Arts Groups Fret the Woes Of Big Donors

Global stocks have experienced wild fluctuations this week in the wake of the U.S. government's seizure of insurance giant American International Group, the failure of Lehman Brothers, the disappearance of Merrill Lynch as an independent company and reports the U.S. government will set up a government entity to take on bad debts from financial institutions.
By David Segal and Jacqueline Trescott
Washington Post Staff Writers
Thursday, September 18, 2008

Katy Clark knows that this is a deeply awkward moment to ask Lehman Brothers for $50,000 -- a bit like showing up in the smoldering aftermath of a Road Runner explosion and asking for a match.

But two years ago, the then-flush investment bank gave Manhattan's Orchestra of St. Luke's 50 grand for a music education program, and as the organization's vice president of operations, Clark is hoping that in its death throes, the company just might cut one last check. She has traded a few e-mails with her Lehman contacts in recent days, but she hasn't raised the subject.

"Timing is everything," she said. "They need time to figure what's coming next."

With Wall Street in a shame spiral, "What's coming next?" is a question that has everyone in the arts community taking big, anxious gulps. Lehman may never hand out another charitable dime; the immediate future of the firm's philanthropic foundation, like everything else about it, is now a matter of bankruptcy law. But the fear isn't limited to those groups that were getting money from corporate America's recently deceased and badly wounded. There's agita all around.

For now, it's agita about the future. You don't hear panic from the directors of museums and theaters, nor has anyone started to cut back the number of productions or exhibitions they're planning. Economic jolts take a few months, or longer, to reach budgets and schedules in Planet Arts, and gifts from corporations make up one of the smaller slabs in the pie chart of annual giving in this realm. The National Endowment for the Arts reported that corporations accounted for only 3 percent of contributed income for nonprofit arts organizations in 2005.

But what if the economy tanks, rather than just a couple of companies? In six months, foundations will assess their portfolios, the government will start to cut spending, and individual donors might start to pull back. When the workaday, six-figure suit starts to get chintzy, then it's white-knuckle time.

"You're talking about what could be a very sharp, two-edged sword," said Arnold Lehman, director of the Brooklyn Museum. (He's no relation to the founders of the firm, by the way.) "We've already seen some diminishment in the amount of corporate support in recent years, and now it could affect those shareholders whose generosity depended on income and capital gains. Everyone might start to feel a little poorer."

Charitable giving to arts groups -- 13 percent of total corporate do-gooding in 2006, according to Giving USA -- has always been the low-hanging fruit for companies looking to cut costs. And when companies merge, the generosity of the combined entities rarely equals the sum of its once independent parts. A spokesman for Bank of America, which just acquired Merrill Lynch, said the future of Merrill's philanthropy has yet to be decided.

"But if you look at our history of mergers," Ernesto Anguilla said, "you'll note that in each case, Bank of America has honored all of the existing commitments for all of those companies."

For arts charities, not all of the pain is from mergers or flameouts. Some of the money now being funneled to the campaigns of John McCain and Barack Obama might otherwise have gone to places such as the Kennedy Center.

"The economy has been shaking, and the prolonged primary season and presidential campaign takes a dig into giving," said Marie Mattson, the center's vice president of development. Fundraising in 2008 was stable. "In fiscal 2009, I am seeing a little softening." She said people who would normally support the annual fundraising ball by buying $25,000 tables are buying $10,000 tables instead."

Whether there's ultimately a real funding crisis or not, theaters and museums have begun to strategize with some worst-case scenarios in mind. Pitches to potential donors are now likely to include a note of urgency that hasn't been heard in a while -- lots of talk about programming and shows that will disappear if they're not underwritten pronto. There might be cheaper tickets, too.

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