{"id":1794,"date":"2013-03-14T16:46:44","date_gmt":"2013-03-14T20:46:44","guid":{"rendered":"https:\/\/www.icsom.org\/senzasordino\/?p=1794"},"modified":"2019-03-14T16:58:19","modified_gmt":"2019-03-14T20:58:19","slug":"judging-symphonies-tax-exempt-organizations","status":"publish","type":"post","link":"https:\/\/www.icsom.org\/senzasordino\/2013\/03\/judging-symphonies-tax-exempt-organizations\/","title":{"rendered":"Judging Symphonies as Tax-Exempt Organizations"},"content":{"rendered":"

W<\/span>hen symphony managements and boards cut the artistic guts out of their institutions by slashing performances and downsizing the musicians, the nonprofit mission of the orchestra has all but been relinquished. One has to ask, then, why are the public standards and expectations directed at other U.S. nonprofits and charities not being applied equally to nonprofit symphony orchestras? For whatever reason, American symphonic nonprofits have been given a pass.<\/p>\n

What should a nonprofit organization prioritize when it is financially challenged? Would it be appropriate for a humanitarian charity to economize by downsizing the number of its on-the-ground linguists, medical personnel, and truck drivers? Would it matter if the charity cut costs by offering impoverished people cheaper food of lesser nutritional value or providing them lower quality medical supplies? Would any of these cost-cutting measures be tolerated by the public without the charity\u2019s first having announced significant cuts to its administrative overhead?<\/p>\n

Certainly, where other community nonprofits are concerned, the public expectation is that the mission of the organization should be sacrosanct and maintained at all costs. If genuinely non-for-profit principles were fueling the business behavior of American symphonic organizations, cuts to the administrative side of the budget would routinely be the first economies instituted. This would ensure that a community continued to receive the maximum number of program services an orchestra could deliver under financial constraints.<\/p>\n

Unfortunately, the business philosophy many financially troubled orchestra boards and managements are pursuing these days ignores the nonprofit purpose and attaches greater importance to a full-time, well-compensated management overseeing a small, part-time ensemble. They reason this will make their organizations \u201cfinancially sustainable.\u201d When shrinking the product and downsizing the number of artists who carry out the nonprofit mission of an orchestra are the first fiscal initiatives undertaken by its leadership, the idealism and altruism that are supposed to be the driving impetus behind our purpose have been supplanted by a for-profit business doctrine: Downsize the workers, make the product smaller and cheaper, and expect the public to pay the same price for it.<\/p>\n

American orchestras have historically been in financial trouble. The article \u201cSymphony Finance,\u201d published in the March 1935 issue of Fortune Magazine<\/em>, chronicled the incessant economic woes of the New York Philharmonic Symphony Society. By 1934, the Philharmonic\u2019s budgetary dilemma was so great that the management finally turned to the public to ask for donations. In contrast to what we see throughout the industry today, back then, every organizational expense of the Philharmonic was cut, including the salaries of musicians and administrators. However, for practical business reasons, the Philharmonic\u2019s management made every effort to avoid cutting performances.<\/p>\n

In the 1930s, one of the largest single sources of revenue for an orchestra was from ticket sales. It was, therefore, difficult to justify cutting anything which generated income. Today, performance revenue is still a substantial part of every orchestra\u2019s budget; so why would it ever be deemed economically prudent for a financially challenged organization to do more than make modest cuts in the number of performances? Symphony managements complain they can\u2019t sell concerts these days. This is not a new problem. Even in 1935, Fortune Magazine<\/em> cited low audience attendance as having been one of the Philharmonic\u2019s most challenging, longstanding problems and offered a cogent explanation: programming\u2014the same reason at work today.<\/p>\n

The Fortune<\/em> article made three points. First, no part of the Philharmonic\u2019s structure was exempt from cuts. Second, the purpose and quality of the orchestra and its musical product had to be protected from any erosion which might result from the drastic budgetary pruning instituted to stabilize the organization financially. Third, even after every level of the Philharmonic\u2019s operation had been cut dramatically, the Philharmonic still could not balance its budget.<\/p>\n

As compared to the considerable commitment of boards and managements to protect the artistic product of orchestras in the 1930s, a for-profit doctrine has begun to emerge in the modern symphonic industry. Today, the nonprofit mission of symphonic organizations and the quality of the product become secondary when cuts are made exclusively in the artistic side to deal with a financial crisis. While this might be the preference of a growing number of boards and managements, it does not change the fact that American orchestras are nonprofits and have an obligation to provide their communities with more than a cursory product for the multi-millions of tax-exempt dollars they spend each year.<\/p>\n

In 1994, the CEO of Save the Children, James Bausch, was driven from office over what journalist Michael Maren described as an \u201costentatious waste of sponsorship funds.\u201d Maren\u2019s observations are still applicable to today\u2019s institutions.<\/p>\n

The two little slices [of Save the Children\u2019s financial pie chart] are always fundraising and management. The big slice, always more than 80 percent, is \u201cProgram Services.\u201d…The pie chart is misleading in two ways: First, it tracks the proportion of all expenditures that go to program [services], not the proportion of all donations. The distinction is probably lost to potential sponsors, who might naturally assume that the pie chart is a representation of how their donations are being spent. The second misleading thing is…[that the pie chart does not] explain exactly what \u201cprogram services are.\u201d [sic] The reason Save the Children…emphasizes the program services statistic is, presumably, that it is seen as a rough approximation for \u201cmoney that actually helps people,\u201d as opposed to funds spent on overhead and fundraising expenses…In fiscal 1994, [program service] included nearly $4.5 million for travel, $3.5 million for supplies, $15.5 million for salaries, and $2.2 million for rents. Save\u2019s non-public financial statements show that film, holiday cards for sponsors, the gift shop, and craft catalog were also charged to program expenses. The total of the sponsors\u2019 dollars that actually went in grants to field programs was [$]45.1 million, less than 50 percent.<\/p><\/blockquote>\n

One assumes that if an organization as highly respected as Save the Children could camouflage which expenses it classified as \u201cprogram services,\u201d symphony orchestras have been doing the same thing. While this technically may not be illegal, it is dishonest. It was dishonest for Save the Children to create the illusion of their funding helping more poor children than was actually the case. It is dishonest for a symphony management to represent to the public that 75%\u201380% of organizational funding goes to music, while loosely classifying many administrative expenses as \u201cprogram services\u201d in their annual audits and tax returns.1<\/sup><\/p>\n

In 2010, Stanford University lecturer Laura Arrillaga-Andreessen wrote an expose\u0301 about the \u201cexcessive\u201d compensation of the CEOs of the five largest children\u2019s charities, none of which was more than $500,000 a year. She observed, \u201cIf a charity CEO earns $400,000, and the sponsorship is $20\/month, the first 1,666 donations go directly into the CEO\u2019s pocket before the children get anything.\u201d The annual budgets of these charities are in the hundreds of millions of dollars and far exceed the annual budget of any American orchestra. So why is there no public concern expressed when, from a percent-of-budget perspective, the compensation of a symphony\u2019s CEO is far higher?<\/p>\n

No one is arguing that symphony orchestras don\u2019t need administrators or that administrators should not be compensated; nor is it to say there are never times during which musicians legitimately have to accept cuts in compensation to help their orchestras survive. It is to point out, however, that there has been a lack of public scrutiny of orchestra boards and managements which address their financial difficulties by cutting the product and the purpose of the organization while leaving the administrative structure and costs intact. It\u2019s not about equality of sacrifice but how the mission of a nonprofit orchestra should be the preeminent survivor during a period of economic instability.<\/p>\n

The League of American Orchestras has a history of obfuscating the reasons for the financial problems of symphony orchestras. From the Wolf Report<\/em> and Americanizing the American Orchestra<\/em> to the present, the League has endeavored to pin the economic woes of the industry on union contracts, musician compensation, shrinking audiences, ethnic and cultural tastes, the national economy, and other forces of nature. There has never been a legitimate discussion about the enormous financial burdens created for many orchestras by oversized, highly compensated, uncreative managements and underperforming boards. One could even argue that the symphonic industry has never been able to shed itself of its enduring economic problems because those in our organizations responsible for developing creative solutions have largely been exempt from the commitment of financial sacrifice.<\/p>\n

For-profit solutions cannot work in a not-for-profit environment, but who in the public is paying attention? Musicians have to begin changing the conversation and countering the spread of the for-profit thinking which has insinuated itself more and more into the business practices of American orchestras. Our traditional public talking points during difficult negotiations have always centered on the musicians\u2019 sacrifices and how cuts in the artistic side impact artistic quality. Communities that have lost many teachers, firefighters, and police to budget cuts will have little sympathy left over for our problems. So we have to build a new case that puts the nonprofit responsibility of our orchestras under a microscope.<\/p>\n

Orchestras do not exist for their name only. Nonprofit arts organizations have as their basic premise the goal of making the arts accessible to the public, but their benefit to a community is not limited to the uplifting experience they provide. When a symphony cuts its season, not only does the public receive fewer program and educational services, it economically impacts all of the local businesses which depend upon concert goers to patronize their shops, restaurants, parking lots, boutiques, and the like. This creates the ripple effect of fewer tax dollars flowing into a community\u2019s treasury.<\/p>\n

Beyond the lacking nonprofit sensibility in today\u2019s symphonic industry, there lurks the other more troubling, long-term consequence of the downsizing of American orchestras. With symphonies cutting seasons and musicians, Broadway shows using smaller orchestras, and virtual orchestras and electronic instruments replacing live musicians far and wide\u2014if a living cannot be made playing music, what is the incentive for young players to consider music as a profession? How long will it be before we see an irreversible impact on our industry? Even if a few full-time organizations are able to survive, it won\u2019t be enough to prevent what will surely be a dramatic decline in qualified artistic talent.<\/p>\n

Symphony managements might be able to convince their otherwise preoccupied communities that an orchestra\u2019s fiscal challenges justify cutting performances and artistic personnel, but they will find it a much more difficult task to explain why protecting the orchestra\u2019s nonprofit purpose should not be the principal goal that obligates cutting other expenses within the organization first. If we are to ensure the continuation of the viability of symphonic music as an art form in the United States, musicians have to become outspoken advocates for the nonprofit mission of our industry.<\/p>\n

Lucinda Lewis has been the New Jersey Symphony\u2019s principal horn since 1977 and served as the ICSOM secretary from 1990 to 2002. She runs the website embouchures.com and is the author of the books <\/em>Broken Embouchures and <\/em>Embouchure Rehabilitation.<\/em><\/p>\n

1<\/sup>An interesting place to verify such statistics is Charity Navigator\u2019s website, www.charitynavigator.org<\/a>, where other useful information pertinent to evaluating nonprofits can also be found.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

When symphony managements and boards cut the artistic guts out of their institutions by slashing performances and downsizing the musicians, the nonprofit mission of the orchestra has all but been relinquished. 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