Robert Bettmann

Last week, arts advocates visited with District of Columbia City Council members to learn which policy-makers support an increase in arts funding within D.C’s FY 13 budget. Some members went on the record supporting a $10 million dollar (plus) funding level for the DC Commission on the Arts and Humanities, and several others, including Council-members Cheh and Wells, refused to take a position, stating that until the new budget was created, they couldn’t know the right number. Charles Allen, Chief of Staff for Ward Six Council-member (and arts supporter) Tommy Wells asked advocates to clarify why the ask was for $10 million, instead of $11 million. Government funding is critically important to local artists and arts organizations, but how much arts funding is the right amount of arts funding?

Two recent news stories highlight a common misunderstanding about U.S. government arts spending. Journalist Carl Franzen’s Talking Points Memo interview with online fundraising website co-founder Yancey Strickler stimulated conversation last week because of Strickler’s assertion that his site, Kickstarter.com, may distribute more money to the arts this coming year than the National Endowment for the Arts. Franzen quotes Strickler saying, “maybe it shouldn’t be that way… maybe there’s a reason for the state to strongly support the arts.”

The U.S. arts system is designed to be powered by the private sector, not the government, and Strickler’s website, which crowd-sources small donors, is an example of the rise of online game-influenced fundraising, not weak state support. The National Endowment for the Arts’ 2009 publication How is NEA Money Distributed affirms, “In contrast to the European models, the U.S. system of arts support is complex, decentralized, diverse, and dynamic… [In 2004] only about 13 percent of arts support in the U.S. came from the government… of which less than 1 percent came from the National Endowment for the Arts.” NEA funding is, by design, less than one percent of the total arts funding ecosystem.

One core arts support in the U.S. model is the non-profit tax deduction, created within the War Revenue Act of 1917. The most important part of the Act, when it was written, was a set of massive income tax increases. For example, individuals earning $100,000 of taxable income in 1917 saw their tax rate jump 22% (to 31%), while those reporting $1,000,000 in income saw a 50% hike, to 65%. According to an Internal Revenue Service history, the deduction “was conceived as a way to encourage charitable contributions at a time when income tax rates were rising in order to fund World War I.” When the wartime tax rates were rescinded the non-profit deduction stuck, and in 1936 corporations were additionally granted the deduction.

A January 25, 2012 New York Times story on Republican presidential candidate Mitt Romney’s tax returns asserted that Mitt’s taxes display, “the array of perfectly ordinary ways in which the United States tax code confers advantages on the rich.” Even some Conservatives were concerned about his overall tax rate of 15%, with an example article titled, “Do Romney Tax Returns Reveal Problems in America’s Tax Code?” The non-profit tax deduction is just one of the deductions the Romney’s used to reduce their tax burden, but it was a significant one.

A few months ago President Obama riled up non-profit supporters with a proposal to limit the charitable tax deduction for families earning over $250,000 a year. A Washington Post article reported that Obama’s proposal would, “limit those individuals to writing off 28 percent of their itemized deductions, down from 35 percent…. wealthier donors would save $2,800 in taxes on a $10,000 charitable contribution, instead of the $3,500 allowed under current law…. While such a change could cut donations to all kinds of charities — from food banks to homeless shelters to health clinics — arts groups are feeling especially vulnerable these days.” Of course anything that might reduce donations makes non-profits uneasy.

Government funding is a pittance within the overall arts economy, but especially in today’s economy, it’s a very important and powerful pittance. What is the right amount of government arts funding at the Federal, State, and Local level? There is no absolute answer, but on DC’s Arts Advocacy Day, March 14, 2012, the Local answer is: $10 million dollars. Government arts support in D.C. has been cut 69.88% from FY 09 to FY 12, and with a total DC budget last year over $11 billion dollars, as a percentage, funding for the arts was less than one half of .1 percent (0.034%.) A community petition to increase DC arts support to $10 million for FY 13 is live right now, and currently has over four hundred signatories.

Image from The Washington Post’s blog Capitol Voices; This blog post originally published on the Huffington Post here.

The Historic Lincoln Theater on U Street is sparking an important and emotional debate about arts infrastructure in the District of Columbia. The city-owned Lincoln has a looming budget shortfall, and is on the brink of closing, and D.C. politicians are split about the responsibility government has to keep the venue operating.

According to the Lincoln Theater’s materials, the venue, built in 1922, was the center of a cultural renaissance that predated Harlem. Washington natives Duke Ellington and Pearl Bailey performed regularly in the hall, along with artists including Ella Fitzgerald, Billie Holliday, Nat King Cole, Cab Calloway, Louis Armstrong, and Sarah Vaughn. Longtime board member and Ward 1 Councilmember Jim Graham is advocating for the city to pick up 2012 operating expenses to keep the Lincoln open, while D.C. Mayor Gray has stated that the Lincoln’s business model is “not sustainable.”

The Lincoln’s struggles highlight the need to increase funding for the D.C. Commission on the Arts and Humanities, the city’s official arm for arts support. The tragedy of the Lincoln’s closing — if it is a tragedy — will be that it is the victim of investments made in other arts infrastructure. A quick look around the city shows a sparkling list of new and renovated theater since 2004, including: the Greenberg, GALA, ARC, Atlas, Artishphere, Woolly, Olney, Shakespeare Harman, Fords, Arena, Signature, Bethesda, Studio, and Source. The latest jewel in D.C.’s arts venue crown will open February of 2012 just a few blocks from the Lincoln Theater: the newly renovated Howard University Theater (550 seats, at a cost of $29 million.)

The thrill of construction and the potential to anchor neighborhood revitalization has driven enormous investment in arts infrastructure in the region over the last decade. Now, non-profit managers and policymakers are struggling to find the money to cover the operating expenses for all of the venues — old and new. These problems are not unique to our region, and writing for the New York Times Claudia La Rocco quotes Kate D. Levin, commissioner of the New York City Cultural Affairs Department, who said the government could help only so much: “If you want to build something, and the city can help, that’s great, but you cannot expect us to come in also with operating funds… We have to have organizations that are able to deal with the operating costs.” Also in the New York Times, Robin Pogrebin reported, “Some are arguing that arts administrators and their patrons succumbed to an irrational exuberance that rivaled the stock market’s in the boom years.”

Just a few months ago, The Bethesda Cultural Alliance hosted an auction for the bankrupt Historic Bethesda Theater, renovated at a cost of $12 million dollars in 2007. As reported on TBD, “BB&T bought back the Bethesda for $2 million — the exact same sum, coincidentally, that Montgomery County taxpayers spent on the theatre’s $12 million renovation three years ago. Now the bank is looking for buyers, and the only thing saving the building from becoming, say, a CVS, is a county law requiring that it remain a performance arts center.” Erin Donaghue’s article for the Gazette quotes Steven Silverman, director of the county’s Department of Economic Development, “The biggest challenge is that the theater is not economically viable without a full-time operator and a business plan that will produce contributed income — meaning corporate sponsorships, philanthropic gifts, something other than the box office.”

Rental revenues are a critical component of budgets for the majority of theater venues, and with more available venues there has been increased competition for a shrinking number of rentals. The general recession has reduced the ability of outside non-profits to rent theater space. The Lincoln and other theaters are suffering from a Trickle-Up Effect of reduced earned revenue. With less arts money available in general, smaller non-profits rent fewer nights in theater venues, resulting in a Trickle-Up Effect of contraction from the smaller non-profits to the larger ones, impacting the sustainability of theaters.

Granting funds available to D.C. non-profits through the D.C. Commission on the Arts and Humanities have been reduced from over $10 million in 2009 to less than $4 million for the current fiscal year. While the rush of opening new venues is no match for the grind of daily maintenance and the needs of the community day after day, one has to hope that sooner or later awareness of the struggles of the Lincoln and other venues will help reverse that trend. An increase in general arts funding would enliven the city and could help salvage the bottom line of theaters like the Lincoln. With D.C.’s “Creative Economy Initiative,” started under Mayor Fenty and now hanging as an incomplete thread, there is an opportunity for policy-makers to replace arts investment outside of a capital funding framework and into sustainable community initiatives.

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Published October 13, 2011 on the Huffington Post; click here to read and comment on this text on the Huffington Post website.

My editor didn’t want to publish the following graphic, which is research I did into the expense of creating all of these new theater spaces. If I have time a future post will present the research in a way they can publish.