The Coalition government has slashed the Australia Council’s funding yet again, in a sneaky summer efficiency dividend.

Rumours have swirled about the new funding cut since before Christmas, but yesterday was the first official confirmation of the new cut to the arts agency’s funding.

The release of the government’s Portfolio Additional Estimates Statements by Treasury on Thursday afternoon contained the details.

The Australia Council’s Additional Estimates Statements, released yesterday, contains a footnote explaining the new Australia Council funding cut. Source: Department of Communications and the Arts.

The additional estimates detail funding cuts as “changes in parameters” and “increase in efficiency dividend” and add up to $9.2 million over the forward estimates.

While this is a rounding error in a $400 billion federal budget, the funding situation for the Australia Council is so dire that the extra funding cuts triggered talks at board level about the future of the agency’s funding programs.

A funding cut of $9 million over the forward estimates sounds small, but it represents a 6% cut to the Australia Council’s discretionary funding. While the Australia Council’s total appropriation is $183 million annually, about $140 million of this money is locked up in multi-year funding contracts with arts organisations.

Crikey understands the new efficiency dividend was so significant, the Australia Council convened a board meeting to discuss a response. A source tells us there was genuine concern over whether the agency could meet its contractual obligations going forward.

The Australia Council last year announced four-year funding agreements with more than a hundred smaller cultural organisations, committing the agency to $112 million out to 2020. With most of the Australia Council’s appropriations for coming years committed, an extra funding cut leaves the agency in a parlous situation.

To make ends meet, the board, led by Rupert Myer, decided to raid the agency’s cash reserves. An extra $10 million has been shaken out from under the couch cushions.

The reserves drawdown is listed in the additional estimates as “increased support for the small-to-medium art sectors,” indicating that the money was needed to meet the Australia Council’s commitments to the smaller companies.

[Totally coincidentally, noisy critics of arts cuts miss out on funding]

Perhaps the most interesting aspect of the funding cut is that it appears to be retrospective.

The 2016 federal budget specifically excluded the Australia Council from the government-wide efficiency dividend, on the grounds that the agency had already endured hardship in 2015. The 2016 Portfolio Budget Statement for the Australia Council states that “there are no budget measures for the Council in the 2016-17 Budget”. Rumours also swirled in the run up to the Mid-Year Economic and Fiscal Outlook in December, but again, no funding cuts were announced in that document.

But some time during the summer, it appears that Treasury decided to impose an efficiency dividend on the Australia Council anyway. Sources tell Crikey there was an exchange of letters between the Australia Council and Mitch Fifield’s Department of Communications, after it became clear the efficiency dividend would be applied.

The new funding cut comes in the context of previous austerity. The Coalition has been consistently creative in funding ways to cut arts funding in office. The Australia Council has already endured cuts of $105 million in 2015 during George Brandis’ infamous “Excellence Program” raid ($32 million was later given back by Mitch Fifield), and $28 million was slashed in 2014.

Money has disappeared from the Australia Council in strange and mysterious ways. When Tony Abbott was prime minister, $6 million was taken from the Australia Council to set up a new book industry council. But the books body never met, and it was later cancelled. It ended up becoming another funding cut: the $6 million vanished into consolidated revenue.

The implications of the new funding cut are clear: further slashes to the Australia Council’s discretionary grant programs. Distributing grants to solo artists and small projects to make culture used to be the core business of the Australia Council. But after three years of ongoing austerity, grants to artists are down 72% from 2013 levels. On current trends, there may soon come a time when the Australia Council stops distributing grants to individual artists altogether. 

It also seems likely that the Australia Council will have to shed more staff.

[‘Devastating’ OzCo grants just the tip of the iceberg]

The Australia Council confirmed the funding cuts to Crikey in an email this morning. “In late 2016, the Australia Council was advised that it would be subject to the increased Efficiency Dividend which was announced in the May 2016 Budget,” a spokesperson wrote.

“The Efficiency Dividend will have a significant impact on the Australia Council and we are carefully reviewing all activities to ensure that our support for the arts is delivered as effectively as possible within the budget available.”

The spokesperson also confirmed the $10 million drawdown of the Australia Council’s cash reserves, stating: “The Australia Council Board made a significant strategic decision to utilise $5 million per year of the Council’s reserves in 2016-17 and 2017-18 to increase the funding available, subject to the appropriate Federal Government approval, which was granted.”

“This $10 million over two years from the Council’s reserves was fully allocated to our Four Year Funding program and does not represent additional grant funding available in future,” she continued.

Crikey contacted Arts Minister Mitch Fifield for comment, but at the time of writing, we hadn’t received any. 

Labor’s shadow Arts minister Tony Burke was scathing. “Every time you look, this government has found a new way to cut support for the arts,” he told Crikey in a text message, “and to make it harder every year for Australian stories to be told.”