To: iPNB From: Dan Coughlin, ED Lonnie Hicks, CFO Date: November 20, 2003 Re: Revised Budgets and Network Issues
At the September NYC meeting of the Pacifica Board of Directors, the iPNB passed the network budget with the proviso that each station was to present budgets with one month's operating expenses in reserve.
This action was taken in light of a number of key facts: 1) Projected declining listener support in FY04; 2) Projected 10-12 percent increase in Pacifica's total FY04 wage bill; 3) Expenses were seen to be increasing faster than revenues; 4) Outstanding debt from professional service firms; 5) Significant potential litigation liabilities from personnel suits.
Since September, the CFO, the finance office staff, business managers, general managers and I have worked hard to re-budget in light of the iPNB resolution.
Key Highlights of the New Budget and Network Finances
* We have identified a projected drop of $1.5 million in listener support for FY04 compared to FY03 actual, including projected drops of some $450,000 at KPFA and $1.1 million at WBAI in New York.
* In the September budget, listener support was projected at $11.96 million. In the new budgets, listener support is projected at $10.57 million, a drop of 11 percent.
* In the September budget, salaries totaled $6.05 million. In the new revised budget, salaries are coming in at $5.07 million, down 16 percent.
* From $2.19 million in the September budget, central services has dropped to $2.01 million, down eight percent.
* National expenses down to $2.57 million from $2.67 million originally projected in the September budget.
The Core of the Problem
The surplus in the new revised budget is only $7,800 compared to the $300,000 in the September budget. It cannot be overemphasized that this creates a severe liquidity problem for the network.
The CFO and I have seen that even with one month's operating, the sharp drop in listener support has created a new financial challenge for the network no station has adequate cash reserves on hand. The source of the one month's operating is to come from this current year's budget. No actual reserves exist at the present time. This is the important fact to be drawn from the drop in listener support. And if listener support drops even more than projected, and the next drives are below goal, there are no reserves to fall back upon. This would be as close to the brink as any organization ought to be.
The resolutions below are designed to help deal with not only the finance issues (the symptom) but also that of reduced listener support which is the driver in this scenario.
Station-by-Station Review
KPFA has not been able to meet the iPNB's criteria of generating one month's operating expense of $303,000 for this fiscal. They have only been able to increase their surplus by $64,000 from their September budget. A recommendation for KPFA is listed below.
KPFK, KPFT, and WPFW will all have reserves equal to one month's operating.
Our thanks to all the staff for their contributions in these areas and for understanding the importance of listener support and the need for reserves.
National Office has been immediately impacted by the reduced listener support dollars. We are not meeting the one month's operating due to the sharply reduced Central Services network-wide. Overall expenses, however, have been reduced by $100,000 at the present time.
The Special Situation of WBAI
The issue at WBAI involves several factors. Most importantly, the October fund-drive fell short of its goal by $400,000. As such, the station is now spending about $300,000 a month, but is raising only $200,000 (at best). In discussions with union officials, paid and unpaid staff, we have decided upon a two-pronged strategy to deal with the station challenges.
The first requires that WBAI raise $200,000 extra by December 31, 2003. This will help us meet one month's payroll. It will also help with the $1.4 million we project WBAI will need by September 30, 2004.
However, the second part of the plan calls for conditional reductions in staff if the needed revenues are not in place to keep the station going beyond December 31, 2003.
The station GM, the CFO, and I will be meeting with the union on or about December 1, 2003, to review WBAI's financial situation, the revenues that may be generated by the end of the calendar year, and the planned conditional reduction in force.
We will arrange for an iPNB briefing on or about December 3 to appraise members of the situation.
Board Action Items for Approval
The following items will be presented for board approval on the call slated for Monday, November 24, 2003.
1) Resolved: The ED and the CFO are empowered to ensure that one month's operating reserves are in place for each station each fiscal year.
2) Resolved: KPFA accumulate one month's operating reserves this fiscal year and that the ED and CFO provide a progress report to the iPNB in 45 days.
3) Resolved: Each Pacifica station before January 15, 2004, review its day-time programming schedule with the goal of having each day-time program be revenue sufficient and financially self-sustaining with a listener base of support.
3a) The ED will review the progress of each station self-sustaining plan and report back to the board by January 10.
3b) Where exceptions are warranted to the self-sustaining requirement due to mission relevance or special circumstances, and a waiver is recommended to the above resolution by the ED, the board of directors will specifically grant such waivers based on criteria it may develop.
4) Resolved: The Core Recovery Plan, see attached, for WBAI presented in meetings with WBAI management, staff, union officials, is to be implemented by the ED, the CFO, and the WBAI GM if local revenue generating efforts do not produce funds needed to sustain the station.