Finance

Portland, OR Art Tax Update

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Back in 2012, Portland, OR approved a $35 tax to supports arts education and arts organizations around the city. In 2017 I wrote a post about how overhead was starting to cut into the amount of money available to distribute to programs. Part of that overhead was attributable to the fact people weren’t paying the tax and so funds had to be diverted toward enforcement.  Last week, via Artsjournal, is another article mentioning that the tax hasn’t proven to be the boon supporters hoped it would be. For one, people still are resistant to paying it.

The art museum, like the rest of the big five, never received the targeted 5 percent support.

That’s in part because the tax has never brought in the $12 million a year voters were told to expect. (Revenues were $9.8 million the first year and peaked at $11.46 million in 2016.)

Portlanders have been reluctant to pay it. Although the city’s population has risen nearly 12 percent since November 2012 and tax receipts should have increased proportionally, figures show revenues still never reached levels proponents forecasted.

A point I want to clarify. The article makes it sound like arts funding for schools has diverted money that was intended for non-profit arts organizations. However, from my earlier posts, it appears the law that was passed intended to fund the schools first and then the non-profits would receive funding. In fact, this recent article says when the measure was passed in 2012, funding the schools was politically more attractive to voters than funding non-profits. While the arts organizations had been pushing the art tax idea for a long time prior to the vote, when the time came, the resolution being voted upon was written to fund the school first.

The other thing the article notes is that between the collection effects and the art tax name, there are public relations and perception issues which have proven problematic.

While arts leaders all favor more Portlanders paying the tax, some worry the city’s zeal to collect is counterproductive. “You get pinged with a letter, you get pinged with a postcard, you get an email saying time to pay the arts tax,” says Portland Center Stage’s Fuhrman. “That’s where I think the bad PR comes in.”

Andrew Proctor, executive director of Literary Arts, which produces the Portland Book Festival, says the public’s ill feeling has a cost. “Even the name ‘arts tax’ sounds punitive,” he says, “and it misleads citizens that in paying the tax they have supported arts institutions. They haven’t. It can damage our fundraising efforts and can polarize the conversation.”

[…]

Hawthorne, the former RACC official, says he fears the public may believe the tax works. “Ten to 12 million is a lot of money,” Hawthorne says. “People may perceive the arts have had their influx and now it’s time to focus on more pressing needs.”

The whole article provides a lesson for those considering advocating for an arts tax of some sort. The basic idea isn’t bad, but the way it is structured and executed needs to be thought out. The example of Portland points to things people want to avoid. The name; the way in which it is collected, structured and discussed; all call negative attention to it.

It is worth reading the whole article because it also mentions the Regional Arts and Cultural Council’s (RACC) initiative to provide more equitable funding for smaller arts organizations. Back in 2012, RACC was starting to require more diversity on the boards, staff and eventually audiences of Portland’s arts organizations. In January, I had written about how the Arts Council of England was instituting similar requirements, forgetting that Portland had been working toward that goal for nearly a decade now.

Last year, RACC shifted their funding model to better align with this philosophy which includes size and economic diversity among its criteria. As a result, the larger organizations in town receive less of the art tax money than they once did.

We Can Never Beat Overhead By Ourselves, It’s Time To Merge!

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When I saw a story on Non-Profit Quarterly about four Kalamazoo, MI non-profits entering a shared-services partnership, I immediately assumed it was confined to back office functions as I had written about before. However, that isn’t entirely the case. Moreover, the impetus for their partnership isn’t so much driven by a desire to save money as it is by the fact that funding entities won’t allow grants and donations to be used for administrative overhead.

The four non-profits, Boys & Girls Clubs of Greater Kalamazoo, Prevention Works, Urban Alliance and Big Brothers Big Sisters, didn’t form the shared entity, Hub ONE, just to handle their back office functions, Hub ONE staff will help people navigate the services offered by each of these groups. “With each organization working to combat an aspect of generational poverty, the partnership appears to be a natural fit.”

A three year, $8.3 million grant from the Stryker Johnston Foundation will largely support developing the infrastructure of this new shared services entity. Some of the money will also go toward staff development and retention–something that is actually the long term goal of the shared services model.

…Gail Pico notes that overhead caps stifle social progress by restricting funding for use in effective management (e.g. professional development, evaluation, and strategic planning), keeps direct-service employees in poverty, and discourages innovation by not permitting organizations to take risks in trying new methods.

Each member of Hub ONE has been negatively impacted in some way by overhead myths. For instance, many of their employees are eligible for the programs they offer. Consequently, the group asserts that much of their time is spent trying to hire and retain employees who are driven to leave the sector for better pay. Sielatycki hopes the new collaborative will free resources for member nonprofits to pay employees more competitive wages, thereby helping reduce turnover and its associated retraining and onboarding costs.

The title of this post is a reference to the merging robot motifs of cartoons like Voltron

Of course, what can be a threat to the folks in Kalamazoo and other places is when one organization prioritizes themselves over the whole. (offered more for entertainment than caveat)

Colorblind Grant Evaluation Measures Aren’t

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There was an opinion piece on the Chronicle of Philanthropy website today by Antony Bugg-Levine, CEO of Nonprofit Finance Fund, discussing how the evaluative measures often employed by funders tend to discriminate against non profit organizations lead by, and serving, people of color.

He writes,

What I did not realize then was how colorblind application of financial assessment and funding practices can make it harder for organizations led by and serving people of color to get grants and make the most of them.

The problem often originates in the fact that these organizations don’t have access to networks of influence and financial resources that other organizations do.

So requiring dollar for dollar matches for grants or using rates of donations by board members as a measure of engagement and investment are difficult criteria for many non-profits to meet.

The same problem arises when using budget size as a point of assessment.

Determine grant size based on the value of the work rather than the current revenue of the organization: When you recognize the structural barriers that prevent many well-run and effective organizations from gaining traction, you come to see how distorted the link can be between an organization’s size and capacity. And the formal accounting rules that determine what counts as revenue make the problem worse. For example, pro bono legal advice from a corporate law firm counts as revenue. The many hours a volunteer spends reading to young people in a community center does not.

A better approach: Rather than creating rules that peg grants to a share of revenue, spend time understanding the value the work would generate and the full cost to undertake it.

Obviously, these evaluation measures don’t just present problems for organizations run by and for racial minorities. Many non-profit organizations run by racial minorities lack resources, but not every non-profit lacking resources is run by and for racial minorities.

Bugg-Levine provides a link to a guide recently issued by the Nonprofit Finance Fund which charts racially-based financial analysis and provides suggested alternatives.

There are some issues you might not immediately anticipate. For example, having access to a wealthy private donor allows organizations to take government contracts which tend not to cover full costs. Having the imprimatur of a government contract provides other funders with a greater degree of confidence in the organization, leading to better funding opportunities. But not having a relationship with a wealthy private donor makes it difficult to secure the government contract in the first place.

Another example identified in the chart is that:

Funders associate small organizations with community authenticity

Organizations will intentionally limit their revenue (often below $1 million/year) to remain eligible for “small organization” grants, because some funders will cut them off when they become larger. But, they still can’t make the leap to effectively compete against larger organizations for larger grants, given the dearth of funding options for organizations in the $750,000-$3 million/year revenue range.

Even an organization’s accounting method can be a source of bias. The indication that the organization employs accrual based accounting vs cash based accounting  favors better funded organizations that have the resources to pay for accrual accounting services because,

If an organization is using cash-basis accounting, which counts money when it is received or spent, rather than when it is earned or billed, their finances appear less stable. This can lead to suspicion about the soundness of their leadership and overall financial health, and create a perception that making a grant to this organization is riskier than if they were using accrual accounting

Not Words, But Deeds

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Last week Doug Borwick wrote a blog post saying it wasn’t enough to tell people that the arts have value in their lives.

As I started reading his post, I agreed with this sentiment because we have long acknowledged the argument that the arts are good for you isn’t really that compelling for people. I have talked about how the arts shouldn’t be viewed as a solution to all sorts of problems a number of times before.

But there is also the basic experience we all have growing up being told that food/medicine/classes/experiences are good for us. We roil when forced to consume such things under the eye of parents and authority figures and often happily reject them when provided the freedom of choice. Sometimes we come back to them with appreciation, but other times the bias is so ingrained, we resist any opportunity presented to engage with these things again.

As Borwick’s post continued though, the situation became a little more complicated in my eyes. He quotes the former CEO of National Assembly of State Arts Agencies, Jonathan Katz about how little stock people put in empirical evidence about art.

“Neither professionals [or community leaders] in the relevant disciplines nor the general public put sufficient stock in . . . studies to alter policy. This disinclination to believe is rooted in unexamined assumptions that the arts do not touch the lives of more than a select few.“

Borwick continues, (his emphasis)

In other words, people do not believe the stories or the studies because they don’t believe they can be true. For many, the arts are so inconsequential, so void of impact on their own lives, any proof of their power is literally unbelievable.

So whether you are trying to convince people of the merit of the arts or the value of your organization or you are simply trying to get them to attend your events, there is a profound chasm of disbelief to be overcome. The way across this divide is not by words. It is action alone that will work. Being perceived as valuable must be earned by doing things that make us so. If we have to tell people we are valuable, we’re not to them.

Now to echo my friend Carter Gillies, just because you can measure something doesn’t mean what you have measured is relevant. We all know that the amount of revenue something garners has no relationship to the artistic value or quality of that thing.

But what Borwick is saying means that regardless of whether you are providing accurate data derived of the most rigorous methodology possible or not, people won’t believe the evidence if it doesn’t align with their personal experience. (Which granted, doesn’t just apply to the arts and also contributes to things like the current political divide in the U.S.)

So in the end, it is actions that enter someone’s experience, including that of individuals they value, that will serve as proof of the value of arts/culture/creativity.