Minnesota Orchestra posts a smaller budget deficit despite the pandemic

For the third year in a row, the Minnesota Orchestra has posted a hefty deficit. The nonprofit reported Thursday an operating loss of $6.3 million for fiscal year 2021 — about $5 million less than the previous year's record-breaking loss.

"Although a $6.3 million deficit is not something we would think of as a positive data point ... in light of what this past year held, I'm very pleased with the substantial progress we've made," President and CEO Michelle Miller Burns said in an interview.

The orchestra performed just 13 ticketed concerts to limited in-person audiences during the year that ended Aug. 31, a time when arts organizations across the country were battered by a pandemic that continues to upset ticket sales and upend performances.

Total operating revenue dropped from $6.8 million in fiscal 2020 to $662,000 in 2021. That so-called "earned" revenue made up just 3% of the orchestra's income, compared with 36% the year before.

But the orchestra kept playing, creating its free "This Is Minnesota Orchestra" broadcasts online, on the radio and on Twin Cities Public Television. Those 19 performances averaged 42,000 views, the nonprofit reported — or about 21 times Orchestra Hall's seating capacity.

The orchestra received $3.7 million during fiscal 2021 from the Shuttered Venues Operators Grant program, a spokesperson said, with another $3.7 million for the current fiscal year.

While other arts organizations slashed their staff to grapple with pandemic losses, the Minnesota Orchestra eschewed layoffs. But this fiscal year reflects cuts to compensation. Total expenses were $26.9 million — down $7.3 million, or 21%, from the year before.

The musicians agreed to a 25% compensation cut that was later reversed after the whole orchestra returned to performing for full audiences. Staff and administrators, too, took temporary pay cuts.

"We all took a haircut together," said Sam Bergman, violist and chair of the orchestra members' committee. He said he and other musicians are proud that the orchestra refused to "turtle."

"Other arts organizations in this country seemed to view the pandemic as an excuse to ratchet back on how much they do," Bergman said. "This orchestra did the opposite."

Musicians know "there's always a chance of red ink in the arts," Bergman said. What they're looking at is "when you're not balancing the budget, are the people in management panicking? Or do they have a plan?" This team has a plan, he said, and they've been transparent about it.

Across the country, ticket sales for orchestras "are still lagging significantly behind pre-pandemic levels," according to a November report conducted by the consulting firm TRG Arts in partnership with the League of American Orchestras. From November 2020 to October 2021, ticket revenue fell 67%.

But the report also found that donations over that time were up 23% from the same period before the pandemic. Donations helped the St. Paul Chamber Orchestra balance its 2021 budget despite zero ticket sales.

The Minnesota Orchestra saw a small bump in donations. Gifts from individuals to the nonprofit's annual fund reached $5.4 million, up 7% from the year before. Smaller gifts — those under $2,500 — grew by 60%.

The orchestra's video broadcasts also inspired donations, Burns said. More than 1,300 audience members gave an average of $140. "Donors have been really responsive to what is understood as a real need during a time of such disruption," she said.

While posting deficits, the orchestra has emphasized the growth of its financial assets. Minus liabilities, its net assets reached $180 million in fiscal 2021, thanks partly to strong returns on the investments that make up its endowment.

"We have had a few years of these operating losses," and orchestra leaders have planned accordingly, Burns said. They "anticipate being able to move out of that cycle in the years ahead," though it's "too early to say" whether the orchestra might report a balanced budget a year from now because of the uncertainties of the COVID-19 pandemic.

Experts see challenges for orchestras ahead.

"We're all hoping that fiscal year 2021 was the low point," said Simon Woods, CEO of the League of American Orchestras, a trade organization. But he said that after a strong summer and fall, "the brakes got slammed on" as the omicron variant took hold.

Woods likened the pandemic to a tide, strengthening and waning. "The question is, how long does that go on for?" he said.

Last year, performing arts organizations were buoyed by federal funding, which the League is fighting to extend. Government funding "is just not there to the same degree this year, and it's going to be there to an even less degree in 2023," Woods said.

"Although I think the conditions with audiences will be much better, there's definitely the sense that orchestras will be back fending for themselves."

While other arts organizations have scotched performances, the Minnesota Orchestra has resumed a regular, in-person schedule since September, including a recent three-week Sibelius festival that honored the expertise of outgoing music director Osmo Vänskä.

Subscribers were "quick to return" to the concert hall, Burns said. But single-ticket sales have been softer. This weekend's rescheduled performances of "Harry Potter and the Order of the Phoenix" are sold out, she noted.

Meanwhile, the pandemic has slowed the search for Vänskä's replacement. If the orchestra named someone tomorrow, "I would not anticipate that person on the podium with any frequency in the 2022 season," Burns said, given how far in advance conductors' schedules are set. But "the impact of that person would start to be felt very quickly."