Orchestra cutting staff and pay

In what is only the first step in averting or minimizing a deficit this season, the Philadelphia Orchestra Association yesterday shed 20 percent of its administrative staff and said other cost-cutting moves were on the way.

Twelve staffers were let go, and six other positions will go unfilled, leaving the orchestra with 72 administrators.

"This is an exceedingly sad day for us," said Frank P. Slattery Jr., acting executive director and CEO since the January departure of orchestra president James Undercofler.

Remaining staff members earning more than $50,000 annually will take a 10 percent pay cut for the portion of salary above $50,000, and vice presidents will take additional compensation reductions.

While the cuts, made across a range of departments, are a clear consequence of the economy, they add to an arguably self-inflicted institutional crisis greater than any since the 64-day strike of 1996.

Among the current challenges:

A wounding slip - or at least, for some, a perceived one - from the top tier of orchestras. The Philadelphia Orchestra was alone among major American orchestras in being absent from a recent Gramophone magazine ranking of the world's great orchestras.

The continued deterioration of a national and international presence. The orchestra is at the end of its relationship with the record label Ondine and has canceled a European tour this summer with chief conductor and artistic adviser Charles Dutoit that would have begun to move the orchestra's image beyond its bumpy past with former music director Christoph Eschenbach.

The juggling of three searches at once: for a new board chairman, president, and music director.

An ongoing effort to improve the orchestra's home at the Kimmel Center, in terms of acoustics and urban liveliness.

The orchestra recently celebrated surpassing by $5 million the goal of its $125 million endowment drive, for a total raised of $130,078,771. The boost was to have ensured the fiscal health of the organization, but, in a cruel bit of timing, the goal was reached as portfolio values were plunging.

The market value of the orchestra's endowment was $117 million as of Jan. 31, down 30.73 percent from the same date a year earlier, "and it's fair to infer that February was a down market," Slattery said.

That's a far cry from the summer of 2007, when the orchestra, with $20 million to go in its endowment drive, was already looking at a nest egg valued at $202 million. Leaders were confident that, between new gifts and market appreciation, the campaign could end with $250 million in the bank.

Adding to the stress on the budget are the first signs that the devastated economy is affecting the buying and giving habits of orchestra supporters. Ticket revenue is 14 percent lower than at the same time last year. Corporate support is unchanged, but individual giving is down 15 percent.

Attendance has softened. Verizon Hall was filled an average of 79 percent of capacity this time last year; that number has dropped to 73 percent.

Yesterday's cuts will shave about $900,000 in spending, but only part of that savings will be realized this year, and the orchestra is facing a potential $2.2 million deficit on a $46.6 million budget.

"This will help the deficit, but in and of itself will not avert that," Slattery said. The orchestra, which hasn't run a significant deficit in several years, will likely end this fiscal year in red ink, but the extent of the shortfall is unclear.

"Unless some generous soul does something I don't know they're going to do yet, I think there will be a deficit," Slattery said.

He is asking various corporations, board members, and friends of the orchestra for support, but he suspects additional cuts will be necessary to narrow the gap. The orchestra recently retained Thomas W. Morris - an orchestra-industry consultant, who was executive director of the Cleveland Orchestra from 1987 to 2004 - to perform an evaluation of orchestra operations.

His recommendations will be brought before the orchestra board later this season, Slattery said.

The cuts at the orchestra echoed similar budget contractions that appeared to intensify this week at arts organizations nationwide. The Pittsburgh Symphony, with its endowment down about 30 percent, announced the layoff of nine staff members.

The Philadelphia Museum of Art, the other powerhouse arts group in town, last month eliminated 30 slots, or 7 percent of its administration.

The staff of the Philadelphia Orchestra was already operating at a lean level in comparison with other orchestras its size, and the cuts leave it bare-bones, Slattery acknowledged.

"We have only a very, very simple mission now," he said, "and that is to put this orchestra on stage to play the music they've been playing and still be an international touring organization that is attempting to become the best orchestra in the U.S. Anything else that gets in the way of this is extraneous now."

The cuts are the first since 2004, when seven administrators, or 10 percent of the staff, were let go, paring it from 70 to 63 members.

These new layoffs throw down the gauntlet to musicians, whose raises in the last decade and a half have well exceeded inflation and who are scheduled for another pay increase next season.

Musicians will receive a minimum-salary boost to $131,040 next season from this season's $124,800 - a 5 percent increase - and some board members see potential savings in renegotiating the contract now.

Cellist John Koen, chairman of the members committee, said that, so far, the musicians' contributions to solving the deficit were "minor steps, things like forgiving overtime here and there," but that more major moves were being considered. "We're meeting with our attorney next week, but management has not come to us with a request for a reopener," he said.

After a long period of nettlesome labor relations, the orchestra board in 2006 hired a new president, Undercofler, who is widely acknowledged to have brought civility to discussions. But he ended his leadership before the end of his three-year contract, stepping down in January.

Then, in late January, board chairman Harold A. Sorgenti left his post, nine months before he had been scheduled to do so.

With the ongoing hunt for a music director to succeed Eschenbach, the orchestra has been searching for three leaders at once - although a board chairman could be announced as early as today.

Some musicians would like to see Dutoit named music director for a short, finite period while the search for a conductor continued; others were arguing against it.

"The sooner we get these things taken care of, the better off we're going to be," Slattery said. "They will determine who we are and what we will do for a long time."