Layoffs and new management expose ‘severe’ financial crisis at Capital Public Radio

Every Saturday for 25 years, Sean Bianco sat in a recording studio at Capital Public Radio and selected an opera to stream across the airwaves. His listeners wrote him postcards and called in from across the world: New York, Florida, Nebraska, Poland, Finland, Japan.

The show gave the opera conductor, singer and musician pride, joy, community and music opportunities. It also led him to his wife — whom he met when, two decades ago, she called in with a request. They’ve been married for 17 years.

Bianco and his wife sat in their living room weeping as they listened to the pre-recorded goodbye he made after getting a call Aug. 30 that his position and show “At the Opera” were cut by the NPR-affiliated broadcaster. He’d been laid off on his birthday.

“I’m sad for Sacramento. I’m sad for my listeners. I am sad,” Bianco said.

CapRadio laid off 15 employees and cut four music shows. As audiences tune in to social media and apps like Spotify instead of the traditional airwaves, public radio stations have suffered. Hosts like Bianco, whose show was geared toward a niche audience, were ushered out.

But CapRadio’s problems are much deeper than a shifting media landscape, former employees and current management say: three costly construction projects combined with falling revenue have pushed the nonprofit media organization to the financial brink.

“The finances are pretty severe right now for CapRadio. We owe a lot of money to vendors. We barely have enough cash to keep us going right now. We are making payroll. It’s just been a very, very tough time. We have no reserves,” said Tom Karlo, the interim general manager, in an interview on CapRadio Sept. 5.

The station owes vendors $3.3 million in unpaid bills from the past two fiscal years, according to a budget presentation made on Aug. 30 to CapRadio’s executive board. One of those vendors is NPR itself, a bill that has not been paid for more than a year.

Not included in that deficit is the rent it owes Sacramento State for its current East Sacramento headquarters, also unpaid since September 2022. It also does not include other financial assistance of an unspecified amount that the university has given the station.

Sac State owns the central license for CapRadio’s two powerhouse stations — KXJZ-FM (90.9) and KXPR-FM (88.9) — though CapRadio operates a total of seven FM frequencies and six FM translators that repeat the signals for those news and music stations. CapRadio also operates North State Public Radio, two stations owned by Chico State.

Bena Arao, CapRadio’s treasurer and chair of the Finance Committee, said that former Sacramento State president Robert S. Nelsen had approved for CapRadio to stay in its headquarters rent-free until auditors determined that to be against university rules. The university and the station are now figuring out an agreement on what CapRadio can pay. The rent was $17,787 per month as of 2022, Arao said.

Karlo started at CapRadio eight days before the layoffs, summoned by his friend Luke Wood, the new president of Sacramento State. He spent 47 years at KPBS Public Media in San Diego, which operates a PBS-affiliated TV station and an FM station carrying NPR, among other media platforms.

He replaced Jun Reina, who had been at CapRadio for 16½ years, most recently as GM and executive vice president. Former employees said Reina, who served the bulk of his time as the station’s chief financial officer, pushed for the three costly capital projects seen as the root of the station’s present financial precarity.

Karlo led KPBS through the 1989 recession, the post-9/11 stock market crash and the 2008 financial collapse. Still, on-air last week during an interview with “Insight,” the station’s current affairs program, Karlo said, “this is a challenge for me. This is really deeper than I thought.”

In 2019, CapRadio announced that it bought a 34,000-square-foot property at Seventh and I streets downtown that would become its new headquarters, bolstered by a $2.25 million investment from Sutter Health. Then the station announced it was investing in a second building: a live performance venue on Eighth and J streets, now scheduled — after over a year of delays — to open in December.

Meanwhile, the station was amid a 15-year, $2 million radio tower relocation project. The tower is responsible for transmitting KXPR’s classical and jazz music station.

When fears of a recession hit, prompting advertisers to pull back, it made for tough math. Revenue has been in a decline since 2021, the financial committee reported. In the last fiscal year, corporate fundraising fell short, and the board predicted declining member support in the upcoming fiscal year.

The 2023-24 budget forecasts a 26% increase in revenue for the upcoming fiscal year. Of that, $500,000 is expected to come from the new live venue while $2 million is expected to come from state funding secured by Assemblyman Kevin McCarty, D-Sacramento.

What led to the layoffs?

Up until nine months ago, “K-ZAP on CapRadio” host Dennis Newhouse said, employees were told that the “financial picture was pretty rosy.”

In fact, public radio across the country did well during the COVID-19 pandemic: individual giving revenue to the country’s largest public radio stations reached a record high in 2020, according to a Pew Research Center analysis.

This winter, management notified staff of a “temporary cash crunch” but told employees not to worry about it, former music director Nick Brunner said. In the meantime, management implemented a hiring freeze and “canceled travel, training, and any expenses that are not vital to meeting our public service commitment for news and cultural programming,” Karlo said in an email to The Sacramento Bee.

Then, in March, the Sacramento Business Journal reported that CapRadio was tapping into operating reserve funds in order to pay for loans taken out for the construction of its new downtown headquarters. Karlo said “cost overruns and regulatory hurdles” added to the burden.

The station also tapped into employees’ health care funds, cutting coverage of premiums. Former CapRadio employees said they found out not through a notice from management or company-wide communication, but at the doctor offices, when employees were handed unexpected bills.

Karlo corroborated that the company had decided to no longer cover 100% of staff health insurance premiums, the previous coverage of which he said was “an outlier within public media.”

In July, Reina stepped down and, a month later, was replaced by Karlo.

“When we heard they were gonna hire an interim general manager, you pretty much get the idea that that person is gonna come in, do some house cleaning, cut people,” said Newhouse, who had been at the station for 18 years. “That’s just business.”

Brunner said that Sac State saved the station this summer.

“Had the university not come in with an infusion of cash at the eleventh hour, there may not be a CapRadio,” he said.

At company meetings, staff asked if they should expect layoffs and were told, “all options are on the table,” said Brunner.

Then, on Aug. 30, Brunner came into the office anticipating a normal work day and discovered he couldn’t access his email account. He said he was pulled into a conference room and told his position had been eliminated.

Three of the other staffers laid off said they received a phone call. Bianco said he was told he couldn’t record one final goodbye show.

“Watching the whole thing, it’s like a slow-motion tornado with heartbreak at the very center of it,” said Brunner, who hosted “Hey, Listen,” a Saturday evening show of modern music, which also featured local artists. He had worked at the station for 16 years.

When CapRadio “Insight” host Vicki Gonzalez asked Karlo about the lack of forewarning given to the staff, he said he would not answer questions about personnel issues, saying they “are the privacy between the organization and the people.”

Most of the employees laid off were part-time, CapRadio said. Twelve of the fifteen were based in Sacramento, and another three worked at North State in Chico.

Which programs did CapRadio cut?

CapRadio eliminated “K-ZAP on CapRadio,” “Hey Listen,” “At the Opera” and “Mick Martin’s Blues Party.” All four shows ran on Saturday, and three ran on CapRadio’s news station. CapRadio officials said in a news release that the programming slots would be replaced by storytelling and informational programs including “The Moth,” “This American Life,” “Hidden Brain” and “Radiolab.” The BBC World Service, distributed by another public radio in New York, streams after 10 p.m.

Brunner and Newhouse were told that the station was trying to reduce the number of “live voices” on air. The format of combining music and news programming on one station was unique in the industry.

Mick Martin and Newhouse will both be streaming their shows on KZAP — KZHP-FM (93.3) — a low-power, all-volunteer rock and blues station. Bianco said he intends to launch his show online.

“What we don’t have in this market is much variety of music,” said Newhouse. “All the stations are corporate, overly researched, narrow playlists.”

Bianco said that his show cost the station very little. He did his own sound engineering and claimed to have donors underwriting his salary to host and produce the once-a-week show.

In an email to The Bee, Karlo said that the board and management were “guided by audience data in these decisions.”

An industry-wide downturn

Public radio listenership has been declining since a peak in 2017, according to the Pew Research analysis. Still, 47% of U.S. adults said they got news from radio at least sometimes in 2022.

According to Nielsen Audio’s Topline Ratings in the Sacramento market in August, CapRadio’s news station KXJZ ranks 14th among all AM and FM stations with a rating share that’s dropped nearly a point since June. A share represents a percentage of all listeners tuned to a specific station at a given point in time, usually a quarter-hour at some point between 6 a.m. and midnight. KXJZ slid to a 2.3 share from 3.5 in March, according to Nielsen. Nielsen reports that roughly 103,000 people tune into CapRadio’s news station in a given day.

Combined with KXPR, CapRadio’s rating share is about a third of the market’s leading stations — news and talk commercial station KFBK-AM and classic rock station KSEG-FM (96.9, The Eagle) — which had a 9.7 share.

CapRadio is the latest in a string of layoffs in public radio and news media overall as audiences ditch traditional television, radio and newspapers for Instagram, X (formerly known as Twitter) and Spotify.

Earlier this year, National Public Radio laid off more than 100 employees and canceled four podcasts as it faced a $30 million budget shortfall. Southern California Public Radio, based in Pasadena under the flagship KPCC-FM, laid off 10% of its broadcast staff, as well as a portion of workers at its associated website, LAist.

Karlo said he wants to help the station evolve with the changing media landscape.

“All CapRadio’s stories should be created with the potential to be distributed to digital and social media. We need to meet audiences where they consume content, not force them into the legacy radio model,” wrote Karlo.