A. AUTHORITY AND SCOPE

At the 1996 Regular Session, the General Assembly passed House Joint Resolution No. 174 (Appendix A), that established the Commission Studying Creative Solutions for Funding for the Arts in the Commonwealth. The study resolution directed the Commission, comprised of legislative and citizen members, to consider (i) current funding needs for the visual and performing arts in Virginia; (ii) federal, state, local, and private sources for arts funding; (iii) the role of the Virginia Commission for the Arts and local arts organizations in supporting and promoting the arts; (iv) arts funding initiatives in other states; and (v) such other issues as it deemed appropriate.

B. MEMBERS

Serving on the Commission were Delegates Marian Van Landingham of Alexandria (chair), W. Tayloe Murphy, Jr. of Westmoreland, William Roscoe Reynolds of Henry, and Anne G. Rhodes of Richmond City; Senators Richard J. Holland of Isle of Wight (vice chair), Joseph B. Benedetti of Richmond City, and Benjamin J. Lambert III of Richmond City; and citizen members Russell Allen of Norfolk; Donna F. Bergheim of Alexandria; and Anthony Sgro of Richmond City.

C. STUDY APPROACH

In determining its objectives for the study, the Commission first reviewed the prior work of two Virginia studies on the arts: the 1992 Governor's Task Force on the Promotion of the Arts and the Joint Subcommittee Studying Educational Museums and the Appropriate Level of Public Support to Be Provided to Such Institutions (1993-1996). Both of these studies examined in depth the need for additional state funding to support the arts and cultural activities in Virginia. Upon reviewing the testimony based on these two studies, the Commission concluded that the need for additional funding had been well established and that the current Commission should direct its efforts to finding new and innovative funding sources.

The Commission initially examined and evaluated other states' funding initiatives designed either to supplement or replace direct state appropriations for the arts. Most of the information collected on these initiatives was obtained from the 1994 comprehensive report of the National Conference of State Legislatures on Creative Solutions for Funding the Arts and follow-up interviews with fiscal and policy analysts from several state art agencies. Representatives from Arizona, Delaware, Florida, Missouri, Texas, and Utah were asked to assess their funding initiatives and evaluate the level of support for these programs from arts organizations, local governments and businesses.

After determining which revenue-generating programs had been well-received in other states, the Commission examined the feasibility and desirability of implementing these programs in Virginia. The Commission also examined ways other states have supported the arts indirectly through tax incentives to encourage individuals and corporate sponsors to contribute to the arts.

In determining the fiscal impact of implementing the various funding programs in Virginia, the Commission was assisted by and wishes to thank staff members of the Department of Motor Vehicles, the Department of Planning and Budget, the State Corporation Commission, the State Lottery Department, the Department of Taxation, and the Virginia Commission for the Arts. From the information provided by these agencies, the Commission was able to assess the full fiscal impact of each funding program. This information also served as the basis for the deliberations of the Commission and the development of legislation which was circulated in November to all interested parties, including local arts organizations.

D. FINANCIAL SUPPORT FOR THE ARTS

1. Current Support

According to statistics compiled by the Virginia Commission for the Arts, state funding for the arts constitutes only six percent of the total support received by local arts organizations in Virginia. These organizations receive their primary support, comprising approximately 66 percent of their operating budgets, from earnings generated from ticket sales to the organization's sponsored events. However, state funding is still seen as essential because of its domino effect in stimulating contributions from local governments, corporations, and individuals that add another 28 percent to the pool of funds.

Traditionally, the state has supported the performing and visual arts through general appropriations to the Virginia Commission for the Arts and the Virginia Museum of Arts and through grants to nonstate agency educational and cultural entities. An undetermined amount of additional funding is also available to Virginia's public schools and institutions of higher learning to sponsor art activities in the classroom. However, these funds are part of the general appropriations to these entities and are not separately tracked at the state level. For Fiscal Year 1997, funding specifically designated for the arts in the Appropriation Act (Chapter 912 of the 1996 Acts of the General Assembly) was compiled and reviewed by the Commission. (See Table 1 at page 11.)

According to the 1994 statistics compiled by the National Assembly of State Arts Agencies, Virginia ranks at the bottom for its state appropriations and National Endowment for the Arts grants to its art agency (the Virginia Commission for the Arts). (See Table 2 at page 12.) In comparison, all of Virginia's neighboring states rank in the top half of the survey. Defenders of Virginia's present level of support for the arts argue that the ranking does not take into account all federal, state, and private support for the arts, nor does it consider other factors, such as the state's demographic characteristics and other pressing fiscal priorities. However, the Commission stated that increasing support of the Virginia Commission for the Arts should be a top priority regardless of Virginia's ranking because of the many worthy and successful programs initiated by the Commission for the Arts.

Initial efforts to raise additional revenue for the Virginia Commission for the Arts began in 1996 when the General Assembly authorized a special license plate for the arts and designated a certain portion of the proceeds to support the Commission. Under this program the Department of Motor Vehicles transfers to the Virginia Commission for the Arts $15 of the $25 fee charged for every special arts license plate sold in excess of 1,000 registrations. These proceeds will be used by the Commission to increase its grant awards to artists, arts and other not-far-profit organizations, educational institutions, educators and local governments and to provide technical assistance in arts management.

2. Virginia's Goal

In the mid-1980s, Virginia's leaders in government, business, and the arts embraced a public funding goal of one dollar per capita to support the activities of the Virginia Commission for the Arts. By the 1989-1990 fiscal year, state and federal funding of the arts Commission had exceeded $5.5 million and Virginia was within a few hundred thousand dollars of reaching the goal of one dollar per capita. However, the recession of 1989 coupled with a change in the spending priorities of Virginia's new administration resulted in substantial and disproportionate cuts to the Commission for the Arts and plummeted Virginia's support to 30 cents per capita. Even though some of the funding for the Commission has been restored over the past several years through modest increases proposed by the General Assembly, Virginia still ranks third from the bottom of all states in its support of the arts.

In 1992, the Governor's Task Force on Promotion of the Arts heard from 78 speakers about the value of state support for the arts and the impact of state spending cuts on not-for-profit arts organizations and artists. The task force found an integral link between the expansive growth in the arts in every area of the state and the programs offered by the Commission for the Arts, which the task force found had a multiplier effect by encouraging additional funding from individuals, businesses, and local governments. The task force recommended that the General Assembly establish a financial goal of one dollar per capita of the Commonwealth. Also, the task force recommended that the Virginia Commission for the Arts continue and increase its efforts to support the arts throughout the state, particularly by bringing the arts to underserved areas and into the arts education curriculum in public schools.

In 1995, the Joint Subcommittee Studying Educational Museums and the Appropriate Level of Public Support to be Provided Such Institutions concluded its three-year study. [See House Document 70 (1996)]. This study was directed to conduct a comprehensive study of educational museums, develop eligibility criteria for receipt of public funds as well as guidelines for state appropriations, and to examine ways in which the Commonwealth might encourage and promote the arts.

In its report, the joint subcommittee cited the many valuable contributions of educational and cultural museums to the Commonwealth. Like its predecessor, this subcommittee also recommended that state funding for the Virginia Commission for the Arts be increased to an annual general fund appropriation of one dollar per capita. The joint subcommittee found that although private donations comprise the majority of arts funding, government funding--from the federal, state, and local levels--is essential to the survival of museums and other cultural institutions in Virginia. Further, a stable funding source for these institutions is essential to the fulfillment of their missions.

3. Other States

State-supported funding for the arts has reached a crossroads. With an increasing share of the states' budgets allocated for education, Medicaid, and criminal justice, states have had to find other sources of revenue to support the arts. Federal spending cuts and the possible elimination of the National Endowment for the Arts have forced states to look internally for these funding solutions. (See Table 3 at page 13.) Through creative thinking, several states have found steady sources of funding for the arts from the following:

Endowment Funds -- are the most commonly used alternative funding mechanism created either to supplement or replace state general fund art appropriations. The principal of the endowment fund is invested in long-term securities, and the income from the interest is used to support the arts. Sources for endowment funds and how those funds are distributed vary among the states. The most recent endowment fund was created in Arizona in 1996 and is supported from a portion of entertainment taxes collected. The legislation designates up to $2 million over the next 10 years.

Bond Issues -- raise money to fund projects that require large expenditures, such as infrastructure and capital projects. Many states' ability to use bond instruments is restricted by legal limitations regarding the amount of debt they can assume.

License Plate Programs -- enable drivers to purchase artistic, specially designed license plate for an extra fee, part or all of which goes to support the arts. In 1996, Virginia established this program.

Income Tax Checkoff -- gives taxpayers the option, by checking a box on their tax forms, to contribute a portion of their tax refunds to a particular cause. Currently, Rhode Island and Alabama have arts checkoff boxes on their tax forms.

Allocation of Lottery Funds -- permits a portion of the funds generated from lottery sales to be used to promote the arts. Lottery revenue in Arizona is distributed by a formula to localities, which have the authority to allocate 10 percent for cultural endeavors. Opportunity to tap lottery proceeds is limited in many states because of laws requiring lottery proceeds to be used for specific purposes such as education.

Corporate Filing Fee Programs -- allow a portion of the fees assessed against corporations conducting business in the state to be dedicated to the arts.

Creation of Special Tax Districts -- are designated by a number of states in metropolitan areas to support cultural institutions. One of the most successful special tax districts described in the NCSL report is Colorado's Scientific and Cultural District, encompassing six counties in the Denver metropolitan area. This special district is supported by an additional sales tax of .1 percent. To distribute the tax yield, three tiers based on the size of the cultural facilitates were created. The percent share to each tier was developed after a great deal of discussion and compromise. A volunteer cultural council is appointed in each county to receive requests and distribute funds appropriated to the nine-member district board.

Local Option Taxes Earmarked for the Arts -- typically include taxes on lodging, food and beverage, rental cars, and admissions to attractions. In Broward County, Florida, the county levies a 0.5 sales tax on admissions to movies, sporting events, theaters, concerts and cultural events. The tax is also collected on music and electronics store sales including tapes, compact disks and computer wares and the rental of tangible personal property that includes video rentals.

Percent for Art Programs -- set aside a given percentage (usually one percent) of the cost of constructing or renovating a public building for artwork. The laws differ concerning whether the amount set aside is mandatory or voluntary and whether a maximum threshold on the cost of the project is required. (*1)
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(*1) Mary Rafool and Laura Loyacono, Creative Solutions for Funding the Arts (National Conference of State Legislatures), October 1995, pp. vi and vii.