The agencies have reported an aggregate decline for the past three years. Between 2001 and 2004, total arts-agency funding fell from $450.1 million to $281.1 million.

According to the report, of the United States' 56 state and jurisdictional arts agencies, only 11 reported decreases in funding. California, the state with the lowest spending on arts, reported an increase of 4.3 percent; in other states, including Colorado, Missouri, Michigan, Massachusetts, Minnesota, Oregon, and Virginia, the agencies' budgets have not yet recovered from recent shortfalls, and are still operating on reduced funding.

The report notes that the states were operating with budget shortfalls of "historic magnitude," in which all areas of spending were cut, and although the economic situation has recovered somewhat, "states remain cautious" as "budget pressures continue to mount because the biggest state government expenditures—Medicaid, corrections, and education—are escalating rapidly."

Nevertheless, NASAA remains optimistic about what the arts can do for the economies of the states. Jonathan Katz, the assembly's CEO, said "State officials look to the arts to provide innovative solutions to the most serious challenges our communities face. These include building a skilled workforce, making the economy more productive, and developing communities that attract the creative industries. The arts help to communicate a distinctive state brand identity."

He added, "Although state arts agency appropriations represent a modest .049 percent of total state general fund expenditures—less than one half of one tenth of one percent—they demonstrate that the arts is a smart investment."

State arts agencies fund about 20,000 of the country's arts organizations, schools, and artists each year year. NASAA is the membership organization for these agencies.

For more information, or to order NASAA's annual report, go to www.nasaa-arts.org.