NSW Treasurer Mike Baird handed down the state budget yesterday. As Crikey‘s Adam Creighton notes, the premier state has long had one of Australia’s largest public sector workforces, rivalling that of the Commonwealth itself.

Compared to about $60 billion in total expenditure, the arts portfolio is small biccies, with about $345 million in capital and recurrent spending all told. Of this, $272 million goes to the state’s large cultural institutions such as the Opera House, the State Library and the Art Gallery of NSW.

Only $58 million is actually devoted to grants funding for artists and small organisations, a figure that had only recently received a top-up in the final year of Kristina Keneally’s government.

Arts minister George Souris stated in a media release that “this budget will boost our arts sector by supporting the production and presentation of dynamic arts projects and programs as well as capital investment”. Souris highlighted $1.7 million for the 2012 Sydney Festival, with half a million for the event’s expansion in western Sydney, as well as $1.7 million for the Short and Sweet theatre festival and $1.2 million over four years for Sculpture by the Sea, an event Souris describes as “one of the world’s largest annual free-to-the-public outdoor sculpture exhibitions”.

The cultural institutions appear to have been protected from budget cuts, receiving either CPI increases or in some cases some modest new funding for capital expenditure. But the small-to-medium sector has not been so lucky. A detailed analysis of the budget papers reveals funding at that end will actually be cut.

By delving into the portfolio budget statement for the mega-department of Trade and Investment, Regional Infrastructure and Services, Crikey has discovered that the government appears to have paid for its pre-election arts promises by dipping into the existing Arts Funding Program for arts grants, leaving a $2.8 million shortfall over last year’s figures. The decision to re-allocate appears to contradict pre-election promises by the Coalition’s previous arts spokesman, Anthony Roberts, that new money would be found to pay for the commitments.

The Arts Funding Program’s budget of $58.2 million includes the new commitments for the Sydney Festival, Sculpture by the Sea and Short and Sweet, which together total $4.4 million. This means that the existing organisations and grant streams funded through the Arts Funding Program will suffer a $2.8 million or 5% cut over 2010-11 figures.

In addition, it appears as though $7.9 million from last year’s Arts Funding Program has not been not spent, as the estimated actual expenditure for the program in the portfolio statement is listed as $48.8 million, compared with a budgeted figure of $56.6 million. Perhaps this explains why Arts NSW has in recent months wound back its quick response grants, an action that has triggered an online petition from concerned sectors of the arts community. In the small-scale end of the sector that is proverbially impoverished, these budget cuts will be felt keenly.

Before this March’s election, the Coalition’s then-arts spokesman Anthony Roberts told Crikey in a phone interview that “new money” would be found for the Coalition’s arts election commitments. “What this is doing is sending a clear message to the arts community that we’re open for business,” Roberts said at the time.

The NSW film sector has also discovered that the budget contains cuts to screen funding. $5 million in production investment funding that had been previously allocated in 2009 and 2010 has vanished from the portfolio statement