Bad note: Minnesota runs up record $8.8 million loss

The upper midwest orchestra has been spending like there’s no tomorrow.

The 2019 operating deficit of $8.8 million is the biggest in its history, larger than the $6m in 2012 when the orchestra was shut down in a long standoff over musicians’ pay.

This time round President and CEO Michelle Miller Burns says it’s in a ‘strong financial position with $26.3 million raised this year in donations.

Read here.

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  • “strong financial position with $26.3 million raised”

    Helloooo, with a $8.8 million deficit, that means you just raised $17.5. And if you run that deficit again next year, you’d have raised just $8.7. Bye bye endowment, bye bye pension plan, bye bye salary increases…

  • Having been born, living, and working in Europe it is difficult for me to understand the US mentality of overspending beyond their possibilities and living out of borrowed money. Yes, culture here is heavily subsidised by the governments (and sometimes governments cut out the subsidies and orchestras get disbanded), but that exactly means that with whatever an orchestra gets as budget is with what we have to work…. an if that means less concerts per season, less “fancy” soloists, less pieces not in the public domain, and less programs with “‘extra” players (Eine Alpensinfonie and a complete cycle of Berio works can wait!) so be it! I don’t understand how someone making 17.000.000 spends 26.000.000. The people responsible for the situation should be sued.

    • Who are you? Everything you comment is spot on. I could not agree more. If the MO needs to have a couple of seasons of Mozart and Haydn symphonies it is OK. What is important is the orchestra remains while seeks better ways to continue existing. That easy.

      • I promise that a couple seasons of Mozart and Haydn are exactly what the orchestra does not need. The notion that the general public is really just hungering for warhorses and an orchestra in financial trouble just needs to program more Beethoven is an incredibly blinkered way to approach the problem.

    • There is so much more risk baked into the American model. You program your season, book guests, use up your contract-determined orchestra rehearsals/services, and only then do you begin to see revenue. Your first indication is subscription tickets. Then single tickets. But at most, you are expecting that to cover maybe 40% of your costs. The rest is all “contributed income,” i.e. donations that you are expecting to raise.

      You never start with 17 million in your coffers. You never have more than a million in the account at any time. It’s all based on modeling the last few years and a projection of “I think we can raise X and sell tickets to Y.” But once you’re committed, you’re kind of committed unless you want to upset donors, your core audience, your orchestra union, and outside guests by cancelling concerts as you realize your revenue is not going to cover your bills. Missing by this much is pretty crazy. That’s more than half of the debt the Baltimore symphony racked up over a decade, which has placed them in hot water, in a single year. No idea how this happened, if that includes some major capital improvements or what. But the thing with American orchestras is a bad season is like a slow motion car wreck. You see it coming, but there isn’t much you can do to change it.

    • Very well stated, but sad that it has to be said to adults. Overspending is an American disease (as a card-carrying American, I know of what I speak), whether in the American family or in our arts institutions. More, more, more is the American mantra. Sustainability is rarely considered.

    • That said, Frau Geigerin, there’s no shortage of “Alpensinfonie” performances in Deutschland, is there? It’s nice when you can lean on the government to pick up the tab.

      • It comes of living in a culture where citizens share responsibilities and feel paying taxes is a fair way to offer a rounded and healthy society.

        If Americans would pay tax, they too could have universal health care and successful orchestras and galleries. Everywhere, not just in rich places and not just for rich people.

      • Frau Geigerin doesn‘t lean on the government. The government leans on her to nurture essential cultural life.
        Matter of perspective.
        Is the purpose of life money, or is it cultural development?

      • Then what is The purpose of us « government », war, empty rhetoric, citizen based double taxation, hustling, huckstering, propaganda, fake ceremonies, war? Arts ? What’s that? More flatulent humor tv, movies.

    • One might note to Frau Geigerin that in the US there is no one to pick up the tab when a fancy new philharmonic hall goes several hundred millions of Euros over budget. This is the pot calling the kettle black. As if European cultural institutions were not known to overspend. The situation is a bit different when you can’t rely on the state to pick up the difference between ticket sales and operating costs.

    • Actually, they spent a bit less than they did last year. Unlike someone getting a paycheck from the government, an orchestra here in the US doesn’t know in advance what they will have to spend, and you can’t exactly make active changes on a month-by-month basis to your programming and staffing. Total amount of money that came in was actually more than expected, it just couldn’t all be used as historical patterns would suggest because much more of it was earmarked for building up the endowment.

  • It may come as a shock to the editor and those who commented, but in Minnesota people are not panicked by the report. The atmosphere is nothing like what it was during the time of the lockout in 2012-14. Different board, different management, different relationships with the musicians, different venue, stronger financial resources.

    The orchestra just finished a fundraising campaign that yielded $60M, or $10M more than budgeted. More of these raised funds went to the endowment than expected, as opposed to operations, hence the deficit. They also finished paying off the construction bonds for the remodeled Orchestra Hall. Management and musicians will examine the situation and some revenue and audience-building initiatives will come in time. After a year off from touring, next year they will tour in the Far East, which will produce revenue (large donors will cover the travel expenses). Life goes on.

    • How nice to read actual facts about the Minnesota Orchestra’s financial status. The orchestra’s musicians are taking a proactive role in helping with the current temporary shortfall. They have announced that they’re starting a program called Hall Pass, inviting young people to attend this season’s classical concerts for free. It’s paid for by $30,000 from the Bellwether Fund, created in 2015 with the remaining assets from the nonprofit the musicians formed during the labor dispute.

      The Minnesota Orchestra’s musicians are its greatest asset.

    • Actually, you’re right, no one actually cares. It’s Minnesota. Whether it has a symphony or no symphony, it really doesn’t affect the classical music world the slightest bit.

      • So tell me then, does what the Berlin Phil, LA Phil, New York Phil, etc etc etc affect the people of Minnesota? Each and every individual orchestra is important to its local community. According to your logic, classical music in general would have no impact on the world at all, but it does and mainly on the local level.

      • It’s “only” Minnesota, a orchestra that happens to be as good or better than any of the “Big 5” orchestras in the country. You should listen to them sometime?

  • Reminds me of ex-GM of San Diego Opera Ian Campbell who blithely claimed every year SDO had a balanced budget. Turns out every year he ran a deficit but “balanced” it by taking out from the tiny endowment. Then one day he proclaimed “oops, we are out of money and we need to close now (as in tomorrow).” The dumb but happy–until that moment–socialite donors and their husbands agreed, and then were drummed out by a new group that saved the company. As the great Maggie Thatcher said, “eventually you run out of other people’s money.”

    • All or virtually all American orchestras of significant size draw from their endowments every year. The generally accepted rule is to draw 5% in a given year, although that can vary. That, and other obligations, is why they have significant endowments and constantly raise funds. The issues are whether your endowment is adequate and how much you are drawing each year.

      • They draw from the endowment’s EARNINGS, not from the endowment itself. And even then they don’t usually take all of the earnings, because they want the endowment to grow. When an organization starts drawing from the principal of their endowment other than in special situations, the deathwatch begins.

    • Except that this situation is exactly the opposite. More money than expected went into the growing endowment, and they openly stated that they didn’t play accounting games to make it look like the budget was balanced when they could have because that would be detrimental in the long term.

  • As you learn on day one of Accounting 101, financial statements are a snapshot in time. So long as the orchestra has a strong cash flow from ticket sales, donations (including pledges), and other income, so what if at this moment in time they spent more in the last 12 months than they earned.

  • A misleading report.

    A better one is at Minnesota Public Radio which says:

    “Minnesota Orchestra president Michelle Miller Burns said last year the $50 million campaign brought some big surprises. First, donors came through with $60 million.

    That’s good news, but Burns says the surprise was how donors designated their gifts.

    “We anticipated that we would receive $40 million in operating support from that campaign and $10 million in endowment support,” she said. “What we actually received was $20 million in operating support, so half of what we had anticipated. And then $40 million in endowment support, four times what we had anticipated for endowment.

    …Miller said it was a surprise how the money came in, but it will have no impact on how the orchestra operates. …

    The orchestra’s annual report points out that a third of the total audience last year comprised of people attending their first concert at Orchestra Hall.

    “There’s probably ways we could have managed the last fiscal year to get a balanced budget,” he said. “It probably wouldn’t have been the best for the organization’s long-term financial health.”

    So, the “deficit” is just that more revenue was earmarked for endowment than operating support. No problem. It’s a strong institution. Read more here: https://www.mprnews.org/story/2019/12/03/minnesota-orchestra-says-its-financially-strong-despite-88-million-deficit

    This is an excellent orchestra and has a great conductor. No problemo. The orchestra will tour South Korea and Vietnam next year.

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