The Economic Impact of Connecticut's Non-Profit Arts and Cultural Industry

The Arts Are Big Business in Connecticut

Anyone who attends concerts, visits museums, frequents community festivals or listens to poetry readings knows how the arts elevate our spirits and enrich our lives.  Fewer people, however, recognize the tremendous impact the arts and humanities have on Connecticut's economy.

The creative sector provides jobs for thousands of Connecticut citizens and generates millions of dollars of revenue every year. Connecticut has become a prime destination for tourists who travel to the state to sample its wealth of cultural events and attractions - and these visitors all spend money here. The arts also play a crucial role in economic development by improving the quality of life and making Connecticut a more attractive location for present and potential corporate headquarters and business facilities.

The Commission on Culture & Tourism, in partnership with the New England Foundation for the Arts and the region’s five other state arts agencies, have conducted periodic studies to determine how the non-profit cultural industry impacts New England’s, and each state’s, economy. The most recent study identified and measured 2,260 Connecticut organizations, using data gained from non-profit tax returns filed with the Internal Revenue Service, a master business file maintained by the IRS, and a web-based survey.

The study’s findings are impressive and show that Connecticut’s non-profit arts and cultural industry in 2002:

The Arts Put People to Work

Arts and cultural organizations, by their nature, tend to be labor intensive. In the course of their operations, they rely heavily on employees relative to other business factors such as physical capital, land and raw materials. Essentially, a cultural organization’s “product” is a service.  Like other service providers, which constitute a very important segment of our state's over-all economy, the arts provide jobs for many citizens.
 
This is borne out by the high share (45.4 percent) of their budget that the state’s cultural organizations spend on employees’ salaries and fringe benefits. The average organization, spending just $342,097, supports eight paid employees.

Arts and cultural organizations throughout the state employ 17,955 persons, 10,430 of whom were identified as artists. These numbers include both full-time and part-time workers. Not counted are performers who are contractually engaged for a shorter period by these organizations.

Spending

The state’s arts and cultural organizations collectively spent $773.1 million in 2002. As previously noted, the single largest component of this spending, $350.8 million (roughly 45 percent), was employee compensation, the highest percentage among the six New England states.  All other expenses accounted for $422.3 million of spending.

Total spending has grown at an average annual rate of 9 percent since 1998.

Income

The aggregate income of the state’s cultural organizations was reported at $799 million.  Net assets were $2.4 billion in 2002.

Earned income (i.e. direct sales of tickets and subscriptions, touring revenues, sales of art works, tuition, etc.), contributed income from the private sector (corporations, foundations and individuals), and contributed income from the public sector (federal, state and local government) was reported as follows:

Revenues of Connecticut Cultural Organizations, 2002

# of Orgs.	Earned Income	Contributed Income (Private)	Contributed Income (Gov't)	Total
2,260	$332 million	$264.4 million	$202.4 million	$799 million

Contributed income accounted for 58 percent of total revenues, a high figure among New England states. The state’s cultural organizations received 7.7 percent of their revenue from sources outside the state.

Admissions

Admission figures reported by cultural organizations cover all paid and unpaid attendance at artistic performances, museums, cultural sites and other events and can include multiple visits by individuals during the course of a year. Nevertheless, the study’s estimate that admissions totaled an estimated 22.2 million persons in 2002 is very impressive. This admission figure is roughly six times the population of Connecticut.

As mentioned, Connecticut cultural organizations serve as an attractive magnet for visitors from out-of-state. Tourists accounted for about 10 percent of total cultural admissions in 2002.

Taxes

Although non-profit organizations themselves are exempt from taxation, they do create significant tax revenue.  In the survey, organizations were questioned about the amount of federal taxes collected and/or paid (income taxes and employer social security contributions) and the amount of state taxes collected and/or paid (income and sales). State sales taxes would be paid primarily out of concession sales by these organizations.

Overall, the state’s cultural organizations reported generating $32.4 million in federal payroll taxes and $.9 million in state sales taxes.

Organizations’ Economic Impact

To evaluate organizations’ economic impact, the report estimated the additional indirect spending caused by the initial spending of the state’s arts and cultural organizations. These two figures, initial and resultant indirect spending, were then added together.

Economists argue that only income brought into a region has an economic impact. In other words, income that cultural organizations receive from state residents might still have been spent inside the state (on other entertainment, perhaps) if these cultural organizations did not exist. Thus, conservatively, the “multiplier effects” of cultural organization spending should be applied only to that percentage of spending financed by income received from out-of-state sources.

We previously noted that 7.7 percent of total revenue received by Connecticut cultural organizations came from out-of-state sources. Using a regional input-output model, it is possible to estimate the additional indirect and induced spending that this export income creates. Connecticut cultural organizations are responsible for indirect and induced re-spending of $119,774,000. The total economic impact of the state’s cultural organizations is thus estimated at $892,913,000.