Presentation | November 2006

From Blues to Benton to Bluegrass: the Economic Impact of the Arts in the South

Sujit CanagaRetna

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Testimony Before a Hearing of the Georgia Senate Grassroots Arts Program Study Committee


It is a great honor to be here and my thanks to Chairman Hill for extending this invitation to me and to The Council of State Governments. Established in 1933, The Council works primarily with state legislatures in tracking trends, carrying out research and analysis and promoting state interests through continuing education. While I work for The Council's Southern Office, the Southern Legislative Conference (SLC) here in Atlanta, the Council is headquartered in Lexington, Kentucky and also has regional offices in New York, California, Illinois and Washington, D.C.

The economic impact of the arts is an issue that the SLC has been studying for well over two decades now. The SLC's ongoing review of this topic and publications is a reflection of the recognition of its importance to SLC economies and public officials in the South. As demonstrated in these reports, a relatively miniscule investment in the arts results in substantially larger financial returns alongside many other benefits.

My presentation this afternoon will summarize a report I completed earlier this year entitled From Blues to Benton to Bluegrass: the Economic Impact of the Arts in the South, the latest SLC report focusing on the arts in 16 Southern states. Broadly, my presentation comprises five interconnected parts. Part I highlights the key benefits of the arts and Part II reviews legislative appropriations to the arts between fiscal years 2001 and 2005, the report's review period. Part III documents national and SLC state economic impact trends while Part IV focuses on some of the alternate funding mechanisms pursued by states during the recent fiscal downturn. Finally, Part V describes state efforts to harness cultural and heritage tourism as a means to generate positive economic flows.

Part I

The multi-layered contributions of the arts and arts-related activities rank among the lesser known and unheralded aspects of contemporary American society. Beyond the intrinsic benefits of the arts, i.e. benefits that serve to enrich an individual's life experiences, standard of living and learning, advocates recently have reiterated the crucial role played by the arts in generating a significant level of economic growth. In fact, highlighting the substantial private and public economic benefits from a thriving arts environment continues to be a theme often stressed by arts advocates across the country.

The arts have also proven to be a very effective tool in reviving moribund and blighted neighborhoods and there are numerous examples of this from around the South and the country. Here in the South, the progress of the Lower Town section of Paducah, Kentucky, remains notable and the town's Artist Relocation Program has been identified as the major impetus for that part of Paducah being transformed into a vibrant, viable and productive neighborhood. The Castleberry Hill area here in Atlanta; the blues revitalizing towns like Clarksdale, Mississippi; the arts rejuvenating the Grand Center District in St. Louis are additional examples of this trend from around the South.

Another benefit relates to arts education and Arkansas Governor Mike Huckabee is a vocal advocate for the arts and signed legislation in 2006 requiring 40 minutes of music and art in grades 1 through 6 every week. Governor Huckabee strongly agreed with numerous studies that a solid arts curriculum raised standardized test scores and promoted fundamental creative and problem-solving skills among students. Similarly, in Tennessee, on the arts education front, the state has leveraged matching federal dollars for it's Value Plus Schools program. This is a five-year arts education reform effort that emphasizes learning through the arts by integrating performing, visual, literary, and traditional art forms into non-arts subjects such as math, science, and languages.

Part II

During the first half of this decade, the American economy faced a series of unprecedented challenges that rippled across all levels of society. The arts community was not impervious to these challenges, and artists and arts advocates in every part of the country faced their own set of obstacles in responding to these economic shocks. One of the consequences of these fiscal challenges was the slashing of legislative appropriations to state art agencies. Private sector funding for the arts also tailed off as the negative effects of the fiscal downturn swept across the economy.

Legislative appropriations to the arts remain the primary source of funding for state arts agencies and Table 1 indicates the precipitous decline in legislative appropriations to SLC state arts agencies between fiscal year 2001 and 2005. By the end of fiscal year 2005, the state fiscal outlook improved in practically every state in the country, and most SLC state arts agencies were seeing either an increase in their appropriation levels or no change from the prior fiscal year.

Yet, appropriation levels remain far from the amounts disbursed as recently as fiscal year 2001, when states were flush with revenues and appropriators could afford to allocate impressive amounts to their arts agencies. As a quick comparison, in fiscal year 2001, legislative appropriations to the SLC states totaled a striking $117.6 million; by fiscal year 2005, this total had declined to $71.3 million, a 39 percent reduction from the lofty levels reached just four years previously. In the interim, cumulative SLC state legislative appropriations kept declining to $106.7 million in fiscal year 2002, $95.3 million in fiscal year 2003, and the lowest level, a scant $65 million, in fiscal year 2004. In fact, 11 of the 13 SLC states that saw appropriation cutbacks actually experienced double-digit reductions during this period. The state that saw the steepest drop was Missouri (-96 percent), while Arkansas ' 11 percent growth was the highest during this time period. The other two states that saw increases were Louisiana (7 percent) and West Virginia (2 percent).

Per capita legislative appropriations to state arts agencies between fiscal years 2001 and 2005 also declined steeply from $1.17 in 2001, to $1.06 in 2002, to $0.93 in 2003, to $0.77 in 2004, and to $0.76 in 2005. As evident in Table 2, despite the improvements in the state fiscal position and a dollar increase in appropriations in fiscal year 2005, per capita appropriations continue to languish. In three of the five review years, Texas was the SLC state with the lowest per capita appropriation; Missouri was the lowest in the two most recent fiscal years with Texas ranking second lowest. Interestingly, Missouri had the third highest SLC per capita appropriation level in fiscal year 2001, before gradually ceding that ranking in the ensuing four fiscal years.

Part III

Notwithstanding these complex financial challenges, the economic impact of the arts, both nationally and on a state-by-state basis, continues to notch remarkable numbers. According to the latest Americans for the Arts report, touted as the most comprehensive economic impact study of the non-profit arts industry ever conducted, America 's non-profit arts industry generated $134 billion in economic activity, including $24.4 billion in federal, state, and local tax revenues. This report indicated that the overall economic impact resulted in 4.9 million full-time equivalent jobs; $89.4 billion in household income; $6.6 billion in local government tax revenues; $7.3 billion in state government tax revenues; and $10.5 billion in federal income tax revenues.

In March 2005, Americans for the Arts released another important report that gauged the number of businesses and employees in the nation's creative industries, i.e., establishments, both for-profit and nonprofit, involved in the creation and distribution of the arts (museums and collections; performing arts; visual arts and photography; film, radio and television; design and publishing; and, arts schools and services). According to this report, there were more than 578,000 total arts businesses with over 2.9 million employees. Table 3 provides this breakdown for the 16 SLC states. According to the report, the SLC state with the largest number of businesses and employees in the arts was Texas, with Florida coming in second. Nationally, the study noted that arts-centric operations represented 4.4 percent of all businesses and 2.2 percent of all jobs in the United States .

The economic impact of the arts continued to be sizable among the SLC states too, and a sampling of some of the economic data described in greater detail in my report illustrates this feature. For instance, a December 2003 study noted that the arts industry stimulated $270.2 million in business and consumer spending in Oklahoma; a January 2004 study documented the $19.5 billion economic impact generated by the cultural arts, historic preservation and library services industries in Florida; and a November 2004 study described the $4.7 billion in annual income produced by Missouri's creative industries.

Then, according to a study released in 2004 by the Maryland State Arts Council, the non-profit Maryland arts industry (arts organizations and arts audience activities) contributed a remarkable $911 million to the state's economy during the year. In North Carolina, a June 2004 study estimated that the total economic impact of the nonprofit arts industry amounted to $723 million alongside the fact that just below two percent of all jobs in the state were in the creative industry. Finally, in Georgia, in anticipation of moving to its new location and as an opportunity to drum up support for this $300 million project, the Atlanta Symphony Center released an economic impact analysis study in September 2005 that forecasted an impressive $2 billion economic impact for the state during the construction phase and through the first 10 years of operation. Beyond these sizable economic impacts, there is a growing sense that an animated and vibrant arts and cultural scene remains an essential element for a city, state, region and nation to be considered a world class venue. This economic impact is based on events ranging from major blockbuster art exhibitions to cultural heritage tourism to music festivals to the multitude of arts events at large and small locations across the region.

Part IV

As noted earlier, during the recent economic downturn, state arts agencies were forced to nimbly react to reduced appropriations by generating alternate revenue sources to sustain the arts programs in their states. Compounding the fiscal problems of these arts agencies was the fact that individual, corporate and foundation donations were dipping as well. The following describes some of these measures:

• States have sought to issue bonds to raise funds for arts and cultural projects; in recent years, borrowing has become an increasingly popular strategy to fund a range of state government programs. While bonds are used mostly to fund large arts projects on the front end like buildings, these efforts are sometimes constrained by constitutional and statutory limits on debt. During Virginia 's 2005 legislative session there was bi-partisan support for a $86 million bond issue to fund various arts projects.

• Another popular strategy adopted by a number of jurisdictions across the country involves earmarking a certain proportion of revenue flowing into the coffers of a government entity specifically for the arts, i.e., local option taxes earmarked for the arts. Some of the popular tax categories that often are earmarked are retail sales taxes, occupancy taxes on hotels and motels, taxes on rental cars and property taxes. For instance, Mecklenburg County Commissioners overseeing the Charlotte, North Carolina area recently approved an increase in their car rental tax, the final piece of a plan to generate nearly $160 million for arts projects. Revenue from the increase in the car rental tax (from 11 percent to 16 percent) is one of several revenue sources that will eventually change the arts landscape of Charlotte .

• A number of jurisdictions across the country also have enacted 'percent-for-art-legislation' whereby a certain percentage of specified publicly funded capital improvement programs are allocated toward arts-related projects. Several Western states (HI, WA, OR and AK) passed such legislation back in the early 1970s and 27 states currently have legislation guiding the inclusion of art work in new public construction.

• Public officials also have entered into innovative arrangements with corporate developers involved in multimillion dollar projects to enhance the image and economic potential of a city or downtown area. Under these arrangements, the arts community seeks allocations toward public art works by pitching it as an integral part of this economic expansion effort. In this regard, states also raise funds for the arts by assessing a portion of the annual filing fees paid by corporations. Florida and Arizona are two such examples here.

• States also created endowment funds to finance the arts, i.e., enacting legislation to set aside a significant pool of money to either supplement or replace state general fund art appropriations. Even though these endowments have not been fully funded as originally planned, in the South, Missouri and Texas have established such endowments. The Missouri program, established in 1993, was designed to generate $100 million over 10 years, though state disbursements never approached the required $10 million per year. In fact, the highest, total amount reached by the endowment was $28 million and during the fiscal downturn, the state arts council had to rely on capital funds from the endowment to operate its programs.

• License plate programs are another mechanism with California, Tennessee and Texas using specialty license plates to generate funds for the arts. Tennessee 's program has been particularly successful in recent years and in fiscal year 2006, the Tennessee General Assembly appropriation for the Tennessee Arts Commission included approximately $4 million in revenue from the state license plate program. Texas ' program has also been fairly successful and the Texas Commission on the Arts has generated nearly $4 million from the sale of these arts license plates over the last ten years.

• In Ohio 's Cuyahoga County, the area around Cleveland, voters approved – by a comfortable margin – an increase in the cigarette tax two weeks ago and cleared the way for dedicated public money to go to arts and culture for the first time. The measure will raise the county cigarette tax by 1.5 cents per cigarette starting in January 2007, generating about $20 million per year for 10 years for arts and cultural organizations and individual artists.

• During the fiscal downturn, universities surfaced as an unusual funding source for many arts agencies too. In fact, these institutes of higher learning have resuscitated many arts agencies during the recent downturn by providing significant sums of money, particularly by commissioning and sponsoring new arts projects and works.

• States – North Carolina, for instance with its Golden LEAF Foundation – have also tapped a portion of their tobacco settlement monies to fund the arts. The Massachusetts Cultural Council receives a significant portion of its funding from its state lottery.

Part V

States have also begun promoting cultural tourism as a means to ignite interest in the arts and foster positive economic trends. Several Southern states are tapping into the economic potential of the cultural and heritage treasures within their borders and are actively seeking to market these venues as a means to attract tourists and tourist dollars. SLC policymakers are quickly realizing that cultural and heritage tourists not only spend more money than regular tourists, they also tour for a longer period of time.

In Louisiana, even before Hurricane Katrina's devastating impact, Lieutenant Governor Mitch Landrieu was focusing intensely on tapping his state's "multi-faceted, deeply-rooted, authentic and unique culture" as a source of "economic energy." In the aftermath of Katrina, state officials led by the lieutenant governor are even more intent on making Louisiana 's cultural economy the engine of its economic and social rebirth.

At the 2005 summer meeting of the Southern Governors' Association (SGA), Georgia Governor Sonny Perdue announced that the primary initiative of his tenure as chair of the SGA would involve promoting heritage tourism as a means to spur economic growth in Georgia and the South. With his Heritage Tourism Initiative, Governor Perdue chose to focus on and expand the link between tourism and economic development even beyond the usual mix of tourist attractions scattered across Georgia and other parts of the South. The initiative now includes such venues as agri-tourism, music history, film legacy, locations crucial to the civil rights movement, plantations, Spanish forts, Civil War battlefields and a host of other cultural and historic sites.


In closing, while the arts continue to struggle for recognition as an important economic and revenue generator in most states' budgets, the growing strength of their collective contributions – as proven admirably during the most recent downturn, when they continued to create positive economic flows despite depleted budgets – may bring a time when policymakers think twice about substantially cutting funding during the next economic crunch. In fact, the ability of the arts and cultural sectors to contribute significantly to the economic vitality of local and state economies, despite the reductions in legislative appropriations, begs the question that the continuation of funding during an economic downturn could potentially ensure even greater levels of economic flows from these sectors.

Thank you for your attention.