National Endowment for theArts

How the United States 

Funds the Arts
National Endowment for theArts

How the United States

Funds the Arts

October 2004
Published by 

National Endowment for the Arts

Office of Research and Analysis

Mark Bauerlein, Director

October 2004

Prepared by Tyler Cowen, Department of Economics,

George Mason University, and the staff of the National

Endowment for the Arts.

Designed by Fletcher Design Inc., Washington, DC

Cover: The Cloud Gate Dance Theatre of Taiwan’s

Chou Chang-ning, Sung Chao-chiun, and Sheu Fang-yi

in Cursive, a work co-commissioned by the University

of Iowa’s Hancher Auditorium and supported by the

National Endowment for the Arts.

Photo by Liu Chen-hsiang

Voice/TTY: 

(202) 682-5496 

For individuals who are deaf or hard-of-hearing.

Individuals who do not use conventional print may

contact the Arts Endowment’s Office for AccessAbility

to obtain this publication in an alternate format.

Telephone: (202) 682-5532

This publication is available online at www.arts.gov,

the Web site of the National Endowment for the Arts.

National Endowment for the Arts

1100 Pennsylvania Avenue, NW

Washington, DC 20506-0001

(202) 682-5400
CONTENTS

Preface by Dana Gioia ...............................................................v

I. Introduction ..............................................................................1

II. Direct Public Support for the Arts .....................................3

III. Other Public Support for the Arts and Culture ..............8

IV. Private Giving and Tax Incentives ...................................15

References ..................................................................................23

NATIONAL ENDOWMENT FOR THE ARTS iii
T

he role of a federal agency in funding

the arts is often misunderstood—and

for very good reasons. The American

system of arts philanthropy is complex

and ever changing. As Chairman of the National

Endowment for the Arts, I have constantly been

impressed by the ingenious diversity and

endless creativity of ways in which the arts are

funded in the United States. I thought it might be

useful to provide—for both Americans and an

international audience—a concise overview 

of how America’s unique system of arts

philanthropy works. 

In order to understand how the National

Endowment for the Arts—and arts funding in 

the United States—operate, it is helpful to have

some basis for comparison. By looking abroad,

we can see how other nations manage similar

cultural institutions. In countries like France,

Germany, Mexico, or China, most arts funding

comes from the government—either at a federal

or local level. These systems tend to be simple,

fixed, and centralized, often focused in a large 

ministry of culture. These organizations are also

typically political, as arts personnel are usually

members of civil service or political appointees

from the ruling party. These systems provide

smooth and stable planning for arts

organizations, but they also divide the 

cultural world into insiders and outsiders. The

insider institutions tend to be well subsidized

with large annual grants while the outsiders

survive on the margins of the culture, if they

survive at all. 

The subsidies awarded by ministries of

culture are enormous by American standards.

For example, the government subvention for

Italy’s major opera houses is nearly ten times

larger than the annual Endowment working

budget. This support allows major Italian

companies to present opera at the highest

artistic standards. And yet, some of these

lavishly supported houses do not stage a single

production in some years because of

organizational problems, labor issues, or

reconstruction. Government support, therefore,

does not solve all artistic and organizational

problems, or guarantee that an institution serves

its local community. 

In contrast to the European models, the 

U.S. system of arts support is complex,

decentralized, diverse, and dynamic. It combines

federal, state, and local government support

with private subvention from individuals,

corporations, and foundations, as well as box

office receipts. The financial statistics differ by

art form and change from year to year, but in

general terms about one-half the income

American arts organizations receive is earned

from box office or sales. The rest is donated—

overwhelmingly from the private sector. 

Only about 10 percent of arts support in the

U.S. comes from the government, and only about

2 percent from the federal government, of which

NATIONAL ENDOWMENT FOR THE ARTS v

PREFACE

The Role of a Federal Arts Agency

Dana Gioia, Chairman

National Endowment for 

the Arts

Photo by Vance Jacobs
slightly less than 1 percent comes from the

National Endowment for the Arts. (The figures

on government support exclude the enormous

indirect subsidy the federal government

provides by making cultural contributions tax

deductible.) The amount of federal government

support is miniscule by European standards,

and yet the American system works. How can

this be? 

Decentralization and Diversity

Like most free market or mixed market systems,

American arts philanthropy is complex precisely

because it is decentralized and dynamic. Similar

institutions often have wildly differing results

because of their locations, artistic talent, 

cultural philosophies, and management.

Likewise, the dynamic nature of the system

means that one decade’s high-flying leader can

suffer huge reversals in the next—just as in

corporate America. While no one relishes the

ups and downs of the cultural economy, it 

does have the healthy effect of keeping artists

and institutions realistically focused on their

goals and communities. The best institutions

make themselves irreplaceable in their 

chosen fields. 

This cultural dynamism also provides new

groups the chance to grow. Chicago’s

Steppenwolf Theater did not exist 30 years ago.

Now it is one of the nation’s leading theater

companies. Jazz at Lincoln Center is even more

recent. In little more than ten years it has

become the world’s largest nonprofit jazz

organization. It is worth noting that the NEA

played an important role in fostering the growth

of both organizations. 

Some of these new institutions are quite

amazing. Rimrock Opera of Billings, Montana, for

example, is the only opera company in the

nearly 800-mile stretch between Bozeman,

Montana, and Fargo, North Dakota. Only five

years old, Rimrock now not only brings opera to

its own community but also tours rural Montana

and Wyoming from Glendive and Miles City to

Cody and Casper, the sparsely populated high

plains and mountain territories where the deer

and the buffalo still roam. These are places that

Verdi, Puccini, and Donizetti have never before

been performed. As my Italian grandfather used

to say in astonishment, “Only in America!” 

If the American arts system is remarkably

complex, decentralized, and dynamic, it is also

uniquely effective—producing a cultural

landscape of enormous size and unmatched

diversity. No one—not even the NEA—has exact

statistics on American cultural institutions

because they change so rapidly, but an expert

estimate of different fields leads us to some

astonishing numbers. 

There are now more than 1,500 professional

theaters, large and small, operating in the U.S.

There are also more than 1,200 symphony

orchestras, plus another 600 youth orchestras,

as well as roughly 120 opera companies.

Meanwhile, there are approximately 5,000

Jazz at Lincoln Center, featuring the Lincoln Center

Jazz Orchestra (pictured), has become the world's

largest nonprofit jazz organization in just over ten

years.

Photo by Keith Major

vi
writers’ conferences now offered around the

nation. Nonprofit organizations such as the

Poetry Society of America in New York or the

Writers Place in Kansas City present public

readings of authors on a regular basis. 

These groups display enormous variety.

Among the 1,200 symphony orchestras, some

are huge professional organizations like the

Boston Symphony that offer year-round concerts

and international tours. Others are small

amateur groups like the Cotati Philharmonic (in

my home county of Sonoma, California) that

gather to produce a few local performances each

year. Some orchestras focus exclusively on

modern and contemporary music. Others cover

the entire symphonic repertory. Smaller groups

specialize in Baroque and Renaissance music.

That diversity, size, and scope is confusing to

anyone trying to summarize the field, but they

reflect the vitality of American classical music. 

In such a rich and dynamic artistic culture,

what meaningful role can the National

Endowment for the Arts play? The NEA’s 2004

budget is only $121 million dollars—of which

$100 million is distributed after agency overhead

is taken into account. In other words, what role

can be played by an institution that provides

slightly less than 1 percent of total arts funding?

This situation is further complicated by the

NEA’s public mandate to support all of the arts,

as well as arts education, in all 50 states, as well

as in the six U.S. territories. 

Multiplying Effects

From a European perspective, the NEA would

seem doomed to perpetual marginality. The

institution is surely too small and too stretched

to make a difference. As reasonable as that

verdict sounds, I would maintain that this

defeatist perspective is wrong. It misunderstands

both the nature of the U.S. arts world and the

Arts Endowment. It also ignores the remarkably

productive history of the NEA and its welldocumented, if not equally well-known, record 

of transforming American culture. Finally, this

perspective equates NEA effectiveness purely in

terms of dollars without any recognition of how

that money is spent. 

The National Endowment for the Arts has a

proven ability to initiate and sustain powerful

trends. During the 1970s and 1980s, under the

leadership of Nancy Hanks, Livingston Biddle,

and Frank Hodsoll, the NEA slowly transformed

American cultural life. It consciously created 

the vast system of regional theaters, opera 

and dance companies, and orchestras that 

America now enjoys. 

During this time, certain laws of what we

might call American cultural microeconomics

emerged. In case after case, the NEA learned 

that its grants had a powerful multiplying effect.

Every dollar that the NEA gave in grants

typically generated seven to eight times more

money in terms of matching grants, further

donations, and earned revenue. A $100,000

grant, therefore, delivered $800,000 in eventual

funds to an organization. The reason for this

multiplying effect is obvious: NEA funding has

the power to legitimize a new organization 

and further validate an existing one. Such

A performance of Tchaikovsky's opera The

Queen of Spades at the Spoleto Festival USA,

which benefitted from early NEA support. 

Photo courtesy of the Spoleto Festival USA

NATIONAL ENDOWMENT FOR THE ARTS vii
endorsements attract further support. As 

the old saying goes, “Nothing succeeds like

success.” In this way, early NEA support helped

create major ongoing arts organizations as

diverse as the American Film Institute, the

Spoleto Festival USA, and the PBS series Great

Performances. 

Although the Endowment represents less

than 1 percent of total arts philanthropy in the

U.S., it nonetheless remains the nation’s largest

annual funder of the arts. This fact demonstrates

the radical decentralization—and therefore

diversity—of the American system. Just because

a system is decentralized, however, doesn’t

mean that it lacks leadership, trends, or

direction. Consider the stock market, where a

single company’s earning results can trigger a

rise or fall in overall market results. 

An astonishing amount of the media

discussion of the NEA overlooks an obvious fact

about its past, current, and presumably future

situations—namely that the Arts Endowment

cannot and has never operated like a centralized

ministry of culture. It has never possessed the

resources to impose its will on the American

arts world. It cannot command or control the

policies of individual institutions. 

Leadership through Collaboration

Rather than being disappointed about the lack 

of central control, I consider this realization of

our limits in purely neutral terms. Objective 

self-assessment is the proper and inevitable

basis on which any truthful vision of the NEA’s

future must be built. I feel, therefore, absolutely

no disappointment in the fact that the Arts

Endowment cannot dictate the terms of

American culture. That putative weakness is

actually one of the agency’s basic strengths. 

To build on the implied metaphor of

“dictate,” let me offer a more democratic verbal

formulation of the Arts Endowment’s role in

American culture. The NEA does not dictate 

arts policy to the United States; instead, it enters

into an ongoing series of conversations about

our culture, out of which emerge thousands 

of collaborations, large and small, national,

regional, and local. NEA leadership cannot work

by centralized fiat. It operates effectively only 

by fostering and sustaining partnership.

A decentralized and constantly evolving

system of private and public support for the arts

is more than just a political practice. It goes to

the heart of artistic freedom, experimentation,

and diversity. With resources and funding spread

across a variety of agencies, foundations, and

other institutions with different values and goals,

no single power sets the cultural agenda and no

single creed or outlook dominates. The result is

an energetic mix of traditional and experimental

approaches, Western and non-Western

inspirations, populist and elitist perspectives,

folk and fine arts.

The following report provides a brief but

comprehensive overview of how the arts are

funded in the United States. It also addresses

the role of the National Endowment for the 

Arts and other public agencies in this

decentralized and protean process. American

arts funding is complex, with many direct and

indirect sources, both private and public,

playing a part. This report attempts to clarify

some of the relationships and provide a clear

understanding of how the United States funds

the arts. Although the American model may be

difficult to understand, the extraordinary vitality

of our artistic culture demonstrates that it works

remarkably well. 

Dana Gioia

Chairman

viii HOW THE UNITED STATES FUNDS THE ARTS
T

he world of arts and culture in the

United States is extraordinarily complex

and fertile. Citizens who enjoy the arts

can choose from a wide array of drama,

visual art, dance, music, and literature available

in local theaters, museums, libraries, universities,

performance halls, and nightclubs, as well as on

radio and television. In the last 20 years, the arts

and culture sector has boomed as the number 

of performing arts groups and the revenues 

from sales and attendance have risen to all-time

high levels.

The proliferation of U.S. arts institutions 

and revenues has been mirrored by substantial 

gains in financial support for the arts. Private

philanthropy has increased dramatically since

1960, and public agencies expressly devoted to

the arts have come into being through acts of

U.S. Congress. Private donors have created

endowments, and foundations have placed the

arts at the center of their portfolios. In this 

fluid and evolving world, the directors of arts

organizations face a two-sided challenge. 

On one side they must cope with rising

expenditures for artists, artworks, productions,

and educational projects. On the other side,

they forecast the revenues needed to support

the former. The revenues themselves are

unpredictable, though, and come from dual

sources: “earned income” (ticket sales,

subscriptions, etc.) and “unearned” or

“contributed income,” that is, private and public

sector donations of money, time, and resources.

To people outside the American art world,

the funding system must appear a labyrinthine

NATIONAL ENDOWMENT FOR THE ARTS 1

I.

INTRODUCTION

Lloyd Notice as Othello and Kathryn Merry as

Desdemona in the final scene of the Aquila Theatre

Company’s production of Othello. 

Photo by A. Vincent Scarano 

The report was prepared by Tyler Cowen, Department

of Economics, George Mason University, and the staff 

of the National Endowment for the Arts.
network of public and private entities, tax

policies, legislative allocations, donated

bequests, restricted endowments, education

mandates, and social agendas. The hierarchy of

government agencies, composed of city, county,

state, regional, and federal strata, is a dizzying

scheme, especially to those foreigners whose

own nations have highly centralized, statedirected systems. It is no wonder that the

financial mechanisms of American arts policy

and practice are poorly understood. 

This monograph explores the entire funding

network and details how the financial system in

the United States fosters artistic creativity and

preserves artistic traditions. Commentators

2 HOW THE UNITED STATES FUNDS THE ARTS

Earned Income

50%

Contributed Income

50%

Public

10%

Federal: 2%

State: 2%

Local: 6%

Corporations: 7%

Foundations: 13%

Individuals: 20%

Private

40%

tend to regard the arts as separate from fiscal

policy, but in fact the arts are a substantial part

of the economy, driving tourism, motivating

business and residential relocation trends,

shaping schools, and employing approximately 

two million professional artists. If international

cultural exchanges are to be meaningful, the

relations between public/private funding and 

the artworks, performances, and education that

they ensure must be understood in all their

complexity, if only to explain how a nation

founded on principles of political freedom 

and capitalism should have produced such 

rich traditions and widespread participation

among its citizens.

Financing Nonprofit 

Arts Organizations 

in the U.S.

Estimates from multi-year data. These numbers

do not include private tax deductions for giving

to the arts and culture, currently estimated at

$5.4 billion.
Most discussions of arts policy 

start with the idea of direct 

public subsidies. Typically, a

government agency will use

selection procedures and then write checks to

artists and art institutions. In many cases a

government will erect a formal agency to

administer all of the country’s arts programs

and steer the development of its culture.

By contrast, the American system uses a

regime of incentive grants and relies on a

principle of decentralization. There is no

cultural ministry, and no single agency or

institution controls more than a small

percentage of the funds distributed. The

National Endowment for the Arts, one of the

largest funding institutions, accounts for a 

small fraction of aggregate support for the arts. 

Direct public support should not be

identified with the concept of an arts policy.

Direct grants will never finance the bulk of

artistic activity in the United States; instead,

they fill gaps, enhance arts education, spread

new creations, and enable preservation. Direct

grants complement other means of funding the

arts, not substitute for them. The majority of

the Arts Endowment’s grants, for example,

require the recipient organization to couple the

award funds with other, non-federal donations.

The United States has chosen a relatively

low level of direct grants for several related

reasons. First, Americans are suspicious of the

prospect of centralized government

NATIONAL ENDOWMENT FOR THE ARTS 3

II.

DIRECT PUBLIC SUPPORT FOR THE ARTS

bureaucracies. The idea of the cultural ministry

has never been popular in the United States.

Second, the American system has drawn 

from the British tradition of “arms-length”

government institutions, such as arts councils.

Third, America has a large, ethnically diverse

population and heritage. Fourth, Americans use

the tax system to support the arts, as will be

discussed further below.

These features are sometimes regarded as

weakening the American commitment to the

arts, but they can make direct grants more

effective as well as guaranteeing more diversity

and greater freedom in the arts. In the U.S.,

direct grants are less likely to politicize the arts,

and American artists are not required to court a

political establishment. The granting agencies

are not expected to oversee an entire culture or

to provide the bulk of the required

entrepreneurial energies.

If one program or agency makes bad

decisions, its impact is limited in size and 

scope. At the same time, the large number 

of independent programs allows for

experimentation and learning. Over time, the

best ideas and practices can spread to many

different institutions, both private and public.

Furthermore, no single program or agency

can too greatly influence the general state of

American culture. To be sure, levels of

accountability are present. Arts programs and

agencies are accountable for the grants they

make. But no one holds the Arts Endowment
responsible if American dance is not very good

in a particular year. Its mission is to improve

our cultural life and heritage, not to take

responsibility for America’s entire creative

output.

This targeted kind of accountability achieves

two ends. First, arts programs and agencies are

responsible only for variables under their

control. Second, the programs and agencies are

not tempted to disrupt the more general

mechanisms of cultural production and

dissemination. Arts programs and agencies in

the United States supplement broader processes

of creative discovery and education, rather than

substituting the state for the market.

That being said, let us examine a few of

America’s arts programs.

A. National Endowment for the Arts

Established by Congress in 1965 as an

independent federal agency, the National

Endowment for the Arts is the designated arts

organization of the United States government.

The Arts Endowment is dedicated to supporting

excellence in the arts—both new and

established, bringing the arts to all Americans,

and providing leadership in arts education. It

awards more than $100 million annually—

investing in every state and jurisdiction—which

in turn is estimated to generate more than $700

million in additional support. The Arts

Endowment has played a substantial role in the

development and preservation of folk arts,

dance, theater, literature, opera, and other arts

that Americans now enjoy. 

The Endowment awards matching grants for

projects undertaken by nonprofit organizations.

In addition, it awards non-matching individual

fellowships in literature and lifetime

achievement awards in jazz and the folk and

traditional arts. Forty percent of the Arts

4

NEA NATIONAL HERITAGE

FELLOWSHIPS

The Endowment recognizes the

contributions of outstanding practitioners of

traditional art forms in the United States

with NEA National Heritage Fellowships.

More than 300 exemplary folk and

traditional artists have been selected for the

U.S. government’s highest cultural honor,

accompanied by an award of $20,000. The

NEA National Heritage Fellows represent

the best achievements of diverse artistic

traditions across the nation. A partial list of

award-winners reveals the breadth of the

program: Native American basket weavers,

potters and storytellers; African American

blues, Cajun, Hmong, Sephardic and

Mariachi musicians; Basque cowboy poets;

Swedish, Irish, and Appalachian fiddlers; 

a Guamian blacksmith; an Eskimo mask

maker; a German American Bobbin

lacemaker; an Arab American oud player; a

Tibetan sand mandala painter; a Bonsai

sculptor; African American and Appalachian

quilters; Lebanese and Puerto Rican musical

instrument makers; Cambodian traditional

dancers; Appalachian songwriters; and

Orthodox Byzantine icon and Santos

woodcarvers.

1990 NEA National Heritage Fellow Nati Cano 

and his band Mariachi Los Camperos performing

at the 2004 Smithsonian Folklife Festival. 

Photo by Jim Saah

HOW THE UNITED STATES FUNDS THE ARTS
Endowment’s funds go to the 56 state and

jurisdictional arts agencies and the six regional

arts organizations in support of arts projects 

in thousands of communities across the 

country. In general, support is provided for

projects that nurture creativity and provide

accessibility to the arts. For instance, the

Endowment awards matching grants to small

presses to help literary works reach American

readers. Part of its mission is to ensure

availability of the arts outside the major cities

and to protect indigenous and regional cultures.

Applications generally receive three

independent levels of review for artistic

excellence. First, they are reviewed by

independent panels of nationally recognized

artists and arts experts. Recommendations are

forwarded to the National Council on the Arts,

the Arts Endowment’s advisory body comprised

of renowned artists, distinguished scholars, and

arts patrons appointed by the President and

confirmed by the U. S. Senate, and ex-officio

members of Congress. The Council reviews

grant applications and makes recommendations

on which applications to fund. These

recommendations are sent to the Chairman of

the National Endowment for the Arts, who

reviews them and makes the final decision on all

grant awards. The Chairman of the Endowment,

appointed by the President with the advice and

consent of the Senate, serves a four-year term.

The National Endowment for the Arts is only

one of several federal agencies that support

culture. Other important federal agencies are

discussed later in this monograph.

B. State Arts Agencies

Federal arts funding is complemented, indeed,

exceeded, by state arts appropriations. State

arts appropriations are dependent upon state

tax revenues, which are tied to the general

economic conditions in the state. In 2003, statelevel expenditures were at $354.5 million, falling

to $273.7 million in 2004, a 23 percent decline. 

In 2002 and 2003 many state arts budgets came

under strong fiscal pressures, in part because

state governments were required to balance

their budgets with falling revenues. California

cut its arts budget from $20 million to $2 million,

Florida cut from $30 million to $6.7 million, and

Michigan cut from $22.5 to $11.7 million.

Although a few arts agencies had increases

(such as Mississippi, which rose from $1.7

million to $3.8 million), many other states

enacted small cuts and some states talked about

phasing out their arts councils altogether. 

But the state-level fiscal crises may have peaked,

and large cuts to state arts budgets appear to

have ended.

While state arts agencies came into being 

in the 1960s and 1970s, much of the financial

NATIONAL ENDOWMENT FOR THE ARTS 5

The Oklahoma Arts Council provides funding for a

variety of programs, such as their apprenticeship

program in mandolin-making in which master

mandolin maker Nicholas Richardson participated. 

Photo courtesy of the Oklahoma Arts Council 
growth in the state institutions came in the

1980s. In 1979, Arts Endowment funds were 

80 percent greater than state legislative

appropriations; but by 1989, state appropriations were 60 percent higher.

The Arts Endowment and the state agencies

are partners in funding the arts. When the 

Arts Endowment was established in 1965, five

states had official arts agencies or councils. But

from the beginning, the Arts Endowment

supported the development of state arts

agencies and, by the mid-1970s, gave at least 20

percent of its program funds to state arts

agencies and regional arts organizations. The

potential for grants induced states to set up arts

programs and councils; it is no coincidence that

most state arts agencies were founded shortly

after 1965. 

The New York State Council on the Arts

(NYSCA) is the largest state agency; its 2003

budget was $51.5 million. New York State had

arts relief programs during the Great Depression,

starting as early as 1932. NYSCA was founded in

1960 and provided an early model for the Arts

Endowment in terms of its funding patterns and

system of peer review.

State-level arts support—appropriations

from state legislators—does not deviate

dramatically from Arts Endowment spending

patterns, but there are a few differences. 

State programs tend to support smaller and

more local organizations, and younger, less

established artists. State arts agencies 

support community groups, whereas the 

Arts Endowment typically does not. State

programs are also more likely to support 

arts “applications” in the fields of health,

penology, and gerontology.

State funding procedures follow broadly

common patterns. A council or commission,

with approximately 15 members, will set funding

policy. Governors appoint council members in

staggered fashion. A few states have cabinetlevel departments with responsibility for 

cultural policy. 

Sometimes cultural nonprofits receive

direct inclusion in the state budget through lineitem appropriations. In Connecticut, line-item

appropriations have accounted for as much 

as 73.7 percent of total state arts spending. 

A few states (Alabama, California, Illinois,

Missouri, Montana, Rhode Island, and West

Virginia) have stood in the 30 to 50 percent

range for their direct appropriations, at least

until recent cuts. Nonetheless line-item

appropriations are small for the median state

and often are zero. On average, line-item

spending has accounted for roughly 16 percent

of state arts expenditures. 

C. Local Arts Agencies

Americans for the Arts estimated total arts

expenditures at the city and local level at $770

million in 2003. The U.S. Urban Arts Federation,

which includes only the 50 largest local arts

agencies, forecasted 2003 expenditures of $338

million by its members. The single largest urban

funder is the New York City Department of

Cultural Affairs; in 2004 this agency funded the

arts at a level of $118.8 million. The second

largest urban funder in 2004 was the San

Francisco Arts Commission, with expenditures

of $25.5 million.

As with state-level grants, local and city-level

grants have a scattered history. After the

success of the Chicago World’s Fair in 1893,

many American cities set up art commissions 

as part of their urban planning policies. Often

their budgets were no more than a few thousand

dollars, but they had authority to commission

public improvements and artworks. In some

cases, these institutions provided independent

support for the arts, rather than just

6 HOW THE UNITED STATES FUNDS THE ARTS
commissioning works for public buildings 

and spaces.

The first municipally supported art

collection (later discontinued) came in Chicago

in 1914. In 1915, Baltimore was the first

American city to have a municipally supported

orchestra. The Detroit Museum of Art was

turned over to the city in 1919, in return for a

new building. Philadelphia made the first

American municipal opera grant in 1923.

Between 1870 and 1910, local and state

governments accounted for 40 percent of the

funds available for museum building. By 1930,

municipalities were spending $2.5 million a year

on art museums.

New York City support for the arts dates

from nineteenth-century commissions of public

sculptures. In the 1890s, the New York Art

Commission was founded; its mission was to

oversee the attractiveness of public buildings

and parks. The city already had played active

roles in the Metropolitan Museum of Art, the

New York Public Library, and the Brooklyn

Museum of Art. These discretionary

interventions date as far back as the 1860s.

Urban involvement in the arts grew steadily

after the Second World War. In the latter part of

the twentieth century, many American cities

decided to expand their presence as regional

arts centers and magnets for tourists. These

city governments moved towards subsidizing a

wide variety of artistic institutions, including

museums, art spaces, historic buildings and

neighborhoods, and symphony orchestras. 

Local involvement takes numerous and

diverse forms. Community development

initiatives may involve the performing arts,

support arts education, or foster artistic and

architectural heritage programs. While there are

no systematic figures, local government art

expenditures go well beyond the formal arts

agencies.

NATIONAL ENDOWMENT FOR THE ARTS 7

AMERICAN THEATER

Today, there are more than 1,500

professional theaters across the 50 states

providing live performances, education, and

professional training for different audiences.

The regional and local institutions show that

development of new theatrical productions

does not take place only within the large

established theaters in major cities. New

works are supported through initiatives

such as the National Endowment for the

Arts/Theatre Communications Group

Theater Residency Program for Playwrights,

which helps playwrights produce new plays

in small and mid-sized theaters. For

example, playwright Nilo Cruz crafted a

new play, Anna in the Tropics, at New

Theatre in Coral Gables, Florida. His play

about cigar makers in 1929 Tampa whose

lives were transformed by literature was

recognized with a 2003 Pulitzer Prize 

for Drama.

Image by SpotCo, courtesy of TCG
run programming on both popular and high

culture. As for PBS, it is estimated that about 28

percent of the programs deal with culture. The

programming comes from many different

sources, including from other countries such as

Great Britain. Sesame Street, produced by the

Sesame Workshop (formerly known as the

Children’s Television Workshop), is the best8 HOW THE UNITED STATES FUNDS THE ARTS

III. 

OTHER PUBLIC SUPPORT FOR THE ARTS AND CULTURE

T

he decentralization of U.S. government

cultural subsidies is reflected in the

variety of federal agencies that have

programs to support the arts and

culture. Some agencies are independent units

specifically devoted to the arts, while others 

are arts programs directed by large government

offices unrelated to arts concerns, such as 

the Department of Defense. The way the arts

are supported varies from direct funding of

artists and arts organizations to insurance for

art works on tour. The exhibitions and

performances that ensue appear in an array 

of public spaces, including national forests,

military bases, and federal office buildings.

A. Domestic

Cultural programming is made available to the

American people on public television and public

radio. The Corporation for Public Broadcasting

(CPB) supports noncommercial radio and

television programs. The CPB, founded in 1967,

is a private nonprofit corporation, whose board

is chosen by Presidential appointment. By law,

the governing board of ten may not contain more

than six members from any single political party.

CPB provides funds to the Public Broadcasting

Service (PBS), National Public Radio (NPR), and

Public Radio International (PRI). Almost threequarters of CPB funds are given directly to

individual television and radio stations.

More than 330 National Public Radio stations

2004 Budgets for Selected U.S. Federal 

and Quasi-Governmental Organizations

Funding Arts and Culture

(dollar amount in millions)

Smithsonian Institution $489

Corporation for Public Broadcasting $377

Institute of Museum and Library Services $262

National Endowment for the Humanities $135

National Endowment for the Arts $121

National Gallery of Art $88

Department of Interior $30

(Save America’s Treasures)

Kennedy Center for the Performing Arts $17

Department of Education $10

(Arts in Education Model Development Program)

Commission of Fine Arts $8

National Capital Planning Commission $8

General Services Administration $5

(Art-in-Architecture Program)

Advisory Council on Historic Preservation $4

There are more than 200 other federal programs that

support the arts and culture.
known children’s show to have appeared on

public television. Three large PBS stations—

Boston, New York, and Washington—produce

slightly more than half of the national programs,

with the remainder being either a local product

or imported from abroad.

The CPB appropriation for 2003 is $362.8

million. Public television, however, is very 

much a mixed private-public enterprise. In a

typical year, the federal government supplies no

more than 15 percent of the public television

budget through grants, and another few percent

through direct contracts. State and local

governments, combined with public universities,

put up 30 percent or so. The remainder comes

from viewer memberships and subscriptions, and

from private corporate and foundation support.

The Smithsonian Institution, which runs 15

museums, maintains research centers, manages

the National Zoo, is affiliated with the National

Gallery of Art, and is an independent institution

inside the federal government. A Board of

Regents, with members drawn from the 

United States government and the citizenry 

at large, governs the Smithsonian. Regular

appropriations come from Congress, and in

fiscal year 2003 the net budget authority ran 

to $446 million. Its private endowment, while 

it fluctuates in value, has stood as high as 

$755 million.

The Smithsonian museums include the

Hirshhorn Museum (sculpture and modern art),

the National Portrait Gallery, the National

SMITHSONIAN FOLKLIFE

FESTIVAL

For the past 37 years on the National Mall, the

Smithsonian Institution has celebrated the

world’s cultural traditions with a public arts

festival. An estimated one million people

attend each year. More than 16,000 musicians,

performers, artists, craftspeople, and

storytellers have participated. In 2002, the

Smithsonian Folklife Festival’s theme was “The

Silk Road: Connecting Cultures, Creating Trust,”

which showcased the music, art, architecture,

and food of 20 countries on the famed trading

route from Italy and Turkey to Kazakhstan,

Bangladesh, and Japan. Puppeteers from

India, Chinese papermakers, Syrian glass

blowers, and musicians from Armenia were just

a few of the artists and artisans who took part. 

The annual two-week festival receives public,

foundation, and corporate support. The

Smithsonian event is one of hundreds of

heritage events and festivals—such as mariachi

festivals, exhibits of Native American art,

African dance and music performances, and

Chinese instrument youth orchestras—that take

place every year and are made possible with

federal and state government grants.

The annual Smithsonian Folklife Festival on

the National Mall provides folk and traditional

music and crafts from across the U.S. and

around the world. 

Photo by Barry Bergey
Collection of Fine Arts, the Renwick Gallery, and

the Cooper-Hewitt Museum of Decorative Arts

and Design. The newest addition to the

Smithsonian museums is the National Museum

of the American Indian, which opened on

September 21, 2004. 

The National Gallery of Art, one of the world’s

premiere art museums, received an appropriation

of $79 million in 2003 from the U.S. Congress. The

history of the Gallery exemplifies the private/

public partnerships that are the hallmark of

American arts institutions. It began in the 1920s

when Secretary of the Treasury Andrew Mellon

envisioned a national art museum in the nation’s

capital. In 1936, Mellon offered to donate his art

collection to the nation and to personally finance

the construction of a museum to house it on

public land. Soon after, Congress passed

legislation to establish the National Gallery of 

Art as an independent bureau within the

Smithsonian Institution. With construction well

under way in 1939, Samuel Kress added almost

400 art works to the project, and after the

National Gallery opened on the Mall in 1941,

further private giving arrived with the Widener,

Dale, Rosenwald, and O’Keefe donations.

The Institute of Museum and Library

Services (created in 1976 as the Institute of

Museum Services) supports museums, zoos,

botanical gardens, and libraries, and is now

spending $262 million a year. Of this total, 

$31.4 million is allocated to museums; most of

the remainder goes to libraries. The John F.

Kennedy Center for the Performing Arts 

receives a direct appropriation, currently in 

the neighborhood of $17 million, as do a few

small programs that support the arts in the

District of Columbia. 

The Federal Council on the Arts and the

Humanities, which is administered by the

National Endowment for the Arts, oversees the

Arts and Artifacts Indemnity Program that

insures foreign objects exhibited in American

museums. The Indemnity Program was created

10 HOW THE UNITED STATES FUNDS THE ARTS

The National Gallery of Art is supported by the federal government, but its world famous collection has

come from private donations. 

Photo courtesy of the National Gallery of Art
by Congress in 1975 for the purpose of

minimizing the cost of insuring international

exhibitions. Since its inception, the program has

indemnified nearly 800 exhibitions, saving U.S.

museums more than $160 million in insurance

premiums. The Arts and Artifacts Indemnity

Program was substantially increased in 2003 

to provide up to $8 billion in total coverage. 

Risk management for this program has been so

successful that it has never created any costs 

for U.S. taxpayers.

The Art-in-Architecture program is

administered by the General Services

Administration (GSA). This program, originally

modeled after the New Deal’s Treasury

Department Section of Painting and Sculpture,

commissions and funds art for public buildings.

Since 1979, GSA has spent one-half of one

percent of construction costs for federal

buildings on artwork, which is then owned by

the federal government. In 2001, the program

initiated projects with a collective budget of 

$4.5 million. As of 2001, the program had 260

projects and another 65 in the works.

The National Endowment for the Humanities

(NEH) provides funding for scholarly research 

in history, philosophy, literature, religion, ethics,

and jurisprudence. Together with the Library of

Congress, the NEH funds programs to preserve

old books by protecting the paper from

deterioration. It also funds literary programs for

public television, makes grants to museums for

exhibits, supports scholarly seminars for

teachers, and subsidizes low-price editions of

American literary classics. Most NEH programs

concern “the humanities” rather than “the arts,”

but the two concepts overlap in literature and

museum support.

The Library of Congress and its American

Folklife Center are active in gathering the

records of diverse cultures and, through

technology, providing public access to a 

growing archive of three million items ranging

from photographs and manuscripts to audio

recordings and moving images. As the 

country’s largest archive of ethnographic 

field recordings, it preserves materials from

around the world that date from the very first

sound recordings of 1880 to the present. 

The Center is developing an ethnographic

thesaurus of cultural archives and collections

worldwide that can eventually link and be

interrelated via database technology, enabling

scholars––and the public––access throughout 

the world. 

The U.S. Forest Service funds

demonstrations of folk arts and crafts, or

performing arts activities more generally, in

NATIONAL ENDOWMENT FOR THE ARTS 11

MAYORS’ INSTITUTE ON 

CITY DESIGN

The National Endowment for the Arts, in

partnership with the American Architectural

Foundation and the U.S. Conference of

Mayors, conducts regular workshops for

mayors to collaborate with design

professionals on solutions to the design and

environmental challenges of America’s

cities. Participation is limited to 20 persons,

half mayors and half designers. At the

meetings, mayors present their specific

design issues, such as waterfront

redevelopment and downtown

revitalization, and designers help them draft

solutions. Over the last 20 years, more than

600 mayors and 400 design professionals

have participated in the Institute, which has

been honored with the Presidential Award

for Design Excellence, the Progressive

Architecture Award from Architecture

Magazine, and an Institute Honor Award

from the American Institute of Architects.
many national forests. Many national parks 

have collections of artwork and support

residency programs for artists, under the aegis

of the Department of the Interior. The National

Park Service collaborates with the Arts

Endowment, NEH, and IMLS in funding a major

preservation program, “Save America’s

Treasures,” which conserves historic structures

and collections. Additionally, many large-scale

“earthworks” sculptures, such as those of

Christo or Robert Smithson, have been created

or placed on public lands.

Some of the largest government arts

programs come through the military. The

budget for the military bands alone exceeds

$100 million dollars annually. The United States

Armed Services, under the “morale, welfare, and

recreation” initiative, presents regular cultural

programs for servicemen and servicewomen 

and their families. Libraries and movie showings

are common. The U.S. Army runs a large theater

12 HOW THE UNITED STATES FUNDS THE ARTS

NATIONAL ENDOWMENT

FOR THE HUMANITIES

The NEH is deeply involved in scholarly

projects to preserve local and regional

cultures. With assistance from the NEH, 

the University of Alaska in Fairbanks is

preserving and cataloging 132 reels,

consisting of 56,600 feet of film,

documenting Alaskan native peoples,

activities, and settings from 1927 to 1965.

Information about the individuals and

activities depicted on film will be obtained

from Alaskan native peoples and

incorporated into catalog records for entry

into local and national bibliographic

databases.

In the Western United States, the NEH

provides financial assistance to 180 libraries

for bilingual reading and discussion

programs called “The Language that Unites

Us/El lenguaje que nos une” and “The

Bridges that Unite Us/Los puentes que nos

unen” to foster an appreciation for the rich

culture and experiences of Latinos as

reflected in the work of noted authors, such

as Julia Alvarez, Carlos Fuentes, Miguel

Méndez, Pablo Neruda, and Sabine Ulibarrí. 

Another collaborative project currently

supported by the NEH is “Southern African

Praise Poetry.” Researchers at Ohio State

University are working with African

colleagues to create a CD-ROM on

southern African oral literature, specifically

on the praise poetry performed in the

Nguni and Sotho-Tswana languages.

Through the U.S. Forest Service and NEA’s Arts and

Rural Community Assistance Initiative, this series of

metal sculptures depicting the Blackfeet Tribe’s Napi

Creation Story was commissioned for the Museum of

the Northern Plains Indian in Browning, Montana. 

Photo by Alex Gladstone
were both created at this time. The Voice of

America (VOA) transmitted radio programs,

often of a cultural nature, as did Radio Free

Europe and Radio Liberty. In 1953, the United

States Information Agency (USIA) was created 

to spread a favorable American image around

the world. 

State Department and USIA programs sent

leading American orchestras, singers, jazz 

and folk musicians, musical shows, and

instrumentalists on tours of the world. Jazz,

modern dance, and avant-garde theater

benefitted in particular from federal patronage.

The performers received financial support and 

a new air of legitimacy, thereby widening their

audience base.

program. These programs have a significant

influence on the cultural lives of the 1.4 million

Americans who serve in the military and 

their families. 

The Army Art Collection, an extensive

(10,000 plus) holding of paintings, drawings,

sketches, and watercolors, records the history 

of America at war. The military art held by the

government includes such notable artists as

Jacob Lawrence, Reginald Marsh, Horace Pippin,

and Thomas Hart Benton.

Working with the armed services, the United

Service Organizations Inc. (USO) entertains

soldiers by bringing in movie stars, musicians,

and other celebrities, especially during wartime.

For performances, USO relies on volunteer labor

or pays its performers at reduced rates. During

World War II, the USO employed 5,424 salaried

entertainers and had total show attendance of

172 million. The USO is not part of the federal

government, but it does receive its charter from

Congress and relies on the U.S. military for its

support. The President is typically the

Honorary Chairman of the USO and formally

endorses the agency. The USO today has 120

centers around the world and serves an average

of five million individuals each year.

B. International

The arts also receive support from the U.S.

foreign affairs agencies. Diplomacy programs

support the presentation of American arts

abroad.

As the Cold War developed, politicians

supported the performance of American arts

abroad as a counter to Soviet communism. The

Smith-Mundt Act of 1948 called for the spread of

information abroad about American culture and

government. The Office of International

Information and Educational Exchange (OIE) 

and the United States Information Service (USIS)

NATIONAL ENDOWMENT FOR THE ARTS 13

NEA Jazz Master Dizzy Gillespie has led various bands

on U.S. State Department tours around the world,

most notably in the 1950s to South America. 

Photo by Martin Cohen 
Cultural diplomacy programs declined with

the end of the Cold War. USIA was folded into

other State Department programs in 1999.

However, the Department still administers the

Fulbright exchange programs and runs “artistic

ambassador” programs that support

performances by U.S. artists abroad, with a

budget of approximately $3.4 million annually for

the last five years. Cultural broadcasts continue

through the Voice of America, Radio and

Television Marti (aimed at Cuba), and World Net.

Cultural diplomacy is now applied in the

Middle East. The recently established Radio

Sawa received $35 million from the U.S. Congress

to broadcast popular Arabic music and news

from an American perspective. A Congressional

appropriation also provided $62 million for an

Arabic language TV station, Al Hurra [Free One],

to broadcast throughout the region. In addition

to news and documentaries, the station offers

movies, music, and cultural commentary.

For many years, the National Endowment for

the Arts has supported international exchanges

through such programs as the U.S./Japan

Creative Artists’ Program and ArtsLink, an

exchange program with Central and Eastern

Europe, Russia, and the Baltics. Recently, the

NEA has initiated cultural exchange programs

with Mexico, China, the European Union, and

UNESCO, as well as expanded the Open World

program that brings Russian artists, arts

journalists, and arts administrators to the 

United States.

14

NEA LITERATURE

FELLOWSHIPS AND GRANTS 

The National Endowment for the Arts

nurtures a multiplicity of literary traditions

through fellowships to emerging writers and

incentive grants to nonprofit literary

magazines and independent and university

presses to publish, distribute, and promote

poetry, fiction, translation, and creative

nonfiction by contemporary writers. 

Through the Translation Fellowship program,

established in 1981, the U.S. government has

helped support the translation of 218 literary

works into English, providing access to

foreign literature not generally available to

American readers. In 2003 and 2004 alone,

the NEA program supported the translation

of writers from Albania, Chile, China,

Denmark, France, Germany, Greece, India,

Israel, Lithuania, Norway, Poland, Portugal,

Spain, and Turkey.

Some of the authors who have received NEA

Literature Fellowships.

HOW THE UNITED STATES FUNDS THE ARTS
NATIONAL ENDOWMENT FOR THE ARTS 15

A. Individual and Foundation Giving

The tax system provides the most significant

arts support in the United States. Estimates

suggest that Americans donated roughly $12.2

billion to the category “Arts, Culture, and the

Humanities” in 2003. In per capita terms, the

total amounts to about $42 for each individual in

the United States. Private individuals account

for about 50 percent of the total, foundations 

for 33 percent, and corporations account for 

17 percent.

Under the U.S. system, any donation to a 

tax-exempt nonprofit organization qualifies as 

a potential deduction for the tax-paying donor. 

It is required only that the taxpayer itemize his

or her deductions, rather than taking the

standard deduction allowed by law. Today

about 60 percent of American taxpayers—most

of all homeowners and the wealthy—itemize

their tax deductions. For these individuals, the

donation of a dollar to a nonprofit institution

reduces taxes between 28 and 40 cents per

dollar, depending on the individual’s tax

position. The tax incentive therefore applies to

most giving to the arts. The estate tax provides

further incentive to donate wealth rather than

pass it along to heirs. 

Donations to other tax-exempt, nonprofit

institutions—such as charities and churches—

are also deductible. The U.S. tax system thus

favors decentralization of nonprofit activities,

rather than any particular conception of art, or

even any particular conception of what a

nonprofit should do. Nonprofits with artistic

programs may serve as talent spotters, direct

producers of creative outputs, donors,

marketers, educators, event organizers, or

preservers of the past. Many nonprofits are

small and informal, such as volunteer

community groups.

The tax incentive motivates a great deal of

giving. In economic language, donations appear

to exhibit a “price elasticity” in the range of 

-0.9 to -1.4. In other words, for every dollar the

U.S. Treasury loses from the deduction, private

nonprofits receive additional donations in the

range of 90 cents to $1.40. These numbers

suggest that the tax incentive is central to

charitable and artistic giving.

Donations fund American nonprofits to a

considerable degree. Museums, symphony

orchestras, opera companies, and other cultural

organizations reap only part of their overall

revenues from ticket or entrance fees. Many of

America’s leading institutions would not exist if

private citizens had not bequeathed their

holdings and invested their resources. 

Consider some broad estimates for American

symphony orchestras. According to one set 

of figures, 33 percent of their income comes

from private donations and 16 percent from

endowments and related sources. Concert

income generates 42 percent of revenue, and

direct government support provides only 6

percent of revenue. For nonprofit arts

IV. 

PRIVATE GIVING AND TAX INCENTIVES
16 HOW THE UNITED STATES FUNDS THE ARTS

institutions more generally, individual,

corporate, and foundation donors make up

about 45 percent of the budget. Twelve percent

of their income comes from foundation grants

alone. While these numbers fluctuate each year,

they provide a rough measure of the appropriate

magnitudes at hand.

For purposes of contrast, a theater or

orchestra in Germany will likely receive 80

percent or more of its budget from direct

governmental support. In France and Italy,

government support at various levels accounts

for almost all of the funding for a typical

museum. Even the Louvre, which was asked to

find private funding as of 1993, raises less than

half of its operating budget. In the United 

States, however, direct government support

accounts, on average, for no more than 5

percent of the total budget of nonprofit arts

organizations.

Individual private philanthropy to the arts 

is virtually nonexistent in most European

nations. If we look at individual donors,

Americans give almost ten times more to

nonprofits on a per capita basis than do their

French counterparts. This dramatic difference

reflects distinctly American social and cultural

traditions, which have become institutionalized

in public tax codes.

Historically, European governments have 

not offered comparable tax benefits to their 

arts, although the trend is toward offering more

benefits. France limits tax deductions to 1

percent of taxable income for individuals and 0.1

percent for corporations. Germany has allowed

tax deductibility in law but made the deduction

unwieldy through bureaucratic restrictions.

Britain allows tax deductions, but also makes

them difficult. Typically, a taxpayer has had to

agree to make payments for at least seven years

to earn the deduction. Furthermore, the

donations have not always been deductible at

the top marginal tax rate but rather at a lower

rate. Some European countries, such as France

Symphony orchestras, such as the Knoxville Symphony conducted by Kirk Trevor (pictured), combine

public support with private donations and performance income in order to cover the costs of putting on

a season of music. 

Photo courtesy of the Knoxville Symphony
NATIONAL ENDOWMENT FOR THE ARTS 17

and Italy, have few private foundations. Legal

restrictions and unfavorable tax treatment make

these organizational forms very costly.

Often it is Americans who serve as the

leading donors to some European arts

institutions. In the mid-1980s, J. Paul Getty

donated $62.5 million to the National Gallery in

London, the largest donation the institution has

received. The Tate has raised significant

American funds as well. To capture such

donations, many British nonprofits now have

American affiliates with tax-exempt status in 

the U.S. 

In the United States, donations of volunteer

time—equal in scope to 390,000 full-time

volunteers—are a large part of the broader

philanthropic picture. As of the early 1990s, the

average time donor had an income of more than

$56,000. The implicit dollar value of these time

donations thus stands above $20 billion, with

some estimates going as high as $25 billion.

American foundations are significant in their

size and scope. Recent estimates put foundation

assets at around $400 billion. Furthermore, the

flow of new money into foundations is ongoing.

From 1981 to 1999, 84.5 percent of the increase in

foundation assets (which rose almost threefold

over that period) came from new donations and

the creation of new foundations, rather than from

returns on existing foundation assets.

The foundation sector consists of more than

just a few major institutions. A 1992 estimate

has the top 25 institutions accounting for no

more than 40 percent of foundation arts funding;

the rest comes from widely scattered sources.

Of all the foundations, Getty is the largest; its

$4.5 billion endowment generates up to $250

million in yearly arts spending. Getty has used

the money to build an art museum and art

research center in Los Angeles.

The Ford, Carnegie, and Mellon foundations,

among many others, have supported a wide

variety of high culture enterprises, most of all

museums, orchestras, and libraries. The Ford

and Rockefeller Foundations have also

recognized less mainstream art forms, such as

modern dance, Beat poetry, and Latino music. 

In addition to these larger entities, small

private or family foundations also give

significant amounts to the arts. The legal and

institutional environment of the United States

supports the number and diversity of these

foundations. Some institutions, such as the

Bradley Foundation, foster traditionalist

projects; others such as the Dia Art Foundation

specialize in supporting the avant-garde.

It can be worthwhile to start a foundation for

sums smaller than a million dollars. Particular

kinds of foundations offer specific or targeted

advantages. Legacy foundations allow an

individual to make a gift during his or her

lifetime and receive a tax deduction in the

current year. The gift is not passed along until

the individual dies; in the meantime the

individual can receive income from the gift

assets. Family foundations allow the board 

of directors to be comprised of family 

members only.

B. Corporate Giving

Corporate giving also is more decentralized than

is commonly believed. Three-quarters of arts

spending comes from smaller companies with

revenues of less than $50 million. Ninety

percent of that money goes to local arts

organizations. Data from the 1990s show that 47

percent of all businesses surveyed gave money

to the arts, and that businesses devoted an

average of 19 percent of their philanthropic

budgets to the arts. The most popular grants

were to symphony orchestras (15 percent),

performing arts centers (13 percent), museums

(12 percent), and theaters (11 percent).
Corporate giving, like private and foundation

giving, has been influenced by public policy

decisions. Corporations have received tax

breaks for supporting the arts since 1936. As

with individuals, corporations give more to the

arts when they receive tax benefits for doing so.

Many of the tax benefits for the arts are

piecemeal in nature; they are not easily

measured in the aggregate. For instance, artistic

institutions benefit from local tax breaks and

legal provisions, often under the guise of urban

renewal. Skillful artistic entrepreneurs can put

together packages of direct and indirect

subsidies, drawing on a wide variety of sources. 

Consider one example. The Minneapolis

Artspace organization wanted to renovate a

decrepit warehouse and turn it into artists’

apartments and studios. They started by going

to the State Housing Finance Agency and

applying for Low Income Tax Credits available

for renovation projects. These credits are paid

for by the federal government but allocated

through state governments. The project had an

estimated value of $20 million, which meant that

the available tax credit was about $900,000 per

year. This sum is paid out yearly for ten years,

or $9 million in total. The Artspace used these

tax credits to get a bank loan of $7 million, and

then set up a corporate partnership, in essence

“selling” the tax credits to the corporate partner

for cash. Artspace also financed 20 percent of

the $20 million cost from the Historic Tax Credits

available through the Department of the Interior,

again “selling” these tax credits for 93 cents on

the dollar. Of the $20 million total, $11 million

was now in hand, and construction could begin.

County and state tax programs served to

complete financing, and the remainder was

raised from private foundations, again with an

implicit tax break for the donations.

Other inventive designs for supporting the

arts will surely follow in the coming years. 

One novel approach is that of the Arts Council

Silicon Valley. The Council recognizes that

Potter Brad Henry is a resident of St. Paul, Minnesota’s Northern Warehouse Artists’ Cooperative, 

a former warehouse turned into artists’ studios by Minneapolis’s Artspace. 

Photo by Jeffrey Hanson 
NATIONAL ENDOWMENT FOR THE ARTS 19

organizations must work within an environment

that provides financial incentives for businesses

to donate to the arts. So, it has devised

inventive programs for employers and

corporations to create efficient donation

strategies beneficial to their portfolios.

C. Universities

Universities are significant conduits for

government support of the arts. By subsidizing

universities, federal and state governments

provide employment for painters, writers,

musicians, and other creative artists. 

In the world of classical music, almost every

composer serves as a “guest composer” at a

university for some period of time. Many

composers teach as full-time faculty and

collaborate with campus-based musicians to

premiere new music. Professional performing

groups, such as the Cypress String Quartet at

San Jose State University in California, use

academic residencies as a base for regional and

national touring.

Roughly two dozen universities commission

new artworks. Creative writing programs, often

at state or state-subsidized universities, train

American writers and help them connect with

publishing houses. Hollywood relies on film

schools, including the film school at UCLA—a

state university—to educate and recruit future

directors. Much of the American avant-garde

theater is based in drama workshops at colleges

and universities. Architects look to universities

for their basic training, as do many individuals in

music technology and production. Universities

also subsidize literary magazines.

University presses publish many works,

including fiction, which commercial houses

reject. Some of these books have won

significant honors. John Kennedy Toole’s 

A Confederacy of Dunces was picked up by

Louisiana State University Press after being

rejected by numerous commercial publishers.

The book won a Pulitzer Prize and is now

considered a classic. American colleges and

universities operate more than seven hundred

art museums. College radio stations, and the

college tour circuit, are critical to the success of

independent rock bands and do much to foster

musical diversity.

D. How Nonprofit and For-Profit

Sectors Interact

Although America started from an underdeveloped cultural base in the eighteenth

century, it has become an acknowledged leader

in abstract art, contemporary classical

composition, modernist fiction and poetry,

theater, jazz, and modern dance, to name just a

few fields. Artistic nonprofits and the American

tax system have supported each of these

endeavors.

That being said, subsidies to artistic

nonprofits benefit for-profit enterprises as well.

Too frequently, commentators paint a picture of

one subsidized cultural sector and another

entrepreneurial cultural sector. In reality,

popular culture often draws upon nonprofit

culture for its “research and development”

efforts (and to some extent vice versa). Indirect

subsidies to the arts have made American

popular culture much stronger.

Hollywood, for instance, draws on stories

and ideas produced by the nonprofit sector.

Driving Miss Daisy, The Gin Game, On Golden

Pond, Children of a Lesser God, Glengarry Glen

Ross, and Prelude to a Kiss all started as nonprofit

theatre. Over a recent 20-year period, 44 percent

of the new plays produced on for-profit

Broadway originated in the nonprofit sector.

The literary world blurs the nonprofit and

for-profit sectors as well. Public libraries and
20 HOW THE UNITED STATES FUNDS THE ARTS

university libraries put books in the hands of

readers and boost the reputations of commercial

authors. Libraries also provide a steady demand

for low-selling works. This makes it easier for

authors to market their ideas to publishers,

provides modest royalty support, and gives

authors a chance to find a larger reading

audience.

Conclusion

American arts funding is a complex and 

evolving system of entrepreneurial initiatives,

philanthropic foundations, and government

agencies. The public and private aspects of

support are ever in flux, and the mechanisms 

of delivery mingle the best of charitable giving

with entrepreneurial ingenuity. Funding goes 

to artists, museums, theaters, orchestras,

schools, presses, community centers, cities, 

and states, and the purpose of funding ranges

from the creation of new art to the preservation

of the old, from teaching children basic skills 

to providing master artists with needed

resources.

The funding network is diverse and

perplexing, to be sure, and sometimes arts

organizations do not survive the vicissitudes of

the economy. But, simultaneously, the flexibility

of the American system may rightly be credited

with fostering the boom in art making and arts

participation that we have seen in the last 40

years. New arts organizations are constantly

emerging––bringing new styles and perspectives

to cultural life. No single agency or individual

can set an artistic agenda for the nation; the

contrasting values and tastes of different funders

ensure a rich diversity of art works; tax

incentives promote innovative methods of

private support; and decentralization helps

regional heritages and local communities retain

their integrity. 

What we see today is the spirit of American

enterprise—in the past so successfully applied

to commerce, technology, and politics—

increasingly applied to the art world. In its

comparatively short existence in the life of

civilizations, the United States has produced a

grand legacy of lasting cultural achievements,

and leaders are fast recognizing the centrality 

of artistic expression to a healthy society. “A

great nation deserves great art” is the motto of

the National Endowment for the Arts. The

American system of free enterprise, coupled

with public support, is a proven means of

fulfilling it. 

FILM FESTIVALS AND

PROGRAMS IN THE UNITED

STATES

Nonprofit film programs and festivals flourish

in the United States. Some film festivals

focus on the general—the screening of

independent films, short films, and foreign

films. Others have a specific emphasis; for

example, Asian film, documentaries, Latino

productions, or children’s film. The common

thread is that they all provide opportunities

for audiences to see work in different genres,

from America and abroad. NEA support was

instrumental in the establishment of the

Sundance Institute for Film and Television, a

nonprofit organization in Salt Lake City, Utah

that offers a program for emerging

screenwriters, directors, producers, and

composers to develop new work. More than

1,100 artists apply annually for 200 positions

in the Feature Film program that includes an

initiative for Native American filmmakers.
NATIONAL ENDOWMENT FOR THE ARTS 21

AXIS Dance Company of Oakland, California. 

Photo by Marty Sohl
NATIONAL ENDOWMENT FOR THE ARTS 23

Archambault, Edith. The Nonprofit Sector in France.

Manchester: Manchester University Press, 1997.

Barbetta, Gian Paolo. “Foundations in Italy.” Private

Funds, Public Purpose: Philanthropic Foundations in

International Perspective, edited by Helmut K. Anheier

and Stefan Toepler, 1999, 199-218.

Benedict, Stephen, editor. Public Money and the Muse:

Essays on Government Funding for the Arts. New York:

W.W. Norton & Company, 1991.

Clotfelter, Charles T. Federal Tax Policy and Charitable

Giving. Chicago: University of Chicago Press, 1985. 

Cobb, Nina Kressner. Looking Ahead: Private Sector

Giving to the Arts and the Humanities. Washington,

D.C.: President’s Committee on the Arts and the

Humanities, 1996.

Coombs, Philip H. The Fourth Dimension of Foreign

Policy: Educational and Cultural Affairs. New York:

Harper & Row, 1964.

Cowen, Tyler. In Praise of Commercial Culture.

Cambridge: Harvard University Press, 1998.

Creative America: A Report to the President by the

President’s Committee on the Arts and the Humanities.

Washington, D.C., 1997.

Cummings, Milton C. Jr. and Katz, Richard S.

“Government and the Arts in the Modern World:

Trends and Prospects.” The Patron State: Government

and the Arts in Europe, North America, and Japan.

Oxford: Oxford University Press, 1987, 350-368.

Cummings, Milton C. and Schuster, J. Mark Davidson.

Who’s to Pay for the Arts? The International Search for

Models of Arts Support. New York, New York: ACA

Books, 1989.

Dimaggio, Paul J. “Decentralization of Arts Funding

from the Federal Government to the States.” Public

Money and the Muse: Essays on Government Funding

for the Arts, Stephen Benedict, editor. New York: W.W.

Norton & Company, 1991, 216-252

Frey, Bruno S. and Pommerehne, Werner W. Muses

and Markets: Explorations in the Economics of the Arts.

Cambridge,. Massachusetts: Basil Blackwell, 1993.

Giving U.S.A. 2003. American Association of

Fundraising Counsel: Bloomington, Indiana, 2003.

International Data on Government Spending on the

Arts. National Endowment for the Arts, Research

Division, Note #74, January 2000.

Legislative Appropriations Annual Survey, Fiscal Year

2003. Washington, D.C.: National Assembly of State

Arts Agencies, 2003.

Mulcahy, Kevin V. “Government and the Arts in the

United States.” The Patron State: Government and the

Arts in Europe, North America, and Japan. Oxford:

Oxford University Press, 1987, 311-332.

Schuster, J. Mark Davidson. Supporting the Arts: An

International Comparative Study. MIT, 1985.

Schuster, J. Mark Davidson. “Questions to Ask of a

Cultural Policy: Who Should Pay? Who Should

Decide?” Culture and Policy, 7, 1996, no.1.

United States Urban Arts Federation Fiscal Year 2002.

Washington, D.C.: Americans for the Arts, 2002.

Wyszomirski, Margaret Jane. “Background on Cultural

Policies and Programs in the U.S.” Comparing Cultural

Policy: A Study of Japan and the United States. Ed. by

Joyce Zeamand and Archie Kleingartner. London:

Altamira Press, 1999.

REFERENCES 
1100 Pennsylvania Avenue, N.W.

Washington, D.C. 20506-0001

202-682-5400

www.arts.gov 

A Great Nation Deserves Great Art.