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Public Value and the Bottom Line
Brandon Gryde, Director of Government Affairs, Dance/USA and OPERA America
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Original Content11/29/2011

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We like to compartmentalize our lives. It makes things easier. We have different groups of friends; work life, social life and family life rarely converge. In the realm of arts advocacy, we separate issues of funding for the National Endowment for the Arts (NEA) and charitable deductions, among other issues.

However, support for the arts through NEA appropriations and through private contributions face challenging times. The arguments against supporting funding for the arts and against the charitable deduction (the incentive that allows those who itemize to deduct a portion of their contributions from taxes owed) are related: The benefits of both the government spending and the government subsidy are reaped by only the few, wealthy individuals who already have access to the arts.

Throughout the past 15 years, the NEA's budget has increased, albeit slowly, to reach $167.5 million. While it has never matched its peak budget of $176 million in 1992, the national arts community had opportunities to rejoice at this continued trend to support arts funding.

While our nation's bottom line was in good health, we worked to convey to policymakers, the media and other potential naysayers how much the arts contributed to the bottom line of the economy. "The arts support 5.7 million jobs!" we shouted. "The arts have a total economic impact of $166.2 billion!" we repeated, unsure of what other industries we were comparing ourselves to.

Except now it seems as if the bottom line doesn't get a lot of play. Supercommittees and Gangs of Six (give or take one or two) have the challenging task of reducing spending, so the bottom line for the federal budget will shift significantly throughout the negotiation process. All interest groups must make their case for continued federal funding, and no one is expecting to come out of this battle unscathed. (The NEA has already eliminated consortium grants for FY13 in anticipation of future cuts.) These same groups are also seeking to increase revenue through exploring new taxes, including implementing a cap on the charitable deduction. Balancing the budget by decreasing spending and increasing revenue is like constantly shifting one's weight in order to find balance while standing on a ball. And while the last of these groups charged with finding an outcome has thrown up their hands, we know that this debate is not yet over.

The charitable deduction currently offers those in the highest tax bracket a 35% deduction on taxes based on much they contributed to charity. That's $350 deducted off of a $1,000 donation. However, the wealthy have still decreased their annual net income by $650 a year and the recipient charity receives the full $1,000 contribution. If the deduction is capped at 28%, then donors will only be able to deduct $280 from a $1,000 contribution. Their financial advisors will most likely recommend giving less so as not to reduce their net worth so significantly.

If this happens, nonprofit groups, including nonprofit arts groups, will receive fewer contributions. Some policymakers justify this cap by pointing out that only hospitals, universities, and arts and cultural institutions rely on the large contributions of wealthy donors. Add to that the implication that arts organizations are not as significant as those who offer direct human services.  However Brian Gallagher, president and CEO of United Way Worldwide, speaking at a Senate Finance Committee Hearing on the charitable deduction, called this a myth and stated that his organization and its affiliates all relied on large contributions in order to provide direct services. He also pointed out that there was great crossover between the work of arts organizations and that of human service organizations.

A cap on the deduction leads to reduced contributions which can lead to fewer programs and services from nonprofits, as well as a potential reduction in the number of individuals employed by the nonprofit sector. The community served now has access to fewer arts and culture programs and there is an increase in those unemployed in the arts and culture sector. The newly unemployed in the arts and culture sector struggle to get help because organizations like United Way are also impacted by the reduction in individual contributions. To top this off, there's no government funding available to replenish these programs because federal support for the arts is seen as expendable.

The bottom line that was so black and white when talking about economic impact is now almost impossible to identify. Since there's no magic number that we can offer the government as a bottom line, we have to start thinking like social entrepreneurs and offer a multi-faceted bottom line.

  1. Economic Impact
    Don't lose the economic impact numbers: 5.7 million jobs, total economic impact $166.2 billion. They're always good to pull out in order to tell a well-rounded story.
  2. Contributed Wealth
    Know how much your organization relies on private contributions. According to OPERA America's Quick Opera Facts, approximately 53% of all revenue to opera companies comes from private contributions. Where does this money go? Many private contributions help pay for overhead — that's rent, utilities, salaries, etc. This general operating support is the hardest money to find and its loss could be devastating to many nonprofits.
  3. Public Value
    Know your public value. Who do you partner with? Are you working to increase educational opportunities? Are you providing performances to underserved populations? Do you have a special outreach program for senior citizens? Do you offer transferrable job skills training to teens? And please include the art-making in this discussion as well — WHY is it important to produce the operas you've chosen this season?

There is no longer one story to tell. There are many. But that's OK because arts organizations have many stories. We spent so many years building up the arts as a separate entity and we forgot to talk about art's fluidity. This is especially challenging as an opera community where our predecessors made beautiful memorials to the art form. My challenge to you, during this coming year of budget battles and attacks on public value, is to tear down the metaphorical shrines we built for opera and demonstrate how the art bleeds across borders; tell the story of opera in culture and opera as culture.
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