“We were planning our return during COVID and thought it would come back to what it was. It never will be back to what it was. If we know folks aren’t coming back right away — especially for new works — how can we properly scale the operations and execution of them?” – Performing Arts Organization Leader, Spring 2023

While the COVID-19 public health emergency officially came to an end on May 11, 2023, there is a growing – rather than waning — sense of financial and operating crisis in the arts. Despite a 2022 uptick in many financial and operating trends, full recovery has not been swift nor is it guaranteed in the future. A look in the rearview mirror provides context for the underlying challenges that a lot of organizations are facing today. It shows why many organizations are experiencing crisis now: dwindling ticket sales, increased costs, and private donations that failed to keep pace with inflation. It also shows the temporary lifeline provided by government relief funding, impact on bottom line and working capital, as well as how different kinds of organizations are bucking trends and thriving.

In early 2023, Chicago’s Department of Cultural Affairs and Special Events (DCASE) contacted SMU DataArts for an examination of financial and operating trends among its applicant organizations from 2019 through 2022, and an analysis of whether they varied for organizations with different characteristics such as budget size, discipline, and mission focus that celebrates the culture of a specific population. This would be a first look at the health of many of the city’s arts and cultural organizations before, during, and emerging from the pandemic. At the time, many in the arts field anticipated a quick return to better days in 2023.

This project attempted to synthesize as much data as possible to understand a spectrum of trends from 2019 to 2022 for as many Chicago arts and cultural organizations as possible. The key findings from this analysis illuminate challenges and bright spots. Time will tell whether the resiliency exhibited by arts and cultural organizations in the wake of previous crises will prevail, or whether this proves to be a crisis like no other.

The executive summary of the report is also available from Chicago DCASE.

Key Findings

Several themes emerged within the financial and operating trends of the Chicago organizations analyzed, which resonate with those identified nationally.

 

Dwindling Audiences and Earned Revenue

• Earned revenue supported an average of 6% less of total expenses in 2022 than in 2019 among the Chicago organizations studied, and 15% less of total expenses for theatres included in this cohort.
• In-person attendance recovered somewhat in 2022 but was still 60% lower than it was pre- pandemic. In-person attendance decreases for performing arts (-59%) and other arts and cultural organizations (-73%) were far more severe than those of museums (-14%) in the Chicago organizations studied.
• The pandemic exacerbated the ongoing trend of declines in relational customers in the performing arts and museum sectors. From 2019 to 2022, Chicago performing arts organizations and museums in the study saw 26% and 29% further declines in the number of subscribers and members, respectively, reflecting national trends.

Increased Costs, Shrinking Budgets

• The average Chicago organization cut total expenses by 8% in nominal dollars; however, due to inflation, the real change was an average budget that was 20% lower in 2022 than in 2019.
• Chicago organizations studied substantially reduced staff during the pandemic but reinstated all but 10% of employees in 2022.
• Budget reductions were mainly achieved through cutbacks in the scale and number of programmatic offerings such as productions, exhibitions, education programs, lecture series, and the like. In the organizations studied, there were nearly two-thirds fewer programs offered in 2022 than in 2019.

Private Donations Failed to Keep Pace with Inflation

• Private giving by trustees, other individuals, and foundations supported virtually the same level of Chicago organizations’ total expenses in 2022 as in 2019 and 2020, with only 1% difference over time. With expense levels lower in 2022, this means that private giving was lower over time, too.
• During 2021, the peak pandemic year, trustees stepped up their support. The average Chicago organization’s trustee support more than tripled in 2021 relative to 2020, and it covered 18% of expenses rather than 4% to 6% as it did other years, including 2022.1

Government Relief Proved Essential, Especially to the Performing Arts:

• Total Government funding supported an increasing level of the average organization’s expenses over the past four years, rising from 4% to 12%.

1 The 2019, 2020, and 2022 levels are very similar to historical levels of trustee support for the average arts and cultural organization in markets nationally. See https://culturaldata.org/the-fundraising-report/by-source- indices/trends/

• Federal relief programs kept many organizations afloat during the pandemic and saved jobs in the arts, fulfilling their intended purpose.
• The vast majority of federal relief dollars that buoyed many organizations during years of pandemic crisis have now run out. The duration of relief funds has not matched the slower rebuild and return experienced by most arts organizations, particularly theatres.

Bottom Line and Working Capital:

• Through 2022, Chicago organizations weathered the crises of recent years by scaling back their operations and attracting revenue that, while lower over time, exceeded the amount of their reduced expenses. This resulted in annual surpluses, rising from the equivalent of 2% of expenses in 2019 to 12% in 2022.
• Large organizations’ working capital diminished relative to expenses, driven by mounting short- term obligations to others, such as banks, vendors, or employees. By contrast, small organizations increased their level of working capital relative to expenses by 40% over time and medium organizations 20%.

The report delves further into these local trends, how they relate to national patterns, and includes an analysis of whether they varied for organizations with different characteristics such as budget size, discipline, and mission focus that celebrates the culture of a specific population.