Arts, Heritage and Cultural Industries Funding

Arts, Heritage and Cultural Industries Funding

Not-for-profit arts and heritage institutions in Canada receive funding from 3 major sources: self-generated revenues from tickets or admissions, concessions, facility rentals, memberships, sales or rentals of works, gift shops, and other operations; governments at all levels; and the private sector, including individuals, corporations and foundations. These cultural organizations - performing arts companies, festivals, media arts organizations, museums and art galleries - also depend heavily on volunteer labour for their boards, fundraising committees, organizing teams, and education and outreach programs. Many are registered charities and able to provide tax receipts for donations.

The cultural industries (sound recording, book publishing, magazine publishing, broadcasting, film, television and new media) also receive funding from a number of sources. Besides the sales of products and services, which are common to all, revenue sources particular to a given industry may include licensing and distribution, advertising, the sale of rights, investments required of cable companies and broadcasters, government subsidies and loans, and indirect government support through tax-based credit or investment measures.

Arts, heritage and cultural industry organizations alike receive direct government funding, usually in the form of grants or contributions (and sometimes, in the case of cultural industries, loans or loan guarantees). But, beyond direct funding, these sectors are influenced differently by government action and policy. For arts and heritage institutions, tax measures affecting charitable donations are extremely important. The cultural industries, operating in an industrial or business environment, often benefit from tax investment incentives. Government regulations related to Canadian ownership, control, content and foreign investment are also very important for the cultural industries. The Investment Canada Act requires that foreign investments result in a net benefit to Canada and are compatible with national cultural policy objectives.

Government Support

Ever since Confederation, Canadian governments have made public expenditures on culture. Art galleries and museums, often founded by private benefactors, have received support from one level of government or another for over 100 years. The National Gallery of Canada was created in 1880 and the National Archives of Canada in 1912.

By contrast, orchestral and theatrical companies active before World War I sustained their operations through box-office earnings and donations from private patrons. Orchestras, mainly amateur, functioned in Montréal, Halifax and Hamilton before the turn of the century, and the Société symphonique de Québec (now Orchestre symphonique de Québec) can trace its history back to 1903. Manitobans had active theatre groups before the formation of the province, and Le Cercle Molière began presenting French-language plays in St. Boniface in 1925. In Toronto, beginning in 1908, concerts were performed by a semiprofessional ensemble supported by a group of businessmen.

But the absence of appropriate theatres and concert halls inhibited the growth of professional performing groups. When a private patron donated a building to the community it often stimulated professional ventures, as was the case with Massey Hall in Toronto.

Government funding became increasingly important after World War II. In 1948, Saskatchewan was the first jurisdiction in North America to establish an arm's length arts council, the Saskatchewan Arts Board. At the federal level, the Canada Council was created in 1957. Québec established its Department of Cultural Affairs in 1961. In the years that followed, many governments consolidated their previously scattered cultural expenditures within a department responsible for culture. Federal support, for years co-ordinated in the Department of the Secretary of State, was shifted to the Department of Communications in 1980. In 1993 that department was reorganized and re-born as the Department of Canadian Heritage.

The 1970s and 1980s were marked by significant growth in government spending on culture. In the wake of the cultural excitement of Expo 67 in Montréal, many capital grants were provided for new, renovated and enlarged facilities, halls and museums, giving the Canadian public better and wider access to cultural events. The number of cultural organizations and the size of the cultural labour force both expanded. Culture-related occupations increased by almost 100% during the 1980s, twice the rate of the total Canadian labour force. In 1999, 3.1% of the Canadian workforce (447 400 people) were employed in cultural occupations. But for most of the 1990s, as Canadian governments concentrated on reducing their deficits by curbing spending, expenditures on culture declined.

All levels of government - federal, provincial, territorial and municipal - currently provide funds for the arts and culture. The federal, provincial and territorial governments all have a department with responsibility for culture, and all the provinces and the federal government also have an arts council. Some jurisdictions have additional specialized bodies to support particular cultural industries, such as the Canadian Film Development Corporation (Telefilm Canada) at the federal level and SaskFilm in Saskatchewan. Though most of the funding for arts and cultural institutions comes from arts councils and cultural departments, funding is often available from other departments, such as economic development, tourism, education, and parks and recreation. In some provinces, lottery revenues are a source of funding for cultural and other charitable causes.

At the federal level, the Department of Foreign Affairs and International Trade promotes and protects Canadian cultural interests internationally and provides grants to artists and cultural organizations to tour, exhibit, promote and develop markets abroad. The Cultural Industries Development Fund, sponsored by the Department of Canadian Heritage and administered by the Business Development Bank of Canada, supports production by Canadian-owned and controlled firms in the cultural industries through a range of financial services, especially term loans.

In addition to direct funding, governments use a number of other instruments to nurture and promote Canadian culture. These include the following:

- the creation of public institutions and services, such as public broadcasters like the Canadian Broadcasting Corporation and TVO (in Ontario), the National Library of Canada and provincial libraries and archives, and museums and galleries owned and operated by governments; -legislation, such as Copyright and Status of the Artist laws; - regulations, such as the monitoring and licensing of broadcasting entities by the Canadian Radio-television Telecommunications Commission, federal protection against the export of valuable heritage artifacts, provincial guidelines governing textbook purchase and film distribution, Canadian ownership, control and content regulations, and the required review of foreign investment in film distribution, sound recording, and book publishing for its "net benefit" to Canada; -tax measures, eg imposing or waiving import and excise taxes on cultural products, allowing income tax deductions for charitable donations, providing investment tax credits for films, and forgoing amusement, property or sales taxes.

Government Expenditures on Culture

In 1997-98 Canadian governments spent almost $5.6 billion on culture, a decline of more than 5% from the peak level of 1992-93. About half of all government cultural funding ($2.7 billion) came from the federal government. Provincial and territorial governments contributed $1.7 billion and municipal governments $1.8 billion. During the 1990s the federal and provincial/territorial governments reduced their cultural spending, while municipal expenditures grew by almost 20%.

Total cultural spending includes operating expenditures (eg, the costs of operating government cultural departments and agencies and facilities owned and operated by a government), capital expenditures, and grants and contributions. Grants and contributions actually grew by 4% in 1997-98. This fact and the recent resource allocations described below suggest that governments are beginning to restore funds to the arts and culture.

Broadcasting and libraries are by far the largest beneficiaries of government cultural spending. Expenditures for the Canadian Broadcasting Corporation account for about half of federal cultural spending, while libraries take 40% and 80% respectively of provincial/territorial and municipal expenditures.

Some 68% of federal spending on culture is devoted to the cultural industries, including broadcasting. Heritage receives 23%, and the arts (the performing arts, visual arts and crafts, and arts education) 5%.

Private Sector Support

Support from the private sector takes the form of donations by individuals, contributions from foundations, and corporate donations and sponsorships. In addition, individual Canadians volunteer their time and effort on behalf of cultural organizations.

During the 1990s, as government funding for culture declined, private sector support became increasingly important in the finances of performing arts and heritage institutions. Many of these organizations were experiencing falling public sector grants and contributions, increased competition for consumers from other leisure activities, and declining attendance, and they had to work diligently to maintain and develop their audiences, increase earned income, and generate private sector contributions. From the beginning of the decade to 1997-98 the revenues of performing arts organizations provided by private sector sources rose 44%, while private donations to heritage organizations grew by 23%.

In 1997, 560 000 Canadians contributed a total of $35 million to cultural organizations, and in the previous year corporations, according to the Canadian Centre for Business in the Community, allocated over $15 million to cultural organizations, about $9 million to the performing arts and $6 million to museums and galleries.

In the late 1990s the federal government made several improvements to enhance the attractiveness of donations to registered charities. Both the tax credit for donations and the percentage of net income that individual and corporate donors could claim for contributions were increased. In addition, the tax to be paid on capital gains of publicly traded securities donated to charities was reduced and the annual donation limit for gifts of capital property increased. Charitable gifts can now be carried forward and claimed for up to 5 years.

Just under half a million people volunteered their time for Canadian cultural organizations in 1997. Volunteers are especially vital for museums, galleries and other heritage institutions, where they make up 66% of the workforce.

Performing Arts

The 602 not-for-profit professional Canadian performing arts companies surveyed by Statistics Canada in 1996-97 performed to 13.2 million audience members, which represented a 15% drop in attendance since 1992. The largest single source of revenue for these companies is the revenue they earn from ticket sales, concessions and other sales. In 1996-97 it totalled nearly $202 million (or 48% of all operating expenses). Government grants (at 32%) were the second largest revenue source. Private support constituted 20% of total revenues in 1996-97, compared with 14% a decade earlier.

For many performing arts companies, tours outside Canada are an important revenue source. In 1996 nearly 90 companies in theatre, dance and music undertook foreign tours, generating an increase of 10% in total earned revenues from 1994.

While individually most performing arts companies break even, taken as a whole they carried an accumulated deficit of $27 million at the end of 1996-97. Of this amount, 85% was attributable to the 82 largest companies and almost half to 17 large orchestras. Given such chronic financial problems, Canadian governments in various jurisdictions have introduced arts stabilization programs - public and private sector partnerships intended to help organizations eliminate deficits, build up working capital, enhance their organizational capacity, and achieve long-term stability. The first stabilization programs in Canada were launched in Alberta and Vancouver with resources from foundations, the federal and provincial governments, and in the case of Vancouver, the city.

The federal government, through its parliamentary appropriation to the Canada Council for the Arts, funds the performing arts as well as other art forms. It provides an appropriation to the National Arts Centre, located in Ottawa. The Department of Canadian Heritage administers the Cultural Initiatives Program, which supports national festivals in music, theatre, dance, film, literature, and the visual arts as well as children's and multidisciplinary festivals. The Department also administers the National Arts Training Contribution Program, providing funds to independent non-profit Canadian institutions specializing in training Canadians for professional national and international artistic careers.

Visual Arts and Crafts

In 1997-98 the federal and provincial/territorial governments spent a total of $57 million on visual arts and crafts, an increase of 18% since 1990. Almost all of these funds were expended as grants, contributions and other transfers to visual artists, craftspeople, and related cultural organizations such as public art galleries and museums, artist-run centres, craft organizations, etc.

The provinces and territories were responsible for three-quarters of government spending on the visual arts and crafts, which accounted for 2% of their total cultural expenditures. At the federal level, support derived largely from the Canada Council for the Arts and the Department of Canadian Heritage and represented 0.6% of the federal cultural budget.

In 1997-98 181 not-for-profit art galleries and art museums received 5.8 million visitors. Government funding made up 62% of their operating revenues. Other revenue sources are earned income from membership fees, admission fees and gift shop sales, which showed strong growth in the 1990s.

A survey of Canadian Public Museums and Art Galleries undertaken by the Council for Business and the Arts in Canada in 1997-98 noted the growing importance of donated art and capital campaigns to these organizations. While Canada's museums between them had only $15 million to spend on acquisitions in 1997-98, they received gifts of art and artifacts valued at $120 million, more than in any other single year.

In 1996 Canadians spent an average of $73 on purchases of original works of art, collectors' items, and other art goods and decorative ware.

Heritage Institutions

Statistics Canada's 1997-98 survey of over 2300 not-for-profit heritage institutions included museums, public art galleries, historic sites, archives, exhibition centres, planetariums, observatories, aquariums, zoos and botanical gardens. The total operating revenues of these organizations were $1.1 billion, of which 62% was furnished by governments - $403.5 million by the federal government and $383 million by the provinces and territories.

Between 1990 and 1997 government expenditures declined 14% and earned revenues increased 76%, reaching nearly $294 million. The surveyed organizations had just under 54 million visitors in 1997-98.

The federal government provides parliamentary appropriation to the National Gallery of Canada, the Canadian Museum of Nature, the Canadian Museum of Civilization, and the National Museum of Science of Technology, all located in the National Capital Region. The federal government also administers designated national historic sites across Canada.

For non-federal museums and galleries, the Department of Canadian Heritage provides funding through the Museums Assistance Program and other forms of service support. The Canadian Conservation Institute promotes the care and preservation of heritage collections through services, training and research. The Canada Travelling Exhibitions Indemnification Program reduces the cost of insurance for travelling exhibitions hosted and developed by Canadian museums, galleries, libraries and archives.

Under the provisions of the Cultural Property Export and Import Act, income tax credits are available for donations and sales of nationally significant cultural property to Canadian public cultural institutions, and grants help Canadian institutions acquire cultural property to prevent its export from Canada or to repatriate Canadian works that are for sale outside the country.

Film and Television

The federal government supports the National Film Board of Canada and its production facilities. The Film Board was created in 1939 and promotes the creation and distribution of Canadian audiovisual works. Telefilm Canada, set up in 1967, financially invests in independent film, television and multimedia production in Canada. The Canada Council for the Arts provides funding for artists and organizations in film, video and new media, and in a number of provinces arts councils or other government bodies also support film and television.

In addition, the Canadian Television Fund, an independent non-profit corporation whose board is composed of both industry and federal government representatives, provides $200 million annually to increase the quality and quantity of Canadian television programming. The Canadian Film or Video Production Tax Credit gives a refundable tax credit for certified Canadian films and videos. Federal foreign investment guidelines for the film distribution sector seek to improve the market position of Canadian-owned and controlled distribution companies.

Canada has official co-production agreements with 54 other countries, which enable Canadian and foreign producers to pool their creative and financial resources in co-producing programs that enjoy national production status in each of the countries involved. In 1998 Canadian producers participated in 71 official international co-productions.

In 2000, in recognition of the special difficulties facing Canadian feature films (Canadian movies take in only 2% of box office revenues in Canada), the federal government announced a new Canadian feature film policy, From Script to Screen. Its purpose is to increase the quality and accessibility of Canadian films through a doubling of federal support (from $51 million to $100 million annually). The Canada Feature Film Fund, administered by Telefilm Canada, will provide assistance for screenwriting, production, marketing and promotion.

The Canadian content requirements of the CRTC also have an impact on the film and television production industry. Private TV licensees generally must achieve a yearly Canadian content level of at least 60% overall and 50% between 6 pm and midnight. Pay-TV, specialty and pay-per-view services also have varying content requirements set as a condition of licence.

In 1997-98 the independent film, television and video production industry had revenues in excess of $1 billion. The industry has been buoyed by export sales, which more than tripled during the 1990s. The single most important source of revenue in this industry is sales of TV productions, which accounted for 45% of all production revenue in 1997-98.

Sound Recording

The federal government administers the Sound Recording Development Program to stimulate production of Canadian content recordings and the development of the Canadian industry. The program has an annual budget of $10 million. Its components (loans and contributions) are administered by the industry consortium FACTOR/MUSICACTION CANADA, the Canada Council for the Arts, and the Department of Canadian Heritage.

In 1971 the government introduced Canadian content quotas for music played on radio. Except for stations whose music is primarily instrumental, the current quota requires that at least 35% of popular musical selections played every week on AM and FM radio stations be Canadian.

Book Publishing

The federal government's Book Publishing Industry Development Program, with an annual budget of over $30 million, helps the Canadian publishing industry produce and promote Canadian-authored books domestically and internationally. Lines of credit are also extended to Canadian-owned and controlled book publishers through the Loan Program for Book Publishers, a joint initiative by the Department of Canadian Heritage and the Royal Bank of Canada. Book publishing is also funded by the Canada Council for the Arts and some provincial arts councils and agencies.

In 1996-97 book publishers and agents had total revenues of over $1.9 billion; 10 500 titles were published and 7200 titles were reprinted. Sales in Canada, totalling nearly $1.5 billion, were by far the largest revenue source. Nevertheless, book exports are experiencing healthy growth, fuelled in part by the spectacular popularity of Canadian writing around the world. From 1991 to 1996 the rate of growth was almost 20% a year.

In addition to publishing and marketing their own books, some firms act as exclusive agents for foreign publishers. Revisions to the Copyright Act in 1997 allow enforcement of exclusive book distribution rights in Canada. Additionally, Canadian foreign investment policies promote the maintenance of the Canadian-owned and controlled publishing sector.

Magazine Publishing

No other cultural industry has been as directly challenged by the globalizing impact of technology and international trade as Canada's magazine sector. In 1997 the World Trade Organization Appellate Body ruled that some of Canada's traditional policy instruments for the promotion of Canadian periodicals were inconsistent with Canada's obligations under the General Agreement on Tariffs and Trade. To bring Canada's actions into compliance and at the same time support the Canadian periodical industry, the government of Canada undertook a number of initiatives.

First, in late 1999 it announced the creation of the Canada Magazine Fund, a package of $150 million dollars to be allocated over 3 years. Magazines that are majority-owned and controlled by Canadians, with editorial content that is at least 80% Canadian, will be eligible for direct financial assistance to reward them for their investment in the production of Canadian editorial content. Other components of the fund include support for the business development of small magazines and support for industry infrastructure projects.

Second, the Publications Assistance Program, the postal subsidy, was adjusted to be paid directly to Canadian magazines to help defray the costs of distribution.

Third, conditional access to the Canadian advertising services market was provided to foreign publications, and tax deductions were made available for advertisements in periodicals regardless of the domestic or foreign ownership of the periodical.

Specialized periodicals, such as scholarly, literary and arts magazines, continue to receive assistance from organizations such as the Canada Council for the Arts, provincial arts councils, and the Social Sciences and Humanities Research Council of Canada.

Canada had about 1550 periodicals in 1996-97, with total revenues of over $1 billion and a circulation of about 539 million copies. The single most important source of revenue (at 62%) is advertising sales, but competition for that income is fierce, with television, newspapers and the Internet all chasing advertising dollars. Subscriptions and single copy sales constitute the second largest source of income.

Conclusion

The growth and success of the arts, heritage and cultural industries in Canada are the fruit of the work and talent of Canadian artists, cultural workers and administrators, and the support of volunteers, audiences, local communities, governments at all levels, and individual Canadians, businesses and community groups. The Canadian "system" of cultural support is complex, multi-layered, labour-intensive, and fragile: the loss or significant decline of any funding source - earned revenues, private sector, or government- can have a punishing, even fatal, effect on cultural organizations. Conversely, strong and sustained support from audiences, the public and the private sectors allows cultural organizations to flourish in Canada, providing the public with access to a diverse array of cultural and artistic products reflecting Canadian experience, history, and expression.