For the Arts, the Party Is Over

First, a slowing economy crimped donations. Now, museums and symphonies must compete with September 11 charities

By Thane Peterson

When a recession takes hold, arts organizations are the canaries in the economic coal mine. Perennially strapped for cash, art galleries, ballet companies, orchestras, theaters, and the performers and artists who depend on them see their funding drop off sharply when times turn tough. And in this downturn, arts groups are already gasping for breath.

The first to get into trouble have been symphony orchestras. In California, the already hobbled San Jose Symphony, which had been preparing an emergency fund-raising drive, has just decided to shut its doors instead. Backers hope to reorganize and revive the symphony next year. The St. Louis and Toronto Symphonies also are in deep financial trouble. Even the venerable Chicago Symphony, one of the nation's best, is projecting deficits for this season and next, its first red ink in years.

I fear that this is just the beginning of a major shakeout among arts organizations in New York and nationwide. Even before September 11, many artists and arts groups were suffering from the economic slowdown. Now the terrorist attacks have cut into travel and tourism while diverting hundreds of millions of dollars in charitable giving to organizations helping the attack victims. Meanwhile, at museums and other established arts organizations, plunging interest rates and share prices have slashed the investment income earned from their endowments.


  The longer-term problem is that expansion by arts organizations got way out of hand during the boom years of the '90s. For instance, nearly every major and minor art museum in the U.S. launched a significant expansion plan during the 1990s, many of the big projects designed by high-price, big-name architects.

According to Art News magazine, more than a dozen art museums in New York City alone are starting, finishing, or in the midst of big expansions. Among the other cities undertaking fancy new art-museum expansions are Houston, Austin, Los Angeles, San Francisco, Denver, Minneapolis, Cincinnati, Detroit, Las Vegas, Reno, and Biloxi, Miss., Art News says. The museums probably won't go under, but the slump could force many to cut staff and shorten their hours.

Hard times are already bankrupting struggling small and midsize arts organizations at an alarming rate. One example: The nonprofit Ansel Adams Center on San Francisco's Mission Street, with origins in an organization founded by the famous photographer and his friends in 1967, shut down at the end of October and is selling its collection of 140 Adams prints and other assets in an effort to pay off $1.2 million in debts.


  Many of the most severely hit groups are in the Big Apple. On Oct. 26, I checked in by phone with Ronald Feldman, who runs a respected art gallery in New York's SoHo district. He's just north of Canal Street, so close to where the World Trade Center Towers used to be that the acrid smoke from the smoldering disaster site still burns his eyes when the wind blows from the south.

Feldman had just been to an emergency meeting organized by the New York Foundation for the Arts, which is mounting the United Arts Rebuilding Effort. The NYFA figures there are 230 nonprofit arts organizations below Manhattan's 14th Street, and 90 south of Canal Street in areas near the WTC site.

Based on past grant applications, the foundation figures at least 2,200 artists are living south of 14th Street, about 700 south of Canal Street -- though Feldman guesses the real number is probably "two or three times that many" because many artists never apply for grants. "Some of the artists' studios are in ruins, their work so covered in dust that it's not recoverable," Feldman says. "Some of the small arts organizations don't even have enough money left to apply to get money."


  Among larger arts organizations, the consequences of '90s building boom are going to pinch funds for years to come. "If a museum doubles the size of its exhibition space, it doubles its operating budget," says Kent Logan, a retired investment-banking exec and major art collector. "Now they're saying, 'Holy smokes! Look at all the money we have to raise each year just to operate the museum!'"

The terrorism threat will only increase the financial pressure by raising security and insurance costs, cutting into donations and reducing visitor counts. And the ripple effects will extend well beyond museums and orchestras. For instance, art and music schools -- a major source of jobs for artists and musicians -- saw enrollments boom in the '90s.

Since 1992, there has been a 17.5% increase in enrollment at the 34 U.S. schools that are members of the Association of Independent Colleges of Art & Design. That raised member schools' total enrollment to about 35,000 students, close to 9,000 of them in New York City. Now, says Bill Barrett, the organization's director: "We're all preparing to take a hit next year."


  Art collector Logan predicts that over the next five years or so, many museums will be forced to radically revamp their strategies by tightening business practices, as well as scaling back on the size and diversity of their collections. Howard Reich, arts critic at the Chicago Tribune, predicts that the beleaguered classical music industry will have to do the same. In an article by Reich, Paul Freeman, music director of the Chicago Sinfonietta and the Czech National Symphony Orchestra in Prague, sums up the situation: "We're fossils, and if we don't change, we'll remain fossils."

What can lovers of art and culture do to help in the meantime? I think we should be sure not to forget the arts and artists while we're heeding President Bush's entreaties to go out and spend some money to boost the economy. See a play, take in a ballet or concert, buy a novel or CD, a painting or print -- whatever grabs you.

And when you're pulling out the checkbook to give more money to the Red Cross or Salvation Army, don't forget to also consider making donations to arts organizations. Alas, even that may not be enough. A bubble economy developed in many parts of the art world, as elsewhere, in the 1990s. Now it's bursting.

Peterson is a contributing editor at BusinessWeek Online. Follow his weekly Moveable Feast column, only on BW Online

Edited by Douglas Harbrecht

    Before it's here, it's on the Bloomberg Terminal.