The Art Of Leverage: Co-mingling Public And Private Funding

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Feb 20, 2014
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Rupert Myer

Global Giving to the Arts
THE AUSTRALIAN INSTITUTE OF ART HISTORY
The University of Melbourne

Tuesday | 18 February

The art of leverage: co-mingling public and private funding – Rupert Myer

Acknowledgments

Fred Grimwade, Chair, and Kerry Gardner, Deputy Chair, Australian Institute of Art History and Professor Jaynie Anderson, AIAH Director and Herald Chair of Fine Arts

Fellow speakers, distinguished guests, ladies and gentlemen.

I begin by acknowledging that we meet on the land of the Kulin Nations and I pay my respects to elders past and present and all indigenous peoples attending this symposium.

Thank you for the opportunity to speak to you today.  It is always a necessary time to discuss financial support for the arts and today’s symposium with its theme of global giving allows us all to hear many different perspectives.

Introduction

I have been asked to give a sketch of the Australian arts philanthropy landscape to provide some context for today’s discussions and have titled my talk ‘The art of leverage: co-mingling public and private funding’.

I have done so because I often find that international visitors are surprised at how extensive government funding is for the arts and Australian audiences are often surprised at how extensive private sector support is for the arts.  So, I hope there is something for everybody in these remarks. The term ‘co-mingling’ is used to describe the bringing together of one or more government sources of funding with one or more sources of private sector funding.

Australia has a long tradition in the arts of co-mingling sources of public funding with sources of private funding. The legislative architecture that enshrines government support is pretty effective and efficient and is built on strong institutional and legislative foundations.  The Government incentives that promote private sector support for the arts are, in the main, generous and appropriate to our systems of taxation.  Whilst effective, they could be better known and more often utlilised.  A necessary pre-condition for the further development of a culture of private sector giving to the arts in Australia is the creation of a more sophisticated culture of asking.

Talking about policy settings and administrative arrangements for arts funding so early in the day might present a bit of a challenge.  So close your eyes and imagine, if you will, your favourite classical landscape painting in which every tree, rock, or animal is carefully placed to present a harmonious, balanced, and timeless mood.  If your mind strayed to expressing this bluntly, you might say that the positioning of every object is entirely contrived in order to achieve the desired effect.

So too with public policy.  Getting public policy right in the arts matters a lot.  The health of the arts sector and the related behaviour of governments, benefactors, corporations and private foundations are greatly influenced by those elements of public policy that shape and nurture the development of a nation’s cultural heart.  The combination of enlightened Government funding and policy, generous benefaction and sponsorship, inspiring institutions and great arts leadership, and the nurturing of creativity itself, are the shared responsibilities of a nation.  As a culturally ambitious nation, Australia has contrived its own architecture and traditions around how these elements are drawn together and, not surprisingly, they are unique to our geography, to our forms of government and to the society that we have created.

Governments and Culture

The Government piece of funding culture and arts has its antecedents in the pre-Federation days of separate colonies.  It is still worth reminding our own population that Australia’s cultural journey included the establishment of libraries, museums and picture galleries at times within 25 years of the first European settlement.  With the State Governments continuing their financial support for their respective arts sectors and institutions, the early Commonwealth Governments in Australia from 1901 began to get seriously involved in culture early on. The first arts funding by the new Government – the Literary Fund to provide pensions for needy writers or their families – was in 1908. In 1912 the Commonwealth Art Advisory Board was established.  The establishment in 1932 of the Australian Broadcasting Commission, now Corporation, was a further significant national cultural initiative as was the creation of the Australian Elizabethan Theatre Trust in 1952 that combined Government and private sector support for the arts, primarily performing arts. Its role as a funding body came to an end with the establishment of the Australian Council for the Arts (later the Australia Council) in 1968.[i]

Australia Council – the ‘public’ partner

Today the Australia Council is the Australian Government’s national arts funding and advisory body. Along with the Commonwealth Government’s support for the National Cultural Institutions located in the Nation’s Capital, Canberra, and the Arts Ministry’s own programs, the Australia Council’s role is complemented by State and Territory Governments and by local government at a capital city, metropolitan and regional level.  There is a fair bit of government funding, strengthening and developing the arts sector.

Funding

Broadly speaking the State, Territory and Local governments tend to be responsible for cultural infrastructure and the Federal government contributes substantially to the funding of artists and arts organisations.

Federal, State and Territory spending on the arts is about A$1.4 billion, the majority (68%) funded by the States and Territories.  Local government spending is usually around 11%.

As the main Federal funding body we at the Australia Council each year deliver more than $200 million in funding for arts organisations and individual artists across the country.

The key principles and objectives that underpin public arts policy are enshrined in legislation.  On a rainy day, it is worth reviewing those functions and reflecting upon how they define the government’s expectations, on behalf of the Australian people.  They speak of excellence and diversity and Aboriginal and Torres Strait Islander arts practice; of the promotion of freedom of expression in the arts and community participation; the recognition of significant contributions made by artists and the promotion of the appreciation, knowledge and understanding of the arts, the development of markets and commissioning of research.

That is what our Commonwealth Government sets out to do in the arts. The Minster can give certain directions to the Council but in fact the legislation protects the independence of the Council’s arts funding from government.  Whilst some of this may seem a little off the track at a symposium on global giving, it does explain the circumstances and the background to our own traditions of private sector support.  It surprises many that Australian Governments do so much in the arts both absolutely and relatively and it is an investment well rewarded by its outcomes and by private sector responses.

The Australian Philanthropic Tradition

There is enough clear evidence to support the view that Australia has a strong philanthropic tradition which is often unacknowledged; a good deal of current philanthropic practice is thoughtful, considered and influential; there is now more of it, there are more participants in it and there is more coming but, even with the current well designed Government incentives, wealthy Australians and Australian corporations commit significantly less of their wealth to philanthropy than do their counterparts in other countries, particularly the United States.

As a nation, we do not do justice to our past philanthropic achievements. For a range of historical and cultural reasons, Australians have been less willing to speak openly and publicly about philanthropy than, say, our American cousins. It’s probably part of our national character, and frankly, not a bad trait.  We dislike self-aggrandisement generally and fear that others may judge us to be getting ahead of ourselves.  And what could be more overt than talking about giving away one’s wealth?

However, this attitude of reticence decreases public discussion about Australian philanthropy.  The lack of profile discourages greater giving. The media don’t know how to report it and wildly flip-flop between indifference, scepticism and sycophancy.   Regretfully, these factors unwittingly and unhelpfully nurture the myth that philanthropy is not typically the Australian way of doing things.

Australia has a proud philanthropic tradition that has helped create some of our great educational and cultural institutions.  It has also transformed our health and welfare sectors.  In the nineteenth century, the expression of philanthropy from across the whole community was considerable.  There was a broad community expectation that support would be given according to one’s circumstances.

There are numerous examples across metropolitan and regional communities around the nation of gifts and benefactions that occurred to support the building of the nation’s infrastructure.  There is hardly a gallery, a theatre, a hospital, a church, a community centre anywhere in the nation that doesn’t tell a story of benefaction.  Some of the stories are modest in scale and some are substantial.

National collective memory in Australia is scant about some of the very significant acts of benefaction that have occurred in our history.  This is due in part to state boundaries.  Acts of benefaction are little enough know in the states where they occur let alone across state borders.

How many outside of Sydney would have heard of the Power Bequest to the University of Sydney and know of the role that it played in giving birth to the Museum of Contemporary Art there?  How many outside of Adelaide know of the Elder Bequest or the other great endowments that have given rise to the great collections and teaching resources in that state? Or of the Trout’s support for the Queensland Art Gallery?  How many would know, even in Melbourne, of the Herald Chair of Fine Arts at Melbourne University established by Sir Keith Murdoch, one of the first named Chairs in the nation and held today by Jaynie Anderson.

The Felton Bequest, even today 110 years later, remains Australia’s landmark philanthropic act. Alfred Felton was the Getty of his day and a true philanthropic outlier.  His Bequest stipulates that half of the funds are used for charitable purposes in Victoria, with a primary focus on the physical and emotional health of women and children, and the other half be used to purchase works of art, calculated ‘to raise and improve public taste’ for the National Gallery of Victoria, the nation’s oldest, established in 1861.[ii] The value of his bequest enabled the NGV to regularly outbid the National Gallery in London and the Metropolitan Museum in New York for the best part of five decades last century.

In giving emphasis to this historical perspective, I seek to discourage, hopefully even eliminate, a view often expressed here that there has not been a culture of giving in Australia, or that there are no great examples of giving or that there have been insufficient incentives to give.  This denial of our philanthropic history is too common and it makes for a great excuse to not give now. There was a period in our history when competitive philanthropy was rampant, when it mattered to be giving support and to be seen to do so.  It wasn’t just in the US; that tradition was ours too.  And Alfred Felton was our Rockefeller, Frick and Morgan rolled into one.

Today’s Private support for the arts

So, to today.  The lack of mandatory reporting for philanthropic foundations in Australia makes it impossible to give accurate data, but Philanthropy Australia estimates that there are approximately 5,000 philanthropic foundations in Australia giving between half a billion and one billion dollars per annum across all sectors, not just the arts.

The information available on total private support for the arts shows a combined figure for sponsorship and donations. This was $221 million in 2009-10. Interestingly, this more than doubled in a decade and has continued to grow since then.  Around a quarter of the $221 million in 2009-10 went to art galleries.  A recent study of 12 Australian foundations showed that approximately 10.7% or A$22m of their grants supported arts and culture during 2009-2011, most of which were for the performing arts (A$14m).[iii]

Why partnerships?

The co-mingling of private and public support is our way of doing things even if it is seldom articulated that way.  In the evolution of our model, it is philanthropy that is more often entrepreneurial with a high tolerance for risk, while governments are usually more cautious and risk averse. Philanthropists and trustees of foundations are independent, while governments are responsive to pressure from numerous stakeholders.

Given their relative resources, philanthropy’s efforts are best directed to start-ups, while governments are best placed to take projects to scale. Philanthropy is built on deep bottom-up knowledge, innovation and has long term horizons, while governments are obliged to take a top-down perspective and are more often necessarily short term and cost-focused. The true art of leverage is to ensure that the work and reach of private sector and government intellectual, cultural and financial capital can be maximised.[iv]

For the art gallery sector, that means adequate recurrent funding, investment in cultural infrastructure, incentives to drive private sector support, strong acts of benefaction and sponsorship, inspiring public programs, exhibitions and collections, the appointment of arts leaders and a continual amplification of the importance of the enterprise to the nation. It also means driving broad recognition for the value of creativity and the arts, and for the status of the artist in our national identity.|

The architecture of incentives

One of the key levers that the Commonwealth Government has in driving private support is its legislative role.  Because it pays for philanthropy, it gets to determine what it’s paying for.  It is responsible for income tax and it’s responsible for legislative initiatives for encouraging private support not just for the arts, but also for charitable giving generally. These initiatives have assisted the recent acceleration in the development of privately funded art galleries and museums as well as the levels of support to public institutions and arts organisations.

The key elements to our architecture are deductible gift recipient (DGR) status, which enables organisations to receive income tax deductible gifts and donors to claim tax deductions.[v]

In the arts, there is a shorthand way for organisations to join the list of DGRs through the Register of Cultural Organisations. To be eligible, an organization must meet several requirements including that its principal purpose must be the promotion of literature, music, a performing art, a visual art, a craft, design, film, video, television, radio, community arts, Aboriginal arts or movable cultural heritage. There are currently more than 1300 organisations listed on the Register of Cultural Organisations.

Private Ancillary Funds are private philanthropic foundations that provide businesses, families and individuals the flexibility to start their own trust fund for philanthropic purposes.[vi]  Private Ancillary Funds have served to boost philanthropy in Australia considerably.[vii] In 2010, $26.4 million or about 15% of the total distributable funds were directed to cultural organisations.[viii]  There are now 1200 PAFs with several billion dollars of philanthropic capacity (and growing), yet there are many in the arts sector that have not yet been able to organise themselves to be eligible to receive the grants and distributions.

The Cultural Gifts Program encourages Australians to donate items of cultural significance from private collections to public art galleries, museums, libraries and archives.[ix] With objects valued at $45million donated last year, the total donated since the establishment of the program in 1978 will likely reach over $1 billion by its 40th anniversary.

Finally, Creative Partnerships Australia is a national organisation that works with the arts, business and philanthropic sectors, as well as government, to support sustainable creative industries in Australia. It was established in its current form in 2013 to encourage and facilitate private sector support for the arts and is supported by the Australian Federal Government.

Through one of its programs, Plus1, Creative Partnerships Australia matches dollar for dollar up to $50,000 in funds raised from the private sector.  In fact, it is Plus1 matched funding that has enabled the Australian Institute of Art History (AIAH) to hold this international symposium and is a good example of strategies between public and private philanthropy to create growth in our cultural institutions.xi

The Australia Cultural Fund, administered by Creative Partnerships also offers an attractive and successful mechanism for providing tax deductible donations to individual artists this year.

Current Partnerships and Future Directions

All of these represent the form and function of the co-mingling of government and private support for the arts. The revenue forgone by the Commonwealth Government through the provision of tax deductibility is often overlooked for its value and significance.  And the leverage exists in both directions, indeed every which way: Government leverages private sector support for its own institutions.  The support that Government gives to other arts organisations establishes the type of financial certainty that is required ahead of private sector participation. The private sector, via its support of arts programs, projects, institutions and individuals leverages government through the taxation system.

A good example is the State and Commonwealth Governments’ support through the Australia Council, for the Major Performing Arts Companies and a wide array of Visual Arts and Craft organisations.  It is the certainty of that funding that provides the opportunity for leveraging private support.[x] A healthy ecology can be formed by all these elements combining through powerful partnerships.

The Australia Council is currently exploring ways to leverage off its processes. The long established and well-designed peer review and grant making systems employed by the Council provide levels of credibility, transparency and cost efficiencies that are beyond the capacity of most foundations and private grant making bodies.  Whilst there will be projects funded that would be funded exclusively from public funds, an increasing pool of funding for the arts would ensure that more projects are supported.  There are already a number of recent examples

Australia’s representation at the Venice Biennale is an example of a highly successful public private partnership. I acknowledge the current leadership of Simon Mordant who is driving this partnership and also the Public Private Partnership formed to build the new pavilion.

In dance, Carriageworks, the Keir Foundation, and Dancehouse have partnered to present the first major Australian choreographic award in 2014. This is the first significant philanthropic award for contemporary dance.  The Australia Council’s role is to invite and international jury and to commission new work by the finalists.

In 2012 leading Aboriginal Australian artist Lena Nyadbi was commissioned to create a new site-specific installation for the Musée du quai Branly museum’s rooftop terrace in Paris.  This project came about through a unique partnership between the Australia Council, Musée du quai Branly and the Harold Mitchell Foundation.

The Aboriginal and Torres Strait Islander Curator Exchange Program is an initiative of the Australia Council and the Harold Mitchell Foundation to support a six-week exchange between a collecting institution in Australia and the Musée du quai Branly in Paris, France.

These examples demonstrate some very effective and successful projects where the Australia Council has co-mingled its public funding with private sector support.  They pave the way to extend this form of collaboration for the benefit of the arts sector.  In his 2011 landmark review of private support for the arts, Harold Mitchell found that there is still potential to broaden and strengthen the base of giving to the arts in Australia.

The development of greater co-mingling requires a shift in the arts sector’s culture of asking.  This needs to be refreshed with greater expressions of clarity around anticipated cultural outcomes, the potential risks and benefits of such support, an understanding of the health, education and community well–being impacts, as well as economic benefits and the myriad of other benefits created in a community from support for the arts. [xi]

The sector too would benefit from understanding more completely the current incentives and programs that exist as well as some of the motivations cited by arts donors for their support: a sense that the arts is a valuable cause, a direct connection with the subject matter, a recognition that the recipient project or organisation will benefit the broader community, a sense of obligation or a personal connection with the recipient project or organisation. [xii]

In conclusion, we have developed and continue to evolve a model for co-mingling government and private sector support for the arts that is an appropriate marker for a culturally ambitious nation; we have an architecture of legislation, institutions, arts organisations and leadership that can support the nation’s ambition; we have a proud philanthropic heritage and an increasing number of private sector supporters who are enthusiastic and engaged but who need be mobilised by a more sophisticated conversation with arts organizations and we have brilliantly creative artists in all disciplines creating outstanding work.  It is an exciting moment.


[i] https://www.nla.gov.au/ms/findaids/5908.html#hist

[ii] https://philanthropywiki.org.au/index.php/ The_Felton_Bequest

[iii] Gina Anderson  op cit pp25-28

[iv] Gina Anderson Where the Money Goes: Private wealth for public good Centre for Social Impact, University of New South Wales July 2013 p9

[v] To constitute a ‘gift’, property must be transferred without any material benefit to the donor: Federal Commissioner of Taxation v McPhail (1968) 117 CLR 111; Leary v Federal Commissioner of Taxation 80 ATC 4438; Cyprus Mines Corp v Federal Commissioner of Taxation 78 ATC 4468.

Building Support: Report of the Review of Private Sector Support for the Arts in Australia

October 2011 (Mitchell Review) P61

[vi] The tax law rules state that item 2 DGRs (ancillary funds) can only give to item 1 DGRs, that is to doing, or non–ancillary DGRs. The law of equity provides that charitable funds (such as ancillary funds) must only give to other charities, which means that normally, ancillary funds can only give to charitable DGRs.

[vii] https://eprints.qut.edu.au/61373/1/2013_PAFs.pdf

[viii] https://www.philanthropy.org.au/research/fast.html  October 2013

[ix] Mitchell Review op cit p65

xi Australian Institute of Art History, University of Melbourne, Global Giving to the Arts International Symposium, Plus1 matched funding $19,100, https://www.creativepartnershipsaustralia.org.au/how-we-can-help/programs/recipients/australian-institute-of-art-history/

xii https://www.australiacouncil.gov.au/artforms/visual-arts/news_items/the_visual_arts_and_crafts_strategy_vacs_evaluation

xiv Mitchell Review op cit p7

xiv Mitchell Review op cit p7