WASHINGTON — Less than a week after being awarded a $25 million grant as part of the federal government’s $2.2 trillion stimulus package, the Kennedy Center is bracing for more layoffs.
On Tuesday, the arts center announced that it will furlough 250 administrative staff for five weeks, bringing its temporary layoffs to more than 1,100. The cuts — made days after musicians at the National Symphony Orchestra were told their paychecks would cease April 3 — reveal the deepening financial impact of the COVID-19 pandemic on Washington’s preeminent performing arts venue.
This latest round of cuts is spread across marketing, development, education, and National Symphony Orchestra and Washington National Opera administrative departments and is necessary despite the $25 million grant, Kennedy Center President and CEO Deborah Rutter said.
“My hope is that we won’t have to do too many more,” Rutter said in an interview Tuesday, noting that all senior executives will participate in rolling furloughs over the next few weeks.
Most of the federal emergency funds will be used to cover the salaries and benefits of the reduced workforce over the coming months, she said. Some of it will pay for upcoming artist fees, rent and utilities and additional cleaning and IT upgrades related to the coronavirus outbreak. The arts center closed March 12 and will not reopen until May 11 at the earliest.
Without the federal aid and no staff cuts, the arts center would have run out of money in mid-May, Rutter explained. With the stimulus funds, a $10 million line of credit and staff furloughs, the institution will stretch the cash through September. The arts center earned $123 million in performance, education and ancillary revenue in 2019, about 60 percent of all revenue, according to its annual report.
“The chances of reopening as soon as we’d like are small. It may take longer and we have to preserve as much capital as we can,” Kennedy Center board Chairman David Rubenstein said Tuesday.
Three weeks ago, Rutter laid off 750 hourly and part-time workers, including ushers, stagehands and concession, parking and retail personnel as she tried to contain the financial losses of closing nine theaters for more than three weeks. In addition to having no money coming in, the arts center must refund the price of tickets to the hundreds of events that were canceled. The arts center is being asked to refund about 90 percent of previous sales, she said, despite its plea for patrons to donate the cost of their tickets or exchange them for future shows.
Perhaps the most controversial cut came Friday, when the 96 musicians of the NSO were told their last paycheck will be April 3 and pay will not resume until the center reopens. The news was blasted on social media by musicians and orchestra supporters.
The orchestra musicians say they were blindsided by the news. They said they had contacted NSO Executive Director Gary Ginstling to negotiate some cuts but didn’t hear back. Instead, Rutter informed them that they would be furloughed after this week until the arts center reopened. The musicians said she also told them their health care would be cut off after May 31, though Rutter says no such decision has been made.
“That was part of the shock. The musicians thought they were going to a meeting to have a conversation and instead they had the door slammed in their face,” Ed Malagna, president of the Metropolitan Washington DC Federation of Musicians, AFM Local 161-710, said. “The trust that’s been violated. That’s going to be hard to restore.”
The union filed a formal grievance, stating the move is illegal because the orchestra’s contract has no force majeure clause and requires management to give a six-week notice of pay cuts.
Rutter said she’s had multiple conversations with the entire Kennedy Center staff about pending cuts and the “shared sacrifice” ahead. “The musicians already have not been working for four weeks and were paid 100 percent for those weeks,” she said. The 10-day NSO tour to China and Japan this month was canceled because of the outbreak, and it was followed by scheduled vacation time, several musicians said.
She also disputed the union’s interpretation of the six-week requirement. “If we were to terminate the contract, it would take six weeks,” she said. “In our effort to save the entire organization, it is important to act quickly and not go through a six-week debate about whether the circumstances of this worldwide health crisis are exigent.”
A union lawyer called that position “baseless.”
“Even if there were merit in the center’s position that it could stop paying musicians because of exigent financial circumstances — which there most assuredly is not, wholly apart from the $25 million appropriation to the center under last week’s federal legislation that was, by its terms, to be used for operating expenses including employee compensation — that would not permit the center to disregard the dispute-resolution procedures in the CBA,” Jacob Karabell wrote in a letter sent Tuesday to the arts center’s lawyers.
Violist Jennifer Mondie, a member of the player’s committee, said the issue goes beyond the contract. “Barring the legal obligation, they have a moral imperative to discuss why [they made this choice] and that was not done at all,” Mondie said.
Rutter called the musicians’ claims about cutting health care “an utter lie.” “We have to negotiate with Cigna to see how we can do it,” she said about continuing those benefits.
Several current and former employees say they believe that the federal aid will be used to heal the financial problems caused by last fall’s opening of the center’s $250 million annex, the Reach, a mostly underground building of rehearsal and education spaces funded entirely by private philanthropy. The project was several years delayed and tens of millions of dollars over budget.
The Reach opened in September with a 16-day festival that some say went several million dollars over budget. The nonstop party, with its food trucks and outdoor bars, attracted 100,000 people to performances and workshops by the Chuck Brown Band, Second City, Esperanza Spalding and hundreds more. Since then, the Reach has held rehearsals, visual art exhibits and nightclub concerts, but the crowds have not been as large. A promised new restaurant with a high-profile chef has been delayed.
“My guess is that it’s bleeding money,” one former employee said.
Added Malaga: “It started as a $100 million [project] and grew to $250 million. That’s going to stir up a lot of questions in folks’ minds.”
The 2019 annual report shows $59 million in loans payable, almost $50 million more than 2018 and needed to cover pledges made to the capital campaign. Recent tax filings show growth in earned revenue but a drop in private contributions, which topped $110 million in 2014 but dropped to $80 million last year.
Both Rutter and Rubenstein say that the Reach is not a factor in the current crisis and that taking a bridge loan to cover construction costs is typical. Rubenstein described the arts center’s fiscal health as fairly good before the pandemic. However, unlike Washington’s other major cultural institutions, the Kennedy Center relies heavily on earned income.
Rutter said that she is focused on the arts center’s long-term stability and that everyone must share the pain of the closure.
“The National Symphony on its own would not be able to get this money,” she said about the stimulus funds. “They’d have to compete with the Met Opera, the Met Museum and all the other nonprofits in this county. The appropriation is to the Kennedy Center as a living memorial. We have to be able to open it, and we don’t know when that is.”