Arts Funding—Is Direct Public Funding for the Arts Worth the Headache?
By Thomas Wolf
Public funding is only one avenue towards support of a healthy arts sector, but in the United States it is far from the most important one.
The National Endowment for the Arts, created in 1965, is an independent agency of the U.S. government that offers support and funding for the arts. In its first decade, its appropriation increased an incredible 3500 percent. (National Endowment for the Arts, Public domain, via Wikimedia Commons.)
In 1977, the U.S. Congress’s appropriation for the National Endowment for the Arts (NEA) reached $99.9 million. The growth in federal dollars had been extraordinary since the earliest days of the NEA when, in 1966, the appropriation stood at $2.9 million. Every President—Democrat and Republican—since 1966 had proposed funding increases to the agency, with some of those increases, including those of President Richard Nixon (hardly an arts enthusiast), being quite dramatic. Congress went along. Arts funding, it seemed, wasn’t controversial—“like motherhood and apple pie,” as one wag put it. In fact, public funding for the arts seemed to be widely popular with elected officials, at least judging by their votes. Similar growth in appropriations were occurring at the state level as well with the budgets of state arts councils and commissions—many of them quite new—swelling at a rapid rate. It was a “feel-good” time when optimism about public support for the arts was high.
It was just at this moment that there occurred a meeting of executive directors and chairpersons of the six New England state arts agencies. Their guest was a long-time federal lobbyist who brought a unique perspective concerning federal policy and funding across numerous government agencies. He was asked to speak about how quickly federal funding for the arts might grow and the best way to spur increases in appropriations. As the executive director of the New England Foundation for the Arts, I had the rare opportunity to observe.
The advice of the expert was hardly what the group expected.
“Be prepared,” he counseled. “You are about to pass a threshold. The dollars appropriated for the arts have been so small, most elected officials are not really paying attention. Remember, funding for the NEA is contained within a much larger appropriations bill. The NEA is a blip. But you are about to cross the $100 million threshold. People will start to notice. And my prediction is that you are going to have some tough sledding in the future.”
Most of those attending the meeting dismissed the expert’s observations and in the next few years it seemed he had simply been wrong about public arts funding. Somehow, the arts seemed to be immune from the dangers faced by other sectors. It appeared to have plenty of support from presidents and from majorities in Congress. The threshold of $100 million was passed without consequence. Indeed, over the next four years, the appropriation for the National Endowment for the Arts grew by almost 60 percent.
In his first budget speech in 1981, President Ronald Reagan proposed eliminating the National Endowment for the Arts. It was a rude awakening for those who believed federal arts funding enjoyed broad-based support from Republicans and Democrats. (Michael Evans, Public domain, via Wikimedia Commons.)
Then came President Ronald Reagan. In his first budget speech, which I watched on television while sitting in the living room of the Director of the California Arts Council, Reagan didn’t merely propose a cut in NEA funding. He proposed its elimination altogether. It hardly mattered that the government spent far more on military bands than it did on support for the arts—the NEA was a convenient target for eliminating so-called “government waste” (something we are hearing a lot about these days). And while Reagan did not get his way—the NEA survived—federal funding for the arts was cut during his years as president and its growth would never be anywhere near what it had been in its early years, even lagging significantly in comparison to inflation. As one long-time arts administrator put it: “Reagan made it okay to disparage public funding for the arts and we have been living with the consequences ever since.” Many years later in his first term, President Donald Trump followed suit, attempting to zero out the NEA twice in the federal budget, though Congress eventually restored its funding. Is there any doubt that he will do so again in his second term?
By 2024, the appropriation for the National Endowment for the Arts was $207 million. Had the 1977 appropriation merely kept up with inflation, it would now stand at $515 million (more than double what it is now)! Had it approached even a fraction of the kind of growth it had enjoyed in the early years, it would be well over a billion dollars.
The results of public funding at the state level were even more far-reaching than for the federal agency. In many cases, cuts in state appropriation for the arts were the least of constituents’ worries. Serious attempts were made by governors and state legislators to eliminate state arts agencies altogether—even though, in several cases, their entire grants budget came from federal sources.
One can carp about the sad history of direct public arts funding in the United States and many do. But one might also argue that there were consequences far more dire for champions of the idea of government dollars for the arts. The whole idea of government support came under attack. NEA and state arts agencies would become targets in attempts by public officials to grandstand on cultural issues such as “indecency,” homosexuality, anti-religious zealotry, and a host of other “sins.” The agencies were forced to tack back-and-forth over the years, eliminating programs, changing guidelines, and restructuring granting procedures to prove they met the standards of those whose interest in the arts was overshadowed by their need to score points with constituents in the ever-expanding culture wars. For many elected officials, the presence of these arts agencies was a godsend, as it gave them pretty much defenseless entities they could caricature in service to the frothing up of voters.
Photographer Andres Serrano, whose 1987 photograph Immersion (Piss Christ) caused a firestorm that led to a cut in NEA funding. In time, the agency, bowing to the anger of legislators, would eliminate funding to individual visual artists entirely. (Photo: Jindřich Nosek (NoJin), CC BY-SA 4.0, via Wikimedia Commons.)
As but one of many examples: “Immersion (Piss Christ) is a 1987 photograph by the American artist and photographer Andres Serrano. It depicts a small plastic crucifix submerged in a small glass tank of the artist’s urine.
“Immersion (Piss Christ) was a winner of the Southeastern Center for Contemporary Art’s ‘Awards in the Visual Arts’ competition, which was sponsored in part by the National Endowment for the Arts. [N.B.: The NEA had nothing to do with the selection of this particular work.] The piece caused a scandal when it was exhibited in 1989, with detractors, including United States Senators Al D’Amato and Jesse Helms, outraged that Serrano received $15,000 for the work, and [he had received] $5,000 in 1986 from the taxpayer-funded National Endowment for the Arts. Serrano received death threats and hate mail, and he lost grants due to the controversy. Others alleged that the government funding of Piss Christ violated the separation of church and state. The NEA's budget was cut.”[1] Today, the NEA no longer supports individual visual artists.
Lest we, like so many, lament the United States’ “woeful public support of the arts,” we should take a deep breath and realize that focusing on public sector grantmakers like the NEA and state arts agencies tells only a small fraction of the story. Public funding for the arts is in fact robust in the U.S. and had been for decades before the creation of the NEA. It comes in the form of tax subsidies of private sector contributions and other forms of tax deductibility. This form of government support has grown consistently with far less noise than that associated with NEA funding—though recent firestorms over the ethics of certain donors (like the Sackler family’s association with opioid drugs) has resulted in awkward situations for some grant recipients.[2]
Some private donations are criticized just as public grants are. However, the ratio of controversial funding is far smaller in the private sector than for public agency grants. One high-profile example concerns donations by the Sackler family. Some museums bowed to the pressure to remove the Sackler name from its donor list given the family’s involvement in the opioid crisis. Controversially, Harvard University chose not to do so and the Sackler name can be found prominently displayed as above. (Photo: Thomas Wolf.)
It is in the area of tax subsidy that the U.S. has shown world leadership in government funding for the arts. In 2023, private giving to the arts topped $25 billion dollars in the U.S.[3] Much of that support came in the form of individual donations subsidized by federal and state governments through the mechanism of tax deductibility. Many individuals made contributions to an arts organization and claimed a tax deduction.[4] Private foundations, too, received another form of tax benefit. Those with endowments were not be taxed on income from these assets.[5] Nor were many private institutions that often depend on income from the endowments to cover operating and other costs. Even local governments have played a role by exempting many arts organizations from paying real estate taxes on facilities they own as well as other local assessments.
Let us assume that 20 percent of that $25 billion was deductible from federal and state taxes (a very conservative assumption, since high earners in the higher tax brackets are those who give most substantially to the arts). Doing the math, this would represent a $5 billion public subsidy through foregone taxes. That single-year figure is two hundred times that of the current appropriation to the NEA, a number of dollars that it took the NEA almost a half century from 1965 to 2008 to give away.[6] Is it any wonder that in my travels to other countries where most of the public dollars to arts organizations come through direct grants from government and where there are few if any tax incentives for individual and corporate giving, arts administrators look with envy at the philanthropic system in the United States.
Of course, it is inevitable that there are those who believe that patterns of indirect tax subsidy are inherently unfair. One complaint is that it is primarily rich people—those who contribute the most and are in the higher tax brackets—who get the greatest tax benefit and this gives them far too much power to direct indirect public arts funding at the taxpayer’s expense. This complaint is based on the illusion that public sector systems of direct grantmaking are inherently fairer. But arts agency grants panels and public bureaucrats make decisions based on their own preferences and judgments just as private sector patrons do and the system is rife with conflict of interest.[7]
Zilker Theatre Productions has brought free summer musical theater to the heart of Austin, Texas for the past 65 years. Changes in grant guidelines have resulted in its loss of local City funding after decades and a major budgetary crisis for the organization. For those who criticize private funding because it is dependent on the whims of the wealthy, one could lodge the same complaints about the subjective decisions of public bureaucrats. (Photo: Courtesy Zilker Theatre.)
Indeed, there are plenty of non-recipients of public dollars who are prepared to claim that guidelines and procedures of public agencies are even less fair than decisions of private-sector donors. For example, two years ago, the city of Austin Texas’ Economic Development Department enacted a huge overhaul of its arts grants program to create more opportunities for so-called “historically marginalized groups.” In doing so, they eliminated funding for important players in the community that had been historically funded. One organization, Zilker Theatre Productions, was forced to lay off staff, cancel its warehouse lease, and sell a large portion of its costume library. They will probably have to follow up with a second sale, getting rid of props and scenery.[8] Meanwhile, in Portland, Oregon, it was fifteen of the smaller arts organizations that complained that it was unfair that major arts institutions were getting such a large a slice of the funding pie.[9] Fairness, it seems, is in the eyes of the beholder.
One of those complaining about the system of private philanthropy is Kate Dwyer, whose September 30, 2024 article in Esquire was typical of the genre. She laments the end of a thirty-year funding relationship between a small private press and a private foundation. What she does not acknowledge is that most direct funding from the NEA and state arts agencies would have lasted only a fraction of that number of years. She quotes Laura Callanan, the founding partner of the impact investing nonprofit Upstart Co-Lab, who was formerly the senior deputy chairperson of the National Endowment for the Arts under the Obama administration. In other countries, Callanan explained, “government has decided that it’s going to be responsible for supporting a lot of important issues, whether it’s education, health, culture—a whole range of things that are important to thriving communities. In the U.S., our government doesn’t play that role.”
Oh, I beg to differ—the U.S. government does play the role of support to many sectors including the arts and it does so at a much higher level than other countries by almost any measure. But in the U.S., the approach is overwhelmingly to let the private sector direct government funds through an extraordinary tax deductibility matching scheme.
For those who don’t like the system, are they willing to give up more than $5 billion in annual indirect government support to the arts in the U.S. for a system of direct grants, even if the NEA’s budgets and those of state and local arts agencies were to grow ten times larger than what they are today? Such a system would leave more than $2 billion dollars of government arts support on the table.
[1] Piss Christ - Wikipedia (accessed November 11, 2024).
[2] It is true that more recently the public has been quite vocal in questioning the motivations of individual and corporate donors trying to sanitize their reputations through arts-related giving with the Sackler family’s association with opioid drug manufacture being a case in point. In some cases, donations have been returned.
[3] U.S. charitable giving totaled $557.16 billion in 2023 | Giving USA.
[4] This benefit is extended to so-called “itemizers.” Those taking the standard deduction cannot also claim deductions on arts and other nonprofit contributions. The donation total also is only deductible if a taxpayer clears the threshold of alternative minimum tax rules.
[5] There are rules requiring private foundations to “pay out” at least a portion of the value of their endowments in any tax year. However, those monies can be used both for grants and administrative expenses.
[6] National Endowment for the Arts, Wikipedia.
[7] I have served on many public sector grants panels. In almost every case, an organization I either worked for, consulted to, or served on the board of was an applicant. True, I was asked to leave the room when such grants were discussed. But given the chummy nature of grants panels, I was confident that my participation favored funding for those grants I was associated with and I was rarely disappointed.
[8] City Arts Funding Skipped Established Arts Organizations. Will They Survive? Richard Whittaker, Oct. 25, 2024, The Austin Chronicle.
[9] Arts Orgs Say City Stiffed Them, Sophie Peel, Nov. 11, 2024. wweek.com.