The St. Paul Chamber Orchestra on Tuesday reported its first deficit in nearly a decade. Its 2012 fiscal year ended with a shortfall of $895,000 on expenses of $11 million.

The results cover a year that ended June 30 -- well before fall concerts were canceled because of a labor dispute.

Describing "a major financial challenge," SPCO president and board chair Dobson West predicted even larger deficits in the future "if significant changes are not made."

The SPCO deficit is about 9 percent of expenses. In contrast, the Minnesota Orchestra is expected to announce Thursday a 2012 deficit of about 19 percent of its expenses. Musicians of both orchestras are locked out over failures to agree on new contract terms.

Earned income made up just 15.7 percent of total SPCO revenue of $10.1 million. That is largely the result of low ticket prices. Also, a membership program was instituted last April that allows patrons to see an unlimited number of concerts for $60 per year.

Pricing has become a sticking point in negotiations, as musicians have argued for ticket bumps to boost revenue. Management says that data show the low prices decrease marketing costs and stimulate donors, resulting in positive finances. Attendance last year was 128,000, up 9 percent from 2011.

Contributions account for two-thirds of SPCO revenue. Corporate giving was off 7 percent from the previous year, continuing a trend that has seen a slide of more than 35 percent over the past decade. The Annual Fund -- gifts from individuals, corporations and foundations -- is about 20 percent smaller than it was before the 2008-09 recession.

West said the SPCO avoided deficits since 2008 by reducing expenses by $1.5 million -- including the layoff of 17 percent of its administrative staff and salary reductions for senior management. Musicians also gave concessions, although union compensation was up 8.5 percent in fiscal 2012, according to numbers from the musicians. In dollar terms, that represented about $234,000.

The players are "well aware of the financial challenges of the organization," according to a statement issued Tuesday by musicians. However, they see the picture as "more nuanced" and said the musicians' "immediate concerns do not concern finance, but rather unfettered control by management."

The orchestra drew roughly $1.8 million from its $35.8 million endowment to help cover 2012 expenses.

The SPCO signaled at the end of 2011 that it expected this year's deficit to be between $750,000 and $1 million. The organization last reported a deficit in 2002-03, of $790,000.

No new talks have been scheduled in the contract dispute with musicians. Board officials say the stressed finances point to the need for steep reductions in musician costs. The SPCO began its fall season as scheduled in early September, before musicians rejected a cut of 32 percent in the minimum scale and were locked out Oct. 22. Concerts have been canceled through the end of December.

Graydon Royce • 612-673-7299