A public radio station’s report on the Oregon Shakespeare Festival’s (OSF) finances is a good illustration of how restricted endowments can imperil the health of a non-profit organization. OSF recently had to make an appeal for $2.5 million in order to keep their doors open. This despite the fact the organization has $96 million in assets. About $32 million of that is in property and equipment which are generally illiquid assets. Of course it would be difficult to mount of festival if they sold off all the property and equipment.
The crux of the problem for OSF is that only 15% of the approximately $39 million endowment fund is unrestricted which is roughly $5.8 million. The remainder of the assets totaled around $25 million in cash and equivalents, but their annual expenses are around $18 million. Their business model has been to make about 70-80% of revenue from ticket sales according to the article. That worked well enough until Covid hit and audiences were subsequently became less willing to attend as restrictions eased.
While being able to access more of their endowment wouldn’t completely eliminate their woes, the combination of lower ticket revenue and an inability to access more than $5.8 million from their endowment for unrestricted use have been contributing factors
Having to do a special appeal for 14% of their annual budget after a disastrous previous year does not seem like such a terrible thing to me.
You might want to contrast them with the much smaller Santa Cruz Shakespeare, though, whose forward-funding model (donations and ticket sales pay for *next* year’s shows) seems to be working well. SCS uses rather conservative budgeting and did not see a major drop in revenue (except for the summer of 2020, when the season was cancelled), so is pretty healthy this year. It probably helps that all their shows are outdoors, and last year did not have bad air from wildfires.
I tried looking for the SCS budget, but I could not find it online.