Nonprofit arts face the music

The nonprofit arts economy in Los Angeles drastically favors haves over have-nots and is probably incapable of supporting continued growth, says a study intended to sound an alarm and ignite brainstorming for facing an iffy future.

The report notes “a disconnect between the local nonprofit arts community and the for-profit entertainment industry,” and one unidentified arts executive quoted in the study describes L.A.’s signature industry as “a local economic machine that takes ideas from the arts community but doesn’t give back.”

Neither government funding nor the existing network of private arts donors will carry the arts scene to a healthy and balanced future, the report concludes, advising arts groups to become more businesslike in search of stability and self-sufficiency, and better connected to L.A.’s deep-pocketed entertainment industry as a source of funding and know-how.

The report, “Arts in the Balance,” was researched and written by the UCLA Center for Civil Society, whose director, Helmut Anheier, a professor of social welfare, is the lead author. It was commissioned and published by Southern California Grantmakers, a members’ organization for charitable foundations.

“We’re really trying to say, ‘Wake up,’ ” said Judy Spiegel, interim president of the Grantmakers group.

Among the findings: Spending by the county’s 814 nonprofit arts groups with annual revenue above $25,000 totaled $799 million in 2004 -- a 2% decline from 2002, adjusting for inflation, while spending by nonprofits of all types rose 8%. From 2000 to 2004, spending by all nonprofits grew 24%, nearly triple the 9% increase for the arts.

L.A.’s $799 million in combined annual spending on the arts would pay for just eight major studio films, at the industry-average cost of $96.2 million for production and marketing calculated by the Motion Picture Assn. of America.

Reliance on grants

Small and midsize arts groups -- those with annual revenue of $800,000 or less -- rely disproportionately on government grants that have been drying up, the study found. Meanwhile, a survey of 51 private foundations found that 91% of their money went to organizations with budgets of more than $800,000. The Grantmakers report is far from comprehensive. It focuses primarily on foundation giving, which accounts for 15% of L.A. arts organizations’ funding, and it omits the individual donors who nationally provide 20% of revenue, according to the National Endowment for the Arts. Its claim that government funding for the arts in L.A. is just 1%, compared to an NEA national estimate of 10%, overlooks the annual subsidy of about $40 million that local taxpayers provide for the Music Center and the county museums of art and natural history.

Even so, Spiegel said, the Grantmakers group believes it has uncovered a pervasive problem with arts funding; it has posted the study at www.socal grantmakers.org and is circulating 3,000 summaries to community leaders.

“Arts in the Balance” echoes conclusions reached in 2004 by a blue-ribbon panel former L.A. Mayor James Hahn appointed in response to an outcry in the arts community over his administration’s abortive proposal to dissolve the city’s Cultural Affairs Department. In a report deeming arts grants in L.A. “woefully underfunded,” the panel headed by Music Center Chairman John Emerson proposed surcharges for car rentals or cable TV that would be earmarked for funding the arts. Hahn summarily rejected new fees, and the idea hasn’t been pursued.

The first city budget proposed by Mayor Antonio Villaraigosa increased funding for the Cultural Affairs Department by only 2%; the agency’s budget of $9.9 million remains about three-fourths of what it was in 2002.

Reach out to for-profits

The Grantmakers report advises arts organizations not to hold their breath waiting for government, or even the existing network of foundations and other private donors, to come to the rescue. Because both “are unlikely to meet the financial needs” of the nonprofit arts in L.A., the authors propose that arts groups forge better ties with the for-profit world, especially the entertainment industry, while making their own operations more “entrepreneurial,” including merging some organizations for the sake of efficiency.

Arts nonprofits “need a new business model” and “a greater emphasis on ... generating entrepreneurship,” the report says.

Such suggestions may raise hackles among traditionalists who feel that the purpose of the nonprofit arts system is, within the bounds of fiscal reason, to free creativity from the shackles of the bottom line.

Under that long-entrenched philosophy, the key economic question facing arts groups is not whether they can maximize their business potential, but whether they can cultivate donors willing to step up and pay for the creative tasks at hand, while placing artistic distinction and educational value ahead of box office results.

Russell Willis Taylor, president of National Arts Strategies, a Washington, D.C., nonprofit devoted to strengthening the management and finances of arts organizations, said she is leery of calls for making them “more entrepreneurial.”

“When you say you want these organizations to be run more like a business, I say, ‘Which one? Enron?’ ” she quipped.

The be-more-businesslike message is nothing new, Taylor says. She sees it as an irony-laden gambit by arts funders trying to avoid facing a cold reality of the marketplace: that when too many competitors crowd into a single business -- arts sectors included -- some inevitably will struggle or fold.

Because California is a magnet for creative people, Taylor says, it generates more than its share of nonprofit arts start-ups, and not all can make it. Because arts donors are passionate and devoted to the programs and groups they support, she added, they tend to want to prop up flagging organizations when it no longer makes economic sense, turning to ideas such as mergers and bigger gift shops to stave off the inevitable. “In any other field, the market takes over and brutally puts people out of business,” Taylor said.

But Cora Mirikitani, a veteran arts administrator who heads the Center for Cultural Innovation, an L.A. nonprofit that helps artists become more business-savvy, sees the report as a needed springboard toward new ideas -- especially, she hopes, toward a greater willingness on the part of arts executives and board members to draw on the know-how and connections of the artists they work with.

“As a nonprofit sector, we may not have been very successful” bridging the gap between the arts and show business in L.A., Mirikitani said. “But artists have been. They find their way and maintain their values and quality and point of view,” while working in both commercial and nonprofit worlds. “We should follow that lead.”

Mirikitani will moderate a discussion of “Arts in the Balance,” at 10 a.m. today at the Nate Holden Performing Arts Center, 4718 W. Washington Blvd., L.A.

mike.boehm@latimes.com