As we wade into the financial challenges of the arts in academia, it would be helpful to have a basic understanding of how institutional finance operates. The basics of running a business are similar to running an academic institution. It is all about revenues and expenses and one needs to exceed the other in order to stay solvent. Customers, and at some point a further discussion is needed on who are the customers, must have a demand for the product and be willing to pay for it. Demand is created when the product is beneficial to the customer and the customer believes the value of the product is greater than the expense. Such is true of basic economic practice.
When we begin to look at institutional finance, we must consider additional factors such as endowment yields, inventory, capital, depreciation, insurance, grants, funding sources, budgets, salaries, property needs, and taxes when applicable. Funding sources can include but are not limited to student tuition, fees, residence halls, gifts, and funds that flow through institutions in various forms such as financial aid and governmental grants. The sheer complexity of accounts ultimately demonstrates a complex web of expenses that are managed through a typical institutional governance structure that involves a board of trustees, a president, vice-presidents, deans, chairs, and other responsible parties within the organization.
Academic institutions tend to operate broadly, being satisfied when the end of the year ends with more money left than spent. Because most academic institutions are considered "non-profit," it is essential to keep money flowing by demonstrating a constant need for growth and improvement. Accreditation also plays an essential role in the process and ensures students are receiving quality instruction and an overall positive experience that involves advising, protection, health, resources, and a myriad of student requirements. But whether a school is large, small, for profit, non-profit, private, or state, in the end the school must have students to keep its doors open. Because personnel costs are generally 50% or more of the expenses of an institution, academia depends on a series of quality teachers within a variety of disciplines that encompass the institution. While it is hoped that most disciplines support themselves through student numbers, there are some areas in academia where the expenses are greater than the revenues whether or not enrollment numbers are high. Such is true in the fine arts.
It is in discipline specific areas where academia and traditional business part ways. A low producing area or product would either receive more attention to bring it to the level of success or be evaluated for possible removal from the process. If the expenses for the area are greater than the revenues it contributes to the business, then changes would be made.The product itself would be studied for ways to generate greater revenues and/or reduce expenses. In the business realm, earnings and financial ratios are carefully studied with comprehensive scrutiny over every area of the business. In academia, however, we tend to look at the whole, knowing that the sum of the parts contributes to the entire institution, ignoring, at least to some extent, the differences in expenses of the parts.
There are many disciplines in academia that do not require a substantial outlay of funds to operate at a high level. Given that individual personnel costs, within certain discipline parameters, do not change from discipline to discipline, many areas do not require extensive inventory, budgets, capital improvements, nor advanced facilities to operate. Taking advanced technological needs out of the picture, there are disciplines that need classrooms with desks, basic projection, a computer, wi-fi connection, a temperature controlled environment, and a teacher for each class. Variables in size, scope, and mission aside, there are many inexpensive academic disciplines operating within most institutions of higher learning. Thankfully, these are the areas that allow for the more expensive disciplines to remain a part of the whole. Which brings us onto the fragile ice called the arts. This is not to say the arts are the only expensive discipline on campus, but they are certainly near or at the top of the pile, or to say it another way, they are skating on thin ice with the potential for serious cracks.
While at some level we know that the arts contribute positively to the cultural experience of society and the immediate community, and that the arts are an essential part of the academic experience, we are also aware of the expenses that an arts education requires. There are five additional requirements for running an arts program that most other disciplines do not have: 1) Large inventory, 2) Scholarships, 3) Unique facility requirements, 4) Individualized instruction, and 5) Extensive contact hours. But before diving too far into these challenges, let us take an analytical look at some projections for the future as though looking at a stock for growth patterns.
According to Jim Cramer, there are three requirements for understanding whether an individual stock will grow: world economy, sector growth, and company health (Get Rich Carefully, Blue Rider Press, 2013). Using these ideas in arts analysis, we find a rapidly changing world, decline in classical art interest, and a generally healthy but self-serving company. When we factor in the five expensive requirements for running an arts program in higher education, we are skirting the edge of an untenable situation regardless of the size, scope, or mission of the institution. Continuing down the slope without dramatic changes in approach could result in closed programs, lost personnel, significant tension in administration, and, in some cases, failed institutions. The time to make changes is upon us. Those who can change may survive, but those who cannot will be added to the long list of archaic disciplines once taught in colleges and universities. We are in a cultural crises in the arts that will be driven by economic data more than emotion. Although not a hopeless situation, it is critical that we in the arts come to some conclusions that will save a valued discipline which is an essential part of both higher education and ultimately contributes to societal refinement.
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