The 26|27 Arts Outlook: A Season of Financial Recalibration

As the 26|27 season begins, I believe the most useful conversation for arts leaders is neither that the industry is in crisis nor that it has finally recovered from the disruption of the last several years. Both descriptions are too simple. What we are experiencing is a significant financial and consumer recalibration, and some of the most important indicators remain unresolved.

From the perspective of an Executive Artistic Director, I find this moment particularly interesting because the financial data and the artistic conversation can no longer reasonably be separated. Programming affects liquidity. Consumer confidence affects how far in advance audiences purchase tickets. Artistic choices affect donor enthusiasm, sponsorship opportunities, and institutional relevance. For years, many of these conversations could occur independently. Increasingly, they cannot. The question for this season is therefore not simply what audiences want to see or where funding may come from. It is whether the financial structures supporting American arts organizations remain appropriately sized for the revenues the market can reliably produce.

The Financial Warning Is in the Margin

One of the clearest signals comes from Dance Data Project's recently released analysis of the largest contemporary and modern dance companies in the United States. Among the largest 150 organizations analyzed, 56 percent finished FY2024 with a deficit, marking the second consecutive year in which a majority operated in the red. Among organizations reporting deficits, the median shortfall represented 11.1 percent of annual expenditures. Perhaps even more significant is what has happened to the relationship between revenue and expense. For the consistent group of 125 companies tracked between FY2022 and FY2024, revenue increased only 0.36 percent while expenditures increased 22.65 percent. That is not primarily an audience-development problem. It is a margin problem.

It also helps explain why an organization can report respectable ticket sales, successful fundraising campaigns, growing attendance, or even record gross revenue and still feel financially weaker than it did several years ago. If the cost of producing the work, compensating employees, occupying facilities, touring, purchasing insurance, marketing performances and maintaining administrative infrastructure grows faster than reliable revenue, organizational scale eventually becomes the problem. This is an important distinction for boards. Revenue growth should not automatically be interpreted as financial growth. If a $5 million organization becomes a $6 million organization while adding $1.3 million in annual expense, it has grown operationally while becoming financially weaker. For the next several seasons, I believe margin will matter more than size.

Fundraising Is Holding Up, but That Should Not Create False Comfort

The contributed-revenue picture is more encouraging, although it deserves careful interpretation. Recent sector research from CCS Fundraising found that 62 percent of surveyed arts and culture organizations experienced revenue growth in 2025. Two-thirds increased the number of new donors, while 42 percent reported growth in both annual and campaign fundraising. At the same time, subscription and membership growth weakened considerably: only 19 percent reported increases in that category, compared with 36 percent the previous year.

This tells us something important about the current market. Donors and audiences are not necessarily behaving in parallel. An individual may be less willing to purchase a traditional subscription while remaining very willing to support an organization philanthropically. Someone else may attend only one major production during the year but make a meaningful contribution because the organization's educational or community work matters to them. For financial planning, however, strong fundraising results should not be mistaken for evidence that the underlying business model has corrected itself. Development can compensate for weakness in earned revenue, but an organization should understand when philanthropy is funding mission and when philanthropy is quietly subsidizing structural inefficiency.

That distinction is especially important when considering unrestricted versus restricted revenue. A large grant announcement may strengthen an organization's public position without materially improving the cash available to support payroll, facilities, administration or production overruns. Likewise, a successful capital campaign can coexist with a stressed operating budget. The number I would therefore want to know is not simply how much an organization raised. I would want to know how much unrestricted cash it generated, how much remains available after restrictions, what its operating margin was before depreciation, how many days of cash it maintains, and whether recurring revenue is covering recurring expense. Those are less exciting numbers. They are also increasingly the numbers that matter.

Audiences Are Providing a Different Kind of Signal

The newest audience data is more encouraging than some of the rhetoric surrounding performing arts attendance. JCA Performing Arts' September 2026 study of 44 performing arts organizations found that participating organizations presented nearly 15 percent fewer performances than the previous season, while ticket volume declined only approximately 10 percent. As a result, organizations achieved the highest percentage of capacity sold during the five-season study period. From a financial perspective, that finding deserves considerable attention.

For much of the nonprofit arts sector, institutional growth has historically been associated with greater volume: more performances, more programs, longer seasons, larger staffs and broader activity. But every additional performance carries marginal costs, and some carry substantial ones. Artist compensation, crew, venue expense, utilities, front-of-house labor, ticketing, marketing and production expenses do not disappear simply because the house is half full. Reducing inventory while concentrating demand can therefore produce a healthier financial result even if total attendance declines.

The JCA research also found evidence of continued consumer price sensitivity, with patrons appearing to migrate toward less expensive seating. At the same time, dynamic pricing generated a median of more than $331,000 in incremental revenue among participating organizations. These findings suggest that pricing sophistication will become increasingly important. Organizations need to understand the difference between the average advertised ticket price, average realized ticket yield, discounting, complimentary inventory, capacity utilization and contribution margin by performance.

A sold-out performance is not necessarily the most profitable performance, just as a poorly attended performance is not necessarily unsuccessful if it fulfills an important mission objective. The important thing is knowing the difference before the season is programmed rather than discovering it after the books are closed.

The Funding Environment Remains an Open Question

This is the area in which I would exercise the greatest caution. State arts agencies entered FY2026 in a tighter fiscal environment nationally. The National Assembly of State Arts Agencies projected approximately $650.2 million in state arts agency appropriations, a 7.7 percent decrease from FY2025. More broadly, states are moving away from the extraordinary fiscal conditions created by pandemic-era federal support and toward more constrained budgeting, with education, Medicaid and public safety competing heavily for public resources.

Federal arts funding also remains an area arts organizations should monitor rather than assume. Current NEA information indicates that new Grants for Arts Projects guidelines are anticipated later in 2026. That does not mean organizations should budget for the disappearance of government funding. It means they should stop treating uncertain revenue as certain revenue. There is an important difference.

A finance professional looking at the 26|27 environment would probably encourage organizations to scenario-test their budgets. What happens if a government award is reduced by 10 percent? Twenty-five percent? What happens if a foundation changes priorities? What happens if ticket revenue finishes five percent below projection while labor expense finishes five percent above it? Organizations with adequate liquidity can absorb those variations. Organizations operating with minimal unrestricted reserves cannot. The danger is not necessarily the size of an unexpected loss. It is the absence of room for one.

Arkansas Has Strengths, but It Is Not Insulated

Arkansas presents an interesting version of the national picture. The arts and cultural sector contributes approximately $4 billion to the state's economy and supports more than 32,000 jobs, according to the most recent state data reported by the National Endowment for the Arts. The NEA has distributed more than $12.5 million in federal arts funding in Arkansas over the past five years, directly and through state and regional partners.

The Arkansas Arts Council also continues to provide an important funding infrastructure through state and federal resources. Its General Operating Support program is particularly meaningful because eligible funds can support administrative salaries, marketing, fundraising, facilities, utilities, maintenance and other operating expenses rather than being limited exclusively to programmatic activity. For Arkansas institutions, however, the relatively smaller philanthropic and consumer market makes financial discipline especially important. Large coastal organizations can sometimes compensate for a failed program through enormous donor pools, substantial endowments or very large audience markets. Most Arkansas organizations do not have that luxury.

At the same time, smaller markets can provide advantages. Relationships between cultural organizations, corporations, foundations, government, tourism organizations and individual donors can be considerably more direct. A cultural institution can occupy a disproportionately important civic position relative to its budget. That makes Arkansas an environment in which relevance matters enormously. The case for funding cannot simply be that an organization produces excellent art. It should also demonstrate how that artistic excellence creates educational opportunity, attracts visitors, employs artists, develops young people, contributes to economic activity and strengthens the identity of the community. That is not mission drift. It is explaining the complete value of the mission.

Programming Decisions Are Increasingly Capital-Allocation Decisions

As a leader, this is where I think our profession needs to evolve. Programming is fundamentally an artistic responsibility, but every season is also an allocation of finite capital. When we choose one production over another, we are deciding where to deploy artist weeks, production labor, marketing dollars, costume resources, venue capacity and organizational attention. A production requiring significantly greater capitalization should therefore have a reason for requiring it. That reason does not always have to be ticket revenue.

An important new work may have tremendous artistic value while carrying commercial risk. An education initiative may produce little direct revenue while creating extraordinary community value. A commission may advance an art form even though its first performance cannot recover its development cost. Those are legitimate investments. But calling something an artistic investment does not remove the requirement to understand how it will be financed.

This is where I expect stronger organizations to become increasingly sophisticated. Rather than labeling productions simply as profitable or unprofitable, they will begin to understand their portfolios. Some programs generate cash. Some generate audiences. Some generate donor engagement. Some create visibility. Some fulfill education or access objectives. Some develop artists. A healthy season can contain all of these, provided leadership understands which is which. The financial problem occurs when every program is expected to lose money for a different strategic reason and unrestricted philanthropy is expected to reconcile the difference.

I Expect Programming to Become More Concentrated

Given these conditions, I do not expect the next several seasons to produce a wholesale retreat into conservative programming. I expect something more nuanced.

Recognizable titles and proven repertoire will remain important because they provide a degree of earned-revenue predictability. At the same time, organizations need distinctive artistic experiences because consumers increasingly have enormous entertainment choices and little reason to purchase something that feels interchangeable. The result may be fewer but more consequential programs.

A recognizable production can provide the financial foundation for a new commission. A large collaborative project can distribute costs while increasing market reach. A shorter performance run can concentrate ticket demand. A new work can be paired with familiar music or an accessible narrative. A production can be designed from the beginning to generate education, development, marketing and community-engagement opportunities rather than requiring each department to invent separate programming around it. This is where artistic planning and financial planning should meet. The objective should not be to make art according to a spreadsheet. It should be to ensure that the spreadsheet gives us the capacity to continue making ambitious art.

The Balance Sheet May Become More Important Than the Season Announcement

Perhaps the most significant change I expect is one audiences will rarely see.

Boards and executives will increasingly have to pay attention to balance-sheet strength rather than concentrating almost exclusively on the annual operating budget.

An organization can balance its budget and still be financially fragile. It can defer maintenance, delay payments, draw down reserves, carry receivables it cannot readily collect, use restricted cash temporarily for operations, postpone necessary hiring or rely upon extraordinary gifts to create the appearance of equilibrium. Conversely, an organization can intentionally report a modest operating deficit during a year in which it is deploying accumulated reserves for a planned strategic investment and remain financially healthy. Context matters.

For that reason, I believe boards should be looking beyond whether revenue equals expense. They should understand liquidity, unrestricted net assets, debt obligations, receivable aging, cash-flow timing, reserve policy, endowment restrictions, capital requirements and the degree to which annual operations depend upon nonrecurring revenue. Those indicators tell us whether an institution can withstand volatility.

And volatility is the one condition I think we can confidently assume will continue.

What Remains Unresolved

There are several variables I would resist predicting too confidently at this point in the season. The trajectory of federal arts policy remains important. State budgets are entering a more constrained period nationally. Consumer spending could remain resilient, but price sensitivity is clearly present. Philanthropy has performed relatively well, but changes in tax policy, financial markets and donor behavior can affect major giving quickly. Labor and production expenses remain elevated. The long-term future of subscription purchasing is still developing rather than settled. Those are not reasons for paralysis. They are reasons for scenario planning.

A good 26|27 budget should therefore not represent one prediction of the future. It should demonstrate what management will do under several plausible versions of it.

That means identifying the organization's break-even attendance, understanding which expenses are truly variable, establishing trigger points for discretionary spending, monitoring cash rather than relying solely on accrual statements, and deciding in advance what actions will occur if contributed or earned revenue falls below forecast.

Financial resilience is considerably easier to build before it is required.

What I Will Be Watching This Season

As both a Director and someone who thinks about organizations from a consulting perspective, I will be watching a relatively small group of indicators closely: whether expense growth begins to moderate; whether contributed revenue remains resilient; whether audiences continue concentrating around fewer performances; whether dynamic pricing meaningfully improves net earned revenue; whether government funding becomes more or less predictable; and whether organizations begin resizing their infrastructure around sustainable revenue rather than historical ambition. Most importantly, I will be watching operating margins.

The recent dance data should concern anyone responsible for governance or financial oversight. When a majority of organizations in a field operate at a deficit for consecutive years, the appropriate response is not panic, but neither is it normalization. Persistent deficits eventually become balance-sheet problems, and balance-sheet problems eventually become artistic problems.

The organizations best positioned for the next several years will not necessarily be those that spend the most or announce the most ambitious seasons. They will be those that know precisely where their money comes from, understand what each program is intended to accomplish, maintain enough liquidity to absorb uncertainty, invest aggressively where there is genuine opportunity and have the discipline to reduce activity where the economics no longer make sense.

For me, that is not a retreat from artistic ambition. It is what makes artistic ambition sustainable. The financial model exists to support the art, but the art cannot remain independent of the financial model that makes it possible. The most successful arts organizations of the next decade will understand both sides of that equation and will build their seasons accordingly.