Tag Archives: shortfall

Business, News

Cash-Strapped and Debt-Burdened, Seattle’s Major Arts Institutions Face Leadership Transitions, Too

2 Comments
Kimerly Rorschach (Photo: Robert Wade)

“Kimerly Rorschach, new SAM director, is a museum-builder,” runs the headline in the Seattle Times the morning after Rorschach’s appointment was announced. It’s an odd lede because Seattle Art Museum–and the Seattle Asian Art Museum and Olympic Sculpture Park–are, well…built.

Still, it’s common practice in the Seattle arts scene for institutions to make, on the face of it, bizarre and startling announcements without much transparency.

When Derrick Cartwright resigned suddenly as SAM’s director in May of last year, Seattleites were told that he, after two years at the helm, had decided to take up “scholarly pursuits.” As if that’s something that happens, you know, you move from San Diego to take over leadership of one of the Northwest’s preeminent arts institutions and then two years later you think, Oh my god, I forgot to research that thing. I should get on that. 

Seattle doesn’t take its arts institutions that seriously, as businesses–though multi-million-dollar non-profits are still, technically, businesses–so these attempts to provide the emperor with new clothes don’t attract much investigative attention. Perhaps it’s perceived as unseemly to “pick on” arts groups. But this intentional blindness leads at times to spectacular meltdowns. (In November 2010, Intiman Theatre’s managing director, Brian Colburn, stepped down suddenly for “personal reasons” and by spring the theatre was closed.)

SAM’s Rorschach pick is a Rorschach test, at this point; you can see what you want in it. It is troubling that SAM seems to have been unable to find someone at an institution of more commensurate size: Rorschach is trumpeted at having “built” the Nasher Museum at Duke University into a cultural force (attendance soared from 10,000 per year to 130,000), but SAM can boast over 610,000 attendees at its downtown museum alone in 2011.

On the other hand, the well-connected Rorschach is to be the 2012-13 president of the Association of Art Museum Directors, and her standout exhibits have been “collaborations” with much more significant institutions than the university-campus-based ones she’s led. It is too soon to tell how well she will do in Seattle, but the general impression is that, after Cartwright, SAM’s board has chosen someone who is used to working with less.

Meanwhile, Seattle Opera has announced a possible, estimated, not-at-all-precise shortfall of one million dollars for its 2011-12 season (with a total projected operating budget of over $20 million). The news stories all quote heavily from the press release–I have yet to see a news outlet ask basic questions about how the Opera discovered this disturbingly fuzzy shortfall at such a late date. (Or, if the Opera knew they were falling behind earlier, why they decided against going public to try to raise money, which is what you’d expect a non-profit to do. Subscribers were informed by letter on June 28, 2012, two days after the public announcement.)

The question should also be asked, in response to the release’s (pdf) argument that because of “behavioral trends in the opera-going public away from commitment,” “single-ticket sales have increased while subscription sales have decreased,” whether this might also be related to having raised subscription prices repeatedly in the face of and during a recession. Further, someone might ask whether pricing opera subscribers out of attending regularly has had a second-order effect on fundraising potential. What the subscriber-base decline actually is is unclear since the Opera has discontinued its practice of noting subscribership levels in its annual reports.

The seriousness of the Opera’s position can be seen in its decision to, in the 2013-14 season, go ahead with performing Wagner’s Ring Cycle, but then offer a subscription season of just three operas, down from its usual five. In one accounting, you just get more, since the Ring summer festival is four operas, but it’s long been the case that the Ring plays primarily for out-of-town audiences, not the Opera’s subscribers. (Leaving aside the question of how many of them would line up to see this third presentation of the Ring III production, anyway.) The succeeding seasons will feature no summer opera, unless it is a “Ring year.”

Finally, the Opera’s artistic director Speight Jenkins is due to retire in September of 2014, so there is the issue of succession, and the Opera’s plans there have up to now been unpublicized. When Seattle Symphony was searching for a new music director, you could go hear guest conductors rumored to be “try-outs.” At the Symphony, with the selection of Ludovic Morlot; and at Pacific Northwest Ballet, with Peter Boal; the new directorial choice was made substantially in advance of the “final” performance under the aegis of the former directors, giving audiences a chance to learn about and warm to the new leadership before said leadership’s cup overflowed with daily management details.

A more interrogative approach to non-profit management would no doubt raise eyebrows–if not hackles–in Seattle’s forbiddingly polite arts circles, where everyone knows everyone else, and executives routinely hopscotch from one institution to another. But it’s just business, or should be.

Accurate information about buying patterns, fundraising results, and management performance (metrics might include staffing churn) that makes it into the public sphere are more helpful than not. If the Opera is going to note that “ticket sales cover less than 40 percent of operating costs,” the people who give deserve better than end-of-year bombshells. If SAM’s board, despite the differences of scale in management experience, believes they’ve made the best choice, museum patrons should know that, too, rather than it simply going undiscussed.

Business, News, Politics, Real Estate

Washington’s Unemployment Rate & Economic Outlook, October/November Edition

Washington State's Unemployment Rates through October 2011

Here’s a riddle for you. Washington State’s unemployment rate is tracked to the tenth of a percentage point (though whether the data supports that level of precision is arguable). It has “fallen” for seven out of ten months in 2011, yet in January the (preliminary) rate was 9.1 percent and in October it was 9.0. Is this a new instance of Zeno’s Paradox?

Most recently, it fell in the Seattle Times, Seattlepi.com, and Puget Sound Business Journal. (In fairness, “dipped slightly” in the Times.) Still, common sense tells you that somehow you are not getting the whole picture from the headlines. Nothing can fall that often, without going up, and yet remain within a tenth of percentage point of its beginning. The long-term picture is of an economy that, while not declining, is failing to gain ground in hiring.

I hesitate to call it a conspiracy so much as dogged optimism, but what you almost never read in the headline is “Revised Rate Adjusted Upward for Seventh Time”–I don’t actually recall that ever being in the headline, honestly, but to be on the safe side, I’ll add that “almost never.” But that’s how it works. The lagging revised rate corrects the preliminary rate upward, and then the succeeding month’s rate can be said to have “fallen,” even if, comparing preliminary rate to preliminary rate, you have exactly the same number, month to month.

This matters because on nights when Occupy Seattle blocks bridges with the aid of union members, as a protest against job losses, some fuming in their cars may be questioning whether things are that bad. Surely, after seven months of falling unemployment, things are getting better? And such complacency is best avoided, whether you think snarling commutes is ultimately helpful or not. So far this year, the state has lost 8,800 public sector jobs (5,400 being state workers).

In October alone, “Professional and business services lost an estimated 7,000 jobs over the month, more than any other sector. The transportation, warehousing and utilities sector lost an estimated 1,100 jobs and the retail sector lost an estimated 1,000 jobs,” says the ESD.

It’s not all gloom and doom. Delightfully, in fall, the state also sees a seasonal bump in what it calls “apple employment,” this year up 8.7 percent. And as the state’s chief economist Arun Raha notes in his November update to Washington’s revenue forecast:

We expect Washington’s economy to outperform the U.S. in the recovery. Boeing and Microsoft are both hiring again. The aerospace sector has added 9,100 jobs since May 2010, which is 3,100 more than the number lost during the recession, while the software sector has added 1,900 jobs since December 2009, making up for most of the 2,500 jobs lost during the recession. The state’s farming and export sectors are also doing well. Washington exports were up 29% in the third quarter of this year compared to the previous year.

Boeing’s commercial airplane division has just leased 45,000 square feet of space in downtown Seattle’s Russell Investments Center. These are the kinds of developments that have stanched the bleeding of job loss.

When Raha surveys the national scene, he sees this stagnant hiring situation writ large. You may be surprised to hear that the U.S.’s real gross domestic product is “back up to its pre-recession peak,” but that the nation has managed to do this with 6.8 million fewer jobs.

Growth in jobs has been excruciatingly slow in this recovery. The economy added just 80,000 net new jobs in October, although the previous two months were revised up a combined 102,000. Cutbacks in the public sector continue to weigh down the employment recovery with cuts of 24,000 across all levels of government. Almost 14 million people remained unemployed.

And cutbacks in government seem assured. In a good-news-bad-news sandwich, Raha announced that general fund revenue for the 2009-11 biennium should come to $28.2 billion, $25 million higher than previously estimated, but that his forecast for the 2011-13 biennium is $30.2 billion, $122 million lower. Meanwhile, Governor Gregoire has warned the Legislature to be prepared for a “brutal” November special session “that could include even deeper cuts to state education spending,” as KING TV reported.

Hiring in education was one of the bright spots in this year’s jobs reports. As the state looks to cut another $2 billion, that seems unlikely to repeat itself. (At current spending/revenue levels, the state faces a deficit of nearly $1.4 billion through 2013.)

At long last, we may need to break through the no-new-revenues deadlock. The budget policy group behind Budget Schmudget argues that cutting education spending threatens economic growth, and advises a new capital gains tax. At a Seattle Transit Blog meetup, WSDOT’s Paula Hammond said that the gas tax “has lost 49% of its purchasing power over the last ten years since the tax isn’t tied to inflation.”

News, Politics

Why the City of Seattle Can’t Budget

Seattle in stormy weather (Photo: MvB)

I have to admit to a bait-and-switch here. I realize that with a headline like that, you expect to be told why the City of Seattle can’t budget. But–and here is where things get very devious indeed–my thesis is that most likely you already know why. So the real reason that the city keeps facing deficits is not because leaders simply don’t know how, but because they correctly understand that the populace would rather they dither than decide on a less reversible course.

If the economic siege is going to lift, then it makes sense to keep Seattle poised to take advantage of that. If the economy has reset, and the current boom-fed structure is unsustainable, then it makes sense to act more radically, to reorganize the “city walls,” so to speak. But Seattle is a confusion of people, and at any given time, some thirty percent agree on anything.

Functionally, the city is not allowed to run a deficit, which removes some of its short-term flexibility. Seattle is dependent on funding from state and county governments, and–things being tough all over–leadership all over has been practicing the exact same kind of budget strategy: that of kicking the can into the next budget biennium, when things hopefully will have turned around. In fact, things have not, and it has made it impossible for local governments to accurately anticipate where their particular can will land.

Part of Governor Gregoire’s most recent $2-billion budget cut includes $91 million in monies normally shared with the state’s counties and cities. Everywhere, you see talk of the lowering tide sinking all boats: Seattle’s budget director Beth Goldberg echoes the state’s chief economist Arun Raha when she blames “the federal debt-ceiling debate, European debt crisis, and plunge in the stock market” for expecting $4.3 million less in revenue for 2011 and 2012.

But as Publicola points out, that’s just the tip of the looming city-services iceberg: “Next year’s projection pales, however, in comparison to projected shortfalls in 2013 and 2014, when deficits are projected at $39.4 million and just over $44 million, respectively.” While just about everyone can think of a few things in the city budget that represent “staggering waste,” they have a much harder time persuading a majority of their position. One person’s tough-but-necessary budget axe is another’s executioner’s blade.

Advocates of “small government” may cheer the results in principle,but the practical fact is that creating a smaller government in a recession pours gas on the unemployment fire: “The industry hardest hit by the job losses was government, losing 10,800 jobs as budget cuts led to paring of an estimated 6,100 jobs in local education and 4,700 jobs in state education,” reported the Puget Sound Business Journal in October. In contrast, a booming aerospace industry added 1,000 jobs. That’s the wrong ratio.

For some reason, when the short-term effects of laying off government workers are calculated, you are typically not provided with the counterbalancing costs in unemployment insurance, government aid, and reduced tax revenue, not to mention the longer-term unemployment effects, such as repossession and foreclosure. Given the recession’s historic lengths of unemployment, this is not trivial. Property taxes fund an enormous amount of services.

Though Seattle is fortunately positioned (with hiring in aerospace, software, online retail), it’s also true that it’s increasingly expensive to live in the area. Seattlepi.com reports on a University of Washington study that claims: “For a family of two adults and two young kids in Seattle, the cost of living grew by 13 percent since 2009. For a single person with no kids, making ends meet is now 19 percent more expensive.” In East King County, the most expensive area, “a single parent of two young kids” spends $65,690 on basic needs: housing, food, child care, health care.

That’s without, Sightline underscores, in their more in-depth treatment of cost of living study: “the additional costs of any comforts such as savings, vacations, cable TV, or the occasional restaurant meal.”

Sightline breaks it down:

Over the last decade, taxes for that average 3-person Washington family have risen by 28 percent. Compare that to the cost of housing (up 37 percent), food (up 41 percent), childcare (up 44 percent), health care (up 75 percent) and other necessities like clothing, shoes, telephone service, and household goods (up 40 percent).

That’s the kind of thing that makes it difficult to pass new taxes to deal with plunging revenues. The actual impact of the taxes may be smaller than all else, but struggling people can say no to new taxes. They can’t say no to cost of living increases, except to relocate. And relocating to an area of higher unemployment carries its own expenses and risks.

For the moment, all we have for comfort is the knowledge that if things truly can’t go on this way, they won’t.