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July 21, 2016, 10:15 a.m.
Business Models

As oil prices sag, nonprofit news orgs are tightening their belts and watching their budgets

From Texas to Wyoming, outlets are keeping an eye on the markets.

Texas Tribune CEO Evan Smith says he begins every morning the same way.

“The first thing I do in the morning before I brush my teeth, before I eat breakfast, is check the price of oil,” Smith told me.

Oil prices are hovering around $45 a barrel these days. That’s up from under $30 earlier this year, but still way down from recent peaks; as recently as 2014, prices were over $100 per barrel, and experts believe that the oil market won’t return to that level anytime soon.

And in states such as Texas, Wyoming, Oklahoma, and North Dakota, where the economy is closely tied to the energy industry, news organizations — especially smaller and nonprofit outlets — have created contingency plans and taken steps to deal with potential revenue losses and funding cuts as oil prices have dropped drastically in recent years.

“The reality is that I do it not just because I am a Texan, but because I’m running a nonprofit newsroom that relies on a robust economy, and so there’s no question that I look at the price of oil right now with a certain amount of trepidation — if only because theoretically people who have money because of the benefits that they enjoyed from the oil economy when it was good may have fewer benefits to pass along to me now, and I’m always playing defense,” Smith said.

Texas Republicans last month asked state agencies to prepare for 4 percent budget cuts in their upcoming budgets, Oklahoma has a projected $1.3 billion budget shortfall, and Wyoming’s governor has announced $248 million in cuts.

In Wyoming, cuts include $35 million in budget reductions over the current and upcoming fiscal years at the University of Wyoming, which licenses and supports Wyoming Public Media.

“We’re definitely preparing for a multi-year downturn,” Wyoming Public Media general manager Christina Kuzmych said in an email. “We expect all our operations to become more vulnerable for several years.”

University of Wyoming president Laurie Nichols has appointed a committee to craft recommendations for cuts the 2018 fiscal year, but so far the impact on WPM has been limited.

Thirty-three percent of WPM’s funding is supported by the university, and that funding goes mainly toward salaries, Kuzmych said. University-wide there are about 70 vacant positions being left open. The university instructed WPM not to fill its vacant membership director position, but the station was able to reclassify it into a donor-supported role that can be filled.

Still, WPM has a 10-year revenue plan that runs through 2022. The station has so far hit its targets, even in 2012 and 2013, when oil prices previously took a tumble. Kuzmych said WPM “will have to work harder to achieve goals.”

While WPM expects annual member contributions to remain steady and gifts from major donors to increase, it’s anticipating sponsorship and other business-related revenue to drop from the energy sector.

The station doubled the number of staffers it has working in major gift cultivations, and WPM plans to potentially leave some full-time positions open or use part-time employees instead in some scenarios.

WPM has also boosted its efforts in seeking out corporate underwriters that aren’t affected by the downturn. WPM met its underwriting goal in its 2016 fiscal year, which ended in June. In 2016, it also launched a multi-year corporate giving initiative that’s separate from underwriting, and Kuzmych said WPM is focusing on industries that aren’t affected by the downturn, such as trona extraction.

Additionally, WPM has used events to generate revenue as well, bringing in public radio celebrities such as Garrison Keillor and Ira Glass, while using them as a way to attract new members.

“In short — we will keep the ship steady through a large number of incremental revenue generating activity that will yield small but numerous sources of money,” Kuzmuch said. “This, coupled with prudent spending habits, should tide us over. In the past 5 years, WPM already reduced duplicative staff and turned more to outsourcing key activities.”

In Texas, Smith said the Tribune is about 60 percent of the way to its budget goal for the current year. While he said “there’s probably a donor here or there” who hasn’t given this year due to the downturn, the Tribune has been able to make up the funding from others.

“Honestly, if you’re in the business that we’re in, there are puts and takes every year,” Smith said. “There are different things that affect people’s confidence and their ability to give, there are different drivers. I’m not foolish enough to say that the oil and gas price is not one of the many drivers that people look to, but no, it has not materially affected our fundraising.”

So far in 2016, the Tribune says that its largest donor is the Ford Foundation, which contributed $150,000, and its largest corporate sponsors are The University of Texas at Austin, Blue Cross Blue Shield of Texas, and PepsiCo — none of which are directly tied to the energy sector.

That doesn’t mean, however, that they’re immune from the challenges.

“This has material impact on a bunch of different sectors,” Smith said. “It has enormous impact on individuals whose wealth is in part driven by the oil economy, but it affects potentially a lot of corporate underwriting that we get if those corporations are through the front door energy companies or through the side door see their revenue in part tied to the revenue of the oil industry.”

Some outlets have more direct ties to oil. Prairie Public Broadcasting in North Dakota generated $9,735 in oil well royalties in its fiscal year ending Sept. 30, 2015, well below the $20,000 it budgeted for royalties and a precipitous drop from the $18,689 it made in oil well royalties the year before. In total, Prairie Public lost $473,584 last year. In its 2014 fiscal year, it finished with a surplus of $457,549. (Prairie Public didn’t reply to multiple phone and email requests for comment, but oil well royalties are paid to landowners who allow drilling on their property.)

The downturn is hurting all nonprofits, not just journalism ones. In west Texas, for example, the Permian Basin Area Foundation expects to receive $4 to $5 million in gifts this year, down from $15.5 million in 2011 at the height of the oil boom, according to a report in the Chronicle of Philanthropy:

Now, with oil prices way down, donations have begun to level off, says Aaron Bedell, the foundation’s executive associate. In 2015, the fund raised $5.9 million, roughly on par with its collections before the most recent oil boom.

“While money isn’t flowing like it was when we had $100-plus barrel oil, we do have a little bit more stability,” Mr. Bedell says. “It’s not at a level where donors are gripping their money and their assets very tightly.”

While total philanthropic giving tends to decline during economic downturns, a 2012 Stanford study of giving during the Great Recession found that Americans still gave roughly the same percentage of GDP — about 2 percent — to charity, though the total amount given fell.

“Even though Americans continue to contribute the same proportion of their income, that “tithing” now applies to a smaller base of money and, as a result, produces a real decline in the absolute amount of giving,” the study, written by professors Rob Reich and Christopher Wimer, found.

Ultimately, though, oil and other energy industries are always marked by ups and downs. Organizations in those states know this and prepare contingencies for them. So while prices are down now, news organizations are hopeful that they’ll rebound eventually, and if they do, outlets will certainly be ready to take advantage of the boom times.

“Something to remember about Wyoming — this state is used to boom and bust cycles,” Kuzmych said. “Most long-time administrators have a downturn ‘rescue’ plan tucked away in their drawer ready to implement as needed.”

Photo by Reto Fetz used under a Creative Commons license.

POSTED     July 21, 2016, 10:15 a.m.
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