Monday, September 15, 2008

Pacifica Meltdown: Budgeting for Triage

Developing budgets for the Pacifica Radio network is an arduous task that involves more than 150 people – members of five local station boards (LSBs), managers and staff at Pacifica’s sister stations, the Pacifica National Board (PNB), and national staff, including a finance team in Berkeley and other personnel across the country. Each station develops its own proposals, discusses them with the main office, then forwards them to the National Finance Committee, then back for local approval, followed by review and, hopefully, eventual sign off by the PNB. Since funding for national operations is dependent upon local station contributions, it’s hard to determine how much will be available for projects such as the Pacifica Radio Archives, Affiliates Program, national programming, development and technical infrastructure until the five station budgets have been finalized.

The whole process takes at least four months, and sometimes budgets are kicked back even after the annual meeting.

Talking frankly with the National Finance Committee in early August, Executive Director Nicole Sawaya, who had privately submitted her resignation not long before, described Pacifica’s current cash position as “not good at all.” At that point the year-to-date variance between projections and the actual situation was $1.6 million, she said, adding that this was the reason “we’re going into a relationship with the bank.” A line of credit (since obtained) was already in the works, using a $400,000 C.D. held by KPFA in Berkeley as collateral. But an equity loan also will be needed, she added, and that would take longer.

Meanwhile, management was looking for other ways to economize. For example, staff members were being “migrated” from “incredibly generous” health care programs to less expensive HMOs; the option of “reimbursing employees for their purchase of health care” was also being considered. “We’re trying to ferret out every liability and pending expense as we build these budgets,” Sawaya explained, “to mitigate any surprises,” notably potential legal costs.

Board Chair Sherry Gendleman, who is also on the KPFA local board, saw the situation as “enormously distressing,” concerned that the PNB was on the verge of making decisions that could “destabilize” her station by “using it as a cash cow.” Sawaya responded by asking whether Pacifica was “a network or five stations.” In a very real sense, that is precisely the choice facing the organization as it deals with financial and other challenges.

Station Budgets

The National Finance Committee began reviewing individual station budgets in August. Presenting the plan for KPFA, Brian Edwards-Tiekert, a staff member who also sits on the local board, called it a “break even budget” from which travel and most consultant costs had been eliminated. About $125,000 in staff reductions (about two and a half positions) were also being proposed, but “we may not be conservative enough.” The reason, he said, is that “fund drive revenue plateaued a year ago and is going down.”

The Committee felt that the cuts weren’t deep enough, and Edwards-Tiekert agreed that “if revenue doesn’t go up, we’ll face another $300,000 in cuts” in the future. After looking over the situation, the committee recommended trimming an additional $80,000. The network is “putting enormous responsibility on KPFA,” Gendleman noted, referring to the loans.

Before it began to meet in executive session, due in part to the personnel implications, the Finance Committee also began to look at KPFK in Los Angeles and KPFT in Houston. KPFT has the smallest budget (about $1.3 million) and, along with WPFW, the smallest staff. The proposal was to cut the next year’s KPFT station budget by 6 percent, mainly by eliminating two staff positions, and implement an immediate 10 percent cut in management salaries. But the conservative estimates led to questions about why income from on-air fund drives, Pacifica’s main source of revenues, was declining.

Fundraising was level through the 1990s, Edwards-Tiekert offered, followed by a “surge of support after 9/11 and the invasion of Iraq.” But spending went up with income and to maintain that level a fourth on-air fund drive was institutionalized. “We’re now returning to an historical average,” he said.

Turning to KPFK, the Committee considered the Los Angeles station’s plan to make $250,000 in payroll cuts and heard that KPFK also owed money to the national office. Board member Grace Aaron noted that the summer “mini-drive” wasn’t going well, jeopardizing the ability to cover the September payroll. She also pointed to frequent sabotage, including hackers who attack the station’s website. But the underlying problem, she acknowledged, was that the age of the average listener is 54, and core listeners are over 60, calling the overall situation “very troubling.”

Others pointed to the issue of fulfillment rates, the percentage of money actually collected once a fund drive has ended. At times the fulfillment rate at KPFK has been below 80 percent. The station’s new General Manager, Sean Heitkemper, believes he can change that, but some on the Committee were skeptical.

The biggest question mark, and largest financial challenge, is WBAI in New York. That station has been losing about $500,000 a year, according to Committee sources, sometimes leading to short-term bailouts by the national office. Yet, the Committee had still not reviewed its budget by the end of August, with charges flying back and forth about whom to blame. “National is in no way impeding the process,” Sawaya insisted, while WBAI Board member R. Paul Martin expressed concern that “the PNB is rushing into things before the LSB sees it.”

The main dispute, according to members of WBAI’s local board, is the insistence by the national office that the station cut 6.5 staff positions from its next budget. The station currently has a staff of 23 full time equivalents. At a recent meeting of the station’s LSB, General Manager Tony Riddle listed a series of disagreements with the national office and said he was being pressured. His list included the amount budgeted for legal fees, projections for direct mail and website income as well as increases in health care costs, and a plan to cut station rent through “reduction in physical space” (the national office reportedly wants written confirmation from WBAI’s landlord). Out of total budget of $2.4 million, the station pays $277,969 a year for its Wall Street headquarters, plus $350,778 to transmit from the Empire State Building.

According to a September 12 article in The Indypendent, the newspaper of New York’s Independent Media Center, the station and national office are also arguing about exactly how much WBAI owes the national office. “We’re in major negotiations with Pacifica over this,” WBAI LSB chair Mitchel Cohen told the publication. “WBAI has been unfairly billed and we’re asking for a line-by-line accounting.” Whatever the debt may be – somewhere between $300,000 and $450,000 – an obvious problem is the station’s low fulfillment rate, hovering around 70 percent.

The station continues to be mired in a long-term factional struggle. The Sept. 3 LSB meeting, which attracted only 15 members of the public, “was delayed half an hour in order to reach quorum, then quickly descended into hour-long bickering over the agenda, Robert’s Rules of Order (which outlines meeting process) and what constituted an excused absence,” The Indypendent reported. “Finally, after almost two and a half hours of thinly veiled contempt and bickering, the LSB meeting began addressing the most pressing issue — the budget.”

The two budgets yet to be discussed in public are those for WPFW in Washington, DC, and the national operation. Concerning the former, no information is publicly available yet, except Sawaya’s August comments that she has been attempting to get information and sees as a major challenge the need to relocate the station in a year.

The National Dilemma

The options for the national budget, which relies largely on “central services” payments from the stations, range from cutting about $200,000 to $600,000, depending on the severity of staff reductions. If staffing remains the same, the deficit could top $800,000. On the other hand, if most positions are eliminated – a scenario labeled “national office collapse” – the shortfall would still be around $250,000. The main problem, based on the national office’s analysis, is that WBAI and KPFK haven’t forwarded their full central services payments, and none are expected from WBAI next year.

Health and insurance expenses are expected to rise, and a contract with Democracy Now! calls for a 4 percent increase. Pacifica pays DN about $600,000 a year for the distribution of its daily public affairs show, plus Amy Goodman’s help with on-air fundraising. There might also be unanticipated severance payments and legal fees.

Sawaya has stressed that there is no choice but to borrow, and “anyone lending money will demand a balanced budget.” That apparently won’t pose too severe a problem for some stations. For the national office and WBAI, however, the impact could be devastating. For several years, the New York station has been assisted by national. Now both are in jeopardy.

With both Sawaya and the network’s Human Resources Director resigning, the temptation is to downsize. CFO Lonnie Hicks has been on leave over the summer, but is still being paid and may return. The Pacifica Radio Archives has agreed to make staff reductions, but has a proven financial track record and is too valuable to the organization to sacrifice. Not having an HR Director could be dangerous, given the frequency of employee disputes. So could the lack of an Executive Director for any length of time, although finding someone willing to take the job – and acceptable to most Board members – may be difficult. That leaves technical staff, the DC Bureau, the national programming coordinator, Free Speech Radio News, finance staff, and the Affiliates Program.

The Affiliates Program generates fees from member stations, around $200,000 a year, and has only one full-time staff member, Ursula Ruedenberg. Though modestly profitable, questions have been raised about how much it actually costs, and whether too many low power and Internet stations have been allowed to join without paying. On the other hand, it represents a significant form of outreach to the larger independent radio community, and expands the reach of Pacifica programs. Cutting the program could have a significant impact on how Pacifica is perceived.

The DC Bureau was created when the Pacifica National Office moved from the East to West Coast about six years ago. Verna Avery Brown, who had been Deputy Executive Director, was left behind and agreed to take on a new position. Since then, questions have been raised about her main contribution, daily news headlines available to sister stations and affiliates. Most don’t carry them. The one-person Bureau currently costs around $100,000 a year and doesn’t directly produce income.

Free Speech Radio News provides a daily half hour news program to Pacifica and its affiliates. Last Spring, Sawaya and Hicks cut Pacifica’s payments to FSRN by 25 percent, and funding beyond next Spring is unlikely. FSRN is already seeking alternative sources. But its departure would leave Pacifica without a national newscast, and there is no money to produce one in-house, unless existing local news operations take up the slack. When Pacifica last produced its own national daily newscast, it cost around $1 million a year.

If fully staffed, the national finance team includes four people plus Hicks. Sawaya has suggested that financial management could largely be “outsourced.” But she has also said that Pacifica needs more centralized accounting and reporting. Thus, the questions become whether to strengthen national oversight, and how to do that given the desire of stations to control their own budgets. Each station has its own business manager.

The other members of the national staff are Programming Coordinator Nathan Moore, Technical Director Jon Almeleh, and Internet Projects Manager Pete Korakis. If Pacifica were to eliminate any of these positions, its ability to coordinate programming and technical services, including governance, could be seriously undermined. Still, some members of the community question whether a national infrastructure is worth the price.

This brings the discussion back to Sawaya’s key question: Is Pacifica a network or five stations? If a choice must be made, the overarching structure – which places control in the hands of Board members whose primarily loyalty is to their local stations – makes it likely that the answer will, at least for now, be the latter. But if the national organization is dramatically scaled back, the main reason to pay central services fees is gone. And if those fees are seriously reduced to ensure balanced budgets for the stations, it could take years to reconstitute an effective national organization.

In sum, Pacifica has reached the point of unavoidable triage. Some parts will have to be sacrificed to ensure the organization’s survival. What they will be remains unknown, at least until the National Board meets in Washington, DC on Sept. 19-21. But both the future of Pacifica as a functioning network and the viability of WBAI appear to be on the line.

Sources for this article include meetings of the Pacifica National Board, National Finance Committee, LSB minutes, and members of the Pacifica community who provided information on condition of anonymity.

Coming up: Programming, governance, and the Bylaws

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