As the Sundance Institute prepares to celebrate its 10th anniversary, fiscal problems are forcing it to retrench and go back to its roots – nurturing the writing and making of independent films.

On Jan. 17, the Institute opens its annual film festival (formerly titled the United States Film Festival) in Salt Lake City and Park City, Utah, with a screening of “Once Around,” directed by Lasse Hallstrom and starring Richard Dreyfuss and Holly Hunter. The choice is symbolic, as debuting screenwriter Malia Scotch Marmo participated in a Sundance producers lab workshop, where she met Amy Robinson, who produced the film with Griffin Dunne.

Located since June 1981 at Robert Redford’s Sundance resort in the Wasatch Mountains east of Provo, Utah, the nonprofit Institute has provided support not only to independent film directors and writers, but also to movie composers, playwrights and choreographers.

But the Institute’s financial problems became evident last summer, and when Redford returned from acting in “Havana” for helmer Sydney Pollack in the Dominican Republic, he conceded that Sundance’s fiscal woes had “mushroomed.”

A looming deficit prompted personnel cuts and a 30% reduction in the annual operating budget, from $2.3 million to $1.7 million. Management has been cut and restructured. Suzanne Weil, who moved to Sundance from PBS in 1989, is no longer executive director; she has been named artistic director.

The Film Composers and Film Choreographers labs – which have brought such artists as Twyla Tharp, Merce Cunningham, David Newman and Danny Elfman to Sundance – are gone, and the playwrights’ program will continue, but will be separate from the institute.

Gary Beer, president and CEO of the Sundance Group, which runs the resort and Redford’s new gift-catalog enterprise, has been reinstated as the institute’s executive vice president, a position he held from 1985-88. Beer is expected to add punch to fundraising efforts and keep an eye on the budget.

In February, after the festival, personnel will be re-evaluated and more changes are likely.

Redford acknowledges the rocky financial road of the last year, but insists the institute is fiscally and artistically healthy.

“I visualize the institute’s progress as a steady line with a slight uphill tilt to it,” he says. “Sometimes there’s been a shift to the left, then to the right and then back on the path. It has never stopped, and it has never gone backward.

“The financial situation has never been ‘okay,'” he continues. “From the word go, it’s been hard raising money.”

Redford says it’s been particularly difficult over the course of the last decade, with dwindling government support for the arts.

“And there are a lot of misperceptions about me and about what I’m capable of doing financially,” he adds. “A lot of people say, ‘Why the hell doesn’t he fund it?’… I have stepped up to fill a gap or a deficit, which I don’t think is right or healthy. I did it for emotional reasons. My central contribution is in the real estate, the commitment of my energy and support – getting people from my industry to participate – and the idea.”

Over the last decade, the institute has raised more than $15 million and, according to Beer, Redford is the leading donor

The institute was conceived in the late ’70s by Redford and some of his associates, notably director Sydney Pollack, as a counterbalance to George Lucas’ Skywalker Ranch and its preoccupation with the technical side of filmmaking.

“My industry suffered most from the perspective of the script,” says Redford. “So we decided to focus on the human factor, on the human resource. Focus on script, focus on actors, focus on directors working with actors, on how to stage a scene, on how to get the most – the deepest – out of their material.

In the early days, the institute’s facilities were makeshift. Now there is a spacious, multiple-use rehearsal hall and a 150-seat screening facility.

Sundance has had a hand in the development of a diverse group of films. The institute helped a number of noncommercial ideas see the dark of a movie theater: “El Norte,” “Longtime Companion,” “The Ballad Of Gregorio Cortez,” “Desert Bloom,” “Smooth Talk,” “84 Charlie Mopic,” “Old Enough,” “A Dry White Season” and “The Trip To Bountiful.”

On the other hand, the institute found itself squarely in the commercial mainstream when a project titled “Three Thousand,” which went through Sundance’s June lab a few years ago, emerged last summer under the title “Pretty Woman.”

Three more institute-assisted films will be released in coming weeks: Lasse Hallstroom’s “Once Again,” with Richard Dreyfuss and Holly Hunter; “Dog Fight,” with River Phoenix as a young Marine about to be shipped off to Vietnam; and “Impromptu,” with Julian Sands and Judy Davis in the story of Frederic Chopin’s love affair with French novelist George Sand.

How influential has Sundance been in the last decade? “Very,” says Lindsay Law, executive producer of American Playhouse Theatrical Films.

“There are three organizations which have had an enormous impact on the health of the independent film movement,” says Law. “The Independent Feature Project, Sundance and American Playhouse.”

“It has something to do with that word from the ’80s: networking,” says Law about Sundance’s contribution to independent film. “There are many ways Sundance serves the industry which just aren’t tangible.”

Redford wants to play less of a role at Sundance. He will star with Michelle Pfeiffer in “The President Elopes” for director Fred Schepisi. Come summer, he will direct “A River Runs Through It,” a film he has been developing for three years based on Norman McLean’s book.

“My original idea was to take two or three years to get the institute off and running, and then come back into it only to make sure the concept was still intact and to be part of it. It hasn’t worked out that way. As good as the institute has been to me, it has robbed me of something else… some of my career.”

Some staffers say privately that when Redford is away, Sundance is more susceptible to financial and administrative turmoil.

“There’s an energy that Bob brings to the laboratories when he actively participates that is incredibly productive and exciting,” says one staffer. “It’s evident that he’s there.”

Follow @Variety on Twitter for breaking news, reviews and more