How US Arts Funders Got things Terribly Wrong
By Dr. Thomas Wolf
A portion of the building that is now fully utilized as artist studio space. (Photo credit: Wicked Local.)
A few weeks ago, I was approached by two artists in a small New England town. They described a problem that seemed nearly insoluble and had come for advice. Representing a group of over thirty visual artists, they had managed to lease an old school building and operate it as a cooperative studio space for several years.
Though the owner of the building provided little in the way of maintenance, somehow this creative group had managed not only to operate the building successfully but rent over thirty work spaces, many bright with natural light, offering reasonably-priced leases to artists that paid the ongoing costs.
So successful was the operation, that there was a waiting list of artists who wished to get in. And no wonder. Real estate in the town had become unaffordable to all but the most affluent, exacerbated by the influx of out-of-state residents who had come during the Covid-19 pandemic.
Given that the operation was stable and the artists were happy, what was the problem? The owner had decided to sell the property and a developer was ready to purchase it, demolish the building, and construct housing units that would have been beyond the reach of most of the artist tenants.
But there was a sliver of a solution. The artist group was given an opportunity to purchase the building so long as $1.8 million could be raised within six months. From the point of view of a community case for support, this was a no brainer. The need for artist studio space was acute. The group had proven it could operate the building successfully. In comparison with other capital campaigns in the area on behalf of arts institutions, the money needed was modest. And there were plenty of funders who were interested—conceptually at least.
But there were too many road blocks. Indeed, to understand the dilemma the artists faced, we might look at how institutional funding developed in the United States, the decisions that were made about the new approaches to philanthropy, and how such an obvious winner of a project faced enormous negative headwinds.
Funding for the arts in the US from foundations and government (and to a lesser extent from corporations) was established in a serious way in the mid-twentieth century. A few foundations, led by Ford, provided grants for specific initiatives. Other funders followed Ford’s lead. In time, a new philanthropic model was developed with these characteristics:
Grant funding would be provided to nonprofit organizations that were recognized as tax exempt by the US Internal Revenue Service.
Categories of support would be established by the funder with clear criteria and guidelines. Only organizations that could meet these restrictions could apply for grants.
In many cases, new organizations (those less than two or three years old) were excluded from consideration.
In most cases, grants rarely paid for even half the sum of what was required. In some cases, the funder mandated matching funds at least on a dollar-for-dollar basis (but usually considerably more was required from other sources once grants amounts were set).
Organizations would have to demonstrate that they needed the money. That is, it was not enough for nonprofit arts organizations to have quality programs. Organizations would have to show, at least on paper, that without funding, they would be unable to do what was promised.
The timeline between application and grant was often quite long. When, in some cases, adjudication required a panel of peers to review applications, it could be as long as a couple of years between applying and receiving money.
President Lyndon B. Johnson. It was his administration that figured out how to get a majority of those in the US Congress, including those from rural states without much of an arts infrastructure, to support the creation of the National Endowment for the Arts. (Photo credit: Wikipedia.)
The creation of the National Endowment for the Arts (NEA) in 1965 added new elements to the formula. Some elected officials had tried for years to establish a federal agency to fund the arts but had run into legislative resistance. And that was hardly a surprise. The arts were concentrated in big cities located in a few states. Why should legislators who did not represent these locations support the concept when it appeared money would not go to their constituents? It was the genius of Lyndon Johnson’s administration to develop a formula that would guarantee a block grant to any state that had or would create a state arts council (and within a short time every state did).
For many states, this created a dilemma. It was fine to receive federal money, but if there was little arts infrastructure in a state, who should receive it? Even in arts rich states, there was a concern that the money should be spread geographically, not concentrated among a few major organizations in arts-rich cities. The solution was two-fold.
First, encourage the creation of new organizations. As an example, in 1961, during pre-NEA days, my brother and I created a summer music festival in Maine. At the time, there were only three such organizations in the state. By the time I left the organization a half century later, the state boasted 23 such organizations. The state arts agency, with federal money, had encouraged and supported the creation of many of these organizations.
Program cover from first Bay Chamber Concert in Maine on July 13, 1961. At the time there were three other summer chamber music festivals in Maine. Fifty years later, buoyed by public arts money, there were 23 such organizations. (Photo credit: Bay Chamber Concerts archive.)
The second strategy to identify enough entities to receive public arts money was to expand the definition of what constituted the arts. The old favorites like orchestras, museum, dance troupes, and theater companies now had to compete with fairs, broadcast organizations, schools, research entities, arts education programs, consulting companies, even city and municipal governments—any entity that could boast some program or activity that had a connection to culture in some form. At the same time, organizations that had operated quite successfully as for-profit businesses, saw an advantage to becoming nonprofit and showing losses that would allow funding from the grant makers.[1]
Initially the strategy was successful. Arts funding was popular and state governments added funds to the federal money for distribution. But in time, storm clouds were apparent. It is one thing to create organizations and programs, quite another to maintain them.
The NEA, state arts agencies, and private institutional funders realized they could not support organizations indefinitely. So, most grant funding was short-term, often no more than a year or two or three. Guidelines proscribed money for ongoing operating support though such support was precisely what organizations needed most.
Funders also realized that some costs for expensive items were beyond their capacity. So soon, similar proscriptions were put in place, negating support for facilities, endowments, and other big-ticket items.[2] Instead, applicants were encouraged to dream up new programs and initiative at a time when many were struggling to pay the bills for their existing operations.
There was another negative result of this effort to create new organizations and programs. The growth of audience demand for these programs could not keep up with the increase in supply, especially at a price point that made economic sense for the organizations, though even those offering low-cost admissions or tickets had trouble finding enough audience members. Organizations that had depended on earned income from audiences found it increasingly difficult to maintain and grow those audiences. After all, there were so many organizations now competing for the audience dollar.
As well, many entities incurred new costs by creating marketing departments to figure out how to bring in new supporters while maintaining their old audience base. At the same time, as grant funding became more competitive, many also created or expanded fund-raising (or development) departments thus creating another category of expense.
Which brings us back to the two artists and their need to find $1.8 million in six months to purchase a building. To be eligible for grants from many sources, the group had to create a nonprofit entity. But a new entity was ineligible for funds for at least two years from many grant makers. And much as funders lauded the idea of building acquisition, most could not fund such a project according to their guidelines. One way around that might have been for funders to support ongoing operating costs, releasing money for building acquisition. But their guidelines precluded such funding. And, finally, the six-month timeline to find the money precluded funding from most institutional sources that had fixed application deadlines and then long waits between application, decision, and appropriated money.
The only solution: old fashion individual patronage. The jury is out for now but if this project is successful, it will be because some generous individual donors, unburdened by all the restrictions described above, will simply and quickly write checks to support this worthy effort.
My thanks to Jennifer Chang, former Deputy Director of the National Endowment for the Arts, for her comments on this blog.
[1] When I was executive director of the New England Foundation for the Arts, I dealt with two such organizations that decided to become tax exempt nonprofits even though they had operated quite successfully for decades as commercially viable for-profit entities. The lure of grants helped them make this decision.
[2] There were exceptions. The National Arts Stabilization Fund was established to build the endowments of symphony orchestras. The National Endowment for the Arts created the Challenge Grant program to fund endowments and facility development. The Kresge Foundation’s major arts program was originally related to support for facilities. Today, none of these programs exist.