26 Oct 2023
We’ve learned a lot about adaptation in the past five years. As the impact of COVID hit, we dug into our financial reserves to support the sector. Then we adapted our ways of working to allocate one-off government funding, which came over the first four years of the pandemic. Now we’re adapting to the prospect of materially less revenue to invest in the sector from July 2024.
Where does our revenue come from?
We have a mix of revenue sources – mainly through the government and the New Zealand Lottery Grants Board Te Puna Tahua (NZLGB). Funding through the NZLGB usually makes up about 70–75 percent of our overall public funding, with the balance coming from government. The one-off COVID funding means we’ve had a greater percentage of our revenue from the government since 2020/21.
What’s shaping our financial planning?
Our financial planning for the next few years is shaped by three factors that we know about now: the tight fiscal environment; the end of the COVID funding; and signalled changes to the way NZLGB allocates funding to Creative New Zealand. More details are in our Statement of Performance Expectations for 2023/24 and I encourage you to read it, l but I want to tell you what we know now.
The fiscal environment is affecting people across Aotearoa
The external context is that the arts and creative sector is experiencing the same high inflation and increasing cost of living as all of Aotearoa. In terms of our work, Creative New Zealand has also seen record demand for our services and funding in recent times.
The COVID-related funding ends in this financial year
Additional one-off funding of $22 million received from Manatū Taonga Ministry for Culture and Heritage in early 2023 provided some welcome relief. That additional pūtea – which was the last of a series of COVID-related funding injections that started in 2020 – allowed us to meet some of that increased demand. Over half of the $22 million is already committed; the remainder must be committed by the end of 2023.
The end of COVID funding means we’re planning for a return to broadly pre-pandemic funding levels in 2024/25. We’ve had the benefit of additional one-off funding since 2020, so some may not recall what this looks like. The graph below shows our changing revenue picture over recent years.
As you can see, there’s been no significant change to Creative New Zealand’s baseline government funding for some years, which sits at $16.689 million for 2023/24. It has broadly been the same since 2006/07.
Across the wider sector, the Manatū Taonga-led Arts and Culture COVID Recovery Programme is coming to an end. This provided significant additional funding, including to Creative New Zealand, totalling some $495 million over four years. With this funding ending, we may see increased demand on our services.
NZLGB is changing the way it calculates our funding
Our funding from NZLGB has increased steadily as lottery profits have risen. In 2006/07, we received a total of $21.310 million – last year (2022/23) this was $54.649 million.
The way this funding is calculated is changing. NZLGB has recently advised that from 2023/24 it will allocate Creative New Zealand, and other entities that rely on lottery funds, a set amount instead of a percentage of Lotto New Zealand profits.
While NZLGB's review of how it allocates lottery profits is ongoing, we have been advised, based on lottery forecasts, that we’ll receive $49.5 million this financial year and indicatively the same for 2024/25. This is about $5 million less than last year and roughly $4 million less than the year before. While lottery funding forecasts are normally conservative, NZLGB has advised that it expects we’ll receive less funding if lottery profits are less than forecast. And we’re not guaranteed a share in any above-forecast profits.
What does this mean for the arts community?
We understand that the current environment is tough for the arts community. Philanthropy, sponsorship and public spending on arts are all feeling the squeeze, as is funding from local government and community funders.
To maintain our current service levels – which should help lessen the immediate impact on the sector – the Arts Council has agreed to use some of its reserves to cushion the blow this year. Creative New Zealand does not have the financial reserves to continue doing this. There is no doubt that the end of the COVID one-off funding and changes to NZLGB funding will be felt within the arts and creative sector, as funds available return to broadly pre-pandemic levels in 2024/25. All indications are that there will be less pūtea to support the sector next financial year and beyond than in recent years.
Given the financial outlook and context we’re operating in, we’ll also be looking hard at our own costs. This is in keeping with government guidance but also aligns to our commitment to ensuring as much pūtea as possible is invested in the arts and creative sector. We remain committed to changing the way we work and the services we deliver to better meet the needs of the arts community.
Tēnā te ngaru whati, tēnā te ngaru puku.
There is a wave that breaks, there is a wave that swells.