Jan 23rd Hearing, Part 2: Michael Henson’s Testimony

For part one of this series, click here.

This was testimony given to the Commerce and Consumer Protection Committee of the Minnesota House of Representatives on 23 January 2013.

You can listen to Mr. Henson’s testimony here. It begins at 22:15.

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Rep. Atkins: There was I think a good reference to the fact that there are other lockouts taking place. Each time this issue seems to be talked about it’s in the context of the NHL lockout. Whenever I’ve spoken about it, however, I’ve talked about there’s a number of additional lockouts involving musicians, involving American Crystal Sugar up in Moorhead, and we’ve been joined next by Michael Henson, who’s the President of the Minnesota Orchestral Association. I appreciate your joining us this afternoon. Look forward to hearing your testimony, as well.

Michael Henson: Mr. Chair, and Representatives. Thank you very much. I appreciate the opportunity to address the committee today, and I will offer a brief statement.

I am Michael Henson, the President and CEO of the Minnesota Orchestra. I am very proud to be here to represent the Minnesota Orchestra, which is an exceptional organization that enjoys such an acclaimed history in this state. Our board is made up of citizen volunteers who are generous contributors to the orchestra. Speaking on behalf of the board and myself, we feel it is our responsibility and our great privilege to ensure that the 110-year legacy of this organization continues long into the future, benefiting new generations of Minnesotans for years to come.

As a non-for-profit, our orchestra has three sources of income. First, ticket sales from our concerts and our events. Secondly, contributions from generous community members, corporations, foundations, and of course the state of Minnesota. And thirdly, our endowment earnings. Over the years, generous donors have contributed to our endowment and each year we are able to draw a percentage of those earnings to help us sustain our operations.

As an arts organization, we are not immune from the economic challenges facing the rest of the world, and during the recession each of our revenue streams were negatively impacted, particularly our contributions and our investments. We maintained stability within the organization through those volatile years by relying upon our endowment, which was appropriate and responsible action. But it is not a sustainable one. Today we face the reality that if we continue to draw down our endowment at the current rate, it will be depleted in five years’ time. We cannot allow that to happen in the future of this organization.

Last December we announced a six million dollar operating deficit for the orchestra. We know that this deficit will continue to grow until we address our financial issues directly, and we have developed a thoughtful strategic plan to do just that. This plan calls for a combination of revenue increases, including our board members increasing their already generous gifts to the organization by twenty percent, as well as significant cost reductions, which we’ve already undertaken on the management and the administrative side of the operation.

This then is the backdrop against which we are now trying to negotiate a new contract with our musicians. We understand that the impact of the lockout is felt throughout the community, and we have great empathy for those who have been impacted by this, including our musicians. No one wants the orchestra performing back onstage more than our volunteer board. Music and musicians are the very center of our organization, and we are seeking to negotiate a contract with our musicians that is aligned with what our community can afford. This point is worth emphasizing. The Minnesota Orchestra is entirely supported by the generosity of this community, and our expenses need to be based on what this community is willing and able to give. That is the issue at the center of our talks.

I’d like to make two final points. The first is to thank you, the legislature, for the $14 million in bonding dollars you appropriated the renovation of Orchestra Hall. That project is one of our major revenue generating initiatives outlined in our strategic plan, and is one of the fiscal solutions to our current financial challenges. The building project is on budget and on pace for our 2013 opening and we are currently employing approximately 130 union members of the building trades as we speak. When I first visited the site, I was asked by a construction worker what I did and he thanked me and thanked the organization. He said it enabled him to actually sustain a job for a year during this project, and he had been out of work for a number of months before that. We’d like to thank you for making that possible in terms of creating job stimulus.

Secondly, I know that it has been a point of concern for some legislators that our yearly operating support from public money might be used to fund our current negotiations or lockout. In order to eliminate all concerns around this point, we’ve sequestered in a separate account all state monies received to date this fiscal year, and we will continue to do the same going forward until we’ve reached our contract resolution. I reiterate that point: no state monies have been or will be used to fund these negotiations.

On a personal note, I would like to close by noting that I have worked my entire professional life managing symphony orchestras in various cities around the world. My family and I were drawn to Minnesota and to this great orchestra because of its outstanding reputation. Along with our board of directors, I see it as my duty to ensure the Minnesota Orchestra remains artistically excellent and financially solvent for the future. These two goals are entirely possible to achieve in tandem, and it is only by achieving artistic and fiscal strength that we can ensure our orchestra will be around to serve this community well into the future.

Mr. Chair and Representatives, thank you very much for giving me the opportunity to speak to this committee.

JA: And thank you, Mr. Henson. Could you speak to one point that I believe has been raised, and that is, at the time the $14 million was awarded, the Capitol dollars from the State, was there an awareness or expectation of the possibility of a lockout, or did the economics of the orchestra tend to indicate that that might be a possibility at that time?

MH: There’s been no intention at any point during the application for those fundings to actually have a lockout. The board managed responsibly a very challenging situation three and a half years ago and we continue to hope that we weren’t going to have a lockout as we actually approached the conclusion of the negotiations that we had at the start of October 2012.

JA: Thank you, Mr. Henson.