If this isn’t a blip, just what is it?

The news about the bankruptcy filing that will be made in Philadelphia court tomorrow by the venerable Philadelphia Symphony Orchestra has stirred angst around the globe. (Indeed, on April 20, the Philadelphia Orchestra filed for bankruptcy.) But the bigger news is hidden in the comment made by the American Symphony Orchestra League’s Jesse Rosen: “This is not a blip.” No, it isn’t, and that’s the real story. So far this year, both Honolulu and Syracuse have seen their orchestras go bankrupt. The eyes of the arts world have been on Detroit for months now, waiting to see if the inevitable will happen there as anticipated. Louisville’s fine orchestra filed for bankruptcy in December, not even making it to the New Year, bailing before those critical last few weeks of the calendar year when big donors in search of tax benefits often save nonprofits. Rumors swirl that the Indianapolis Symphony Orchestra, another wonderful ensemble, may not be far from taking the big step. And there are many other cities large and small throughout the United States where business and civic leaders, board members and donors are having plenty of sotto voce conversations about just what to do when the inevitable hits their back yard.

Bankruptcies aren’t new to the performing arts. Every recession in recent history has forced a few organizations that are under-endowed and over-contracted to face the music. Theater companies, ballet companies, opera companies, orchestras and performing arts venues themselves have all been victims.
But now that we all see the world in the post-Wisconsin-public-employee-union-pension world, different questions are being asked about the long term viability of performing arts institutions.
This is an industry that is firmly union based. When they are asked to save performing arts organizations from bankruptcy, many donors know that what they are really being asked is to maintain union agreements – often agreed upon in far rosier days – and in some cases to preserve or potentially bail out union pension funds. With the Philadelphia Orchestra – as with most of the organizations that have gone to Bankruptcy court before and those that are contemplating the move today – overly generous union contracts that can’t be met in today’s economy are the central issue. Sound familiar?

If you read last week’s post to this blog – and a lot of you did – you’ll remember that we’re thinking a lot about the sea changes impacting the arts. So rather than look at the Philadelphia Orchestra bankruptcy as just another blip, we’re pretty convinced that it is potentially, tragically, better described as a “new normal.” Simply put, too many contracts have promised too much that can’t be met. Too many pensions are underfunded, and depend on the continuation of current generous contract agreements to fund past agreements. Also, endowments are restricted in purpose and can’t be drawn down to meet crises. (Though, truth be told, plenty have been borrowed against steeply enough to cause their own set of problems.) At the same time, performing arts halls that have also granted their own unions lavish contracts – such as the Kimmel, the home of the Philadelphia Orchestra – need to charge every penny possible to stave off their prospective bankruptcies. Operating costs are through the roof. For large systems of performing arts organizations and their halls, the performing arts financial model is barely working, and only for those with the very largest endowments.

We’ve had a belief for a long time that if we’re really, really good, and the Philadelphia Orchestra is off-the-charts fantastic … everything will follow, and really, times have changed and it’s not enough anymore.
- Jesse Rosen, orchestra league CEO

At ArtsMarket we’ve been increasingly asked to examine solutions to these developments in many different markets. Business leaders who are increasingly shaking their heads and refusing to bail out individual institutions are seeking larger, systemic adjustments. We’ve heard from many – corporate leaders in particular – that they’ve had it. Many understandably worry at the signals they send to their own employees when they step in to bail out arts union jobs providing six figure wages and generous pensions for jobs that often allow for or even further additional earning opportunities at universities and conservatories.

Politicians feel the same way: How can tax payer dollars go to bailing out private sector union workers when public sector unions are up against it? Donors feel it, too. When institutions as venerable as the Philadelphia Orchestra declare bankruptcy – potentially making it possible to liquidate endowments that were never to be liquidated – why would any individual of means write that seven or eight figure check for an endowment meant to keep organizations safe forever? Why not give those dollars to something more pressing, more immediate, and possibly more honest in intent?

Are there solutions to this mess? Sure. But just as the citizens of Wisconsin have learned over their season of public employee union battles, the adjustments are nasty business, no matter what side you are on. First, you have to face reality, hard and uncompromising as it is. As the old saying goes, you have to raise the dragon to slay the dragon. One of our field’s many dragons is that we want a mid-20th Century performing arts system in a 21st Century world. We don’t want the pain of recognizing that our consumer tastes, interests, budgets, and technology have so dramatically and fundamentally changed our arts consumption and behavior that we aren’t ever going back.