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Every Arts Organization Has a Deficit

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I am always amused (disturbed?) when someone attached to a not-for-profit arts organization (usually a board or staff member) rationalizes an annual deficit with: "Every opera company/symphony/ballet company has a deficit."

Tell that to the Oregon Symphony, which has been in the black two years in a row. As reported in an illuminating article by Anne Adams in the Portland Monthly, the Symphony earned a surplus of over $190,000 on an annual budget of $13.9 million during the 2010/11 season.

Most interesting to me was the statement by Symphony President Elaine Calder, "For the second year in a row revenues have exceeded expenses, despite the additional cost of taking the orchestra to New York's Spring for Music festival and making a recording of the Carnegie program."

The Carnegie program did not feature 19th century European chestnuts. It included Ives' The Unanswered Question, Adams' The Wound Dresser, Britten's Sinfonia da Requiem and Vaughan Williams' Symphony No. 4. (It was recorded on the PentaTone label.)

So how can a symphony orchestra earn a surplus performing less than standard works, touring to New York, and making recordings? I would like to hear an explanation from all of the board members of symphony orchestras (and opera companies and ballet companies...) who are convinced that the only way to attain fiscal health is to cut salaries, eliminate touring, scotch special projects like recordings and reduce the size of the orchestra.

And I would love to hear from a board member in Charleston who said to me after my Arts in Crisis tour that "your idea that exciting art and big projects create fiscal success may work in New York City but they don't work in mid-sized cities." He must mean this approach would work in a megalopolis like Portland, Oregon but not a hamlet like Charleston, South Carolina.

I am afraid NOT every arts organization has a deficit. That is simply not true. And it is dangerous logic. When I arrived at the Kennedy Center in January 2001 we were one quarter through our fiscal year. I was told that we were projecting a deficit for the year but, "as long as it is under a million dollars the Finance Committee says it is OK." It might have been 'OK' to the Finance Committee but a decade of 'OK' operating deficits had leached the cash out of the organization and we could not pay our bills on time.

When an organization accepts deficits, they are placing themselves in a precarious situation. Fortunately, the Kennedy Center was able to right the ship and earn surpluses that created a cash reserve. But had we suffered one or two unexpected losses in 2001 or 2002 we would have faced a difficult situation.

In the challenging economic times we live in, it is especially important to protect our organizations by insisting on earning surpluses and conserving cash. Even the Oregon Symphony saw a modest decline in unearned income last year; but its focus on important programming and its firm fiscal management meant that the organization did not suffer as a result.