The Value of the Federal-State Partnership

The portion of the National Endowment for the Arts (NEA) budget set aside by Congress to be administered by state arts agencies (SAAs) and their regional consortia provides public benefits that strengthen both legislative and popular support for the federal agency. A little history is helpful in understanding these governmental, political and financial benefits.

The congressional leaders who wrote the legislation that authorized the NEA in 1965 provided for grants that would foster the proliferation of state arts agencies. They envisioned a national network that would enhance the effectiveness of the NEA by regranting some of its funds informed by local knowledge, and that would generate state funds to match the federal funds. The anchor point of the NEA-state relationship was to be annual Basic State Arts Grants awarded upon approval of a state arts agency plan. To this day, the quality of the state arts agency planning process, the plan submitted as part of the application and the implementation of the plan remain the focus of the grantor-grantee relationship between the NEA and states. According to former NEA Deputy Chairman Michael Straight, Roger Stevens, the first NEA chairman, and members of his staff “went around the country laying the groundwork with the governors and the state legislatures.” Straight writes that 22 state arts agencies existed in 1967, and by 1975 all states had established arts agencies.

Between 1965 and 1973, the amount of the basic grant to states was determined by the chairman of the NEA. Straight quotes Indiana Congressman John Brademas explaining that he advocated to define the set-aside portion to states in statute in order to cultivate the influence of SAAs on behalf of the NEA: “I felt it was important to give the state arts agencies a greater stake in the success of the Arts Endowment. I believed that in setting aside a certain percentage of the Endowment’s appropriation for the state arts agencies we would build up support for the overall program.” In 1973, Brademas persuaded his colleagues in Congress to triple the grants from $65,000 to $200,000 and to pass language affecting the NEA appropriation beginning in 1974: “To ensure that each State receives that amount [$200,000] in the three years for which the Act is extended, safeguard language for the State arts program specifies that no less than 20% shall be allotted to the States in equal amounts.” At first, NEA Chair Nancy Hanks objected vehemently, interpreting the innovation as a limitation of her power, but she had to accept the decision of Congress. Eventually, she even accepted Straight’s recommendation to appoint a state arts agency executive director to each of her nine NEA grant panels.

The establishment of the federal-state arts support partnership with a legislated set-aside for states is certainly among the most influential and beneficial accomplishments the NEA can claim. What has evolved is a federal-state system that fosters the creative capacity of Americans far beyond levels that the marketplace alone would be likely to achieve—through planning, accountability, partnerships, serving the underserved, and leveraging resources from the public and private sectors.

Governmental Benefits

The portion of the NEA budget mandated for management by states and their consortia extends the reach and impact of federal arts funds, increasing the ability of the nation’s artists, arts organizations, schools, businesses, agencies and not-for-profits to provide artistic services that fulfill multiple public purposes. The NEA itself awards approximately 2,200 direct grants each year. States and regions make approximately 23,000 awards, which reach deeply into communities that no federal agency alone could reach. When state arts agencies make these decisions and provide services to artists, arts organizations and the public with federal dollars, they do so with knowledge of each state’s unique cultural, social, economic and artistic environment. They cultivate means of reaching every corner of their state suitable to each state’s circumstances—including media and social networks, presenter networks, touring programs, arts education programs, state-local government partnerships and cultural district incentives. Since the NEA requires and approves state plans that must be informed by a public process, must support arts education and must serve the underserved, the state portion of its budget supports a system through which statewide priorities are identified and addressed compatibly with national goals.

I should point out that the unique value of the state portion continues to be revealed. When the NEA decided that it would directly award American Recovery and Reinvestment Act (ARRA) funds only to recent grant recipients, it meant that in some states only a small number of groups could even apply. The stipulation by Congress that 40% of the NEA’s ARRA funds be distributed through states and regions ensured that jobs in arts organizations would be supported even in areas of the country where arts groups are sparse.

In addition, the state portion supports and diversifies the NEA mandate to advance excellence in the arts. State arts agencies put their grants through a rigorous peer review process that emphasizes artistic quality, community benefits and management excellence. These processes—in combination with related requirements for planning and accountability and extensive technical assistance services—foster artistic excellence. States also retain the flexibility and prerogative to make certain kinds of investments that Congress has decided the NEA will not do. Investments in individual artists, operating funds and season support play an important role in cultivating creative capacity nationwide.

Management and policy analyst Paul DiMaggio, in his 1991 essay, “Decentralization of Arts Funding from the Federal Government to the States,” observed that a benefit of the coexistence of federal and state arts funding is a form of “risk pooling in an era of political vulnerability.” The system provides multiple opportunities for the discovery of artists and arts organizations whose quality and services merit public support. In addition, the public planning and budgeting processes allow for variety in the programs, policies and funding levels chosen by different states, the federal government, and their constantly changing administrations that reflects the broad diversity of American cultural and political preferences. The NEA state set-aside stabilizes and institutionalizes the overall adaptive capacity of this system.

It was also under Hanks that the NEA and the state arts agencies created the regional arts organization (RAO) network. Hanks explained to state arts agency leaders that her interest was to put in place an arts infrastructure that could parallel and demonstrate the value of the arts to the newly forming regional governors’ associations. Authorizing language had always existed for the NEA to fund consortia of states for projects. The RAOs and NASAA are funded by that same authority. The legislation also allows 25% of the state set-aside to be allocated within the partnership at the discretion of the chairman. Decades ago, the NEA and NASAA agreed that this amount would be divided between two functions: supplementing basic state plan amounts for states with big populations and providing funds to support the plans of multistate regional arts organizations. The regional portion of the set-aside to states provides an additional layer of benefits. RAOs not only extend the ability of the NEA to implement national and international arts programs; they now create numerous artistic programs and field services beyond what the NEA or regional member states initiate.

Political Benefits

The state formula guarantees that a predictable portion of the tax dollars invested annually in the arts by the federal government will go to each state. The portion of the NEA budget distributed through the 56 states and jurisdictions, and their regional groups, contributes powerfully to congressional support of the agency. The NEA is not a foundation. Every senator and every member of the House of Representatives represents constituents who pay taxes, vote, perceive the arts as important, and want to see the federal investment in artistic excellence and access include their district. The distributive principle maintains the NEA’s viability as a government agency just as it does for the federal agencies with responsibility for education, transportation, housing and urban development, the humanities, and other public benefits.

Events demonstrate that the state set-aside helps build and maintain broad bipartisan support for the NEA as controversies come and go, and as political power shifts among parties and factions. A most revealing example of the value of the state portion in sustaining congressional support for the NEA was when, in the process of reducing the NEA budget from $176 million to $98 million in the 1990s, Congress doubled the state percentage to its present level of 40%. In these years marked by debate about “controversies,” Congress limited allocation of the NEA program budget to no more than 15% to any one state, stipulated that the National Council (the NEA’s advisory body) should be geographically representative, directed the NEA to appoint a knowledgeable “lay person” to each grant panel and added nonvoting members of Congress to the National Council. The real issues were also about the perception of fairness and the fact that scores of congressional districts were not then receiving direct NEA grants.

Support for these principles endures. In its report language attached to the NEA budget bill for fiscal year 2012, the House Interior Appropriations Committee reiterated its perception that the 40% states portion continues to be critical to congressional support for the NEA (the context for this comment was the NEA’s proposal that the amount of funds for the Our Town initiative be exempted from the 40% formula):

The Committee values greatly the longstanding collaborative relationship between the NEA and the States. . . . In 1997, Congress established that 40 percent of NEA program funds be allocated to States through State Arts Agencies (SAAs) because they understand community priorities and are accessible to local arts organizations. By exempting Our Town from this requirement, the request would provide funding to communities without this necessary safeguard. The Committee is particularly concerned that funding for this program would gravitate toward large urban centers with strong existing arts infrastructures at the expense of State Arts Agencies which are better positioned to reach underserved populations. This precedent could undermine support not only for SAAs but for the NEA more broadly.

The Committee directed the NEA to distribute Our Town funds “in a manner consistent with the congressional requirement governing the allocation of funds to States.”

Financial Benefits

The state portion greatly leverages federal support for the arts, stimulating support for the arts at other levels of government and from private sources as well. At least half of the state arts agencies were started by governors in response to NEA incentive grants in the 1960s and 1970s. Over time, state governments have increased their investments in arts agencies, surpassing the total NEA appropriation starting in 1985. The NEA invests about $40 million in state and jurisdictional arts agencies, which these agencies combine with $293 million in state and other funds, a return of more than 7:1. Grants made with these funds leverage significant additional matches from local governments and private sources.

It’s important to note that NEA support to state arts agencies can comprise a major portion of a state arts agency’s budget, especially in states with smaller populations. The desire not to lose NEA state Partnership Agreement funding provides an extremely strong incentive to state governments to continue supporting their arts agency when they are looking for agencies to eliminate.

It’s useful to note as well that state arts agencies, through the work of their community development coordinators and their grant making, have fostered the local arts agency movement and many hundreds, if not thousands, of local arts agencies. Even though distribution of locals is uneven and some states have only a few, state arts agencies most recently awarded 16% of their grant dollars (more than $34 million) to local arts agencies and statewide assemblies of locals in 833 communities. In FY2012, local art agencies managed more than $700 million, according to Americans for the Arts. Any consideration of the value of NEA support for state arts agencies should factor in this return on investment.

Grantor-Grantee Relationship to Partnership

The federal-state arts support partnership has matured as state arts agencies have invested in NASAA as their vehicle for policy dialogue and leadership activity development with the NEA, as NASAA relationships with other national service organizations and arts support groups have become more collegial and sophisticated, and as NASAA has established communication on behalf of state arts agencies directly with Congress and executive branch personnel.

Paul DiMaggio observed more than 20 years ago that a collaborative federal-state funding approach “provides a flexibility that permits experimentation and leadership to emerge at different levels, enhancing opportunities for learning by the system as a whole.” His research led him to this conclusion: “If there is a lesson to be learned, it is that neither centralization nor devolution is a satisfactory substitute for the suppleness and responsiveness that a mixed system affords.” His words seem just as current now as when he wrote them. When leadership changes at the NEA, in Congress, in the White House or among arts constituencies, it is useful for all parties—public officials and cultural leaders—to be reminded of that ongoing lesson.