When the Baltimore Symphony Orchestra released an audit of its finances Tuesday (after much prodding from The Sun and others) it showed an organization whose finances are just as bad as management has been saying. It doesn’t get much starker than an auditor’s assessment that “there is substantial uncertainty about the BSO’s ability to continue as a going concern.” What impact that will have on contract negotiations with the now locked-out musicians or the state’s willingness to provide it with more funds, we can’t say. But this much is certain: None of this should have been a surprise. The BSO should have been far more transparent about its finances all along; virtually all of its peer organizations are.
At least not until Wednesday afternoon, a day after an initial version of this editorial was published online, when the BSO debuted a financial information page including the audit and other information. We’re certainly glad to see that, but how much less chaos might the musicians, orchestra patrons and the general public have been subject to over the last few months if this information had been available all along?
Baltimore symphony patrons got whiplash from the BSO’s announcement of a schedule of summer concerts in April followed by the news that they were being cancelled for financial reasons in May. Members of the legislature who worked this spring to carve out additional money in the budget say they had no idea that the orchestra’s finances were so dire. A member of the symphony endowment board of trustees warned management that it needed to be more forthcoming about its situation when lobbying the governor to release those funds. Why did it take a crisis for the BSO to provide the level of fiscal transparency that other major orchestras do as a matter of course? BSO management is dealing now with a fiscal deficit and a deficit of trust that may be just as difficult to repair.
One other note: The financial documents from other orchestras do back up one argument that management supporters are making in the current lockout over contract negotiations with the musicians — The BSO’s endowment is pathetic. At $60 million, it’s only about twice the BSO’s annual budget. Compare that to orchestras of similar size. The Indiana Symphony’s endowment is more than $100 million. The Minnesota Orchestra has about $133 million in its endowment and other investments. The Dallas Symphony’s endowment is $145 million. The St. Louis Symphony’s annual budget is about the same as Baltimore’s, but its endowment tops $220 million. (And that’s not even considering the Big Five — Boston, New York, Philadelphia, Chicago and Cleveland. Boston’s endowment is so big that its most recently reported annual draw is nearly as big as the Baltimore Symphony’s entire annual budget.)
Members of the symphony players committee have criticized the endowment trust for declining to increase the annual draw to the maximum under state law of 7%, but the current draw of 5.75% is already higher than that reported by other major orchestras, which tend to hover in the 4.5%-5% range. Investment returns in recent years have been higher than 7%, but that won’t always be the case, and if the endowment is to provide consistent support for the orchestra in perpetuity, it needs to bank extra assets when the market is up to compensate for years when it will be down. The endowment has already loaned the orchestra millions in the last few years to keep operations going. It can’t keep that up forever.
We completely sympathize with the musicians’ frustration and anger. It’s not their fault that the symphony’s expenses routinely exceed its revenues or that the endowment remains so small compared to other orchestras, yet they have been forced to make repeated sacrifices over the years and are being asked to make more. But digging deeper into an endowment badly depleted by previous bail-outs of the BSO simply isn’t the answer.