When the economy tumbles, charitable giving suffers. Arts organizations, in particular, rely heavily upon philanthropy, and many would not exist without the deep pockets and ongoing generosity of individual donors.
It all raises serious questions about the downstream effects of Silicon Valley Bank’s collapse on the Bay Area arts scene. First Republic Bank—which has been made vulnerable in the wake of SVB’s demise—is a major backer of some of the most prominent arts organizations in San Francisco.
The arts in San Francisco represent a sizable portion of the city’s economic activity. The nonprofit arts industry produces $1.7 billion in economic output a year while also creating the equivalent of 36,828 full-time jobs, according to a report by the Bay Area Council Economic Institute.
Though it is too early to properly forecast what may lie ahead for local arts groups, historical precedent gives us a picture of what could happen.
The Great Recession of 2008 resulted in one of the biggest year-over-year declines in philanthropy since the late 1960s, with total giving falling nationwide by 7%. And even as the situation improved slightly by 2011, giving still hadn’t recovered to its pre-recession levels, according to a Stanford University report.
Arts organizations nationally rely on an average of some 40% of funding from private sources, and the '08 recession forced the closure of cultural institutions across the country—including opera houses in Baltimore and Connecticut, a theater in San Jose, an art museum in Las Vegas and a dance company in New York
This time around, the arts are already suffering from a pandemic-related contraction, making them even more vulnerable to unsteadiness in the financial sector.
A downturn could take time to unspool, since there’s typically a lag before philanthropy is impacted—donations and grants do not respond immediately to market shifts. Yet arts and culture giving is already lower than usual, because so many resources had been diverted to pandemic relief.
While it’s too early to tell whether the collapse of SVB will negatively impact arts organizations across the Bay Area, the outlook does not look good. Even if local arts philanthropy efforts remain on an even keel, arts groups continue to face pandemic-related challenges. It could be years before arts organizations have the opportunity to right themselves—assuming they can.