A Few Comments

on the 2010 Financial Crisis at Pacifica

by Max Blanchet
January 10, 2011

As illustrated in the chart below, I have kept track of the yearly changes in Pacifica's cash position from 2001 using data from the audit reports.

Column A lists the years from 2001 until 2012. Column B lists the actual changes in Pacifica's cash position in current dollars as reported in Pacifica's audit reports. Column C lists these changes adjusted to 2010 dollars using the CPI deflator calculated from US Department of Labor statistics. Column D accumulates the entries in Column C. The entries in Column C for 2011 and 2012 are straightforward mathematical extrapolations of the data for 2005-2010.

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-- A ------ B --------- C --------- D ----
2001 - (238,483) - (295,719) - (295,719)
2002 - 553,601 --- 675,393 --- 379,674
2003 - 409,948 --- 487,838 --- 867,512
2004 - 270,932 --- 314,281 --- 1,181,793
2005 - 479,092 --- 536,583 --- 1,718,376
2006 - 221,804 --- 241,766 --- 1,960,142
2007 - 43,249 ---- 45,844 ---- 2,005,986
2008 - (704,793) - (718,889) - 1,287,097
2009 - (461,146) - (470,369) - 816,728
2010 - (835,000) - (835,000) - (18,272)
2011 - (1,175,916) (1,194,188)
2012 - (1,454,746) (2,648,934)

Negative in 2001, the net change in cash position reached a first positive peak in 2002 ($675,393,) decreased in the following two years, reached a lower positive peak in 2005 ($536,583) and decreased thereafter. By 2008 the net change in cash position turned negative (-$718, 889) and has remained so until 2010 when it reached -$835,000 (preliminary.) In 2011 and 2012 the change in cash position is projected to reach by extrapolation -$1,175,916 and -$1,454,746 respectively. By then, the cumulative decrease in Pacifica's cash position will be of the order of $1.2 million and $2.7 million respectively over the 2005-2012 period. This reflects a steady deterioration in Pacifica's cash position since 2005.

According to a preliminary version of the audited financial reports, Pacifica's loss for fiscal year 2010 was $1,621,034. At KPFA the net loss was $568,445.01 in 2010, a sad development given that prior to fiscal year 2008-2009 --when it used up reserves of nearly one million dollars-- KPFA had achieved steady yearly surpluses.

How did Pacifica get into the mess it is in today? Prior to fiscal year 2008-2009, the big problem was at WBAI where bad management and equally bad programming depleted the finances of the station and made it impossible for it to meet its obligations towards the national office. Effectively, WBAI was being subsidized by Berkeley, Los Angeles, Washington and Houston. This was compounded by the inability of the Pacifica National Board (PNB) to correct the situation there due to political collusion for petty reasons between an irresponsible majority on the PNB and an equally irresponsible and incompetent management team in NYC. Also involved was the limited capacity of the network to behave as a truly unified entity especially with regard to accounting, financial and budgetary matters.

Starting with fiscal year 2008-2009, the recession hit all stations very hard with the end result that except for KPFK and KPFT the other stations in DC and Berkeley --NYC was already insolvent-became insolvent due largely to their inability to cut costs and live within their means. As pointed above, this was particularly acute in Berkeley, the last financial pillar of the network to fall into insolvency.

All of this confirms, in my opinion, that we are still probably headed for bankruptcy notwithstanding the cuts --substantial and painful as they may have been-- recently made here at KPFA and elsewhere in the network and the substantial assets owned by the institution.

It is unfortunate that the recent brouhaha --completely one-sided and unprofessional as reported on the air in recent weeks at KPFA-- resulting from the cuts made to achieve a balanced budget at the station has focused on the wrong issue while overlooking the real issue, which involves the high probability of bankruptcy of the Pacifica network.

Maybe, just maybe, the recent cuts instituted by responsible new management, especially at the national level and in NYC, and a turnaround in the economy --as possibly evidenced by the successful fundraisers in NYC and especially in Berkeley late last year-- will do the trick and restore Pacifica to financial health and help it avoid bankruptcy!

From what I gather, bankruptcy can happen in two distinct ways: three of the creditors can approach the federal bankruptcy court in this area, asking it to intervene in order to help them recover what is due to them or alternatively the management of the network can approach the court independently to ask it to intervene to help Pacifica deal with its creditors. In either case, the court will step in, keeping the current management or bringing in a trustee and new management that will manage Pacifica from here on. In either case, the community will probably lose control of the network. In addition, the FCC will probably step in as well to determine what to do with the stations and the signals. Contrary to what is commonly believed, the FCC will be the ultimate decider as to what to do with the signals and could very well strip them away from Pacifica and give them to other interested parties with no sympathy whatsoever for Pacifica's original mission. In any case, the bankruptcy process will be very expensive and will rapidly eat up Pacifica's more valuable and easily disposable assets, including its buildings and signals.

I hope this analysis will help people focus their mind as to what needs to be done to insure Pacifica's survival for the hour is very late!

Former LSB member
Berkeley, CA
January 10, 2011

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10 Years of KPFA Finances in TABLE FORMAT

and, presented as a GRAPH, the same data:
10 Years of KPFA Finances GRAPH

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