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The Frick Collection, New York, NY. Photo by Lucas Chilczuk. The Frick Collection, New York, NY. Photo by Lucas Chilczuk.

Studying Early Pandemic Data: Which Funding Sources Stepped Up for the Arts?

Posted Mar 24, 2022

In our last post on contributed revenue, we explored how levels of unrestricted funds shifted leading up to the COVID-19 pandemic and into its first few months.[1] Overall, unrestricted contributed revenue increased by 3% in 2020 over 2019 while expenses fell by 11% after adjusting for inflation. From 2017 to 2019, contributed revenue as a percent of expenses was on a steady decline - meaning less unrestricted contributions were used to cover annual expenses over the course of those three years. After falling to a low of 48% in 2019, contributed revenue experienced a sudden reversal in 2020 and ended up covering more than half—55%—of annual expenses for the average arts and cultural organization. Overall, these shifts helped organizations recognize a 2% surplus when looking at unrestricted funds.

Now that we’ve established increases in contributed revenue early in the pandemic, the question becomes: What were the sources of these increased funds?

 

SMU DataArts tracks contributed revenue diversity from five primary sources: trustees, corporations, individual donors, foundations, and public agencies at all levels of government. Prior to the pandemic, these funding streams stayed very consistent over time as percentages of total expenses, as shown in Figure 1.

However, increases in donations relative to expenses were recognized in all revenue sources except Trustees and Corporations in 2020. In inflation-adjusted dollars, individual and foundation giving nudged up slightly in 2020. Government funding, shown in Table 1, increased 12% from 2019.

Table 1: Unrestricted Government Contributions, 2017 - 2020

  2017 2018 2019 2020 Nominal change 2017 - 20 Inflation Change 2017 - 20* Inflation Change 2019 - 20*
Unrestricted Government Contributions as % of Expenses 8% 7% 7% 9% 1%    
Ave. Unrestricted Government Contributions $258,882 $256,803 $260,188 $296,323 14% 8% 12%
Ave. Total Expenses (before depreciation) $3,167,763 $3,431,214 $3,643,630 $3,250,216 3% -3% -13%

*The inflation adjustment for 2017 to 2020 was 6%, and the adjustment from 2019 to 2020 was 2%.

Much of this growth came from federal government contributions. Through programs funded by the CARES Act, many businesses and nonprofit arts and cultural organizations were able to secure funding to sustain employment levels and business operations. Through the summer of 2020, SMU DataArts found that the Paycheck Protection Program (PPP) alone provided $1.1 billion to support 117,805 jobs at 5,713 nonprofit arts and cultural organizations. That is in addition to the $75 million that was distributed by the National Endowment for the Arts for similar purposes. Other programs such as the Economic Injury Disaster Loan (EIDL) Advance program, the Employee Retention Tax Credit (ERTC) program, and various state and local programs also contributed to increased levels of government support for the sector.

As shown in Table 2, expenses contracted 13% in 2020 after years of steady growth for organizations across the board. Overall four-year growth in government support was particularly high for organizations whose missions lie in a specific ethnic, cultural or other demographic voice, despite the fact that 1-year growth from 2019 to 2020 was much lower than it was for their counterparts more generally.[2]

Table 2: Government Contributions, 2017 - 2020, By Mission Voice

  2017 2018 2019 2020 Nominal change 2017 - 20 Inflation Change 2017 - 20* Inflation Change 2019 - 20*
Specific Mission Voice 12% 15% 13% 15% 3%    
Government Unrestricted Revenue/ $100,356 $130,496 $121,466 $126,803 26% 19% 2%
Total Expenses (before depreciation) $829,356 $892,299 $967,174 $860,553 4% -2% -13%
Non-Specific Mission Voice 8% 8% 7% 9% 1%    
Government Unrestricted Revenue/ $277,286 $271,501 $276,149 $316,528 14% 8% 12%
Total Expenses (before depreciation) $3,273,076 $3,562,005 $3,771,934 $3,349,760 2% -3% -13%

*The inflation adjustment for 2017 to 2020 was 6%, and the adjustment from 2019 to 2020 was 2%.

Our early research into the PPP program indicated that many community organizations, that were perhaps smaller, had a more difficult time accessing PPP funds due to fewer connections to the banking industry, which processed the funding requests on behalf of the Small Business Administration (SBA). The SBA noted at the time that “27% of the program’s reach [was] in low- and moderate-income communities, which is proportional to the percentage of population in [those] areas”. In applying this percentage to our study of early COVID-19 impacts in New York City, we found that funds going into “low resource” geographic areas primarily supported jobs at large institutions.

 

We’ve shown so far that transitioning into the pandemic from 2019 to 2020:

  • Unrestricted contributed revenue increased,
  • It was driven primarily by growth in government support, and
  • Many government programs were focused on workforce retention.

 

While we can’t directly speak to the causality of government funds on employee retention at this time, we can explore employment in a few ways. Table 3 shows that for the organizations studied in this analysis, full-time staff levels decreased by about 14% through the first months of the pandemic.

Table 3: Average Fulltime Employment 2017 - 2020

Fulltime Employees 2017 2018 2019 2020 2019 - 2020 % change
Overall 19 20 21 18 -14%
Specific Mission Voice 5 5 6 6 0%
General Mission 20 21 22 19 -14%

Organizations with missions rooted in a particular demographic voice had fewer full-time employees prior to the pandemic and experienced less change, as captured in this data.

 

However, there is more to the story on employment in the arts. Our latest report examining unemployment and demographic characteristics of arts and culture workforces and artists tracks monthly employment data from the U.S. Census Bureau’s Current Population Survey (CPS) to better understand how the sector fared from January 2020 through January 2022.  

The CPS data, shown in Figure 2, illustrates that prior to the pandemic, unemployment in the arts and culture sector was below 5% and spiked to about 28% in April 2020, nearly double the national unemployment rate.

If we average the monthly CPS data for unemployment rates through August 2020, we arrive at about 16% unemployment, which closely aligns with the 14% reduction in full-time employment identified in Table 3.

Unemployment rates continued to drop after August 2020, and specifically for this topic, additional government programs continued to provide support for the sector. The PPP program continued granting funds until May 2021, EIDL Advance funds continued through December 2021, the Shuttered Venue Operators Grant (SVOG) program provided funds to performing arts and museum entities through August 2021 – as well as many other programs that have continued to provide support. The American Rescue Plan (ARP), signed in March 2021, allocated $350 billion to governments of all levels across the U.S. where some funds have been allocated to support local arts and cultural organizations. In Chicago, ARP funding helped increase the Chicago's Department of Cultural Affairs and Special Events by over 700! 

 

As we move through this pandemic, we will continue to probe data on contributed revenue to assess how trends shift and highlight successes as well as areas for improvement. While government funding was a primary driver of support increases in the first months of COVID-19, did individual donor and foundation giving bolster arts organizations’ stability in the year that followed? Will the landscape be altered fundamentally? Will the new wave of government support continue to flow, or when might it dry up? Did organizations rooted in a specific demographic voice access more government funds as the pandemic waged on?

In our next post, we will explore one more facet of contributed revenue: return on fundraising. Stay tuned to see how effective fundraising efforts have been in securing philanthropic funds.

Written by Daniel Fonner, Associate Director for Research, SMU DataArts

 

 

[1] It is important to note the values presented in this report reflect organizational finances tied to their given fiscal years, not calendar years. As such, organizations’ fiscal years ending in 2020 ranged from pre-pandemic time (January 2020) through December 2020. On average, the data shown here captures financial positions through August 2020, or 5 months into the pandemic.

[2] Mission voice was determined by analyzing organizational characteristic questions in the Cultural Data Profile, which can be found here: https://culturaldata.org/what-we-do/for-arts-cultural-organizations/the-cultural-data-profile/

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