclaims that art is not a luxury; it is business.  “It feeds our souls and our families…but it also fills our dinner plates, pays our mortgages, and enhances our standard of living.”  He further elaborates that Art in Cedar City is responsible for hiring a talented workforce, filling local hotels and restaurants, and providing a positive economic impact far beyond the theatre[8].  Tim Daly, an actor on the popular television series Private Practice and co-president of the Creative Coalition, explained how it takes nine days to film a one-hour long episode of the show, which greatly impacts the hosting community by employing 200 people a day, and spending $20,000 on food from local caterers and $2,500 dollars on dry cleaning[9]. 

            Many key products and services extend from artistic institutions producing a ripple effect throughout variety of industries.  Most arts and entertainment organizations’ products are a combination of tangible and intangible elements.  A physical element of an art opening is the hanging images or sculptures in the room, an intangible element would be the emotional benefit you receive from viewing these works.  Products in the art industry encompass everything from the building and services to the core product, or items directly related to the organization.  The core product of an art gallery is the original artwork on display, for instance.   The core product of the symphony is the music is produces.  Products can further be divided into what is expected by viewers or attendees such as a high quality sound system at a theatre or the souvenirs for sale at festivals.  Products may include pictures, drawings, photos, sculptures, books, and even supplies which are needed in the production process. 

Services also account for a large portion of art-related products including framing, delivery, appraisals, technical support, lighting installation, printing, marketing and public relations and even building contractors and architects.  Services are often inseparable from the provider, for example, a theatre production is the result of the performances of the actors, and the way they work together.  In the art industry, services can also be perishable.  While retailers are able to sell merchandise from one day to the next, an unsold seat in a theatre cannot be sold twice the following night.  To recoup losses from unfilled seats, an entire performance must be scheduled. 

            The products produced in the art industry—specifically core products—are generally introduced first in the primary marketplace, where artists sell their art to collectors and dealers or debut performances.  The primary market represents work which has not been bought or sold before.  At this stage in the market, a price point is determined based largely on demand, but also based on development and creation.  These prices are then maintained by marketing, sales techniques, fashionable trends, and even the “Vanity Fair that is art collecting”.  It is especially prudent in recessionary times to target a primary target market or those who are closest to the operation such as board members, development teams, and long-standing donors.

            After the primary lifecycle is over, most core products enter into the secondary market.  Artwork is in the secondary marketplace would include works purchased by individuals, businesses, foundations or dealers.  The greatest degree of difference in the art industry is art does not depreciate with age, rather value is determined by universal desirability.  In performance art, the secondary market includes shows which have been purchased by theatres or corporations and are currently touring or being performed for paying audiences.  Performance art can also increase in value as time goes on, for example, with many symphonies or plays making special rereleases to honor anniversaries of original productions.  In some cases, the secondary market is seen as more prestigious because the timing allows for stabilization or sober evaluation of worth after the initial hype has waned. 

            There is also a third market in the art industry, the tertiary market.  In this stage, collectors and dealers recycle though the auction houses art items which have previously entered the secondary market. 

However grand and far-reaching, with the downturn in the overall economy, arts and music organizations are facing harsh financial realities which are in turn negatively impacting communities which rely on these sectors to create jobs and generate revenue.  Public schools are losing arts programs; art programs are losing grants; numerous theatres, opera houses, music venues and galleries face closure.  Artists themselves are losing their jobs, with the current unemployment rate conservatively estimated at 12.5 percent.  With the economic crisis only a few months old in early 2009, some 10,000 arts organizations nationwide, representing about 10 percent of the total, had disappeared or were facing closing their doors.  According to the most recent economic forecasts, many of the world’s economies are either entering or are well-into the most severe financial recessions in more than 50 years.  Unlike previous economic downturns in the United States such in as the dot-com bust and the tragic events of 9/11 in the early 2000s, the past year has had devastating effects on the art industry in particular.  Curators, directors, administrators, and other art industry leaders have all observed a recurring trend—the current recession is much more widespread in the art industry, with some even categorizing it as “brutal and relentless”.  There is no one culprit, rather, a combination of declines hitting the art community from all sides including declining stocks, the banking crisis, the slashing of state and local funds for the arts, and finally a decrease in demand due to decreased discretionary income. 

            Many museums, galleries, performing groups, and other non-profit art groups are dependent on support from endowments.  Nevertheless, while stocks and investment income continue to decline, so do these much needed endowments.  A recent survey of art museums in the United States found most have lost at least 20 percent of the value of their endowments, and most directors are expecting a continued trend of decline in 2010 and 2011.  In less than a year, between January and November 2008, the endowment of the Indianapolis Museum of Art fell from $382 million dollars to $292 million dollars[10].  The Los Angeles County Museum of Art lost a quarter of the value of its $148 million dollar endowment from July to September alone in 2008[11].  Because many endowments are failing to yield income, they are considered “underwater”, or their current value has dropped beneath their historical value resulting in the loss of millions of dollars to many of even the most prestigious art institutions.

            The banking crisis, another contributing factor to the decline in support for the arts, has cut off funds from reliable corporate donors at an overwhelming rate.  While most boards of directors for art businesses are well diversified, Wall Street tycoons sitting on these boards had been disproportionately generous in the late 1990s which offered a “golden age of giving” to many art institutions.  Hedge-funders, CEOs, and even whole corporations such as Merrill Lynch and Wachovia have funded the construction of renovations, rotundas, wings, and even whole buildings for the arts.  The Met’s first gallery devoted to contemporary photography was endowed predominantly by the senior director of Goldman Sachs, Robert Menschel[12].  More than 20 institutions added wings or buildings in the past three years or are presently continuing construction.  In addition, many art programs and building expansions were able to be funded through bond issues, which in most cases is not problematic, however, institutions with adjustable-rate securities have been hit hard by rising interest rates, some climbing as high as 11 percent halting construction and forcing organizations to refinance millions of dollars worth of bonds[13].   Furthermore, the banking crisis and economic decline has led to the perception among some of the largest and most reliable corporate supporters is that contributions to the arts could be viewed as elitist and excessive at a time of rising unemployment and general economic hardship, which  has led to a subsidiary effect on corporate donations.

            What was once a growing source of support, state and local tax funds have also been slashed.  According to the National Assemble of State Arts Agencies (NASAA), state agencies devoted to the arts support 28,000 grants and programs in 5,600 communities nation-wide, however, state governments have fallen on tough times too resulting in a far-reaching impact to the arts communities[14].  Many state legislatures have proposed cutting arts funding by 20 percent or more to compensate for state deficits, resulting in the same, if not more, organizations all competing for the same funds.  This means many will be left with no financial support from the state in the upcoming years.  In Colorado, the state legislature has reduced funding by 80 percent to the Colorado Council for the Arts.  Nowhere is the collapse of government arts funding more drastic than in America’s “Rust Belt”, which has been in industrial decline when the Big Three automakers crumbled.   While many state art agencies have lost millions in state funding, some states, like Michigan, are proposing cutting funding entirely to the arts until the recession has ended and generally prosperity is restored to other industries.  One exception to these sweeping governmental cuts is the Smithsonian; where, despite endowments being down by 30 percent, federal funding was up by 7 percent for the fiscal year of 2009[15].

            Many organizations looked to the recent stimulus plan to provide much needed government relief and a reinstatement of government financial funding.  However, arts funding met opposition when many senators argued that vital services such as soup kitchens and homeless shelters should receive funds first.  While this sentiment can be appreciated, it perhaps was also exaggerated.  Senator Tom Coburn (R-OK), introduced an amendment preventing arts groups from receiving economic recovery funds.  The amendment proposed that stimulus funds could not be used “for any casino or other gambling establishment, aquarium, zoo, golf course, swimming pool, stadium, community park, museum, theatre, art center, and highway beautification project”[16].  This shortsighted amendment originally passed by a substantial margin of 73-24, however, in the final wrangling of bill, and after strong lobbying by the arts community, the clause pertaining to the arts was removed and the National Endowment for the Art (NEA) was awarded $50 million dollars.  A seeming victory for the arts, 50 million dollars is just 6.3 percent of the total $787 million dollar stimulus package, a “drop in the bucket” says philanthropist and art proponent Eli Broad, the founder of home builder KB Homes and financial titan SunAmerica[17].

            Demand for art programming has also declined since the beginning of the current recession.  With the housing bust and rising unemployment, many individuals have a significantly lower amount of disposable income resulting in a shift to less expensive art experiences, less travel to artistic events, fewer art purchases (by both individuals and companies), and a reduction in ticket purchases for performances.

            Once flush with corporate and private donations, rising ticket sales, and government subsidies, many non-profit arts groups are finding themselves reeling.  “I’ve never seen anything like this in my 25 years in the business”, said Michael Kaiser, president of the Kennedy Center.  Cuts of all kind have been initiated since late 2008 including staff and artist layoffs, furloughs, canceled performances and tours, and reduced seasons.  Historically, contributions to the arts recover only after other business industries have returned to profitability and begun hiring workers again, meaning the light at the end of the tunnel may still be out of sight for many in the arts.

By January 2009, nearly all art directors had begun cutting financial budgets by 5-20 percent, with many prepared to make further cuts in 2010[18].  The New York Botanical Garden has reduced its staff by ten percent resulting in 49 staff members losing their full-time jobs.  Despite their summer exhibit winning a place in Time magazine’s list of Top 10 museum exhibits in 2008, the Botanical Garden decided to cancel their 2009 exhibit stating they just couldn’t afford the financial risk[19].  The Los Angeles Museum of Contemporary Art has eliminated 32 jobs in an effort to save 4.4 million dollars a year.  The Metropolitan Museum of Art in New York has cut 74 positions as of 2009 and is prepared to cut another 10 percent[20]. 

Other institutions have initiated hiring freezes, cut back on travel, or delayed renovation projects to ease the financial burden.  One such organization is the St. Louis Museum, which has halted major expansion projects.  Despite having more than $120 million pledged of the $125 million needed to complete their renovations, the Museum is carefully monitoring wealthy donors who have asked to delay payments on some of those pledges[21]. 

Cancelled shows and layoffs are extremely prevalent in the theatre and dance industries.  Lowered ticket sales and declining donations have caused many to shorten season, cut staff and artists, or even cancel whole productions.  To prevent layoffs, many including the Dance Theatre of Harlem, are cutting salaries by 10 percent hoping to retain their employees but still save precious dollars.  The sixth-oldest continuously operating opera company in the United States, the Connecticut Opera, closed its doors after 67 seasons laying off an entire staff and canceling two spring productions[22].  In Baltimore, Maryland, the Baltimore Opera has declared Chapter 11 bankruptcy causing them to cancel their performances of The Barber of Seville and Porgy and Bess; ticket holders will not be reimbursed as terms of the bankruptcy[23].     

Public education has also suffered losses.   Arts education in the school curriculum is generally the first to be slashed during budget cuts as school administers divert funds to the more basic necessities such as lunch programs or classroom supply needs.  In elementary schools, music and art classes are disappearing as resources dwindle resulting in teachers losing jobs and children not being introduced to critical music and art subjects until potentially high school.  Universities are also forced to cut or combine courses, and full-time professors in art departments are being replaced with lower paid, adjunct professors. 

            While times are certainly bleak for the arts, there are ways to endure.  For any industry to survive they must become sustainable, not only by thriving in favorable economic times, but perhaps more importantly in times of financial turmoil by creatively weathering the storm and maintaining control.  Louise Slaughter, co-chair of the Congressional Arts Caucus stated,

            “Across America, cities that once struggled economically are reinventing and rebuilding themselves by investing in art and culture-a proven catalyst for growth and economic prosperity.  By creating cultural hubs, nonprofit arts businesses help cities define themselves, draw tourists, and attract investment.  Federal support must go on if we hope to continue enjoying the substantial benefits they bring”.

As emphasized by Slaughter, communities must whip up support from Washington for the arts industry to expand/survive.  While many in state and federal legislative positions are proposing cuts in arts funding, the argument must be made for the importance of the arts to local economic engines; providing jobs, stimulating tourism, and producing tax revenue. 

Arts organizations have responded by professing their educational initiatives as examples of how they give back to society and warrant additional money from the federal government.  The Washington Performing Arts Society sponsors a gospel choir for inner-city youth who performed their talents for President Obama at his inauguration[24].    The focus is on cooperation, not competition over funds.  During the 2009 holiday season, the Idaho Museum of Natural History partnered with Toys for Tots offering free admission to anyone who brought a toy to the museum to donate.  The museum’s charity marketing manger noted the relationship was meant to aid a charity in need as well as pull people into the museum and the museum gift shop.  In New York, the Schenectady Museum and Planetarium began a partnership with the local library and school system to offer a two for one membership program to provide individuals who otherwise may not have the means, a chance to visit at no cost[25]. As previously stated, to ensure the local community views the arts as critical to their area, many institutions are looking for ways to deepen their value within society to ensure growth, not just economic gain. 

There has been a shift in government funding, as well as corporate funding, over the last decade and clearly the art community needs to undertake new funding strategies in order to survive long-term.  The recently published, “Arts and Culture in the Metropolis: Strategies for Sustainability,” study declares now is a critical financial moment for the arts and the degree of recovery from their economic troubles is largely dependent on their city’s organizational aid for such an industry.  Charlotte, North Carolina and Chicago, Illinois are cited as two cities which are organizing means to support the arts locally, and help to provide the public with an education of the far-reaching impacts the arts plays in the community[26].   As new and localized funding strategies and arts education are accepted as catalysts for renewing the industry, art businesses can establish concrete leadership, grow an understanding of their place within greater society, develop a vision for the future, and finally, instill a collaborative effort between organizations, all to ensure the future progress and sustainability of arts programming and institutions.

Leadership is critical, as is in any industry, and the person or persons in this role should view the arts institutions and programs as part of this leadership.  Meaning, a great leader is a figure-head for the arts community, but allows the art institutions themselves to lead the community through involvement, philanthropy, and dedication to the success of the entire society.  The “Arts and Culture in the Metropolis: Strategies for Sustainability” study sites that the implementation or set up of an Office of Culture Affairs has previously been a successful tool in driving a collective leadership and vision for the arts in a given city allowing them to locally fund and support their cultural programs and institutions.  Often, an Office of Cultural Affairs, OCA, includes not only arts and culture, but tourism and economic development.  By marrying these previously separate elements of community importance, a collaborative vision can be developed.                    

The vision determined by the OCA should be multi-layered to focus on the important role the arts play in the life of residents both socially, intellectually and even politically.  The group gathered to determine this vision to be a diverse one as to ensure there are no biases or slanted agendas.  Some City Councils appoint individuals to a Commission on Cultural Affairs to assist the OCA and provide more community involvement.  The “Arts and Culture in the Metropolis: Strategies for Sustainability” study uses the city of Chicago as a prime example of a city whose OCA pairs vision with collaboration and progress.  While the arts portion of the OCA in Chicago employees only 70-80 people out of 300 in the entire office, all divisions report to the same person, the head of the OCA, resulting in a shared effort.  This shared effort means successfully integrating excellent marketing, technical assistance and training, film, tourism development, economic development, and development of public art, but most importantly, the ability to fund the arts locally.

In May of 1997, the OCA in Columbia, Missouri initiated the One Percent for the Arts program.  This program allows for one percent of the cost of new city construction or renovation projects to be used for site specific art.  Some above ground capital improvement projects are also eligible to have a public art component.  Since 1997, the city has been able to install projects for public viewing at local fire stations, public transit sites, and most recently, the new City Hall building[27].  These projects are intended to further the public awareness, participation, and support of the arts in the community.   

Upon setting up a collaborative and knowledgeable vision for the art community, goals and specific timetables must be established.  The group or Office of Cultural Affairs, dedicated to the achievement of the arts should set reasonable but challenging goals for both their staff and the community.  The progress of these goals should be monitored and revisited after an established period of time so as to consistently and continually ensure they are being met, or if not, there will be immediate indications that changes are needed.

Cities in the United States, and around the world, are competing to attract new business as well as the brightest young professionals.  Studies indicate those communities which are obtaining these recruits are communities that offer an abundance of arts and cultural opportunities.  Charlotte, North Carolina has been extremely successful in their strategy to build a strong arts and cultural sector.  Charlotte is not on a coast or in the mountains, near a typical tourist or residential attractions, so the community realized than in order to maintain their city as a top banking center, it had to attract well-educated, talented residents by facilitating a community dedicated to the arts.

The Art Industry comprises not only of museums, galleries and theatres, but also artists, performers, musicians, and dancers.  The Arts Industry is unique in its ability to impact a wide range of industries, entire societies, and also support schools and governments.  By generating billions of dollars in annual revenue, the Arts are able to provide an economic catalyst on the local, state, and national levels.  Additionally, these economic impacts are felt by restaurants, hotels and retailers who benefit from traffic generated by arts programming.  As studies indicate, areas with prospering art institutions aid an area in becoming, or maintain, an appealing place to live, visit, and conduct business.

Recent economic hardships have impaired the arts industry, slashing funding and forcing some institutions and programming to close entirely.  Declining endowments, the banking crisis, cuts in state and federal funding, and a lowered consumer demand have all impacted the arts leaving many institutions unable to pay staff, continue programming or performances, or even keep their doors open.

Sustainability and education seem to be the critical elements in the continuation of the arts; restoring them to more successful and thriving times.  Studies indicate by developing of Offices of Cultural Affairs local communities are allowed to collaborate and lead their cities into a position able to support the arts in their area, in turn, supporting their entire community.

Works Cited

Arnold, Laurence. (May 2007). Arts Groups Pumped $166.2 Billion Into U.S. in 2005, Study Says. Retrieved from Bloomberg.com. Retrieved February 12, 2010 from http://www.bloomberg.com

Goodman, Oscar B. (2007, January 3). Nevada Views: Las Vegas and the Arts, Promoting Cultural Activity Helps the Local Economy.  Retrieved March 5, 2010 from reviewjournal.com.

Hass, David. (2007, July). Strategies for Sustaining Arts in Philadelphia. Retrieved from The William Penn Foundation March 2, 2010.

Higgins, Charlotte. (2009, March). Arts world braced for ‘hurricane’ as recession hits. The Guardian. Retrieved February 12, 2010 from http://guardian.co.uk.com

Hoye, Sue. (2009, January 2). Recession Hits Arts Groups Especially Hard. The Chronicle of Philanthropy.  Retrieved February 12, 2010 from http://philanthropy.com

Kaufman, Jason Edward. (2009). Museums Make Deep Cuts in Face of Global Financial Crisis US Budgets Slashed, Programming Reduced and Expansions Halted. The Art Newspaper, (198).

Lynch, Robert L. (2007). Arts & Economic Prosperity III. Americans for the Arts research.

World Socialist Web Site. (2009, February 17). Massive Cutbacks in arts funding by US companies, governments. Retrieved March 5, 2010 from http://www.wsws.org.

Peers, Alexandra. (2008). After the Building Boom. The Wall Street Journal, D6.

Spector, Mike. (2009). Arts Groups Lose Out in Fights for Funds. The Wall Street Journal, A4.

US Committee on Education & Labor. (2009). Economic Crisis is Having Catastrophic Effects on the Arts and Music, Witnesses Tell House Panel. Washington, D.C.

Ward, Doug. (2009, October 23). Recession hits B.C. non-profits, charities. Vancouver Sun. Retrieved February 12, 2010 from http://vancouversun.com.