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October 28, 2024

Hartford-area arts organizations look to boost funding reserves as federal aid ends

HBJ photo | Steve laschever Hartford Stage Managing Director Cynthia Rider.

Rabbi Donna Berman knows a thing or two about living hand-to-mouth.

When she was hired in 2001 as executive director of the Charter Oak Cultural Center in Hartford, the organization was a financial mess and on the verge of closing.

Cultural center officials credit her with breathing new life into the organization, a multicultural arts center that, as Berman describes it, does the work “of social justice through the arts.”

Then came the COVID-19 pandemic, which devastated the arts industry nationwide as donations, ticket sales and season subscriptions plummeted.

The federal government stepped up to help, including $135 million for the arts in the American Rescue Plan Act (ARPA) signed into law by President Biden in March 2021.

That funding stopped the bleeding for some arts organizations, particularly those with sizable endowments that could be tapped during the hardest of times.

But the Charter Oak Cultural Center, which operates on a $1.1 million budget, didn’t have a large nest egg to lean on. Instead, additional help came from another, more local source: Endow Hartford 21, which was created by the Zachs Family Foundation as a first-of-its-kind endowment matching program to support a variety of Greater Hartford nonprofits.

Berman declined to say how much Charter Oak received through that program, but said it was an important lifeline for the multicultural center, which, among other things, provides free arts programs for over 1,000 Greater Hartford students through its City School of the Arts.

“It was just a lifesaver for organizations that really hadn’t built their endowments,” Berman said. “Building an endowment is difficult when you’re kind of hanging on by your toenails.”

Endowments have long been an important tool for arts and other nonprofits as a way to promote long-term financial stability. But there’s been a sharper focus post-pandemic by some organizations to establish and/or beef up their nest eggs.

It’s especially important as government support dries up — federal ARPA funding ends this year, while state lawmakers reduced arts funding during the 2024 legislative session.

Amber Tucker

“It’s tough; they’re coming to their financial cliff,” said Amber Tucker, a partner and CPA with Fiondella Milone & Lasaracina LLP (FML), an accounting firm in Glastonbury.

“ARPA funding is ending, and many of them have also received employee retention credit (ERC) funding,” Tucker said of nonprofit organizations. “They were able to make it through those couple of years with all the additional funding they’ve had, but now that funding is wrapping up.”

A big boost

Endowments can help fill the void left by federal and state financial aid, assuming they are set up properly.

Drew Andrews

There are “multiple forms of endowment,” said Drew Andrews, managing partner and CEO of Hartford accounting firm Whittlesey, which advises nonprofits.

“In a simplistic viewpoint, the word ‘endowment’ is used to mean, I give you $1 million to hold in perpetuity, and the income earned off of that million is utilized for a general or specific purpose for an organization’s benefit,” Andrews said.

The interest and/or dividends from investing an endowment can be used to support anything from staff salaries to capital purchases, he said.

In general, an organization will use a “rolling quarterly average” percentage of the return on investment, “usually it’s 4% to 5%,” for the stated purpose and reinvest the rest, without touching the principal, Andrews said.

Charter Oak’s endowment wasn’t “a significant one,” Berman said, but in March the organization received a big boost — a $6.5 million grant from the Community Investment Fund that it will use to renovate its 148-year-old home, erected in 1876 as the state’s first synagogue, and make it fully accessible.

Berman said that grant helped boost the cultural center’s building campaign.

“We raised … over $11 million and we need to raise another $1.5 million or so,” she said.

CONTRIBUTED PHOTO
Rabbi Donna Berman (left) received the 2024 Champions for Children award this year in honor of her leadership in service to Greater Hartford youth.

Berman said her organization is doing OK financially, but added that many small and midsize arts organizations still struggle.

“You don’t have to be broke to live hand-to-mouth, but you’ve got to put food on the table before you can start putting aside money that you can’t touch,” she said.

Set the Stage

Charter Oak is not the only arts organization seeking to boost its endowment.

Earlier this month, Hartford Stage announced its Set the Stage fundraising campaign seeking to raise $20 million for its endowment fund.

The campaign began quietly last year and has raised more than $9 million from corporate and individual donors.

Managing Director Cynthia Rider, who was hired five years ago, said an earlier plan to strengthen the organization’s endowment was proposed around the time she arrived but was derailed by the pandemic.

“There had already been a lot of conversation, over many years, about the need to grow the endowment,” she said. “So, our endowment is about $6 million-ish, and for an organization with a $10 million budget, that’s not particularly large and doesn’t provide a large percentage of annual support.”

About 60% of Hartford Stage’s annual budget is funded from donations, Rider said. “If we had no contributed income, and we had to support ourselves on ticket sales alone, we would have to charge $175 for every single ticket.”

In the pandemic’s wake, the endowment has become even more important, she said, since subscriptions and individual ticket sales have not yet returned to where they were before 2020.

“Our subscriptions are down 50% post-pandemic,” Rider said. That’s equal to about $1 million in revenue, according to the organization’s website.

Rick Costello, who retired as an associate general counsel and senior vice president at The Hartford about four years ago, is serving as co-chair of the Set the Stage campaign along with Stanley Black & Decker President and CEO Don Allan Jr.

Costello is a member of the Hartford Stage board and chairs its development committee. He said the organization has had an endowment that’s too small to meet its needs.

“This campaign is a very meaningful step towards … right-sizing the endowment,” he said.

Hartford Stage, out of necessity, reduced its “full-time headcount” to make the organization leaner during the pandemic, but costs continued to rise due to inflation, Costello said.

Hartford Stage did conduct a “Raise the Curtain” fundraising campaign during the pandemic to help with costs, and received ARPA funds as well.

“So, the combination of those two sources of funds have allowed us to keep breaking even, if you will, on an operating basis,” as ticket and subscription sales have slowly begun to improve, Costello said.

A quarter of the Set the Stage fundraising, or about $5 million, will help close the gap from ticket and subscription sales, he added.

“We think it’s going to take several more years to get the people back and to bring in new audiences and get our earned revenue back into balance with our contributed revenue,” he said.

Something ‘sexy’

The difficulty for arts organizations, or nonprofits in general, is that trying to raise money to help with operations may not hold as much appeal for donors.

“A lot of times, people that want to give want to give towards something that’s, well, the word ‘sexy’ comes to mind,” Andrews said. “It’s harder for people to get an endowment and say we’re just going to try to keep people paid.”

It’s also difficult, he said, because of the size of donations often being sought, and the number of organizations seeking help.

“Usually, when you raise an endowment, you’re going toward high-net-worth, wealthy individuals” who donate large amounts, Andrews said. “It’s not like the United Way that wants you to give five bucks every pay period.”

He also noted that many legacy companies in Hartford are now part of larger corporations based elsewhere.

“They’re more global and national, and they have to spread their interests in different places,” Andrews said.

That means there’s less money available for local nonprofits.

Rider believes any business that wants to retain workers and improve the community in which it is located should donate to the arts.

“If you want to see an economically vibrant center to the Hartford region, you want your arts institutions to be strong and thriving,” she said. “Whether that’s because you see every single show and you love it, or because you just want to see a thriving downtown Hartford with great opportunities for young people and for artists and the jobs it creates here in Connecticut, then you should support this campaign.”

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