Arts groups describe the grants as critical — a key piece of flexible, stable funding. Except that this summer, that funding took a surprise dip.

In July, the Minnesota State Arts Board awarded 176 arts organizations $13.1 million in operating grants, about 12 percent less than last year. Most grants shrunk, with some big arts centers and small publishers seeing declines of over 20 percent. The Minnesota Opera nabbed about $350,000, compared with $450,000 last year. The Walker Art Center’s grant shrank by 22 percent. Milkweed Editions got 22 percent less, as well.

“Oftentimes an organization will say, ‘What did we do wrong?’ ” said Sue Gens, the arts board’s executive director. “It’s not anything they did wrong. We have less money.”

The slump in this year’s grants surprised some arts-watchers, who had considered this year’s legislative session a success.

Lawmakers slightly increased funding for the Minnesota State Arts Board and regional arts councils over two years but backloaded that funding into the biennium’s second half. Wary of waning sales tax revenue, they also started setting aside 5 percent of arts funding allotted via the Legacy Amendment, creating a cushion.

“In the two-year biennium, the arts board’s funding will go up,” Gens said. “But the fact that it goes down pretty significantly, and then goes back up makes the year-to-year changes a little harder to understand or anticipate.”

Arts funding will rebound next year. But in the meantime, those changes will affect the 10 grant programs the art board distributes during the course of its fiscal year, including those for individual artists. Arts groups see the operating grants as especially important: They’re a rare source of money untethered from any projects, free to be used as their leaders see fit.

“General operating support is extremely important to all of us, whether we are small, very, very big or somewhere in between,” said John Nuechterlein, president and CEO of the American Composers Forum, based in St. Paul. “It’s the money that helps us, literally, pay for rent and the lights.

“It’s a critical piece of our budget because it fills the holes that can’t fill with anything else.”

So news that the nonprofit’s grant would be 25 percent less than last year — from $92,000 in fiscal year 2017 to $69,000 in fiscal year 2018, was “a hiccup,” said Nuechterlein. “These kinds of dips and cuts are never fun, but that’s life.” The American Composers Forum, which supports composers and performers across the country, just started its fiscal year. So it will have time to adjust its budget, he continued. “We have 11 months to try to figure this out.”

The operating grants are distributed based on a formula that takes into account an organization’s budget size, as well as a periodic review based on five criteria, including whether its administration is sound and if the public is benefiting from its work. One group’s budget growth could mean smaller awards for other organizations of a similar size.

“It’s a very complex process that has a lot of variables in it,” Gens said.

This year, for example, the Minnesota Orchestra saw a boost to its grant, totaling $795,428. For a few years, the nonprofit’s budget — and therefore, its grant — shrunk due to the labor dispute that led to the lockout of 2012-14. But this year, the lockout no longer factored into the Arts Board’s formula. At the same time, the American Craft Council boosted its size, putting it in the category of organizations with budgets of more than $5 million.

So that means other big nonprofits in the same category got less. The St. Paul Chamber Orchestra saw a 17 percent decline. The Walker Art Center, which last year received $905,000, nabbed $705,000 this year.

“It’s a tough way to start the year,” said Christopher Stevens, the Walker’s chief of advancement. Over the coming months, the art center will “recalibrate” its budget, hopefully adding income but also maybe making cuts. “Oftentimes, it’s a combination of both.”

But Stevens isn’t complaining. He points out that the Walker and other arts organizations are getting much more state operating funding than they were 10 years ago. In fiscal year 2009, the arts board granted $5.1 million to 115 institutions. The Walker then received about $430,000. Then citizens passed the Legacy Amendment, dedicating sales tax dollars to the arts, the environment and recreational causes.

“It was like a rocket boost,” Stevens said, which came “right as the Great Recession hit and there was no good philanthropic news.”

“We all want bigger grants,” he added, “but I take a step back and pause when I look at the arc of it.”

To a development director, operating grants are coveted. Unlike project-specific grants or sponsorships, they can be used on general expenses, new ideas or a special project that’s losing its other funding. They give artistic directors flexibility, Stevens said.

“In a world where many foundation and corporate gifts are increasingly restricted toward specific projects, where’s there’s been a general decrease in operating support from the philanthropic sector, it’s super great that the Minnesota State Arts Board has such a robust operating support program,” Stevens said. “It’s really what allows all the arts organizations to do what they do best.”

For the Duluth Superior Symphony Orchestra, the cut means that the grant, which accounted for 3 percent of its budget, now covers 2.4 percent.

“We’ll find other ways to make up for that,” said Rebecca Petersen, the orchestra’s executive director.

The reduction emphasizes the importance of having a mix of funding, she said. “We can’t put all our eggs in one basket.” It doesn’t hurt that the orchestra just wrapped up a $500,000 campaign for its Heritage Fund, surpassing it by $12,000. “It was really exciting to see how supportive the community is,” Petersen said. That kind of support also helps with other funding applications, she noted.

Petersen was nervous opening the letter outlining this year’s Minnesota State Arts Board grants. When she got the news, she called up Gens.

“Did I write a really crummy application?” Petersen asked her.

But she left the conversation with a different conclusion: “It’s all math.”