Createquity.

Free to a Good Home? Or For Sale to the Highest Bidder?

Tegan Kehoe — Fri, 17 May 2013 11:48:04 +0000

One of eleven extant copies of the Bay Psalm Book, among the first books printed in British North America, will soon be up for sale. Experts estimate it will go for $10 to $20 million. Did a private book collector die or decide to prune their collection? No, this particular volume is being sold by the Old South Church, a congregation in Boston. Opponents of the decision have expressed concerns that the book would be sold to a private collector. This despite the fact that the Old South Church owns two copies of the book and is only selling one.

Controversies like the one over the sale of the Bay Psalm Book have become increasingly common since the mid-twentieth century. Many museums and other institutions that hold cultural objects no longer believe they must hold such objects in the public trust in perpetuity. Much of the museum community has agreed on best practices for deciding whether to give up an object, yet those practices, and specific museums’ adherence to them, are still hotly contested.

On one extreme, some critics feel deaccessioning, which refers to when an institution formally decides an item is no longer a part of its collection, is fundamentally in conflict with the idea that museum objects should be held in the public trust. On the other, a minority of museums consider deaccessioning to be a part of regular housekeeping, discarding items not only to correct past errors, but even taking in new items with the attitude that they may well be deaccessioned in a generation. Representatives of major institutions have voiced both ideas in the past decade. The more moderate pro-deaccessioning camp (most vocally Donn Zaretsky, a lawyer specializing in fine art) argues deaccessioning can be done without restrictions when it’s to save a museum from the threat of closing or other great danger.

The largest camp is made up of those who feel deaccessioning can be a part of healthy museum operations but only when following guidelines regarding who makes the decisions and how. The American Alliance of Museums advises, but does not require, that proceeds from deaccessions be used for future accession purchases only. The Association of Art Museum Directors considers this a hard and fast rule, and publicly and harshly censured the National Academy Museum, an institution that receives all of its collection by donation rather than purchase, for breaking it in 2008.

National Academy Museum by vitarlenology on Flickr

The casual museum-goer is unlikely to pay attention to whether each decision a museum makes is appropriate. However, many people inside and outside of the museum community share a belief that that museum objects should be accessible to the public, because museum objects are public objects, and museums are their caretakers. The values that underlie the interest in keeping museum objects public inform most discussions of deaccessioning, yet are rarely used as a metric to determine whether deaccessioning is appropriate. I propose a simple rule: the public should sit up and take notice when an institution is unwilling to take the steps necessary to ensure, or at least prioritize, keeping an object in public hands.

Whose Objects?

The word “deaccessioning” is not a household term. From the outrage over a large-scale deaccessioning project at the Metropolitan Museum of Art in 1972 to the outcry over Brandeis University’s plan to close the Rose Art Museum in early 2009, deaccessioning can seem like a non-issue until it becomes a huge issue. In the former, a New York Times article and other responses sparked concern that museum executives and curators were discarding art according to their own standards rather than relying on the wisdom of generations. In the latter, students who had never been to the Rose Art museum realized what they might be losing, and spread protest signs with the Rose logo and “ATM Inside” across campus. Alumni and donors argued that closing the art museum went against the university’s public service mission. I was a student at Brandeis at the time myself, and it was clear that the threat of losing this art, especially to private collectors, was inspiring high emotion.

These emotional discussions reveal two widely held values. First is the belief that certain cultural objects should be accessible to everyone. Second, museum property is public property; a museum is responsible for the longevity of artifacts but they belong to everyone. These values undergird oft-voiced concerns about the practice of deaccessioning, and each can be addressed by placing objects in other public-serving institutions’ care. If a museum deaccessions without respecting these values, it calls into question whether serving the public is truly the museum’s highest priority.

Cultural Property Should be Accessible to Everyone

A common defense of deaccessioning is that objects are not significantly more accessible in museums than they are in private hands. Most of a museum’s items just sit in storage gathering dust, the argument goes, and why does it matter if something unseen is sold? Elliot Bostwick Davis of the Boston Museum of Fine Arts told the New York Times that most American museums show between two and four percent of their collection at a time. The British Museum shows only one percent of its collection, while smaller museums in Britain frequently exhibit 5-10%. Moreover, not all museums are truly accessible to the whole public, because they fail to make accommodations for visitors with physical or financial limitations.

Visible Storage, Sculpture by jspad on Flickr

The logic that deaccessioning can be done freely because things aren’t accessible anyway is flimsy. Few private collectors are going to open up their homes to anyone and everyone who wants a close look at their stuff, but something that is unseen in a museum today may be on display tomorrow. For one thing, most museums rotate even their “permanent” exhibits. For another, methods of making more of the collection available have been slowly gaining popularity for decades. “Visible storage” is a system where objects that are not part of curated displays are stored in cases in rooms that are open to the public. Museums that have visible or “open” storage often have 15, 50, even 80 percent of their collection on display at one time.

Responsible transfers from one museum to another can improve accessibility by taking an item out of storage and putting them back on view to the public. It’s meaningfully different than when a museum sells to a private collector, and proponents of uninhibited deaccessioning are often incorrect when they argue that the items sold by one museum would not be of interest to another museum. For example, the director of the Irvine Museum in California told the LA Times she was “stunned” when another museum sold several important Impressionist works in secret to a private collector. The Irvine was one of several museums that said they would have been interested in the paintings had they been offered the chance to buy them. In this case, a transfer or inter-museum sale would have given the public another opportunity to enjoy these works.

Responsible transfers can also improve physical accessibility: if your historic house museum owns a collection of nineteenth-century leg braces, but can only display them in a room that’s up two narrow flights of stairs, perhaps they could be given to an institution with elevators so that twenty-first century museum visitors who wear leg braces themselves can see them. In the article “Guilt-Free Deaccessioning” (published in A Deaccession Reader, edited by Steven Weil, 1997), Steven H. Miller gives several examples of large general museums donating to small specialized or regional museums, an arrangement that improved the opportunities for the public to view those items.

People believe museum objects should stay accessible to everyone. Because this value is so widely held, it is important for any institution that holds cultural objects to make authentic accessibility a priority and to consider accessibility when planning for deaccessioning and disposal. Deaccessioning can be a great tool to improve accessibility, but if this value isn’t being taken into account at all, that is cause for concern.

Museum Property is Public Property

The loudest voices calling for cultural objects to stay in public hands are firm in their belief in museums’ responsibility to be a public repository for objects. In response to a 2005 Soethby’s sale of 42 impressionist paintings recently deaccessioned by the Los Angeles County Museum of Art, culture journalist Lee Rosenbaum wrote, “These sales are the latest sign that we can no longer depend on our cultural institutions to protect and preserve the public patrimony.”

Los Angeles County Museum of Art by eclipse_etc on Flickr

Rosenbaum, who blogs as CultureGrrl at ArtsJournal, argues for very stringent decision-making processes on the part of museums who might choose to deaccession. In the same opinion piece, she calls for government action “when museums cross too many lines.” She also writes, “Museums’ permanent collections belong to all of us. The public has, in most instances, paid for these works through the tax deductions given to private donors.” The idea that museum property is public because of tax deductions to donors is used frequently in American deaccessioning debates. It’s also a stretch, since the value of an item donated is generally much greater than the tax revenue forgone through deductions. However, even Rosenbaum does not condemn all deaccessioning, and in the same piece she advocates trades or transfers of objects to other museums rather than putting these objects up for sale.

It’s important to note that museums (and some libraries) are generally the best custodians of cultural objects from the standpoint of preservation. Museum staff and contractors have the specialized knowledge to care for a precious work of art or historical artifact over the long term. Museums benefit from economies of scale in that the investment they make in regulating their environment protects many objects. While private collectors have an incentive to keep their possessions in good condition for their own enjoyment and for resale value, they don’t necessarily have a reason or the means to ensure the object will be in good condition beyond their lifetime. Museums’ role in preserving the lifespan of cultural objects is one very good reason certain objects should stay in museums, but that does not mean objects can never change hands within the museum community.

In fact, one of the reasons many institutions deaccession objects is that they feel burdened by gifts of the past that take resources away from their mission in the present. Many museums, especially older ones, accepted any and all donations of objects in the first years they were open, and later, after developing a clearer mission and a collecting policy, find themselves with objects that just aren’t a good fit. Institutions such as churches and schools can be in the same predicament. The expenses associated with proper object care provide a strong incentive for museums to limit the size of their collection.

Donn Zaretsky takes issue with the idea that anything should be permanently considered public or museum-worthy. On The Art Law Blog, he argues that museums should be free to deaccession whenever it makes sense for them, without having to consider unspoken donor intent. He feels that the public benefits of deaccessioning, such as saving a museum from closure, are too often ignored. This side of the argument is why selling items to the highest bidder is a cause for concern, but not proof that the decision is being mishandled. Institutions strive never to be in the dire situations Zaretsky references. However, those that try to sell their deaccessioned objects for the highest possible price, ostensibly to care for the needs of the institution and prevent getting into dire straits, are making a values decision to seek money to serve their mission rather than address their public-serving mission directly. It’s a delicate balance.

Even if a gift was legally unrestricted and the donor has long since passed, though, some observers still place moral responsibilities on museums. Many opponents of the Bay Psalm Book’s sale point to the fact that the book was given to the church as a gift. One told WBUR that to sell donated objects “is to break faith with these donors from the past.” In his article “Selling Items from Museum Collections,” another selection from A Deaccession Reader, Steven H. Miller writes, “The giving and receiving of an item, or the money to purchase it, is an act of faith in and by a museum. When accepting such offers a museum is establishing a relationship which it should be bound to honor.” However, considering that gifts can be a burden as well, if institutions are proxies for the public, one good proxy should be as good as another.

How Can Cultural Objects Stay as Accessible as Possible?

Cultural institutions wishing to avoid letting their deaccessioned objects fall into private hands have many options. The American Alliance of Museums runs an online forum, the Collections Exchange Center,where its member museums can list objects they want to sell, trade, or donate to another museum. The National Park Service runs a similar service primarily for its own sites, although it does not list objects for sale. Some museums use regional networks for the same purpose, and informal networks can also be useful, especially to non-museum institutions looking to find a new home for an object.

There is plenty of precedent for museums to sell or donate objects to other museums. Trades may be less common, but they too have been done. For example, in 1982, the Museum of Modern Art in New York reunited the four paintings in Kandinsky’s Four Seasons suite by trading paintings by Picasso and Matisse for two Kandinskys owned by the Guggenheim. For special cases in which an institution still has a use for a work of art, but finds that it can reach wider audiences elsewhere, joint ownership can present a useful alternative. Last year, Fisk University in Tennessee sold a 50 percent share in its Alfred Stieglitz art collection to the Crystal Bridges Museum in Arkansas. The collection of 101 American Modernist paintings will now spend two years at the museum followed by two years at the university.

A somewhat hairier alternative is to give public institutions special privileges at an auction that’s open to all. In 1994, the New York State attorney general ordered a special set of rules for an upcoming Soethby’s auction of items deaccessioned by the New York Historical Society. Public-serving institutions watched the auction and, before it closed, were permitted to pre-empt any sales, paying the highest bid minus a discount. This option is tricky because it doesn’t guarantee a museum will be able to take the object, but it’s available for organizations seeking a compromise between profit and public.

The Big Picture

While the museum field has mostly agreed upon best practices around the decision to remove an object from a collection, controversies over big deaccessions still arise year after year, partly because many institutions take liberties with standard practices or ignore them altogether. The general public can’t – and doesn’t need to – concern themselves with every deaccession. These controversies are not always easy to follow, but the best litmus test is whether an institution makes a priority of keeping objects in public hands, reflecting the values that museum property should be accessible to all and preserved for the future because it is public property.

Undoubtedly, some institutions would be appalled at giving or trading a valuable object away, or selling it for less than market rate, as may be necessary to ensure that object’s continued public accessibility. Boards of directors and museum leaders oversee an organization’s financial sustainability, and may worry that failing to seek the best price runs counter to that obligation. However, they are also charged with upholding the mission of the organization. How many institutions have language in their mission statements about benefiting the public, serving the community, or promoting a greater appreciation of the topic the museum’s content reflects? All this can be served by making responsible efforts to keep objects in public hands.

Introducing the Cultural Research Network

Ian David Moss — Wed, 15 May 2013 21:09:10 +0000

Way back when I was a fresh-faced intern with the William and Flora Hewlett Foundation’s Performing Arts Program almost five years ago now, I made a startling discovery. In the course of researching various conceptions and definitions of cultural asset mapping in preparation for what would eventually become my work here at Fractured Atlas, I came to realize that a significant body of literature existed on the arts and economic/community development with which I had been entirely unfamiliar. That wouldn’t have been so notable except that I had previously taken an interest of my own in the topic; I considered myself pretty knowledgeable, certainly relative to my former coworkers and business school colleagues. And yet here I was coming across hundreds of pages of stuff, great stuff, really fascinating, ground-breaking stuff, and hardly anyone in my professional circles seemed to know it existed. That summer, for the first time, I got to know the work of Stern and Seifert, Sheppard, Markusen, Brown, and so many other giants of cultural research who have provided the intellectual underpinnings for much of our current and future arts policies. More than anything else, it was the inspiration I derived from that experience that set me on my current professional path.

Ever since then, I’ve been something of a crusader for developing channels for information-sharing within and around the cultural research space. I simply couldn’t believe that such important work wasn’t more visible within the sector. As my interest grew in building bridges between researchers and practitioners through initiatives such as the Arts Policy Library series on Createquity, I also began to see the value of facilitating greater connections among arts researchers themselves. While researchers tend to be more plugged in to what their colleagues are doing than your typical practitioner, there are still significant information gaps that too often hold back collective progress. That’s why, after I started work at Fractured Atlas on implementing the Hewlett Foundation’s Bay Area Cultural Asset Map project, I created a Google Group called the “Cultural Mapping Community of Practice” and recruited many of my heroes from the summer of 2008–as well as some new ones I’d picked up along the way–to join.

There was just one problem: other than an initial burst of activity in which participants eagerly shared details of projects that they were working on or had recently completed, not many people made use of the Cultural Mapping Community of Practice. After the pilot phase of the Bay Area Cultural Asset Map was complete, the group essentially fell dormant. I gradually realized that this was probably because participants, despite the name, viewed the Cultural Mapping Community of Practice as the project of a single person–me. Every time I would post something, there would be some responses, but after that conversation would die out and no one would start a new thread. It’s almost like people were waiting for permission to participate.

That’s not what I wanted at all! My vision was for a commons, a shared resource that we all could benefit from and own. But that wasn’t going to be the reality so long as I was the only person behind the curtain. So I started recruiting some trusted colleagues to join me on a steering committee for the group, starting with Kiley Arroyo, and continuing with Jean Cook, Anne Gadwa Nicodemus, and Andrew Taylor. For the past several months, the five of us have been meeting and speaking regularly, developing background materials, inviting participants from our professional networks, and committing to regularly seed discussion with new and relevant content. Along the way, we changed the name to the less tongue-twisting Cultural Research Network and attracted some notice from the official NEA Art Works blog. And before long, we’ll be opening up membership on the steering committee to nominations from any participant in the group.

I’m proud to share that the Cultural Research Network officially launched this afternoon under its new name and configuration. Here’s an excerpt from the opening message:

How (and How Not!) to Participate in the Cultural Research Network

We hope that you will take advantage of the CRN in the ways that ensure its value and relevance to your work. For example, here are some ideas for how you can participate.

Offer or solicit practical advice and perspectives on methodological challenges. Are you working on a thorny problem outside your area of expertise and aren’t sure how to solve it? Are you considering use of a particular data set and would like perspectives from others who have employed it in the past? Ask away.

Share background information and technical documents developed as part of larger projects. Some of the most valuable elements of a research process—environmental scans, literature reviews, lists of possible data sources, etc.—don’t always make it into a final report. This forum is a great place to share those kinds of materials with your fellow researchers so that we can all learn from them.

Discuss field-wide issues and/or work collaboratively to develop shared infrastructure. What does the field’s sudden interest in Big Data mean for arts research? What are the potentials and barriers to developing common taxonomies for arts-specific data? The CRN provides an ideal venue for conversations about common resources and challenges in the arts research space.

We believe that the CRN will reach its full potential if everyone keeps in mind the following values:

Openness: Participants recognize that no one is an expert in everything, including (especially) themselves. Questions are welcome regardless of the identity of the asker.

Transparency: Participants assume by default that there is more to be gained than lost by sharing information. Dialogue is straightforward, candid, and informed by full context.

Generosity: Empowering people to help one another is a core purpose of the Network. Participants do not hesitate to give freely of their time and expertise to move the field forward.

If all of that sounds interesting, feel free to read the FAQ and sign up at the group homepage. We look forward to sharing and learning with you!

The Pitfalls of Shared Goals: What is the Commons?

Dan Thompson — Tue, 14 May 2013 12:22:24 +0000

from the Library of Congress

This is the first piece in a three-part series on the tragedy of the commons and what it means for the arts sector.

Remember that group project you had in middle school where one of the members slacked off and got the same grade as you? What about that green stuff growing in the back (and maybe event the front) of your fridge in college? Sometimes, when a group of people is collectively responsible for a thing or an action, members of the group don’t do their part–leaving the project unfinished, or the refrigerator unclean.

Arts funders and policymakers are often shooting for goals that require on-the-ground organizations to work together. The Surdna Foundation, for example, “supports efforts that provide artists with business training and financial resources that enable them to be, and create, valuable economic assets for their communities.” One of the grants Surdna has made under this program is to the Rebuild Foundation, an organization that helps finance cultural spaces. This is an important effort, and it is a major part of “providing artists with…financial resources,” but it alone does not make financial resources and business training available to all artists. Instead, the Rebuild Foundation works within an informal network of organizations in St. Louis, Omaha, Chicago, and Detroit to help make the arts a more viable livelihood and to stimulate local economies by strengthening the arts. The strategies that Surdna and all other grant-making institutions put in place have implicit, if not explicit, theories of how the organizations they fund will work with others to reach the goal the foundation intends, e.g., viability of an artist livelihood.

Goals that require a shared purpose, as the goals of many foundations do, are not all that different from those you and your roommates had in college of keeping the fridge clean. Under certain circumstances, they can be left unmet. An understanding of some of the perspectives on why that happens and how to prevent it can help improve the outcomes of a foundation’s strategies.

Tragedy of the Commons

The most common answer to why shared goals are left unmet draws on an out-of-date example about which most people today know very little: common grazing land. Using the metaphor of common grazing land for all shared goals and resources goes back to ecologist Garrett Hardin’s 1968 article in Science, “The Tragedy of the Commons.” In it, Hardin asks us to picture an open pasture. He argues each herdsman in town has the same incentive: to bring all their cows to this free grazing land. As more and more cows come onto the land, a threshold is passed beyond which the shared land is degraded and becomes unfit for grazing. He explains that typically we expect the invisible hand of the market to help us move toward a better society—competition weeds out the socially costly and leaves us with the socially valuable firms and products. In this case, the invisible hand of competition has led to the degradation of what was a perfectly good pasture. Hardin goes on to extrapolate this to other problems like pollution. Each potential polluter faces higher benefit than cost from polluting, so each chooses to pour their leftover grease into the sewer. Hardin calls all of these shared resources or goals “the commons” and names the overconsumption of them “the tragedy of the commons.”

Tragedy of the Jam Session

This same problem can arise in the arts on a micro-level. Take, for example, a simple jazz jam session.

In a smoke-filled room in the West Village, four up-and-coming bebop players take the stage. They’ve never played together before, but they’re pretty talented, so the audience is expecting a show. Each player wants to live up to that expectation; she hopes that everyone in the room enjoys the music, and that she herself will enjoy it too. At the same time, each member wants to show off her chops with some improv. Improvisation is limited to one player at a time in most bebop settings, and if it runs on too long in a context like this, it can ruin the tune.

Each player, then, has two main incentives: to play the song well together and to take more improv time than the other members. Playing the song well is a goal that all members share responsibility for meeting. Every member looks bad if the song flops. If the song sounds great, everyone has succeeded. Assuming the tune as a whole sounds good, each member can make herself look better by playing a solo that is a little bit longer.

The first soloist begins as the melody ends, and she faces each of these incentives. At this point, the band is playing well together, and it doesn’t seem like playing a little bit longer than normal will mess up the song too much, so she chooses to play one extra time through the chord changes. The player who follows faces the same incentives, and also chooses to improvise longer than necessary. Likewise for the third and the fourth soloist. Three-quarters of the way through the tune, the audience is texting and checking email–they came to hear jazz, not a bunch of overly-eager youngsters play worn out licks over the same tune for an hour. The shared goal that they set out to meet has gone unmet, and each member of the band looks worse because of it.

Making Tragic Grants

Individual arts organizations competing for grants are faced with a similar set of incentives as the herdsman or the soloist. A greatly over-simplified, but illustrative example may be helpful here:

Two organizations have a goal. This goal is something like providing a community and audience exposure for emerging artists and cultural innovators. Each organization uses this mission to define metrics and targets for success and measures performance by attendance and the number of performances held in a given year. Both organizations share a similar mission and constituency, so they look for funding from the same foundation.

Meanwhile, the foundation from which they are soliciting funding is attempting to meet its own mission of making the broader community a hub for cultural innovation. Let’s say it also believes that attendance and the frequency of performances are critical components of success, and it chooses to emphasize these metrics in the grant-making process by giving only to the best-preforming organization.

If both arts organizations know the metrics that the foundation is using for assessing potential grantees, they will compete to host the performances that will be most likely to draw the largest, most consistent audiences. A problem arises because an organization can win the funds by scheduling performances that directly compete with the other organization’s schedule, drawing away potential guests on an important night for their competitor. Similarly, one of the organizations can lose out on the funds if they attempt to develop new artists that will benefit the community-wide goal of innovation rather than attempting to bring in established, highly demanded performers. No organization is made better off by focusing on the broad shared vision; they are only made better off when they focus on the part of that vision that can be attributed immediately to their work. In this way, the shared vision of cultural innovation is lost to the competitive struggle for funding.

For the jazz quartet discussed above, multiple internal and external forces set incentives. The arts organizations’ incentives, on the other hand, are at least in part set by the foundation’s expectations for how the grant money will be used and what it will accomplish. Foundations thus have a responsibility to understand how the incentives they create promote or hinder cooperation between grantees.

Avoiding the Tragedy

If you’ve ever had a clean refrigerator, seen a good jazz jam, or observed organizations with competing incentives reach a common goal, you already know instinctively that the tragedy of the commons is not a necessary evil. People and organizations find ways to solve problems like these every day. Anthropologists, economists, sociologists, political scientists, and ecologists have attempted to draw general lessons from people world-over who maintain working commons. In the next installment of this series, I will explain how their theories might work in the situations described above.

Around the horn: Spring has Sprung Edition

Tegan Kehoe — Mon, 13 May 2013 12:27:08 +0000

(Assembled by Createquity Writing Fellow Tegan Kehoe)

ART AND THE GOVERNMENT

At the end of April, the City of Philadelphia unveiled a free online tool called CultureBlocks for “research, planning, exploration and investment” in creative placemaking. Gary Steuer, the Chief Cultural Officer of the City of Philadelphia, gives an inside look at the tool, and the Philadelphia Inquirer has more on how it can be used.
The Metropolitan Museum of Art is returning two statues to Cambodia, where they were determined to have been looted from. Tess Davis, a researcher on Cambodian antiquities, told the New York Times, “The Met Could have treated Cambodia’s request as an obstacle. Instead, the museum recognized it as an opportunity to set the moral standard for the art world.”

MUSICAL CHAIRS

Jeremy Nowak, the co-founder and former CEO of The Reinvestment Fund in Philadelphia, was named the interim Director of ArtPlace, a collaboration of organizations focused on creative placemaking.
Tim Mikulski, the current editor of ARTSblog, is leaving Americans for the Arts, and posted a warm farewell. (ARTSBlog really flourished under Tim’s leadership, and he’ll be missed. -IDM)
The Greater Pittsburgh Arts Council’s new Research and Policy Director David Pankratz, who came to the organization and the city at the beginning of this year, offers his thoughts on Pittsburgh as a dream city for the arts policy enthusiast. Read David’s guest post for Createquity on creative placemaking here.

ALL ABOUT THE BENJAMINS

The Doris Duke Charitable Foundation has announced its 2013 Doris Duke Class of Artists. The Doris Duke grant includes up to $25,000 for audience development and up to $25,000 for personal reserves or creative exploration during retirement.
New Music USA has announced changes to its grantmaking strategy, uniting five programs into one flexible fund targeting a wide range of music projects.
You may have noticed that a new model of TV programming has emerged in the last ten years — dark, gritty shows — but shows like The Sopranos and Breaking Bad are the product of a new model behind the scenes, as well, one that pay networks are better positioned to use, according to a New York Times article last week. YouTube just announced that it is piloting a system in which 30 channels will offer paid subscription access to additional content. I wonder whether these channels will find the same advantage pay networks on TV have, or whether paid YouTube will fizzle as a latecomer competitor to Netflix and Hulu Plus.

IN THE FIELD

After a 191-day lockout, the musicians of the Saint Paul Chamber Orchestra finally ratified a three-year contract. However, the Minnesota Orchestra’s season has been canceled, following an ongoing labor dispute.
Finding ways around traditional funding and production models is also one of the goals motivating a growing movement of a very different kind — public libraries as performance venues. By bringing in artist talks, concerts, and comedy acts in the evening, libraries become more of a community hub, while the performers get a place to share their most expressive works, away from the pressure to bring in big ticket sales that they find at many venues.
The 9/11 museum has decided to charge a mandatory admission fee when the museum opens next year, citing high security costs and questioning whether a donation-only model would support them after the first year. Not directly in response, but on-topic, Jim Undercofler wonders aloud why contributed revenue is considered less stable or predictable than earned revenue.
The Rio Theater, a beloved mom-and-pop cinema in Monte Rio, California, recently raised $63,993 in a Kickstarter campaign to switch to digital projection and stay open in the face of rapid technological change.
“How do you reconcile the desire to be inclusive with the practical imperative to target?” asks Santa Cruz Museum of Art and History director and Museum 2.0 blogger Nina Simon. She’s referring to museum marketing and mission, but it can apply to any organization striving for community relevance. Her answer is “social bridging,” deliberately creating programs that appeal to and “matchmake” unlikely segments of the population.
The Archivists Round Table of Metropolitan New York recently surpassed 500 members, many of whom are young metropolites. The New York Times provides a style-section type look at who these people are and what goes on at their gatherings.
A growing number of business colleges and schools are using art as a teaching and learning tool, and some are amassing important collections of modern and contemporary art. Meanwhile, MIT is teaching young people computer programming as a thinking tool, with some artistic results.
Dayton, Ohio may soon be the home of two separate museums dedicated to funk, leading some to speculate whether it can support two of them.

BIG IDEAS

In an interview Laura Zabel, director of Springboard for the Arts in St. Paul, talks about the new CSA (Community Supported Art!) supporting health care for artists rather than health insurance for artists, and other projects. She says, “In the work we’ve done in the Central Corridor we have seen that artists can see the opportunity in a challenge… and have nuts-and-bolts skills that can draw people, attention, and dollars to a place.”
In a new book, Jaron Lanier asks, “Who Owns the Future?” and presents a manifesto for an economy in which the middle class is supported by micropayments for all data we create online, from tweets to purchasing decisions. For a summary, see Evgeny Morozov’s skeptical review in the Washington Post.
How can foundations become leaders in their communities? The Center for Strategic Philanthropy and Civil Society has just published an essay on how the one group has done it, Changing the Game: Civic Leadership at The Boston Foundation, 2001-2012, authored by the president of The Boston Foundation.

CONFERENCES AND TALKS

In New York on May 23, and in Berkeley on June 2, Author Arlene Goldbard will give book talks to launch her two new books: The Culture of Possibility: Art, Artists & The Future, a collection of short essays on the potential for positive social outcomes through art and creativity, and The Wave, a novel set in a future in which the hopes and predictions of The Culture of Possibility have come true. Goldbard presents both books on her blog, and last week, Barry Hessenius interviewed her on his blog (parts I, II).

RESEARCH CORNER

The Center for Effective Philanthropy’s experiments with a tool called Strategy Landscape have drawn to a close (at least for now; they are considering re-releasing it open-source) and Kevin Bolduc shared some lessons learned from the project on their blog.
The National Center for Arts Research has a short summary of the implications of the Nonprofit Finance Fund’s 2013 State of the Nonprofit Sector survey.
The Centre for Economics and Business Research has released a report demonstrating the economic benefits of the arts and culture on the UK.
The European Expert Network on Culture has released a report on strategies for export and internationalization of cultural and creative industries in the European Union. Find a brief summary here, and the report here.
Pacific Standard Magazine reports on two studies that suggest musicians — or at least men holding guitars — are more attractive to women than non-musicians. I’d like to see more scientific (and less heteronormative) studies, but it’s an interesting theory.

Createquity Office Hours in Pittsburgh June 13

Ian David Moss — Mon, 06 May 2013 11:54:53 +0000

In honor of the Americans for the Arts Convention, we’re having a special Createquity Office Hours event in Pittsburgh this June. I will be joined by intrepid past Writing Fellows Talia Gibas and Katherine Gressel on the night before the conference starts. This will actually be the first time that Talia and I meet in person! As a reminder, Createquity Office Hours is an informal gathering in which we turn a bar into Arts Nerd Central. Come with your questions, ideas, requests for career advice, whatever — it’s a great way for us to get to know some of you a little better and, more importantly, for you all to meet each other.

Createquity Office Hours: Pittsburgh
Thursday, June 13
9-11pm
Tonic
971 Liberty Avenue
Pittsburgh, PA
RSVP here by June 9 (required)

See you soon!

Around the horn: Sweet Caroline edition

Ian David Moss — Mon, 29 Apr 2013 11:06:32 +0000

ART AND THE GOVERNMENT

The New York Times reports on the state of Rhode Island’s disastrous investment in former Boston Red Sox star pitcher Curt Schilling’s video game company, 38 Studios. Little Rhody gave Schilling a $75 million loan as an incentive to locate in the Ocean State, as part of a new Knowledge District in downtown Providence. Just two years later, 38 Studios went bankrupt and the state (for now) is left holding the bag. It’s a cautionary tale for anyone tempted to believe that investing in the creative economy is any kind of magic bullet – as with any investment opportunity, strong leadership and close oversight are paramount.
The number of nonprofit organizations just continues to spiral out of control, and – wait, what? They actually dropped in 2012, for the second year in a row? Must…resist…pre-existing…narrative….

MUSICAL CHAIRS

A little late on this one, but attorney and nonprofit executive Melissa Beck is the new CEO at the Educational Foundation of America. EFA has funded creative placemaking efforts around the country for the past few years.
Barry Hessenius scores an interview with former ArtPlace director – and new Knight Foundation VP – Carol Coletta. I think this exchange encapsulates things well:

Barry: What are your one or two big takeaway lessons from your stint at ArtPlace?

Carol: …There is a piece of communication wisdom that I believe in deeply: Say one thing. Say it simply. Say it over and over.

We tried our best to do that. People didn’t always like it, but we stuck to the path we originally carved out.

ALL ABOUT THE BENJAMINS

The Great Woodruff Arts Center Million-Dollar Embezzlement Mystery has been solved. Amazingly, the perp was a maintenance worker.
Dance music acts are getting paid royalties at a lower rate than other genres in the UK, according to The Guardian.
I found this observation from Michael Kaiser’s weekly column of note: “I do believe that there will need to be some adjustment to cost structures, especially for the highest priced talent like guest soloists, conductors, choreographers, etc. I am already witnessing a softening in the fee demands of all but the most famous artists. (Not coincidentally, these fee reductions are coming at a time when European arts organizations are losing large amounts of their government funding and cannot afford to pay high fees either.)” Kaiser runs DC’s Kennedy Center, one of the nation’s largest performing arts presenters.

IN THE FIELD

NPR’s All Things Considered ran a three-part series on arts education last week. The first story covers the Presidential Committee on the Arts and Humanities’s Turnaround Arts Initiative; the second examines James Catterall’s efforts to study creativity; and the third reports on Life Pieces, an after-school arts program in Washington, DC.
National Arts Strategies has a 20-minute “video case study” with Springboard for the Arts regarding the latter’s Irrigate creative placemaking project.
Boise dance company Trey McIntyre Project has begun selling its creative process to corporate clients. (Note that Pilobolus has been doing similar things for years.)
Three Chicago performing ensembles are trying out a shared fundraising structure. The new group is called Creative Partners, and will spend a quarter of its time raising money for each constituent group and the last quarter pounding the pavement for the entire collaboration.

CONFERENCES AND TALKS

If you missed Theatre Communications Group’s Audience (R)Evolution Learning Convening in Philadelphia earlier this year, Jim O’Quinn has a massive wrap-up for you (with pictures!).
Steven Dawson shares his notes from the 2013 Emerging Arts Leaders Symposium at American University, and Efrain Gutierrez does the same for the Emerging Practitioners in Philanthropy National Conference in Chicago.

RESEARCH CORNER

I’m not exactly sure why Pacific Standard journalist Tom Jacobs seems to be doing a gigantic literature review of research on music and psychology (maybe he’s prepping for a book?), but I’m grateful for it. Here, he analyzes a study of anxiety and depression rates among college students who listen to heavy metal. In a related item, a Boston College study finds an association between after school arts activities and depression in teenagers. “Further widening the jock-artist divide, the study found that the teens least likely to become depressed are those involved exclusively in sports activities.” The usual causation vs. correlation caveats apply, of course.
The NEA has announced its latest round of research grants, as well as a book coming out of last May’s arts and economic development convening that was organized in collaboration with the Brookings Institution.
Grantmakers in the Art’s Janet Brown: “We’ve done an analysis of the financial health of arts groups in the twelve cities where we’ve presented our funders’ capitalization workshop…In some cities, mid-sized and major organizations have, on average, negative liquid net assets. This means, they don’t have a dime to pay the electric bill should money stop coming in the door today.”
The Nonprofit Finance Fund, which helped GIA initially with its capitalization work, conducts an annual State of the Nonprofit Sector Survey. Rebecca Thomas analyzes the 2013 edition from an arts perspective.
FSG has published a list of 27 indicators with which to track the project of so-called “backbone” organizations involved with Collective Impact efforts.
The Ford Foundation has released the results of its 2012 Grantee Perception Report.

DC, Pittsburgh (and Baltimore) – UPDATE

Ian David Moss — Sun, 28 Apr 2013 15:19:24 +0000

Got a few conferences and such coming up, thought you folks might like to know:

Monday, April 29
“GOOD Community Engages the Arts”
organized by Think Local First DC and Listen Local First
Tropicalia
2001 14th Street NW (under the Subway)
Washington, DC
6:30 – 9pm
Info and registration (it’s free)
(This panel features a whopping 8 participants from the DC Commission on the Arts and Humanities, Cultural DC, Council Member Tommy Wells’s office, and more. In a literally underground dance club. What’s not to love?)

May 19-22
American Alliance of Museums Annual Meeting
Baltimore Convention Center
1 West Pratt Street
Baltimore, MD
Info and registration (not free)
(I’ll be around for the day on Tuesday, May 21 and then participating in Nina Simon’s Risk and Reward talk show the next morning, which looks like a can’t-miss event!)

June 13-16
Americans for the Arts Annual Convention
David L. Lawrence Convention Center
1000 Fort Duquesne Boulevard
Pittsburgh, PA
Info and registration (not free)
(Createquity is taking Americans for the Arts by storm! First, former Writing Fellow Katherine Gressel is presenting on her evaluation research during the Public Art Preconference on Friday, June 14 from 9-10:15am at a session called “Like • Comment • Share.” Later that day, I’ll be moderating and presenting at “The one about your community’s cultural ecosystem” from 4:30-6pm. And finally, Talia Gibas will drop some knowledge at “The one about how community partnerships can advance arts education“ [yes, all the titles are like that] on Saturday the 15th from 10-11:30am.)

Cool jobs of the month – special extra/extra special edition

Ian David Moss — Sat, 27 Apr 2013 13:12:17 +0000

Normally I only have one Cool Jobs posting each month, but I’m invoking Editor’s Prerogative and breaking my own rule today because we’re hiring a Summer Research Fellow at Fractured Atlas and the deadline is less than two weeks away. And since I’m doing that anyway, I let a few other cool jobs of recent vintage come along for the ride. Enjoy!

Research Fellow, Fractured Atlas

Does Big Data give you big chills? Do you have long conversations with family members about hypothesis testing? Are you considering getting a causation vs. correlation tattoo? Then you might be just the kind of nerd we’re looking for. Fractured Atlas is accepting applications for a Summer 2013 Research Fellowship. We’re seeking individuals with a background or interest in the arts who are prepared to bring hard-nosed quantitative analysis skills to creative and strategic challenges in our field.

Deadline: May 6.

Intrinsic Impact Program Manager, WolfBrown

The Intrinsic Impact Program Manager is a new full-time position that will oversee the national rollout of WolfBrown’s Intrinsic Impact product line. This is both a sales and client service position, with a focus on marketing and sales to arts organizations who wish to license and use WolfBrown’s proprietary impact assessment tools. The position will report to Alan Brown, principal of WolfBrown, and will collaborate daily with other WolfBrown staff in a highly integrated work environment. Preferred candidates must be able to relocate to the San Francisco Bay Area, although we will consider alternative situations for extraordinarily qualified applicants. This is a highly entrepreneurial position for a gregarious, early-career individual with a track record of successful marketing and communications work.

Deadline: May 13. This is the slickest job announcement I’ve ever seen – it has its own microsite!

Program Director, Carmago Foundation

The Camargo Foundation, a private, tax-exempt operating foundation chartered in the United States and operating in Cassis, France, seeks a full-time Program Director. Founded in 1969 by artist and philanthropist Jerome Hill (1905-1972), The Camargo Foundation operates a residential and cultural center in Cassis, France, to advance the work of scholars and artists from around the world. The Foundation supports a residency program for scholars in the humanities and social sciences working on projects related to French and francophone cultures and for artists creating innovative work in all disciplines. It also welcomes group residencies, seminars, conferences, workshops, and festivals. The Foundation provides contemplative and interactive time and space for residents and visitors. The Program Director of the Camargo Foundation is responsible for managing the program of the Foundation to fulfill its mission, current and evolving. The Program Director works with the Administrative Manager and other staff, handles administrative duties, and reports to the President of the Camargo and Jerome Foundations.

Deadline: May 15.

General Manager, Stonehenge

For the first time in its 5,000-year history, the owners of Stonehenge are seeking a general manager, whose responsibilities will include liaising with Druid leaders and maintaining the “dignity of the stones”. Only the “brightest and the best” need apply for the £65,000-a-year job to manage the famous attraction, which draws Druids and daytrippers to the prehistoric monument each year.

Deadline: May 5. Yeah, it’s a little outside the Createquity wheelhouse, but c’mon, it’s Stonehenge!

The Deduction for Charitable Contributions: The Sacred Cow of the Tax Code?

John Carnwath — Tue, 23 Apr 2013 11:16:40 +0000

photo by Martha Soukup

(I first met John Carnwath when he came to a talk of mine at the University of Chicago Cultural Policy Center last year and asked questions that immediately identified him as a smarty-pants. John is currently finishing up his PhD at Northwestern University, where he has studied the development of municipal arts funding in Germany and teaches courses on cultural economics and organizational structures in the performing arts. He serves as the “Dean” of the Chicago Chapter of The Awesome Foundation and was previously a staff researcher for the Chicago Artists Resource. As I was following the federal tax reform negotiations this winter and thinking about what might happen to the charitable tax deduction, John seemed like an obvious choice to lead the investigation on behalf of Createquity. Enjoy! -IDM)

In his most recent budget proposal, President Obama is seeking to impose a cap on itemized deductions in the personal income tax return – which includes the deduction for charitable contributions. This provision, part of the administration’s strategy to raise revenue to pay for government spending, has been a part of every White House budget proposal since 2009, and every year arts advocacy organizations join the rest of the nonprofit sector in opposing the changes. So far, the cap has been successfully warded off, but there’s growing concern that if Republicans and Democrats ever agree on sweeping tax reforms, the charitable deduction will be on the chopping block. The fear that limiting the tax deduction will lead to reduced donations to charitable organizations is particularly great this year due to the tax increases that were passed at the end of 2012, prompting the Charitable Giving Coalition to step up its resistance with a new website: protectgiving.org.

While it’s become a popular strategy on Capitol Hill to complain about the lack of progress while refusing to budge from one’s own policy positions, a case can be made that the nonprofit sector’s lobbying on behalf of the charitable deduction has neither improved the financial stability of the sector nor created greater legislative security. At best, it has limited the declines in individual giving in recent years. So rather than simply digging our heels as we head into the next round of budget debates, let’s take a moment to explore a broader range of policy options and see which might make the most sense for the arts.

Before we get to that, though, here’s a refresher on the mechanics of the charitable tax deduction for anyone who needs it.

What is the charitable deduction and how does it work?

The tax deduction for charitable donations was established in 1917, just four years after the federal income tax was introduced. While there have been some changes over the years, in its basic form this provision allows taxpayers to deduct donations to nonprofits and charities from their taxable income. So if a taxpayer earns $50,000 and gives $2,000 to charity, she only has to pay taxes on $48,000. The rationale behind this provision was initially that the taxpayer who gives away $2,000 doesn’t have that money available to spend on herself, so it shouldn’t be counted as part of her income. Nowadays, the deduction is more commonly thought of as an incentive dangled before taxpayers to coax them into donating more money to charity. By allowing taxpayers to deduct charitable donations from their taxable income, the government essentially agrees to pay for a portion of the donation.

Think about it this way: If you earn $1,000 and you’re taxed at a rate of 30%, you have to pay $300 to the IRS and you end up with $700 in your pocket. But if you donate $100 to charity, your taxable income is reduced to $900. Your tax bill then comes to $270 ($900 x 30%). In return for giving $100 dollars to charity the government reduces your taxes by $30, so in the grand scheme of things that $100 check that you write to your favorite opera company really only sets you back $70.

Who benefits from the charitable deduction?

While this all sounds great in principle, there’s a big catch: not all taxpayers benefit from the charitable deduction. Initially the income tax only applied to a rather small number of wealthy Americans, but during World War II it was expanded to affect roughly 75% of the population. Instead of having all of these tax filers list their deductions individually—$42 for prescription medicine here, a $100 donation to a museum there—the IRS introduced the “standard deduction” in 1944. The standard deduction lets all filers lower their taxable income by a fixed amount. For the 2012 tax year that amount is $5,950 for single taxpayers and $11,900 for couples. That means that you only have to keep track of your deductions and itemize them on your income tax return if they exceed $5,950 (or $11,900 if you’re married). That saves a lot of taxpayers (not to mention the IRS) a huge headache, but it also means that the 70% of filers who take the standard deduction don’t get to write off their charitable donations. (One might argue that the non-itemizers benefit from the charitable deduction in a roundabout way, since a typical deduction for charitable donations was factored in when the standard deduction was calculated back in 1944, but the fact remains that the current deduction for charitable contributions and any changes to it are only relevant to about 1/3 of American tax filers.)

For those who do itemize deductions, the amount of the government’s subsidy towards charitable donations depends on the filer’s marginal income tax rate. If you’re in the 35% bracket and you donate $100 to a good cause, the government gives you $35, but if you’re in the 10% bracket you only get $10 back from Uncle Sam. Economists say that the “price of giving” is lower for the individual in the 35% bracket than for the one in the 10% bracket (e.g. note 1 here). Giving $100 to charity “costs” the former (presumably richer) person $65 and the latter $90. While this seems sort of unfair, it’s the result of having a progressive income tax system in which those who earn a lot pay a larger percentage of their incomes into the public purse.

This means wealthy taxpayers not only have more money in their bank accounts to give away, but when they donate to charity the government covers a larger portion of their donations. It is therefore no surprise that the rich are responsible for a large share of charitable giving. Although only 3% of tax filers have annual incomes over $200,000, those households contribute 36% of the money that individuals give to charity every year—a total of $73 billion in 2008. However, the federal government foots the bill for about a third of those donations through the deduction for charitable contributions (assuming that most of the individuals with incomes over $200,000 are in tax brackets with marginal rates over 30%).

One might say, “well it’s all for a good cause, so it doesn’t really matter if the government is paying for a portion of the donations,” but it turns out that taxpayers with high incomes choose to give their money to different causes than those who are less well-off, and the charitable deduction allows them to divert large amounts of government funds to their favorite organizations. The wealthy support educational institutions and the arts to a much greater extent than poor people, who tend to focus their giving on basic needs and religious organizations. The extent to which the arts depend on donors with high incomes for their contributions is quite striking. In 2005, 94% of the funds that arts organizations received through individual contributions came from households with annual incomes over $200,000.

Of course, the donors are not the only ones who benefit from the tax deduction. All of the people who receive services from nonprofits and charities may be considered indirect beneficiaries of this provision in the tax code. However, to determine whether the charitable deduction is the best way for the government to support the work of nonprofits we must take a closer look at the incentives that are created and how people respond to them.

Do donors respond to tax incentives?

The deduction for charitable contributions affects taxpayers in two different ways. On the one hand, we have the “price effect.” As noted above, higher marginal tax rates reduce the price of giving, creating a bigger incentive to contribute to charities. However, high marginal tax rates also mean that people have less money left in their pockets after paying their taxes. In general, if people’s incomes are reduced, one would expect them to become less generous donors. After paying for rent, food, and utilities, they have less money left over for nonessentials like vacations and charitable donations. This is called the “income effect.” Note that the income and price effects work in opposite directions. Higher marginal tax rates incentivize donations through the price effect, but they simultaneously create a disincentive through the income effect.

Several economists have examined donors’ responsiveness to tax incentives over the past few decades, but the results remain inconclusive. Most studies find that donors respond to tax incentives, but the historical record shows that the level of charitable contributions remains relatively constant over time when measured as a proportion of GDP regardless of the available tax incentives. Some studies suggest that higher-earning taxpayers are more responsive to the incentive than those who are less well-off and that there are differences between types of charities (religious, social, educational, etc.) that receive donations. Many policy analyses (CRS, CBO, TPC) therefore calculate the upper and lower limits of a range into which the effects of proposed policy changes are expected to fall rather than a specific estimate.

Considering policy options: goodbye deduction?

To establish the worst-case scenario as a baseline, one might ask what would happen if the charitable deduction were eliminated completely. Independent Sector, an advocacy organization for nonprofits and charities, recently put out a list of FAQs according to which “with no deduction for charitable gifts, itemized charitable giving would drop by between 25 percent and 36 percent total.” This assertion is rather misleading. The study from which Independent Sector gets these numbers states that a taxpayer in the 30% income tax bracket might reduce his contributions by 25-36% if the deduction were eliminated. Since the incentive to donate depends on the filer’s marginal tax rate and 98% of households face rates under 30%, the reduction in the total amount of individual contributions is likely to be much smaller than Independent Sector suggests.

The truth is, we have no idea what would happen if the tax deduction were eliminated. Not only have studies of the price and income effects been inconclusive, but they are all based on observations of how donors have reacted to incremental changes in tax rates and deductibility in the past. These estimates may be useful in predicting the effect of small changes within the range of what’s been observed in the past, but there’s no reason to be believe that the response would be the same once the government’s incentive approaches zero. In fact, economic theory would predict that it’s not the same.

For example, if the deduction were eliminated completely, one might expect some donors to dig deeper into their pockets to keep their favorite charities afloat. However, some wealthy Republicans might cease all charitable donations to protest the fact that they’re having to pay more taxes, secretly hoping to blame the financial hardships of the charitable sector on the Democrats in the next elections. These types of reactions are difficult to predict. One thing is certain: if the indirect subsidy that the government provides through the charitable deduction were eliminated in order to reduce the deficit, individual donors would have to dig deeper into their pockets to sustain nonprofits at their current level of activity. And if the entire nonprofit sector were in severe financial distress, one can easily imagine that some donors would reallocate their gifts towards hospitals and basic social services, compounding the impact on the arts.

Capping the deduction

The good news is that no one has proposed eliminating the deduction altogether. Obama’s 28% cap on deductions, on the other hand, remains a very real possibility.

Obama suggests that the government could increase its revenue by capping deductions at 28% of the donor’s AGI. As mentioned above, the size of the tax incentive is generally determined by the marginal tax rate that taxpayers incur, but Obama’s proposal sets 28% as the maximum anyone can claim. For the vast majority of households, this would be of no consequence. If you’re in the 10%, 15%, or 28% tax brackets, you still get your deduction as normal. But the 2% of filers who itemize their deductions and face marginal tax rates over 28% would no longer be able to reduce the tax on their donations to zero. People in the 30% bracket, for example, would still have to pay a 2% tax on their charitable gifts. They owe 30% according to their tax bracket and they only get 28% back on the donated amount (due to the cap), so the IRS gets to keep the 2% difference.

How might this cap affect contributions to charitable causes? The short answer is that it will most likely result in a minor, but noticeable reduction in contributions. Here’s what people are saying:

The Center on Philanthropy at Indiana University estimates that the cap will lead to an $820 million (0.4%) reduction in charitable giving in the first year of implementation, increasing to $1.31 billion (0.7%) in the second year.
In 2010 the Congressional Research Service put the decline in charitable giving in the 0.16 – 1.28% range.
In a back-of-an-envelope calculation for the Washington Post, Harvard economist Martin Feldstein estimates that the 28% cap could reduce charitable giving from individuals by $7 billion, which amounts to a 3% decline (relative to the $230 billion in charitable contributions from individuals reported in Giving USA 2009).
Len Burman of the Tax Policy Center and the Center on Budget and Policy Priorities came up with similar figures in 2009.

Taking all of this together, it seems we’re talking about a 0.5% to 3% decline in gifts from individuals.

The impact on arts nonprofits is likely to be a little bit higher than that, since the cap will primarily affect the wealthy taxpayers who contribute most to the arts. The 2010 study by the Congressional Research Service includes an analysis of how the 28% cap would affect different segments of the nonprofit sector. It estimates the reduction in individual giving to the arts to be around 2.4% (compared to 0.16-1.28% overall).

The figures above were calculated based on the tax rates that applied between 2003 and 2012, but as we know, the tax rate for the highest income bracket was increased from 35% to 39.6% at the beginning of this year. How does that change things? If charitable contributions remain fully deductable, we would expect the higher marginal tax rates to increase donations due to the price effect. However, if Obama’s proposal to cap total deductions goes through, the reverse is to be expected—the higher tax rates actually exacerbate the decline in charitable giving caused by the cap. That’s because the higher tax rates reduce the taxpayers’ disposable income, bringing the income effect into play, while the cap on deductions holds the price of giving constant.

The Congressional Research Service estimates that the combined effect of the 28% cap on deductions and the higher marginal rates that Obama sought to impose on taxpayers earning more than $200,000 would reduce giving by 0.28% to 2.27%. That’s almost double the decline that they estimated for the cap on deductions alone (see above). The Center on Philanthropy arrives at similar figures when including Obama’s proposed tax hikes. Those projections still fall within the 0.5% to 3% range mentioned above. If we take the worst-case scenarios for the 28% cap and the largest estimates for the impact of the of the higher tax rates, we might be looking at a 5 or 6% decline in charitable giving.

So it looks like we don’t need to fear that individual contributions will drop by a quarter if the 28% cap were introduced, with or without increases in the top marginal tax rates. Nonetheless, a 5-6% decline is nothing to take lightly, and for organizations that are already reeling from the recent recession even a modest reduction in individual contributions could be the final straw. Moreover, the estimates apply to total charitable donations nationwide, but individual organizations could be unlucky and find that several of their major benefactors scale back their contributions more drastically than the national average, leaving gaping holes in their budgets.

Other options: expanding to non-itemizers and adding “floors”

Faced with this uncertainty, the response from arts advocacy organizations has been to dig in their heels and demand that the deduction for charitable contributions remain intact. However, as Michael Rushton notes, there’s little reason to believe that there’s anything magical about our current tax code; in fact, the charitable deduction has been criticized in the past for several reasons (notably for being inefficient, regressive, and having an unclear theoretical justification). So instead of clinging to the status quo as our only hope for survival, we might ask: what changes to the current system would lead to the best outcomes for arts organizations? How might we incentivize charitable donations while supporting the government’s goal of reducing the federal deficit?

In 2011 the Congressional Budget Office came up with 11 different policy scenarios and estimated their likely impact on tax revenue and charitable giving. These included:

allowing all taxpayers to write off charitable gifts on their tax returns, rather than just those who itemize deductions
creating a minimum donation (either a fixed dollar amount or a percentage of the donor’s AGI) which would have to be exceeded to qualify for the deduction
converting the deduction into a tax credit (which would give all taxpayers the same 15 or 25% tax break on charitable contributions instead of linking it to the donor’s marginal tax rate)

This study found that by extending the deduction to all filers and simultaneously establishing $500 ($1,000 for couples) as the minimum donation required to qualify for the deduction the government would be able to increase revenues by $2.5 billion annually, while boosting contributions to charitable causes by $800 million. Or even better, by replacing the deduction with a 25% tax credit for all taxpayers, the government would save almost the same amount, while driving up donations by 1.5%.

Since the government’s objective right now is to reduce the deficit, presumably without harming the nonprofit sector unnecessarily, Eugene Steuerle of the Tax Policy Center has advocated for expanding the tax deduction to all filers, with a minimum contribution of 1.7% of the donor’s AGI required to qualify. This would net the government between $10.4 billion and $11 billion per year without reducing charitable donations by a dime. The argument for establishing a minimum contribution to qualify (often referred to as a “floor”) is that people are likely to give a small amount of money to charity regardless of whether they receive a tax break or not. It’s therefore not necessary for the government to forgo any revenue for that portion of their contributions. Further, at a certain point the administrative costs of tracking small donations—acknowledging their receipt, submitting documentation to the IRS, checking for fraud—is not worthwhile. For those who object that a $1,000 donation is a far bigger sacrifice for a couple that only earns $20,000 a year than for a millionaire, a floor that is linked to the taxpayer’s AGI might pose an attractive alternative. With a 2% floor, someone earning $20,000 could claim the deduction by making a $400 donation, while someone earning $500,000 would have to donate $10,000 to qualify.

Beyond the bottom line

Reforming the charitable tax deduction might offer other benefits as well. For example, it could provide an opportunity to change the composition of our donor lists. By giving those in lower income categories greater incentives to support our work and allowing them to leverage some of the indirect subsidy that the government provides through its tax breaks, arts organizations might be able to diversify the ranks of their donors, so as to be less dependent on a small wealthy elite. Based on the CBO’s estimates, by replacing the tax deduction with a 25% credit that is subject to a low floor (say 1% of AGI), it should be possible to maintain charitable donations at their current levels or even increase them slightly while saving the government several billions of dollars annually and allowing donors from lower income categories to acquire a bigger stake in nonprofit arts organizations. A more diverse pool of donors, both in terms of their economic status and their tastes, would reduce the financial risk of artistic experimentation and could allow companies to diversify their programming in ways that their current (predominantly wealthy) donors might not support.

All in all, reforming the deduction on charitable contributions isn’t necessarily a bad thing for the arts. There are ways of changing the tax code that could actually increase revenues and diversify the sources of income for arts organizations, even while helping to reduce the federal deficit. Since any change creates uncertainty and will likely produce losers as well as winners, I can understand arts administrators and advocates who would rather stick with an imperfect status quo than commit their careers and their organizations to an uncertain future. However, I believe that participating in the discussion and shaping the outcomes to fit our sector’s interests will ultimately prove more productive than trying to block change from the start.

April public arts funding update

Ian David Moss — Sun, 21 Apr 2013 23:01:46 +0000

FEDERAL

After a long lull, we’re starting to see some action on the arts and related topics at the federal level. First, the House and Senate have passed a continuing resolution enshrining the “sequester” cuts in the rest of Fiscal Year 2013, meaning that the National Endowment for the Arts and other federal agencies are sustaining a 5% decline from their originally enacted budgets. For the NEA, this means that the new budget is approximately $139 million instead of $146 million, which puts it at the lowest level since George W. Bush was president. (At the first link above, Americans for the Arts has a short video touting the importance of getting involved in Arts Advocacy Day. It’s nicely put together, but as with other videos of this type I can’t help but feel the message might be more compelling if it were accompanied by some music that the NEA actually funded.)

Second, President Obama has released his FY14 budget request. While this still needs to get through Congress, it’s significant in that it sets a likely upper bound for the budgetary appropriations of various arts-related agencies. The LA Times’s Mike Boehm reports that Obama’s budget is relatively generous to those agencies compared to previous years, providing a 4.5% increase in the aggregate above the pre-sequestration levels. The budget allocates $154.5 million to the NEA, which is right about what Americans for the Arts was pushing for but is still well below peak levels. The Smithsonian and National Gallery of Art do relatively well under the President’s proposal, while the Institute for Museum and Library Services and the Kennedy Center get lower priority. Despite the reasonably good news, Obama’s budget request also brings back a much-derided proposal to cap deductions at 28% of adjusted gross income – including the charitable deduction. (More on the charitable deduction later this week.) Watch AFTA President Bob Lynch discuss the budget proposal on PBS here.

In non-appropriations-related items, the Supreme Court has ruled 6-3 in favor of Supap Kurtsaeng, the Cornell math student who made bank by reselling Wiley textbooks purchased overseas at a cheaper price, thus preserving what’s known as the first-sale doctrine in copyright law (i.e., that you’re free to sell used items without first getting permission from the copyright owner). An ongoing legal battle between network television broadcasters and a startup called Aereo, which uses micro-sized antennas to rebroadcast over-the-air content to tablets and smartphones for a monthly fee, could have implications for internet TV more generally. Amidst all this, Federal Communications Commission Chairman Julius Genachowski has announced his retirement from his influential position affecting issues like low-power radio and net neutrality; Future of Music Coalition issues a statement on his departure, and as a bonus offers a review of Maria Pallante’s appearance before the US House to testify about potential updates to the Copyright Act. Finally, many of the critical measures in the America Invents Act patent reform legislation went into effect earlier this month; Keith Sawyer offers some analysis.

STATE AND LOCAL

This isn’t quite “news” since it’s still highly speculative, but for the first time in several years, there is a serious bid afoot to restore the California Arts Council to its former glory. The CAC had its budget cut by 94% a decade ago in the face of financial pressures on the state budget, and has languished among the worst-funded state arts councils per capita ever since. AB 580, sponsored by lawmaker Adrin Nazarian, is a bid to raise the CAC’s state appropriation from $1 million to an eye-popping $75 million, which would easily take the prize for biggest state arts funding story of the year if successful. California’s budgetary situation is arguably no better than it was when the CAC was cut in the first place, but arts advocates are hoping that Governor Jerry Brown, under whose leadership the Arts Council was brought into being back in 1975, will be the difference between this effort and three previous ones that failed (the most recent in 2009). I enjoyed this excerpt from the article:

At the hearing Tuesday, John Gallogly, executive director of L.A.’s Theatre West and a board member of the statewide advocacy group Californians for the Arts, presented each committee member with a crayon that cost 3 cents — the amount per resident that he said state government now funnels to the Arts Council if the federal and license plate money are excluded.

“We’re trying to say ‘give us a small box of crayons,’” instead of just one, Gallogly said. “You can’t create a rainbow with just one color.”

In other state news, the newly reorganized Connecticut Office of the Arts is receiving some bad press from the Connecticut Mirror. A number of arts organizations are apparently unhappy with the new creative-placemaking-oriented system for awarding grants, which relies on a cumbersome application process and out-of-state panelists who evaluate the proposals asynchronously. And Washington State has hit venues where patrons “are given the opportunity to dance” with thousands of dollars in back taxes on the basis of an obscure law dating from the 1960s that hadn’t been enforced in decades.

With the economy now four years removed from the official end of the Great Recession, we’re starting to see some recovery in local government budgets and with it, some welcome increases in arts funding revenue streams – particularly in the West. In Nevada, Clark County (which contains Las Vegas) voted to create a Percent for Art program for the first time, which will “divert 5 percent of annual room tax collections and 5 percent of the county’s share of property taxes into the Arts Fund, not to exceed $1.25 million.” In Utah’s Salt Lake City, increased tax revenues have boosted city arts funding by 14% over last year. California’s San Bernadino County, part of the fast-growing Inland Empire region, lost its arts council in 2006, but as of this year it’s back, with a budget of almost $300,000. And in Atlanta, mayor Kasim Reed seems to be proposing a 25% increase in the budget for the city’s Office of Cultural Affairs, though no one seems sure exactly what he means by that.

Meanwhile, the LA Unified School District has declared the arts a core subject for its 660,000 students but is finding that the devil is in the details, and things have gotten so bad in the Saint Paul Chamber Orchestra labor dispute that the Mayor’s office has gotten directly involved in the negotiations – though to no avail as yet.

INTERNATIONAL

What a bizarre story from Australia: just 11 days after arts minister Simon Crean unveiled the country’s new cultural policy to great acclaim, he is out of a job following a failed coup attempt aimed at Prime Minister Julia Gillard. Crean’s departure leaves the new plans in significant doubt, despite the fanfare with which they were announced. Ben Eltham has more.

Elsewhere, the news is still mostly bad but at least it’s letting up a bit. Arts Council England is taking it on the chin with yet more cuts, this time of just over 1%. In Spain, where the arts community has been deeply affected by austerity measures, arts groups are coming up with some innovative ways of coping – for example, by handing patrons carrots instead of tickets to protest/get around a punishing 21% sales tax on the latter. And in Romania, a national museum has had to partially shut its doors due to a lack of funds.