Thursday, January 28, 2010

The Buzz Word of 2010 is Sustainable


Contributed by guest blogger of the week, Zachary Mannheimer.

You heard it here first.

Answering the New York Times article, In Europe, the Arts Ask for Alms 1/20/2010

Text Message: OMG! We’re going to lose all of our state aid! What are we going to do!!!???

There really is no way around it. With state and g'ment budgets being slashed left and right (10% across the board here in Iowa, I believe it's worse in NYC) and basic services like police and fire and education being cut, why should we artists believe that our funding won't be cut as well? The President said tonight (which is why this is a day late) that in 2011 all g’ment spending would freeze.

There are many different schools of thought on this, though. One can look to Minnesota who has recently surpassed Hawaii as the top state funder of the arts ($5.67 per Minnesotan goes to the arts). When compared with other states, this is dramatic - my state ranks 36th and gives 42cents per Iowan - California is dead last at 3cents per Californian and budgets are being slashed left and right - Pennsylvania and Florida both planned on eliminating arts funding entirely for fiscal year 2010 but were saved by rallies from artists - though both states suffered still almost a 50% cut in funding.

Not only does a cut in funding impact the state budget, federal dollars are tied to the amount the state has allocated. So if the state funding is cut, so is the amount the federal government gives to the state, so it's basically a double whammy for arts organizations.

This is not going to change any time soon. Even if the economy rebounds, it's not going to be dramatic enough to re-instate arts funding on a mass level - indeed most states operate at a deficit anyway, so they will most likely up what politicians deem "essential services" and the arts is not one of them. Plus, it's hard to justify not funding a school and instead funding a theatre company or museum, and these are the kinds of decisions state legislators are going to have to make. You think they will be voted back in if they help the arts over a police officer?

Therefore, we as arts institutions need to change as well. All over the country (and the world, clearly) the buzzword for 2010 is going to be "Sustainable". Businesses, non and for-profit alike are pushing towards sustainability. For a for-profit business this is easier to define - Sustainable meaning you are bringing in enough revenue to cover your bottom line. For non-profits (or social-profits, which is a much better term for us) this definition is more difficult. As 501c3 organizations, we are limited to 1/3 of our annual budget being represented by dollars that do not deal directly with our mission. That means, for theatre companies, only ticket sales and some merchandise can account for earned income with no limitation. If you are selling beverages or food, for instance, in your lobby - the gross-profit you make from this cannot exceed 1/3 of your annual budget as it does not serve the mission of your organization.

So what do we do? One idea is to lobby congress to change the laws surrounding 501c3's to stop that limitation. I would argue that a deal can be made where, since for years opponents of charities have wanted us to pay taxes like any other business, that we should pay taxes. Not at the same level as for-profit entities, but something. 1% even. If they remove this 1/3 limitation. We can still accept donations and grants and offer a tax-deduction to our funders, but we should pay 1% or more for this.

We artists have been saying for years: “You have to fund us and we also will not pay taxes.” And we wonder why those on the right side of the aisle find us elitist, or ignore us altogether. We are what they think we are – a bunch of begging bums.

Obviously this is a long battle to change these laws, and we need answers now as all over the nation arts organizations are either shutting their doors or slashing programming.

So we have to change. Now. No more whining about how we need more grants. We need to run our art like any other company – we need to be conscious of our bottom line, and find ways to meet it. The idea that we will grow up to be another Public Theatre or St. Ann’s Warehouse is not going to happen without a millionaire board member, and those are hard to find these days. The only reason why those companies exist is because they either have this millionaire(s) or they have built up a loyal endowment over the last 20 odd years. These companies are eating up all the grant money anyway. The rate of non-profit arts groups being founded versus the rate of new funding sources is not even in the same hemisphere. We have to find our budget somewhere else. I would like to offer my organization as an example.

The Des Moines Social Club is an experiment. So far it’s working. Our funding model is based on the premise that we have had to have at least 2 full-time jobs to make theater (1 that pays us and the other, theatre, that does not). So why not combine them? My job was in restaurants – which I’ve been doing for over 17 years now. If we have a for-profit entity (restaurant/bar) whose sole purpose is to fund the non-profit and serve as a meeting ground for artists and audiences, we might survive.

All of us have “marketable skills” that pay our bills when theatre does not. How can we combine these two worlds into one, cut down on the amount of hours and commuting we work, and put it under 1 roof. Originally I wanted the bar (it will be a restaurant next year – grease traps are fucking expensive) to be part of the non-profit, but the IRS did not care for that idea, so we separated the companies. The bar pays 1/3 of the gross profits of the bar to the non-profit as rent as the non-profit owns the lease on the building. The bar is a completely separate company, an LLC. I am one of the owners of the bar. I have never seen any income from the bar and doubt I will – that’s not the point. The point is that the monies from the bar go to the non-profit. It’s like having a fundraiser everyday. The bar is open every night as any other bar (and our specialty cocktails and wine list are killer, btw).

This is one approach to paying our own way. As we grow we will be adding more for-profits to the building, all with a similar agreement the bar has. Our predictions show that we will hit 70% sustainability in 5 years at the rate we are moving now. That’s without the restaurant, catering company, wine store, etc. I predict we will be sustainable in 5 years.

And this lets us pay our artists. I’ve made more money as a director in DSM in 1 year than I did in 8 in NYC put together.

The fact is that we can no longer rely on grants and rich folk to always fund us. We need to take some initiative. We love to plead poverty, but really it’s just laziness. We won’t make it on ticket sales and grants, so what will we do? DMSC is one model, there are many others. A big one depends on where you are doing your theatre. That is the discussion for the next blog.



  1. We've been talking about alternative models for non-profits for a while and certainly your example is excellent and really glad that it is such a success so far. However, the federal government, who issues the not-for-profit status, is slow to change and not easy to convince. Granted there are many who might take advantage of a not-for-profit status while making loads of loot on the side. So how do we go about convincing the GVMT that these changes are necessary?

  2. That is a valid point. I think it comes down to thinking of non-profit as a tax status, and not a way to do business.

  3. I think there is a much better chance of accomplishing something like this in a place like Iowa where there is more space and available real estate and less competition.