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Minnesota Orchestra says it's financially strong despite $8.8 million deficit

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The Minnesota Orchestra
The Minnesota Orchestra, in an undated file photo.
Greg Helgeson | Courtesy of Minnesota Orchestra

The Minnesota Orchestra announced an unusual financial occurrence at its annual meeting on Tuesday. Last year it ran up a deficit of $8.8 million, while also raising $10 million more than expected in its major gifts campaign.

Orchestra leaders say the situation was unexpected, but despite the shortfall the organization is in a strong financial position.

Orchestral fundraising is always a mixture of hope, expectation and a lot of planning. Donors who choose to give can also decide where their money goes. It can go towards operating support which pays day to day costs, or it can be dedicated to the endowment, which is designed to develop funds through generating interest and long-term investment growth.

Minnesota Orchestra president Michelle Miller Burns said last year the $50 million campaign brought some big surprises. First, donors came through with $60 million.

That's good news, but Burns says the surprise was how donors designated their gifts.

"We anticipated that we would receive $40 million in operating support from that campaign and $10 million in endowment support," she said. "What we actually received was $20 million in operating support, so half of what we had anticipated. And then $40 million in endowment support, four times what we had anticipated for endowment."

Thus the endowment built more financial muscle, but operationally the orchestra ended the fiscal year with an $8.8 million deficit, on expenses of just over $35 million. For many organizations this would be a huge worry, but board treasurer Bill Miller said the orchestra has a strong financial base.

"There's $176 million of net assets," he said. "This is a very strong organization financially, and with that strength comes different opportunities to leverage that strength to continue to fund the organization on a going-forward basis.”

Miller said it was a surprise how the money came in, but it will have no impact on how the orchestra operates.

"There's probably ways we could have managed the last fiscal year to get a balanced budget," he said. "It probably wouldn't have been the best for the organization's long-term financial health."

The orchestra is currently following a revenue development plan to support artistic development and expand audiences. Burns said those efforts will continue.

"We are funding the organization on a day-to-day basis and we are building for the long term," she said.

She speculates that donors choosing to give more to the endowment may be a holdover from the 15-month management lockout of musicians which ended in January 2014. She said donors clearly want to ensure the orchestra's long-term future.

Flutist Wendy Williams, who chairs the musicians committee, said the relationship between management and musicians is now strongly supportive, and they are fully behind the current development plan.

"The musicians really see the organization in a different place right now, and we are moving forward into this revenue development plan from a position of strength with many, many assets," she said. "And also through these relationships that we have been developing, very close collaborative working relationships that will allow us to move forward together."

To that end the players will sponsor "Hall Pass," an initiative offering free tickets to classical concerts to audience members age 18 and under. The money comes from the musician-led Bellwether Fund for education and community programming. Williams said details are still being finalized but Hall Pass will begin in January and run through the end of the season. She said they are not ruling out continuing this audience development program beyond that.

"It will be great to see how the plan unfolds, and to see if we can find a new commitment to continuing it into the future as well," she said.

There is clearly an interest. The orchestra's annual report points out that a third of the total audience last year comprised of people attending their first concert at Orchestra Hall.