My dad used to keep a goldfish pond in our back yard. Without some form of population control, goldfish ponds can become overstocked, a situtation in which the fish become sick, or even die, from lack of oxygen and competitive stress. 

The Kresge Foundation and Grantmakers in the Arts have recently spearheaded a funder-led initiative,“The National Capitalization Project,” aimed at addressing chronic undercapitalization of the arts sector. The report suggests we have an overstocked arts pond: “At a time of flattening demand there is increasing supply … in terms of both the sheer number of organizations and the supply of product. Neither the audiences nor the public or philanthropic sector can support this level of oversupply. Taken together, this situation is pushing organizations into hyper-competition.” 

But how, realistically, can we address this ‘fish too many’ problem when, according to the Urban Institute, from 2003-2008 (on average) a new non-profit arts organization was created at a rate of one every three hours? It’s reasonable to suggest, as Sarah Lutman has in her blog on this report, that foundations should ‘just say no’. Unfortunately, foundations throw so few pellets in the pond, relatively speaking, I’m not sure that this would have much effect? Besides, it’s the nature of the US system that when one funder closes a door, another often opens a window.

We appear to have neither the mechanism nor the will to effectively downsize the sector and thus we have created a rivalrous environment. And how have arts groups responded? Well, many have grown their institutions, making ever-increasing investments in marketing, development, high profile leaders, and buildings in order to be winners in the desperate fight for prestige, press, audiences, trustees, and donors.

Where did they find the money to grow, you ask? Well, when you look at the balance sheets of organizations it’s clear that many of them didn’t; but that did not stop them from growing their operations anyway. They now have what we call ‘structural deficits’ and many of them have incurred debt or raided their endowments to keep their organizations afloat. So we have not only a ‘fish too many’ problem, in our overstocked pond, we also have a ‘fish too big’ problem.  

Why are organizations permitted to incur deficits year upon year? Who is held accountable when an arts group builds a space it cannot afford or launches a major initiative it cannot sustain? Who looks out for whether other nonprofits in town suffer when one organization becomes overgrown? And who takes repsponsibility for making sure debts related to year-upon-year deficits and unsuccessful capital campaigns are paid off?

The sad reality is that the lack of ‘ownership’ in the nonprofit system too often seems to result in a lack of ‘accountability’. It’s too easy for funders to ‘phase out’ support on programs or organizations they encouraged into existence; trustees who voted to build a new space to cycle off the board when the bonds, loans, and increased operating expenses must be paid; leaders that have driven an organization into the ground to exit stage left leaving a successor to clean up the mess; and everyone to turn their backs on small and midsized organizations that are often the ones left starving in this fish feeding frenzy.

I applaud the funders that have worked on this capitalization initiative for considering ways that they might change their own practices in order to strengthen the financial health of individual arts institutions.Unfortunately, I think their efforts may have minimal impact if these ‘fish too big’ and ‘fish too many’ problems cannot be systemically addressed. BTW, in response to my funder jargon post, more than a few people suggested ‘capitalization’ as the funder word for 2011–no doubt because of this initiative.

Photo of fish feeding frenzy by Tito Wong, licensed from Shutterstock.com.