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How the fiscal cliff will affect dancers and dance companies

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The fiscal cliff is just days away and while Americans believe it’s critical that Congress and the President reach a timely compromise on the issue, many remain skeptical about their ability to do so. For many the fiscal cliff is still some confusing, abstract concept, but it has real consequences to the arts and dance sectors.

In 2011, a bipartisan congressional “super committee” was tasked with drafting a budget agreement that would address and reduce the country’s growing annual deficit. The super committee adjourned without reaching consensus, but the Budget Control Act that Congress enacted that same year calls for “sequestration” to take place should Congress come to no further deficit reduction solution by January 2013.

Sequestration is a series of automatic cuts of over $1 trillion across all agencies of government over the next ten years.This is what has been referred to as the “Fiscal Cliff” due to its potential impact. These mandatory cuts will effect every sector, and, arguably, none more so than the nonprofit sector, which will see deep cuts in government spending to the arts, health, human services, housing and many other areas in which nonprofits operate.

In the fall of 2012, the White House put together a nearly 400-page report on the proposed cuts, how each agency would be affected, and by how much. The full report may be read here.

According to the Colorado Nonprofit Association proposed cuts to Arts and Culture would be close to 74 million…

  • National Archives and Records Administration. operating expenses -$31M (discretionary)
  • Institute of Museum and Library Services grants -$19M (discretionary)
  • National Endowment for the Arts grants -$12M (discretionary)
  • National Endowment for the Humanities grants -$12M (discretionary)

But what does the Fiscal Cliff actually mean to non-profits in the dance sector?

  • Proposals to limiting the deductions for charitable gifts and possibly even the status of nonprofit organizations, would severely impact all operations of dance companies both large and small. Impacted would be programming, staffing and in some cases the ability to even continue to operate. Congressional decision-makers on both sides of the aisle seem to view cuts, caps, or limits to tax deductions for charitable giving as a valid way to avoid the fiscal cliff.
  • Slow economic growth impacts general support for nonprofits and in particular the arts sector.
  • The fiscal cliff could cause a rapid increase in unemployment, which in turn tends to also reduce attendance by the public to performing arts events.
  • If we go over the fiscal cliff, average households could see tax increases of $3,500, which will reduce disposable income to attend events.
  •  Labor market conditions affect nonprofits’ decisions on staffing needs and hiring.
  • Reduced federal funding and cuts to funding of nonprofits through grants means cuts to programs created and delivered by our sector.

For non-profit organizations that rely upon government funding, the fiscal cliff will mean having to find alternative funding sources. For non-profits that rely primarily upon individual giving, the impact will depend on how well your donors fair should we go over the cliff. In either case, this should be a wake up call that dance and the arts can no longer do business as usual, but will need to seek other sustainable models for income and growth if they are to survive in these tenuous economic times.

 

1 Comment

  1. Guillermo Ortega says:

    Excellent article. We had some sort of compromise from both parties, but the real negotiation is coming since both parties will have to agree about how to save money in the next three months. That would be perhaps the real battle for the president.