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The importance of central government transfers for Finnish orchestras

by Hilppa Sorjonen

A study published by the Foundation for Cultural Policy Research Cupore in 2013 investigated the importance of central government transfers for Finnish orchestras, using as its research material the financial statements and annual reports of orchestras and a survey carried out among orchestra managers.
The statutory system of central government transfers as a source of funding for Finnish orchestras entered into force in 1993. The orchestras, theatres and museums accepted into the system receive an annual grant towards their operating expenses, calculated on the basis of the imputed number of person-years in each institution multiplied by the unit price of a person-year. Central government transfers cover 37% of the unit price.

Between 2007 and 2013, the central government paid out funding totalling the equivalent of 1,033 person-years to orchestras each year. From 2014, this total was increased to 1,037. The unit price for a person-year in an orchestra is calculated on the basis of actual operating costs declared by the institutions and is revised to bring it into line with actual costs every four years. In the years in between, only an index-linked adjustment is made to the unit prices.

The Ministry of Education and Culture may, at its discretion, increase or decrease the number of imputed person-years in any given year, for instance when accepting a new institution into the system. The central government also provides funding for the Orchestra of the Finnish National Opera and the Finnish Radio Symphony Orchestra outside this system.

Three years of growth

The system was revised by increasing the unit prices as of 2008 in order to compensate for the increase in the volume of operations and the growth of costs. In three consecutive years, an increase of about EUR 50 million was allocated to the system, of which orchestras received about EUR 8.1 million. The total central government transfers paid to orchestras increased from EUR 12.5 million in 2008 to EUR 20.6 million in 2010, an increase of 65%. At that time, the system of central government transfers covered 27 orchestras, of which 16 maintained by local authorities and 11 maintained by private associations, foundations or companies.

The increase per orchestra in the central government transfer varied hugely from one orchestra to another. The greatest increases in monetary terms – more than EUR 500,000 per annum each – went to the Helsinki, Tampere and Turku Philharmonic, the Sinfonia Lahti and the Oulu Sinfonia. Fifteen orchestras gained an increase of between EUR 100,000 and EUR 450,000, while seven orchestras gained the smallest increase, less than EUR 100,000 per annum.

The above figures do not tell the whole truth, because 11 local authorities made quite a substantial cut to funding to their orchestras at the same time, and the funding available to these orchestras did not increase by the full amount of the increase in the central government transfer. On the other hand, these orchestras had depended on local authority funding to quite a high degree, and even after the aforementioned increase in the central government transfer that percentage remained high, between 47% and 63%.

Between 2007 and 2010, the percentage of the funding of orchestras covered by central government transfers increased from 23% to 33%, while the percentage of funding provided by local authorities decreased from 63% to 54%. Although municipal funding declined, local government is still the largest funding provider for orchestras in Finland; and even though most orchestras also increased their ticket sales somewhat, the percentage of the orchestras’ combined own funding shrank from 13% to 12%. Orchestras also obtain funding from other sources, such as foundations and funds. The percentage of this other funding remained stable at 1%.

More money for personnel development

How did orchestras spend their central government transfer increase between 2008 and 2010, and how did the increase change their operations and funding profile?

Financial statements indicate that the principal application for the increase in central government transfers was personnel expenses. Orchestras hired new employees and implemented pay rises. Outsourcing (including the hiring of temporary employees), rents for premises, depreciation and other costs also grew.

Orchestra managers estimated that the principal uses of the central government transfer increase were improving the artistic quality and presentation of productions and hiring more employees. Orchestras put on more ambitious programmes, commissioned new compositions, set up concert series, revised their production processes and monitoring systems, developed new forms of audience participation especially for children and adolescents, and improved the visual appearance of concerts. Members of orchestras formed smaller ensembles to perform at schools, in workplaces, in sheltered housing and old peoples’ homes, and even gave concerts for infants.

The added human resources broadened and diversified the orchestras’ competence base, which in itself was regarded as having improved the quality of concerts and increased audience interest while allowing orchestras to revitalise their programming. Pay rises were found to improve commitment on the part of the best musicians, which was seen as another quality factor. The central government transfer increase allowed orchestras to engage better-known international soloists and conductors, which contributed to audience interest and hence to ticket sales. Orchestras were also able to programme pieces that required larger forces to perform. Infrastructure improvements were made in the form of instrument acquisitions and IT replacements.

Some of the managers of municipal orchestras considered that their orchestra had not received any increase, because their local authorities had cut back on their funding at the same time. Others noted that the increase contributed to stability, confidence and continuity even if the orchestra did not gain the full monetary value of the increase. Some orchestras undertook extra activities that generated revenue.

More concerts, smaller audiences

At the time of the central government transfer increase, the number of concerts increased by 22%. A production boost was undertaken particularly by private orchestras that perform in variable line-ups and go on tours. While attendance for municipal orchestras decreased by 7% between 2007 and 2010, attendance for private orchestras increased by 23% in the same period (attendance: 38,000).

In 2009, the concert attendance figure was 88,000 lower than in 2008. Audience numbers decreased the most for municipal orchestras, and this trend continued in 2010. By contrast, private orchestras, many of which specialise in a particular genre of music, managed to regain their 2008 attendance level and even raise it further after the dip in 2009.

Changes since the central government transfer increase

In 2011, the Ministry of Education and Culture accepted one new orchestra, specialising in rhythm music, into the central government transfer system and allocated it nine person-years. Because the total number of person-years covered in the system remained the same, some orchestras already in the system lost person-years. A new orchestra had previously been accepted into the system in 2006.

In 2012, central government transfers to orchestras were cut by about EUR 200,000 on the basis of a fixed-term cost-cutting Act, as the National Gallery was brought under funding from the National Lottery, which is also the source of the funding for central government transfers for orchestras. In 2013, this temporary measure was made permanent, and the cost cut stayed. In 2014, the number of person-years allocated to orchestras was increased by a total of four person-years. By a decision of the Minister of Culture, this increase was awarded to four small orchestras that had a rather small number of person-years to begin with, specialising in Baroque music, rhythm music, chamber music and popular entertainment. The total sum of central government transfers to orchestras, EUR 21.4 million, remained broadly the same as in the previous year.

The Ministry of Education and Culture is currently engaged in further development of the central government transfer system in order to fulfil the key goal of cultural policy – to increase the potential for all population groups and all citizens to participate in cultural events. The aim is to take the quality of operations and the activeness of the institutions into account in determining funding and to reserve a few per cent of the total sum of central government transfers for performance-based allocation. The Ministry aims for a decision on performance-based funding for orchestras to be made during the term of government beginning after the general election in 2015.

Hilppa Sorjonen D.Sc.(Econ. and Bus.Adm.) is a Senior Researcher at the Foundation for Cultural Policy Research Cupore and a lecturer in marketing at the University of Helsinki and a part-time lecturer at the Aalto University, Open University. She is a member of the Board of the Espoo Music Festivals Association.


Translation: Jaakko Mäntyjärvi

Photo: Antti Kangassalo