The Federal Government’s Shutdown and Its Impact on the Arts – It’s a Bigger Deal Than You Think

Posted by Mr. Robert Lynch, Feb 14, 2019

The longest government shutdown in United States history ended after 35 days on January 25, 2019, leaving many in the arts world to question what the impact of the shutdown was on the arts. With another possible shutdown looming, Americans for the Arts President and CEO Robert L. Lynch sat down to answer commonly asked questions related to the shutdown’s impact on the arts.

How far-reaching are the effects of the shutdown?

The effects of the shutdown are widespread. The good news about the National Endowment for the Arts (the NEA, a federal agency that receives its annual appropriation from Congress) is that it funds the arts across the country, reaching every Congressional district in all 50 states plus U.S. Territories. The bad news is that any negative impact becomes equally widespread. These are dollars granted not only to nationally based arts and culture organizations, but to locally based small and medium sized organizations, too. A shutdown means a delay in the notification about and delivery of such grants. The arts are a dynamic, entrepreneurial, risk-taking industry often with very thin income/expense margins. NEA funds are matched by states and then leverage other private and public sector resources to support arts and culture in a community. Tight budgets are carefully planned on an annual basis and arts organizations watch their monthly bottom lines carefully. So, when carefully planned-for resources are slowed or eliminated, the arts organizations and related local economies and community quality of life are impacted in short order. The impact reaches across the country and, ironically, the immediate impact takes place right at the bottom steps of the U.S. Capitol—the shuttering of the Smithsonian Institution museums.

Interestingly, in hopes of easing the burden of a federal worker’s furlough, non-federal museums in at least 31 states provided furloughed workers free admission (see examples in Denver, Portland, the Baltimore Symphony Orchestra, and museums across the country). When the chips were down for federal workers, the arts showed up.

In a shutdown, what impacts the arts directly?

The impacts are numerous. Federal arts workers in institutions all across America were not paid during the shutdown. Even though we hope they all get paid eventually, they along with 800,000 other federal workers who went unpaid lose the ability to purchase the essentials they need immediately, and they certainly lose the ability to buy discretionary items like theater tickets or arts institution entry fees. Curators, who are creating visitor experiences, as well as artists, administrative staff, cafeteria workers, maintenance staff, and accountants all miss paychecks. The trades, such as plumbers and electricians who are a vital part of cultural institutions, are also on furlough whether they are internal staff or outside contract employees. No one works. The federal museums lose millions in direct income from tourists and visitors who buy souvenirs from the gift stores and meals at the cafeteria. It was estimated that the Smithsonian lost $1 million a week in the last shutdown.

The federal government invests in arts and cultural organizations across the country. Most of the nation’s 100,000 non-profit arts organizations see either direct support or devolution of these federal dollars through their state and local governments. These dollars fund specific projects such as museum exhibitions, theater performances, arts festivals and crafts fairs, cultural facilities, literary readings, and more. The NEA’s small investment (47 cents per capita in the U.S.) is leveraged 9:1 providing a greater impact, enabling thousands of performances to millions of people. 

These public and private sector dollars are the lifeblood of the nonprofit arts industry, and ensure they are able to keep their cultural product accessible and affordable to the community. The revenue picture for the typical organization can be thought of as 60-30-10:

  • 60 percent earned income from ticket sales and sponsorships;
  • 30 percent from private contributions-individuals, foundations, businesses;
  • 10 percent from federal, state, and local governments.

Delays in government grants directly affects cash flow and the ability of organizations to produce events. Even slight fluctuations in contributions and cash flow can affect the survivability of these organizations. For all the ways the arts help us economically, they are a fragile financial industry that does not carry a lot of saved income to pay for salaries, utilities, and more, when the income has been halted or slowed. Take California for example—the federal shutdown not only eliminated direct funding to arts organizations, but the State Humanities Council also had to close and stop state grants because they too were reliant on the steady flow of their federal match.

And arts organization don’t just get grants directly from the NEA. While 60 percent of the federal money is in direct grants to arts organizations, another 40 percent goes as money to the states and their state arts agencies, which is matched and redistributed as grants. All of this matching and leveraging grinds to a halt in a shutdown.

Who was hurt the deepest by the shutdown?

There were two groups hurt the hardest by the shutdown: small arts organizations with few reserves and Americans who were deprived of something they deeply value and need in their communities. 81 percent of the American public surveyed in our recent Ipsos public opinion poll  say the arts are a “positive experience in a troubled world.” They also tell us that those personal well-being benefits extend to the entire community: 72 percent say that the “arts unify our communities regardless of age, race, and ethnicity.”

What about the economic impact of the arts?

The arts are huge driver of local economies and the shutdown also lessens their economic impact. Americans for the Arts’ Arts & Economic Prosperity 5 study shows that attendees to an arts event spend an average of $31.47 per person, per event—not including the cost of admission. These are dollars spent at local business on items such as food, transportation, parking, souvenirs, childcare, and lodging.  Interestingly, more than one-third of attendees to arts events come from outside the county in which arts event took place (34 percent). These tourists have an even higher rate of event-related spending—$47.57 per person. And, when asked why they traveled to attend that arts event, 69 percent said it was specifically to attend that arts event. The arts are an enormous economic and tourism driver. Nationally, attendees at nonprofit arts events spend an estimated $102.5 billion annually. When arts events and attendance are curtailed because of the shutdown, there is a corresponding decrease in consumer spending and revenue to local businesses. This is non-recoverable money, unlike the back pay that federal employees will rightly get back.

Is it possible to quantify the revenue that arts organizations lost during those 35 days?

A specific example of the chilling effect of the shutdown’s impact on arts organizations and local businesses comes again from the Smithsonian, which reportedly lost $1.5 million in revenue during the first 10 days of the shutdown. According to the Secretary of the Smithsonian David Skorton, the roughly $1 million a week that the institution lost is unrecoverable and will have long-term impact. They have also pointed out the loss to all the private vendors located around their institutions—from food trucks and restaurants, to hotels and shops. There has not been enough time to collect data nationally on that question (and the data that is collected is more of an annual nature about overall arts organization budgets), but the impact on the arts may have been quite substantial, particularly in key areas like Washington, DC, where there are many federal cultural facilities and federal arts workers. Again, the fragility of the arts industry economy means that there isn’t a lot of wiggle room.

What future consequences of the shutdown do you foresee?

I think that the shutdown ended just in time to allow for some recovery. The longer a shutdown, the more permanent this kind of damage becomes. Our country may feel the ripple effects of this shutdown, opportunities lost, for quite a while, and this includes the arts community.

Have you heard anything from artists?

Artists are affected when a venue—whether visual, performing, or any art form—has to close even if briefly and their work cannot be presented, which hurts their income and visibility. What I have been hearing from artists and from many arts institutions is more about their willingness to donate time and help and free art activities to furloughed workers and their families. These offers have come in from all around the United States (see examples above).

Why does the effect of the shutdown on the arts matter?

The American public values the arts and wants access to more opportunities, not fewer. Whether people engage in the arts or not, 90 percent of Americans believe that cultural facilities improve quality of life, and 86 percent believe that cultural facilities are important to local business and the economy. The arts benefits to the community are formidable, and they are to the individual as well. The arts help us address so many challenges in education, health and healing, military, community development, among many others, and the effects of a shutdown are felt not just in the arts organizations, but also in the industries and organizations that are helped by the arts. The benefits of the arts are numerous, but still the ecosystem is fragile and should be cultivated, not endangered.

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