Virginia Budget Crisis: A Philanthropic Perspective
Bobby Thalhimer
Feb 27, 2010
Fear focuses one’s attention. As Virginia’s legislative budget committees reconcile how they will close the $4 billion gap without raising revenues, philanthropists worry about the people and causes they help through their grantmaking; for example:
• Early childhood education;
• Healthcare for the uninsured;
• People with special needs;
• The elderly;
• The arts.
The September 2008 study of Virginia’s Nonprofit Sector: An Economic Force, prepared by Johns Hopkins Center for Civil Society Studies (http://www.vanno.org/newsreports/documents/FinalVAreport9308.pdf), observes that when taken together Virginia’s private nonprofit sector “constitute[s] the state’s second largest employer , deliver[s] the lion’s share of the available health, cultural and social services, enliven[s] the state’s democracy, and add[s] immeasurably to its citizens’ overall quality of life.”
Governmental support is a more critical source of funding for nonprofits than most people realize:
• Revenues from governmental support and service fees (70% of total revenues);
• Private charitable support, including volunteerism (30% of total revenues).
I have read that governmental support may be eliminated for many areas of concern. I worry that lawmakers do not understand that governmental support is too significant to its nonprofit partners to be lost in one year and to expect services to continue.
Furthermore, private charitable support is challenged by declining asset values (S&P 500 is down approximately 30% from its 2007 peak) as a result of the Great Recession. At the same time, many charities in the human services sector are experiencing record demand for services due to the high unemployment rate.
From my perspective, I would be comforted to hear that our elected leaders will focus on ALL MEANS of closing the budget gap. Taking any tools off the table for ideological or other reasons will produce a suboptimal outcome.
Bruce Miller offers a thought provoking viewpoint of this crisis from the perspective of the arts in his 2/25/10 posting on The Barksdale Buzz (http://thebarksdalebuzz.blogspot.com/), which is reprinted here with permission. Bruce is Artistic Director for Barksdale/Theatre IV and has been an arts advocate for decades.
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At least 150 Virginia arts supporters lined the halls of the Virginia Capitol today. It felt like more, but that’s how many stickers saying “Save the Arts” were distributed. However many of us there were, we packed the place, and certainly made a strong statement in favor of continuing state funding for the Virginia Commission for the Arts.
Everywhere we went, smart and well-intentioned individuals asked something like, “Why should the state support the arts when we can’t do all that we should be doing for disabled children, for education, for health care for the poor?”
If there were a true choice between these very worthy causes and the minimal financial support required to save the Virginia Commission for the Arts, I too would pick disabled kids, education and health care. The arts will never and should never win the argument that we are “more important” than these very worthy efforts. The case for disabled children, education and health care for the poor has already been argued and won in the hearts and minds of virtually everyone I know. Especially artists.
But in the real world, there is no such choice. Pretending that such a choice exists is an ideological exercise, lacking any foundation in real world economics.
The one choice is this: should Virginia continue to fund the Virginia Commission for the Arts, cutting it proportionally with other agencies, services and efforts, or should the Old Dominion become the first state in the nation to turn its back on its own nonprofit arts industry.
That is the choice. And as we debate the pros and cons, the only truly germane question, given current budget realities, is this: will spending $4 million to maintain the Virginia Commission for the Arts result in a net loss for the state budget or a net gain. If we all agree that we want more money to go to the aforementioned worthy causes (and who doesn’t), the question is not whether or not the state should fund the arts, the question is whether such funding will be a sound investment resulting in more revenue to devote to all the things the state is honor-bound to fund.
The Virginia economy, like any large economy, is very inter-connected and complex. An economic impact study conducted in 2000 documents that the nonprofit arts generated $1.1 billion per year in Virginia a decade ago. Wise leaders recognize that the arts are like roads, libraries and state parks. They are among the quality of life components that attract businesses to a community, that attract top students and faculty to universities, that bring out-of-state money into local and state cash registers.
Gone are the days when a thriving American city or town (or state) can be “art free” and still expect to attract jobs. The vast majority of major employers don’t move into cities until they determine that a thriving arts and cultural community pre-exists. They require a robust arts community not only because they want their employees to have something fun to do on Friday night, but also because virtually all business studies indicate that the most educated work forces, the most creative work forces, the work forces most adept at the skills that 21st Century companies need to compete come from communities that are rich in the arts.
Don’t believe me? Check out Richard Florida’s (PhD, Columbia University) several best-selling business texts: The Rise of the Creative Class, Cities and the Creative Class, and The Flight of the Creative Class. Follow that with a perusal of Daniel Pink’s immensely popular A Whole New Mind: Why Right-Brainers Will Rule the Future.
As for small businesses ... the Virginia economy is based on small businesses. Every legislator says so, especially those who favor eliminating the Virginia Commission for the Arts. The ironic thing is that arts organizations ARE small businesses, employing over 20,000 professionals in Virginia each year.
Eliminating the Virginia Commission for the Arts (as has been proposed by the House) will not save money, it will cost money. Lots of money. If you truly want to get more money for your favorite worthy cause—and we all agree that education, health care etc are worthy causes—then do NOT destroy the infrastructure that enables and sustains 20,000 jobs and offers a 275% return on investment.
Virginia’s arts organizations have already accepted cuts exceeding 30%. We haven’t whined. We haven’t cried “Wolf!” We understand that we need to tighten our belts and sacrifice just like everyone else.
All we ask now is for the Virginia legislature in its entirety to go with the budget recommendations of Gov Kaine, Gov McDonnell and the Virginia Senate. Only the House budget recommends eliminating the Virginia Commission for the Arts.
All we ask is that the legislature in its entirety think big picture. Save the Virginia Commission for the Arts, and allow our nonprofit industry to continue to provide tens of thousands of real jobs, lure hundreds of thousands or more jobs into Virginia, support education, and increase tourism.
We know the job of balancing the budget is extremely hard. But please, examine the concrete evidence. Think long term and big picture. The voters of Virginia deserve no less.
Bobby,
Thank you for such an insightful and well written explanation of what so many of us have attempted to articulate: the VCA is an economic stimulus engine, and to eliminate it would only exacerbate the current budget crisis.
In my professional fundraising career I’ve worked in both the Arts and Human Services. I can’t tell you how many VCA grant proposals I’ve written, and the data that I included that showed the impact on the local economy of the organization for which I sought funding.
Now, as I am fundraising for an organization that serves adults with disabilities (both intellectual and physical), as well as seniors and those with Alzheimer’s and other forms of dementia, I’m afraid of what cutting revenue producing programs from the Commonwealth’s budget will mean. My organization depends on Medicaid service reimbursements for 66% of our income. Our client members are among the most fragile and financially dependent on such programs. We’ve reconciled ourselves to the possibility of losing at least 5% of our Medicaid reimbursements, although so many in the legislature don’t want to see that happen. However, if you cut out programs that provide jobs, and thus income taxes, our beloved Commonwealth will no longer be able to support the frailest of her citizens.
I am very fiscally conservative, and in fundraising, I don’t believe in creating new programs just to get money in the door. Just the same, I don’t believe in top-heavy bureaucracies that siphon off monies intended for the citizenry. In 2009, the VCA’s total personnel expenditures were $349,087 and the total grants made were $4,782,070. Even if you breakout all other expenses except grantmaking from the total, the overhead percentage is 9.5%. Only $.095 over every dollar is spent on bureaucracy, and the rest is spent on programming; taken in another light, for $349,087 in employee compensation, the Commonwealth has $1.7 billion plowed into the economy, and a hefty portion returns to the state in the form of taxes. Taxes that match federal monies to pay the Medicaid reimbursements for the individuals that my organization serves, so that they might prolong living in the community with their families.
Now, can anyone explain to me again how cutting the VCA is going to help the individuals we serve in the long term (I mean of course, after the savings recognized in the next biennium is gone for 2012 - 2014…or is that the next guy’s problem?)
Mar. 5, 2010 at 01:35 PM
Great blog, Bobby! It was very clear and insigtful. Even if we don’t necessarily believe that government should be funding the arts for arts sake alone, making the business connection makes so much sense. The Arts do attract people and money. You got my vote!
Mar. 2, 2010 at 06:25 PM
Bobby,
Thank you very much for an insightful blog on philanthropy and non-profits. I have worked in fundraising for the past 8 years here, am a mom and an artist. If it it had not been clear to me before, it became glaringly obvious over the past 8 years that art is inextricably linked to health (healing), education (tools for those who do not learn by rote), disability (creative solutions/opportunities, education, expression) and democracy (self expression/communication). I realize how underestimated this is in the community, whether it be the health, education, disabled, or the art community, not to mention the community at large. Every way in which the government and private philanthropy spends its dollars to help others is worthy. When people are faced with life and death situations, whether real or perceived, a balanced budget doesn’t mean much. They need real help. We need a creative solution to move toward a balanced budget. Hacking away at it will surely hurt those who are most in need.
Taxes are meant to take of the needs of the community, whether or not we agree with each and every dollar spent. I would like my car to live through next year and am not interested in donating directly to Public Works to get the potholes in Richmond filled or to filling them myself. I see my taxes as part of this solution. My child is not in public school yet but I see that my taxes need to be spent on public education and health and disability waivers if Virginia is to have an educated public that can govern itself into the future. Especially in the face of the ludicrous ideas about budget cutting that are floating around the halls of our legislature. I am hopeful they will get it right because even when the budget is balanced Virginia is second to last in the nation for spending on its state disabled population this includes the mentally disabled which get the smallest share of that sliver of pie. Individual philanthropy has never made up for that. Coming from New York, I thought individualism ran high there but it really has nothing on Virginia. And there are many more religious folks here of Christian faith than there are in NY for which I expected people in Virginia to be more brotherly and sisterly especially with their resources but I must say that I still have yet to see this on the whole.
Thank you again for a great blog. I am sorry to only now discover it. I will be a regular reader from now on.
Mar. 2, 2010 at 08:47 AM
Bobby,
While philanthropy is my passion, believe in individual rather than government philanthropy. Each of us as individuals have the right to choose the type of charitable institution we want to support. When governments get into the act they use my tax dollars to support institutions and causes you or I may or may not agree with. I applaud them in neither event. Our constitution does not give the government that right. I work with many organizations that depend on individuals to support their good work. Yes, this economy has made it very difficult to raise the funds these great organizations need to do their work - but great organizations find a way to survive and even thrive without government support. I applaud our Governor and legislators who understand this is not the time (nor is it ever) for them as elected officials to use our tax dollars for anything other than the basic services our constitution provides for.
Ray Moore
Feb. 28, 2010 at 03:14 PM
Thank you, Mr. Thalhimer and Mr. Miller. That was an invaluable argument that I can use to combat the misinformation that abounds.
Feb. 27, 2010 at 06:34 PM
Thank you for your remarks, this truly is a time of struggle and crisis for the arts. I am coordinator for member-run art6 gallery, a First Friday participant. It is only with the cooperation of a generous landlord and the tireless work of our members that we will be able to remain open in the future. To eliminate the Virginia Commission for the Arts is a shortsighted decision that will not really help the overall picture and may drive us and other non-profits out of business.
You can walk into our gallery for free. You can attend many events for a nominal donation. Students come on First Friday and weekends for school assignments. We hold workshops and lectures, poetry readings and more during each month. Many of the First Friday galleries can say the same thing. We have accepted, as you mention, the cuts in the budget, but much more will run us (and some others) out of the art business.
I hope the state will listen to us and to strong voices like yours and reconsider what they are planning. As they say on NPR- a great nation deserves great art!
Feb. 27, 2010 at 02:36 PM
thank you for such a clear and convincing argument. Virginia NEEDS the arts, and eliminating the VCA is a penny-wise and pound-foolish move.
Feb. 27, 2010 at 02:05 PM
Bravo for making a most rational, thoughtful and fact-based argument in favor of maintaining the Virginia Commission for the Arts. The reality is that many, many small arts organizations will fold if they do not receive VCA grants, and many larger groups will be forced to lay off staff and cut programming.
As the painter Joseph Jahn said, “To destroy art is a major crime against the future.”
Feb. 27, 2010 at 12:57 PM
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