Ray Tate told a reporter in 1977, "Just keeping this place going is a challenge. Financially, we just barely survive. In the past we have been financed only through tuition and our activities. But in the last five years, costs have gone up a lot, and this year we are going to have to jump on the bandwagon and try to get some outside financing. So far, we have been lucky when things were tough. Something always has happened to bail us out."
But the School's luck had run out.
Life outside the comfortable confines of 909 West Armitage came roaring through the doors in the late 1970s. The oil crisis that left motorists frustrated and angry at the gas pumps kept some students away, and quadrupled the Schools heating bill. The heady days when singer-songwriters dominated the music scene had passed. The School was on a collision course with the nation's changing of musical taste.
At one point in the mid '70s we had 700 or 800 students who were studying with us a week [at all locations]," explains Jim Hirsch, who ran the School's Evanston branch in 1981, "and by the late '70s that had dropped to maybe 300 or 400."
Since, as Ray correctly pointed out, the School received almost all its revenues from tuition and ticket sales - the School did no fundraising beyond benefit concerts and requests to government agencies in those days - the slightest drop in students and audiences meant financial trouble. Worse still, costs were up during those double-digit inflation years. The IRS and the State of Illinois had threatened to close the School for nonpayment of payroll taxes on more than one occasion. Clearly the School was in crisis.
"It's quite simple," recalls Kenton Morris, then president of the board of directors. "They were broke." Jim Hirsch notes, "In 1981 our operating deficit was $59,000 our of a $250,000 total budget. There was accumulated debt, and the School was at the end of its financial rope."
"It wasn't a question of declaring bankruptcy, but which chapter we were going to file it under." -Kenton Morris
Informal management had guided the School during the heady days of the folk boom. But now the School was in a battle for its life - and the old ways fo doing things offered no solutions. Even the cozy family atmosphere soured: staff became nervous about the possibility of layoffs; teachers watched their performance income dwindle as countless folk clubs sealed their doors forever, caught in the same trap of rising costs and declining audiences. Morale sank as teachers, students and board members wondered if the School would survive.
"It wasn't a question of declaring bankruptcy, but which chapter we were going to file it under," offers Kenton Morris. "The prudent things to have done would have been to close it up. But then a couple of us were never very prudent. So we elected to make it go."
Ray Tate resigned to pursue his other interests in the commercial music world. Confronted with the need to hire a new director, the board went through a time of conflict; some members did not want to believe that the School's situation was as dire as indeed it was. Inexperienced in traditional nonprofit business practices, the board did not form a search committee, place newspaper ads, or turn to a placement agency to find a replacement for Ray. Instead it gambled on a young musician who was running the Evanston branch of the School.