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Music awash in red ink

One after another, major symphony orchestras feel the sting of deficits.

October 29, 2002|Scott Timberg | Times Staff Writer

The drumbeat started late in the summer, as one high-powered American symphony orchestra after another made it clear that they had lost money on the 2001-2002 season. For most of them, it represented the first red ink in nearly a decade.

In late August, the mighty Cleveland Orchestra announced a $1.3-million deficit on a $34.6-million budget.

In early September the Pittsburgh Symphony, which had burned through a $2-million surplus fund, said it was more than $1 million short and could end up in bankruptcy. A few weeks later, the Philadelphia Orchestra posted numbers similar to Cleveland's.

The latest casualty came just over a week ago, as the normally sturdy Chicago Symphony Orchestra, with a $60-million annual budget, was $6.1 million in the hole.

And those are the big guys. Among smaller organizations, some outcomes were worse. In June, the San Jose Symphony canceled its 2002-03 season, facing bankruptcy; in July, the Washington (D.C.) Chamber Symphony folded.

For The Record
Los Angeles Times Wednesday October 30, 2002 Home Edition Main News Part A Page 2 ..CF: Y 11 inches; 420 words Type of Material: Correction
Symphony deficit -- In an article about symphony orchestra deficits in Tuesday's Calendar, the Dallas Symphony Orchestra's 2001-2002 deficit was misstated. The correct figure is $850,000.

Jack McAuliffe, vice president of the American Symphony Orchestra League, a service organization in New York City, says the beat will go on. Once all the balance sheets are in -- by December or January -- he expects that a majority of U.S. orchestras will show some sort of deficit for 2001-02.

The trail of bad news prompts a worried question: What's the problem with classical music?

As it turns out, all unhappy symphony orchestras are unhappy in their own way, but the answer is surprisingly consistent.

"It really is 'the economy, stupid,' " says McAuliffe, pointing to the general downturn and to the aftermath of Sept. 11. "It's affecting all those revenue sources" -- especially corporate, foundation, government and individual donations -- that are crucial to an orchestra's bottom line.

One revenue source that has stayed relatively stable is ticket sales. Just after Sept. 11, particularly in New York and New Jersey, according to McAuliffe, ticket sales dropped enough to have a major if mostly short-term impact on revenues. The New Jersey Symphony Orchestra, which lost $1.1 million, saw its ticket sales down for almost four months. But according to McAuliffe, an informal survey of the nation's 50 largest orchestras showed ticket sales down only 1% from the previous year. And in the big picture, sales are up: McAuliffe reports that, nationwide, orchestra attendance in 2000-01 was 32 million people, a rise of 16% from a decade previous.

But in bad economic times orchestras run into trouble because they have high fixed costs -- long-term contracts with halls and their musicians, guest artists booked years in advance. Joe Kluger, president of the Philadelphia Orchestra, says his organization is a case in point. He employs roughly 100 musicians, every week of the year, with salaries and benefits determined by a competitive union contract. In 2001-02, he says, the Philadelphia Orchestra increased its ticket revenue by 27%, or $3.5 million, largely thanks to the excitement around its new Verizon Hall, which opened in December. But, given rising health-care costs, and staff and musician pension funds that were pummeled by stock market declines, the orchestra still posted a $1.3-million deficit.

Chicago was also hit by stock market problems; the market's fall cut into its employee pension plans by almost $3 million, and a slight decline in ticket sales didn't make things easier. The orchestra also posted what it calls a "one-time, non-cash accounting adjustment" of $2.3 million that included old debt.

Many of the red-ink orchestras cite a downturn in corporate giving in explaining their shortfalls. In Texas, where the Dallas Symphony Orchestra posted a $877,000 deficit, many nonprofits took donation hits tied to the Enron scandal, beleaguered energy companies, and corporate mergers, according to McAuliffe. In Cleveland, similar pressures have meant that corporations are leaving town. Thomas W. Morris, the Cleveland Orchestra's executive director, says his organization was hardest hit by a 29% drop in corporate contributions.

"It's not that they're contributing less," Morris said, "it's that they're not here."

Foundation giving is also down, says Jim Ferris, director of the Center on Philanthropy and Public Policy at USC. Not only have foundations seen their net worth fall with the stock market, since Sept. 11, they may be more likely to give money to human services, tolerance programs and international efforts than to the performing arts these days.

"The foundations are thinking, 'What are the lessons of September 11, and how should that affect our giving?' " Ferris says.

Orchestra endowments are another casualty of the stock market decline. When there's a budget shortfall, a nonprofit can draw a set percentage to cover deficits. But as the value of the endowment falls, that percentage yields a smaller figure for the bottom line. The Minnesota Orchestra, for example, has seen its endowment decrease in value 30%, or $36 million, since 2000.

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