How COVID-19 Has Changed Fundraising’s Bottom Line: General Operating Expenses

General operating funds are what keep the lights on at dance nonprofits. But before COVID-19, they could be difficult to procure, with big donors wanting to designate gifts for pet projects and foundations wary of giving unrestricted cash. Here’s how COVID-19 is changing that.

Three Houston Ballet dancers, all white women, stand in a garden, facing a man who is squatting and holding a camera. They are all masked, and the women wear bright, summery clothing.
Facing cuts to major sources of flexible funding, Houston Ballet raised general operating funds through crowdfunding during the pandemic. Photo by Lawrence Elizabeth Knox, courtesy Houston Ballet

The words “unprecedented” and “upended” have become familiar since the pandemic hit. For dance companies, these recall canceled performances, layoffs and furloughs. But there’s one area of sudden change that’s had upsides: funding for general operating expenses.

Companies have long struggled to cover essential expenses such as building maintenance, rent, administrative staff and supplies, as donors and other funders often designate their funds for glamorous projects, like a world premiere or naming rights to a theater. But enticing funders with marquee projects disappeared with COVID-19. Suddenly, companies’ main asks boiled down to keeping the Zoom lights on.

It amounted to an earthquake in the fundraising landscape—and may change how dance nonprofits raise general operating funds for good.

A matter of trust

Before March of last year, it was rare for a foundation to grant funds for overhead expenses, or to give unrestricted cash.

When COVID-19 hit, most foundations immediately changed course in the name of helping companies weather the storm: They relaxed rules, eliminated or reduced reporting requirements and offered new, flexible grants.

The shift was a tacit acknowledgment of what dance companies had been saying for years: Funding for specific projects can only happen when a company has infrastructure. Without unrestricted or general operating funds, dance companies struggle to make long-term plans, have a safety net, or hire adequate staff to support their artistic work.

“The pattern we’ve seen, finally, is releasing restrictions on funding and converting them to general operating support,” says Alejandra Duque Cifuentes, executive director of Dance/NYC. “These requests have been made of the philanthropic community for years. COVID forced everyone’s hand.”      

In April, The Jerome Foundation gave organizations the option of converting the first year of a two-year fellowship grant from program to general operating support, with Ben Cameron, president of the foundation, saying it was “extending flexibility in a spirit of radical trust.”

But many development directors wonder why foundations didn’t trust grantees with how to spend money before COVID-19.

“I’ve dealt with this lack of trust all of my career,” says Lorraine LaHuta, chief development and marketing officer at Ballet Hispánico. “Funders don’t think you know how to best allocate the funds for your organization.”

A woman in a black and red dress twirls onstage, sending her skirt flying around her. A man circles around her, and other couples surround them just off-camera. Confetti litters the stage and rains down around them.
Ballet Hispánico has received general operating support from the Howard Gilman Foundation, which has helped pay the company’s mortgage. Photo by Hayim Heron, courtesy Ballet Hispánico

LaHuta says a notable exception before COVID-19 was the Howard Gilman Foundation, which has given Ballet Hispánico general operating support over the years, including a significant grant used toward paying the building’s mortgage. This helped ease the squeeze of the company’s monthly bills and freed up funds for artistic purposes.

“We trust our grantees,” says Laura Aden Packer, executive director of the Howard Gilman Foundation. “Every organization needs unrestricted cash, and they know what it’s best used for.”

Cameron says that it’s not that he didn’t trust grantees before, but he was wary of providing too much unrestricted general funds that wouldn’t necessarily go towards the foundation’s mission of supporting early-career artists.

“Project support is dating and general operating is marriage,” Cameron says. “You create an expectation of continuity when you start supporting in that way. With COVID-19, it became a different story.”

He says that artists have raised the trust issue with him, asking why reporting and application requirements remain so intense year after year.

“They say, ‘Don’t you trust me to put on my 20th season?’” says Cameron. “It’s a good point, and we are looking at how we may want to shift practices going forward.”

Gilman’s focused grant-making—it funds only performing arts organizations in New York City—allows the foundation to get to know grantees and their work intimately. “It’s easier for us than national, multidisciplinary foundations to be in contact with grantees and see their work a lot. Trust builds that way,” Aden Packer says.

LaHuta says Ballet Hispánico can make more creative art and better serve the structure of the organization when they have discretion in the use of funds. She hopes that COVID-19 will be a turning point.

“Things have been done a certain way for decades, and I’m afraid it will go back,” she says.

The promise of mid-level donors

While large donations from individuals typically have fewer strings attached than those from foundations, these donors sometimes want to direct their funds towards pet projects or glamorous commissions.

For this reason, says Angie Lane, chief development officer at Houston Ballet, the center of the donor pool is often a better resource for unrestricted support to cover a company’s greatest needs.          

Four dancers in masks and bright clothing dance in a sunny park—they seem to be improvising, each in different positions.
Houston Ballet has found that mid-level donors can be a source of unrestricted support. Photo by Lawrence Elizabeth Knox, courtesy Houston Ballet

“The pitch to donors at the $25,000 level is about keeping us a world-class company,” says Lane. “It’s a broad ask without talk about designating the funds.”

That general pitch has proven crucial, especially during COVID-19.  Houston Ballet did benefit from foundations easing restrictions and thus allowing them funds to be directed to general operating support and salaries, which helped offset the major cuts from other sources of flexible funding: earned revenue, corporate sponsorships and, as tourism halted, a city hotel tax that funded the arts.

“A growth in individual donors has really gotten us through this period,” says Lane.

Smaller organizations can face a different calculus, particularly ones of color, which often face tougher barriers to entry from institutional funders and major donors.

Joan Myers Brown, founder and executive artistic advisor of PHILADANCO!, says that general operating support has always been the toughest to procure in an already tight budget. She says that the company has typically relied on income from its two associated schools, grants, performance fees and ticket revenue—and on forgoing raises and looking the other way when paychecks are late.

“We don’t have people writing the big checks,” she says. “Most of our donations are $100 and below. Those have been a steady trickle, but they are a fraction of our budget.”

With the pandemic, Brown has had to cover new general operating expenses, like equipment for creating virtual content and regularly sanitizing the company’s building.

The biggest change in support she has seen is from the State of Pennsylvania, which has increased its funding during COVID-19, as well as increases in general operating support from foundations. She hopes it will continue. “A lot of the general operating support I’ve gotten now—I don’t think I’d have received it in normal times,” Brown says.

Taking advantage of (and holding on to) the moment

Nonprofits in general saw a surge in grassroots support when COVID-19 hit, as is typical during a crisis event.

Houston Ballet moved to bring in as much support as possible through crowdfunding, launching its campaign This Is Not Our Final Act.

“It was a way for our dancers, trustees, staff, anyone in our network to quickly and easily share our fundraising message on social media,” says Lane.

Lane says it brought in over $350,000 from over 500 donors—mostly first-time supporters—in Houston and beyond.

“This was unrestricted support we would not have tried to raise if not for COVID,” she says.

Duque Cifuentes says that this type of grassroots surge and other changes in giving might not hold, but that there’s been a permanent shift in the landscape that will become clearer over time.

“I believe we will see a contraction of donor support, but there is a new normal of giving general operating,” she says. “If funders and donors want the survival of their favorite dance groups to be a reality, they will see the need to give without some of the incentives they looked for in the past.”

Avichai Scher is a freelance journalist who has written for The New York Times and NBC News.