As the SPSP team reflects on the 2023 Annual Convention, we are grateful for the opportunity to gather members and others in the field to share their research and connect. The SPSP Board greatly appreciates our professional staff who created an enjoyable environment and experience for our Annual Conventions through their tireless dedication. As we move forward, the Board is also committed to being transparent about SPSP's budgeting process, the challenges that affect convention planning, and how we will address them.
Those who attended the 2023 Annual Convention may have noticed that the abundance of food and drink served in San Francisco was not available in Atlanta. I'd like to provide background information on the reasons for these hospitality cutbacks, as well as other changes in SPSP spending, as an introduction to the exciting world of academic conference and non-profit finances.
Every year, the SPSP Board of Directors meets in the fall to review current-year finances and approve the budget for the next year. So, we met in November 2022 to review 2022 finances and 2023 projections and to approve the 2023 Annual Budget. Because the projection showed that SPSP continues to operate with a deficit, the Board made the difficult decision to limit spending in 2023 as much as possible and evaluate our business model for financial sustainability. These cuts included reducing costs associated with the conference as well as putting several SPSP programs on hiatus. SPSP is a tax-exempt organization, as described in Section 501(c)(3) of the Internal Revenue Code. Donations made to SPSP are tax-deductible and as a non-profit, SPSP serves the public good and all "profits" must be used to further the mission of the organization. For SPSP, funding comes primarily from five sources: journal royalties (28%), interest from an endowment (4%), membership fees (13%), conference fees (37%), and philanthropy (2%). For much of the past 20 years, SPSP has brought in more money each year than it spent on scholarships, conference subsidies, programs to support research, and staff to support programming, etc. As a result, SPSP has been able to expand advocacy and programming. However, this is no longer true and SPSP is anticipating budget deficits, requiring that we tap into our savings to cover expenses.
Why is SPSP operating in a deficit?
Deficits have arisen for two main reasons. Firstly, SPSP lost money on the 2022 Annual Convention. The event presented unique financial challenges because we hosted a virtual conference in addition to our in-person program, which added considerably to the costs of the conference. Many attendees opted to attend virtually instead of in-person and unfortunately, registration revenue from the virtual conference was not enough to cover the costs. You might wonder if the conference was over-budget, why did the in-person conference in San Francisco have such great hospitality? Why not spend less at the hotel? As is standard in the meetings industry, conference locations are booked several years in advance. In contracts with hotels and convention facilities, we guarantee that a number of hotel rooms will be rented (room occupancy) and that we will purchase a minimum amount of food and beverages. These guarantees allow us to obtain discounts on conference spaces and services. Regardless of how many people register for the event, we must meet these minimums. So, in San Francisco, where we had fewer attendees, we spent more money per person on food and beverages, audio and visual fees, labor, etc. In Atlanta, we had more attendees and we worked to keep our hospitality costs to that guaranteed minimum. Hotel and conference space contracts also include substantial penalties if we cancel a conference. Penalties increase the closer we get to the meeting date, as the possibility of the hotel finding a replacement conference grows smaller the closer we get to the meeting date. To avoid penalties for the 2021 conference cancellation, SPSP agreed to return to Austin in 2026 with similar room occupancy and hospitality obligations.
A more long-term reason for SPSP's deficit is that revenue from journal subscriptions is no longer growing. In 2019, SPSP could count on publication royalties to provide 25% of our revenue and in 2023 only 19% of our revenue will come from royalties. SPSP is guaranteed a minimum royalty payment for PSPB and PSPR through our contract with SAGE (SPPS is co-owned with other societies and is not yet profitable) and in the past, we received funds above that minimum as university libraries and individuals purchased subscriptions in order to access journal content. However, as institutions face budget cuts and models move towards open access, there are fewer institutional and individual subscriptions which have caused our royalties to decrease by 30%, while our expenses to run the journals have not decreased.
While cutbacks on hospitality and service during Society events are relatively simple to make, long-term threats to SPSP's ability to support other programming are meaningful. SPSP has ambitious goals to create a more inclusive Society and science and those programs require resources. Throughout this year, you will see additional emphases on philanthropy, announced changes to support mechanisms, and reexamination of the efficacy of current programs. Meeting one of the first goals of the new strategic plan is to secure SPSP's financial future, will be a Society-wide effort and input from members is critical.
Many individuals and organizations in our field are navigating these financial challenges and SPSP believes that we can rise to meet them by working together. We thank you, as always, for your support of the Society and I look forward to connecting with you at the SPSP Annual Convention in 2024.
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