from the director: another year lost?

March 28, 2010

As I write this, the 2010 state legislative session is in overtime, with legislators battling over the revised 2010 budget, grappling with a $2.9 million deficit.   Does the legislature “enhance revenues,” as the Senate prefers, or cut programs more deeply, as the House prefers?  This is the conversation and debate that is keeping the legislature in Olympia.

Bills in the House and Senate that would designate a portion of future lodging taxes (which don’t go away, no matter what the legislature decides to do with them after stadium debt is retired) for cultural programs in King County have stalled once again, but not because legislators are anti-art.   On the contrary.   The arts and heritage piece runs into very little opposition and has remained unchanged in all permutations of the bill(s).   Unfortunately, there hasn’t been support for an arts/heritage-only bill, so arts and heritage funding is contingent on funding for affordable housing, stadium maintenance, cultural development authorities, public health, human services, tourism promotion, youth sports and on and on and on.   Too many things are lumped into the bills creating too many opportunities for legislators to say “no.”  Some want stadium maintenance, but not affordable housing, given the sources of the tax revenues (“visitor taxes.”)   Others want affordable housing, but don’t want more public funds going to stadiums at a time when so many other services are being cut. Still others oppose extending restaurant and car rental taxes and certainly the two state sales tax credits after Qwest and Safeco debts are retired – these are not the taxes that 4Culture uses, but have been wrapped into these bills, making for another point of contention.

So for the sixth consecutive year, it is unlikely that bills securing funding for arts and heritage in King County in the future will pass the House and Senate this year.

The current revenue stream ends on December 31, 2012.   This will have unfortunate consequences for arts and heritage organizations in 2011.  Here’s why.

The lodging industry has been hit hard by the recession.   Occupancy rates are down, so in order to attract customers, room rates have been lowered as well.  That’s a double whammy for 4Culture.   Obviously, fewer taxes are collected when rates are lower and fewer rooms are booked.   Funding we received from lodging taxes in 2009 were down 17% in comparison to 2008.  So far in 2010, lodging tax collection is down another 18%.   That may change as the year progresses, since we only have numbers for January and February, but I don’t expect a  miraculous turnaround before the end of the year.

The way our funding programs operate is unusual for a government entity.  A government’s 2010 general fund budget is based on revenues the government expects to collect in 2010.  That’s why, when there is an unexpected downturn, governments scramble mid-year to correct the budget, to find additional cuts to absorb the impact of decreased revenues.   But 4Culture collects revenues in one year and allocates them for grant expenditures the next year.   The monies that we award in 2010 are based on the actual revenues collected in 2009.

We knew by mid-2009 that 2010 would be a tough year.   Without any intervention, our grant funding this year would have been devastated.   We are almost entirely holding the line in our key programs in 2009 in comparison to 2008, due to several one-time actions taken by 4Culture staff and Board. The Board allocated interest income and reserves, reduced operating expenses in 2009, and imposed staff furloughs and other restrictions as part of the 2010 budget, just like many of your organizations.  We also re-captured $260,000 in project awards more than three years old that for one reason or another were not going forward.

These measures allowed us to cobble together enough funds to maintain dollars necessary for Sustained Support and Individual Artist projects at 2009 funding  levels.   We are not likely going to be able to run a facilities construction projects program until late in the year at best, or support a second cycle of equipment funding, but we have been able to keep dollars for other programs. We are seeing record numbers of applications in some areas – up 25% in Arts Sustained Support applications – so there’s no question that this year, more than ever, resources are scarce.

For 2011, however, just like your businesses, we have no more rabbits to pull out of our hat. We’ve looked under every rock for revenue, and  already re-captured all the project awards that we feel confident won’t go forward.

Most important, it is unlikely that we  would use our remaining reserves to plug the hole.  We now must begin planning for a future that does not include annual lodging taxes for arts and heritage.  That future, having access only to interest income beginning in 2013, means that the only responsible position is to put every possible dollar aside and not program any interest income in 2011 or 2012. We have a $10 million dollar a year business with thousands of outstanding grants to wind down, and no more capacity to continue awarding funds we will be unable to monitor.

Had legislation passed in 2010, we would have had a different outlook, a greater willingness to use reserves now, knowing that new revenues would be available in the future.

What will 4Culture’s mission be in 2013, when funding for all of its programs and activities is 80% lower than it is today?   How will our Public Art division function, if it has to be the primary tenant in the Kaplan building and there are no more shared costs?

That’s the conversation we will begin with you this summer.   We will announce a series of public meetings, of our Board, Advisory Committees and constituents, to paint the picture of the future, after a 20-year old arts and heritage revenue source slides into the sunset.  This is not an idle exercise.

Jim Kelly

PS – In the event in the final hours of the extended 2010 legislative session a bill is passed to secure future lodging tax funding for arts and heritage in King County, please disregard the above.