Arts / Visual Art
4Culture Already Dipping into Reserves, Facing Cutting by Half Next Year
by Jen Graves
on Fri, Mar 19, 2010 at 9:32 AM
I wrote a few weeks back that 4Culture needs your help. Well, it still does. Legislation to secure a perpetual funding source for the venerable segment of the region's culture system still has not been passed. Write your legislators.
A little more on what's been going on from 4Culture spokeswoman Sara Edwards, via email:
Essentially, the recession has impacted the lodging industry, and therefore the amount that is funding our current programs has been down the last 18 months or so. In the winter, the board voted to use a little bit of the interest income from our endowment to help bridge the gap in the 2009 budget, so we could keep our funding programs stable (what we distribute to the field through grants). They felt this was really important in a year when orgs and individuals were seeing a lot of other revenue streams down.
But, if legislation is not passed this year, and the lodging tax revenues continue to be down due to the recession, our funding programs in 2011 will be half of what they are in 2010. The Board may not be inclined to dip into reserves again in 2011 without the guarantee of a stable future. At some point, in anticipation of the worst case scenario, the Board has to protect the endowment and not further erode future interest income. That is likely to mean program cuts and staff cuts, starting as early as January 2011, and continuing until either we reach 2012 and have to develop a new business model that can be impactful with only $1.3 million, or until legislation is passed and we can begin to build back the programs we’ve cut. Conversely, if we are successful this year, and we know that we have healthy funding into the future, the Board may be more willing to dip into reserves again so that we can avoid the 2011 cuts.
And more details from a conversation Edwards had with another reporter, Jeremy Barker, of The Sunbreak:
How much was dispensed from a rainy day fund and when was that done? FY 09, or current fiscal year? The Board allocated $1.1 million from reserves to bolster the 2010 grant programs. The way we operate is that we take in money one year and program it for grants the next year. So the money we distribute in 2010 is lodging tax revenues collected in 2009. In 2009, we distributed revenues collected in 2008 and so on. This ensures that we know exactly what we have available. Lodging taxes were down 18% in 2009 compared to 2008. The recession is hitting the lodging industry pretty seriously. Since so many corporate and foundation funders were also reacting to the recession, the outlook for arts groups was not good. We achieved about $500k in savings in 2010, by reducing administrative costs and recapturing grants awarded in previous years for projects that are not going forward, for any of a number of reasons. All staff is taking eight furlough days this year, a 1% COLA increase (instead of 2.5%), no merit pay. All these efforts helped us bridge some of the gap between 2008 and 2009 funding to the field. But, had the Board not allocated reserves, our funding in 2010 would have been about $3 million in 2010 compared to $4.5 in 2009. The $1.1 didn’t fully restore funding to 2009 levels, but it helped keep core programs at previous levels. What's the source of that revenue? Interest on endowment? Yes, the source of the reserves is interest income generated by the endowment. We began building the endowment in 2001, as required by state law. Unless the state legislature acts, after 2012 all 4Culture programs (except public art which uses funds generated by the 1% for art program) will be funded exclusively by endowment interest. The endowment at the end of 2012 will be about $40 million. It earns a little over 3% interest, because it is capitalized with public funds and there are many restrictions in Washington State about how public funds can be invested. We anticipate that the interest generated by the endowment in 2013 will be about $1.3 million. Compare over $4 million given in grants this year to $1.3 for everything (programs, smaller staff, rent, utilities, IT, etc.) and you begin to understand how dire the future could be. Not for 4Culture, but for the arts and heritage fields we serve. For this reason, the Board has been saving the interest to try to build the endowment to the largest possible size. However, given the current state of the economy and the hardships being experienced by arts and heritage organizations, the Board decided to take a stand and maintain 2010 levels of funding as close as possible to 2009 levels, allocating 1.1 million of the saved interest income for 2010 programs.