The Victorian government today will announce significant funding cuts in its arts portfolio, Crikey can reveal.

The cuts will affect most of the Victorian arts sector, with triennially and annually funded organisations to receive a 3.5% cut in their ongoing funding. Coming on top of a previous decision that funding would not be indexed, the cuts represent a 5% cut in real terms. Crikey understands that all programs will be affected, including funding to the major institutions, although sources differ on the size of the funding cuts for larger arts organisations.

Organisations with triennial funding contracts with the Victorian government will still have their funding cut by 3.5%, and the funding pool for organisations and applicants applying to 2013 rounds will also reduce.

Arts Victoria will itself suffer the knife, with the department expected to announce redundancies in coming weeks. Arts Victoria is part of Ted Ballieu’s Department of the Premier and Cabinet, which will suffer 50 job cuts as part of the Coalition government’s so-called “Sustainable Government” program.

The cuts were announced yesterday, with arts organisations phoned by their client officers and given the bad news. Crikey started receiving phone calls and emails shortly before lunchtime, and by late last evening word had leaked to Arts Hub. A spokeswoman for Arts Victoria told Crikey that the priority had been to tell affected clients first, before any formal media announcement was released. “All our competitive funding programs are continuing into 2012-13,” she added.

Arts organisations that Crikey has spoken to have been cautious in their reaction to the cuts, with disappointment mingling with concern about further cuts in the future. “It could have been worse,” one general manager told us, while another observed the cuts were far less damaging than those experienced by the TAFE sector. “It’s tough, but not killer, for an organisation like ours,” a general manager from the small-to-medium sector said.

The cuts are not unexpected given the relatively tough budget handed down by Victorian Treasurer Kim Wells in May. More than $7 million was cut from Arts Victoria’s “arts development and access” budget line, which funds the competitive grants and the small-to-medium arts organisations, a reduction of 7% from a funding pool of $60.1 million in 2011-12. In contrast, only $3 million was cut from major cultural institutions, in a much larger line item of $321 million. In other words, most of the austerity looks to have fallen on the small-to-medium sector.

Nicole Beyer, director of Theatre Network Victoria, wrote in an email that “the industry is disappointed to learn about the cuts — we certainly know that other sectors have fared badly too, but the small-to-medium arts sector is already vulnerable and this is going to really harm their programs for next year. We hope that it this a one-off, and that next year’s budget will make up for the cuts.”

Maintaining arts funding was never a formally stated Ballieu election promise. One thing that was promised, however, was a so-called “White Nights” festival for the Melbourne CBD, in imitation of Paris’ famous Nuit Blanche event which sees all-night access in major cultural institutions. Apparently, this initiative will go ahead in February 2013, according to an announcement made on June 13 by Ballieu.

The Melbourne White Nights initiative has angered some in the arts community, who question its relevance in Melbourne’s already-packed festival calendar. Industry insiders also question whether a major event of this nature can be put together in only seven months, with no director and no producer so far appointed. The event will be delivered by the Victorian Major Events Company, rather than an arts organisation with a track record of successful outdoor programming.

When Crikey published this morning we were still waiting, despite repeated request, for comment from the arts minister — who is none other than Ballieu.