Pandemic leads to another record-setting deficit for Minnesota Orchestra

For the second year in a row, the Minnesota Orchestra posted a record-breaking deficit. The operating loss of $11.7 million reported Thursday is the largest in its history, topping last year's $8.8 million.

COVID-19 is one obvious cause. Financial results for fiscal year 2020, which ended Aug. 31, capture the first months of the pandemic, which shuttered Orchestra Hall along with theaters and concert halls across the country.

The orchestra had to cancel 52 ticketed concerts and 19 rental events, leading to a $2.7 million drop in revenue from tickets, rentals and concessions compared with the year before. The pandemic also scotched the nonprofit's biggest fundraiser, one factor in a drop in contributed revenue.

"We had to cancel about a third of our concerts in fiscal 2020, along with our annual fundraising event, the Symphony Ball," President and CEO Michelle Miller Burns said in an interview. "Those two things combined had a very significant impact."

Some of Minnesota's other major arts institutions have also reported losses. The Guthrie Theater tallied a record $2.72 million operating deficit for the fiscal year ending in August. The Minneapolis Institute of Art posted its first loss in 27 years.

But Walker Art Center and the St. Paul Chamber Orchestra balanced their budgets.

The Minnesota Orchestra spent less in fiscal 2020 — $34.2 million, or about $1 million less than the year before. But payroll costs were up slightly because the year began with a contract-triggered wage increase for union musicians.

Unlike other performing arts institutions such as the Guthrie, which cut 79% of its staff, the Minnesota Orchestra has avoided layoffs, though about 200 part-timers have been on hiatus since in-person concerts were canceled. An orchestra is, by definition, a labor-intensive endeavor, built over time; the orchestra counts 86 full-time musicians.

The orchestra used $4.5 million in funding from the Paycheck Protection Program (PPP) to keep paying people, Burns said. (If the PPP loan is forgiven, it will show up as income on a future balance sheet.) When that money ran out, musicians and staff members took pay cuts.

Next year's results will reflect further squeezes to compensation: In September, after negotiations that both sides described in positive terms, the musicians agreed to a two-year contract extension and 25% pay cut. Music Director Osmo Vänskä, too, is taking a 35% salary cut for fiscal 2021.

The hope is that a combination of cost-cutting and new revenues will bring the budget back into balance once in-person concerts can resume. In the meantime, the orchestra has kept playing, first with outdoor chamber concerts and then a series of live broadcasts.

Even before the pandemic, the orchestra was anticipating a deficit for 2020. A year ago, the orchestra's leaders were planning to beef up the budget with new sources of revenue and contributions, including a partnership with Minnesota Public Radio: Two violinists were set to host a Danube cruise.

But that trip and other moneymaking efforts were delayed as the nonprofit grappled with a crisis that has tested symphony orchestras.

"We just haven't been able to move in the direction that we had intended," Burns said. "And those levers we had at our disposal disappeared."

Orchestras have grappled with the pandemic in distinct ways, including steep pay cuts. Some started streaming performances. Others went quiet.

A few have reported balanced budgets, others deficits: In November, the Chicago Symphony Orchestra announced a $4.4 million operating deficit on a budget roughly twice the size of the Minnesota Orchestra's.

But across the country, with audiences erased or limited, "everyone's earned revenue is completely, massively hit," said Simon Woods, president and CEO of the League of American Orchestras, a trade organization. Support from the federal government — first through PPP and soon through the Save Our Stages Act, sponsored by Sen. Amy Klobuchar, D-Minn. — will be "absolutely critical" in helping orchestras survive those losses, he said, but more is needed.

The Minnesota Orchestra's net assets, touted by the board last year as evidence of fiscal strength, were down slightly — from $176.5 million in fiscal 2019 to $166.5 million in 2020. Contributed revenue, which includes corporate giving and individual gifts, fell from $14.5 million in 2019 to $14 million in 2020.

Burns attributed that partly to a decline in corporate giving, a trend across the arts.

But people are giving more. Gifts from individuals to the nonprofit's annual fund reached $5 million in 2020, up from $4.6 million the year before.

An increase in individual donations is a "pretty consistent theme" nationally, said Woods. "It's really been inspiring ... to see how philanthropy has held steady."

It helps that the Minnesota Orchestra has continued making music, he said. "Why did their donations stay strong? Well, the music has gone on playing."

While slimming expenses, the orchestra has focused on generating revenue, "particularly with regard to philanthropic contributions," said Margaret Bracken, chair of its board of directors.

Bracken said the board agrees with the path that Burns, Vänskä and their team have taken to keep the orchestra in the public ear. "The months during the lockout were devastating to the organization," she said, referring to the 15-month contract stalemate in 2012-14, "and during this crisis we wanted to do everything possible to keep the orchestra playing."

When asked whether, after two deficits, the board has confidence in the Minnesota Orchestra's leadership, Bracken said Burns has faced "one of the greatest challenges in its history. And she's doing it with a visionary and collaborative approach that values the contributions of musicians, staff, and our community. ... We could not be in better hands."

Burns, who started as CEO in September 2018, sees opportunities in the performances the orchestra has managed to put on. In August, musicians hosted 16 free chamber concerts on Peavey Plaza for 2,300 people. Ensembles have grown bigger and repertoire more ambitious during Friday-night performances livestreamed online and broadcast on Classical MPR and Twin Cities Public Television.

Those concerts have attracted new audiences and introduced new ways of doing things.

"We haven't been silenced by the pandemic," Burns said. "The fact that we haven't pulled up stakes and we have continued to perform and engage is really special. Not every organization has been in the position to do that, or has made the choice to do that.

"This organization has."

Jenna Ross • 612-673-7168 • @ByJenna