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.
At the off-Broadway Classic Stage Company, executive director Jessica Jenen said that if the downturn continues, she's more likely to charge $49 per seat instead of $75. And if less money ultimately comes through the box office, she's not sure the shortfall will be made up through donors.
"I don't want to indicate that we're hurting," she said. "We've doubled our budget in the last three years. But we have a fundraising spring gala every year where people buy tables for $10,000. Are those people still going to be there?"
What you're likely to see as well is a greater emphasis than ever on tapping into diverse sources of income. The idea, lifted straight from Wall Street, isn't new to nonprofits, and it's one reason you don't hear full-on freakouts this week, even from groups that have been favorites of the companies behind the terrible news. Arena Stage received $1 million from both Fannie Mae and Freddie Mac in 2006, and it's been given all but $20,000 of a $100,000 grant from Lehman Brothers. ("I think it's gone," Molly Smith, Arena's artistic director, said of the remaining $20,000.) But only 2 percent to 3 percent of the company's annual $14 million budget comes from corporations.
Fannie Mae gave the Studio Theatre $100,000 when it was expanding along 14th Street NW, and in 2006 the company kicked in about $45,000 for operating expenses. But overall, corporate support at Studio is about 5 percent.
"Every year, a few new corporations sign on," said Morey Epstein, the theater's executive director of institutional development, "and some that have been supportive drop off. It is fairly steady."
Anyone in need of reasons for optimism can study the past.
"If you look at the history of philanthropy since the '50s, it has dropped about 1 percent on average in a recession," said Reynold Levy, the president of Lincoln Center and author of "Yours for the Asking: An Indispensable Guide to Fundraising and Management." "Whenever there's a recession, or the closure of a given firm, the natural tendency is to extrapolate and predict a very strong downturn. But that has not been the case."
And just because corporations might pull away from the arts in straitened times doesn't mean arts lovers will. It's an article of faith among theater honchos that when the going gets depressing, the depressed go to the theater. Bernard Gersten, who runs the Lincoln Center Theater in New York, recalls big crowds soon after the stock market wreck of 1987 -- for "Anything Goes," a musical set during the Depression. Today, he expects the house to remain packed for "South Pacific," which has been earning $900,000 a week for months.
"The sky hasn't fallen," Gersten said. "It's just the humidity has increased."