Critique of proposed WBAI budget
by James Ross, 9-10-07
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Dear member of the PNB/NFC,
I'm a member of the WBAI LSB writing to express my concerns about WBAI's budget and financial situation.
The WBAI LSB was presented with a revised budget on 9/5/07, in response to the National Finance Committee's request of 8/29/07. To make a long story short, I believe this new budget is problematic, in that it calls for income that WBAI has not demonstrated it can achieve, even given the great number of days WBAI devotes to fundraising.
Further, this budget does not exactly respond to the concerns of the NFC, which called for " WBAI station management [to] identify additional savings that would achieve a net surplus of $125,000..." The bulk of the changes in the 9/5/07 budget that lead to an improved bottom line are increases in income predictions, not savings.
Below is an a quick analysis I did of the new budget and related issues.
I understand that the there is a lot of institutional momentum to avoid serious cuts, in order to save people's jobs. At a certain point this becomes denial, however.
The NFC and PNB have a choice - either 1) pass a budget that likely will not be met, which will avoid immediate serious cuts in staff but will lead to WBAI falling even further into a financial hole, or 2) pushing for a budget with more realistic income targets, which also means greater staff/pay cuts. (By "financial hole," I mean WBAI's current situation, where it needs to fundraise about 90 days of the year, yet still builds up debts to the rest of the network.)
I think the second course is the right one, though it is difficult. I don't know what else can be done. I understand that other stations are reducing staff, even though they are not in the same straits as WBAI.
In concert with a tighter budget, WBAI needs a serious recovery plan, that will help us to address the root causes of our financial problems and will lead us to a more stable future, where WBAI's potential can be more fully realized and we don't continue to peel off staff. It's obvious WBAI's financial problems are ongoing - the responsible thing is to face that fact and deal with it.
Thanks for your efforts on behalf of Pacifica Foundation.
Sincerely,
James Ross WBAI LSB (listener-member), WBAI LSB Finance Committee
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WBAI BUDGET ANALYSIS
Changes in the 9/5/07 budget
Key changes over previous iterations are that listener support (income) is increased to $2,592,630 from $2,440,000; grants income is increased to $276,000 from $125,000; salaries (expenses) are decreased to $1,096,364 from $1,164,452; and now there was an apparent net surplus of around $250,000 rather than a deficit of $98,000.
Listener support income
According to iGM Robert Scott Adams and treasurer Baruti Bediako, the listener support line reflects income from four fund drives ($2,492,630), local direct mail campaigns ($90,000), and a solicitation that goes out with the ballots ($10,000). The drive target pledge totals are $850,000 (fall), $875,000 (winter), $750,000 (spring), and $512,000 (summer). The target fulfillment for on air drives is 83.1%.
The problem is that these increases in Listener Support income are not based on previous performance or on reasonable expectations of improvement:
--In FY 2007, the pledge total for all on air drives was about $173,000 lower than the projected total for FY 2008 in the new budget. This took WBAI 88 days to accomplish, so lengthening the drives is not really an option. (FY 07 pledge numbers from MEMSYS: fall - $817,000, winter - $871,000, spring - $638,000, summer - $475,000, extra day - $25,000).
--The new budget bases income on 83.1% fulfillment. But there is no basis for believing that we will improve fulfillment by that amount. Even 80% may be optimistic. In FY 06 WBAI achieved an annual fulfillment rate of close to 80% - maybe 79.6%. Based on reports of interim fulfillment, it appears the annual fulfillment for FY 2007 drives will top out at 78-79%. [Each fulfillment rate point represents about $30,000 at WBAI.]
--My best recollection is that in FY 06, WBAI pulled in a little over $57,000 in locally produced mail solicitations. Again, the current budget estimates a much higher number.
The combination of overestimates in the listener support line in the current budget add up to about $250,000: That is $138,000 (overestimate of pledge totals) + $89,000 (overestimate of fulfillment rate) + $30,000 (overestimate of mail solicitation income).
Grants Income
There is also a problem in the grants income line. The entirety of a grant for the HD transmitter is included as income ($150,000). However, only $25,000 of the cost of purchasing the transmitter is included as an expense. (The rest will be paid off in future years). Thus the apparent surplus is too high by $125,000. The budget should be adjusted so that the entirety of this grant does not fall in FY 2008. This would reduce the "surplus" in this budget to about $125,000.
Recovery Plan
The NFC on 8/29/07 called for recovery plan targets. It is good to remember that last year (10/06) the NFC and PNB called for WBAI to produce a recovery plan. What happened is that some suggestions were put together (e.g., "improve fulfillment"), but that's as far as it went. Needless to say, no recovery took place.
What is needed for a real recovery plan is 1) good ideas, 2) goals and targets, 3) means to achieve those goals and targets, and 4) regular assessment of progress.
One aspect that must be included in a serious recovery plan is evaluation of paid staff and management. Since it is apparent that WBAI must reduce staff, at least over the short run, to remain financially viable, staff evaluations are needed to determine how cuts should be made with the least harm to the station. But as of last October, the LSB was told by management that regular evaluations of paid staff were not being done.
Management evaluations are also essential - we need to understand whether and how effectively management is moving to deal with the root causes of WBAI's financial decline. It's likely that management bears some responsibility for the current problem
I am skeptical of the current plan to cut all salaries by 5 percent. The problem is, this hurts the most deserving employee the same as the least deserving. It is better, if cuts must be made, not to penalize the best employees. To simply cut by 5 percent across the board is basically to avoid making a decision.
WBAI's declining financial position
Pacifica's CFO reports that WBAI owes money to the national office. Pacifica's audits make clear WBAI's declining financial position:
| FY | WBAI net assets EOY |
| 2006 | $(7,333) |
| 2005 | $101,616 |
| 2004 | $222,738 |
| 2003 | $313,354 |
| 2002 | $77,345 |
For the period 10/03 to 9/06 we have fallen behind at a rate of a little over $100,000 per year. That amounts to about 3% of our annual budget. Apparently we have no reserves left at WBAI. This is why it is essential to be realistic about our income projections for the coming year.