Part 1: The story the budget tells

by George Clifford

Budgets – plans to obtain and to spend money – express values and tell stories. Good budgets tell good stories. Unfortunately, The Episcopal Church (TEC) proposed 2013-2015 budget suggests that TEC:

1. Highly values ecclesial governance and structure

2. Faces significant organizational problems

3.Intends to continue business as usual

4. Lacks a clear vision of, and focus on, TEC’s mission.

First, the budget’s three major expense categories are Canonical, Corporate, and Program. Compliance with the Canons – which is commendable – is not the Church’s mission. The Canons exist to support the Church in its mission by establishing internal order, i.e., the Canons are a means to an end. Similarly, the Church’s corporate structure is important to the extent that it facilitates the Church living into its mission. Otherwise, preserving the structure becomes an end in itself, a form of idolatry. Approximately half of TEC’s proposed budget supports those two categories, leaving only half for Program.

Second, projected revenues are down about 5% from the previous triennium. Diocesan commitments reflect a 9% decrease and investment income an 8% decrease. Withdrawing $3.8 million from the endowment funds a Development Office. Leasing three and a half floors of TEC’s New York headquarters to other organizations substantially increases rental income ($1.2 million). Together, these moves balance the budget. Any inflation during the triennium will further erode the budget’s actual purchasing power.

After factoring out the $3.8 million draw on the endowment, the proposed budget shows a projected decline of 7.7% in revenue compared to the previous budget. This presumes that future efficiencies will partially offset future income decreases, as occurred with the 2012-2015 rental income increase, and avoids positing a worst-case scenario.

Presuming a constant and continuing 7.7% rate of decline, revenue projections for the next four budget cycles are $93, 85.6, 78.7, and 72.4 million. In other words, by 2025, TEC’s projected revenue is two-thirds of its 2010-2012 revenue. Even with imposing the most stringent cost controls, TEC appears likely to have few funds in 2025 available for programs after paying Canonical and Corporate expenses, most of which are not discretionary items. Any inflation, which these calculations ignore, will worsen the financial difficulties; any exceptional investment returns will improve the outlook. Realistically, TEC faces significant challenges to sustain its current organization and level of programming.

Third, the proposed budget largely represents continuing business as usual. Adjustments to the Canonical and Corporate portions of the budget ($1.5 million of $53.6 million) total just a 3.6% decrease. The changes in the Program half of the budget are more substantial. Critically, these changes are largely irrelevant except as a warning of what lies ahead. No amount of realigning program elements will substantially increase income. TEC has two primary revenue sources: endowment income and diocesan commitments. The revenue shortfalls appear likely to be so substantial that TEC must reverse the declines, find new sources of revenue (seems improbable), or radically reinvent itself.

Pressure to reduce the 19% commitment currently requested from dioceses is growing. Dioceses are experiencing their own financial struggles. A diminishing minority of Episcopalians feels a close connection with the national church; the growing majority perceives little value or benefit from monies that flow from congregations to dioceses and TEC. Any reduction in requested diocesan commitments will only exacerbate TEC financial woes. Conversely, proposing to increase the 19% is a non-starter. In part, dioceses and congregations, like TEC, struggle financially because of a continuing numerical decline in attendance and membership (cf. my earlier post, Is the Episcopal Church going the way of the Grange?).

Reversing the decline in endowment income appears unlikely to offer a quick fix. Forecasts for investment returns over the next decade are mediocre rather than stellar. Establishing a Development Office to increase the size of the endowment feels like a last chance, desperate Hail Mary pass. Perhaps some wealthy Episcopalians are ready, if and when asked, to give TEC substantial sum (tens or hundreds of millions of dollars). Lesser amounts will not solve the problem (endowment income is only 5% of the gift, e.g., a $100,000 gift yields only $5,000 per year, less than 0.1% of the revenue decrease).

National trends of growing disaffection with organized religion suggest that few, if any, such individuals are in our pews or on our membership rosters. Indeed, unless the persons responsible for preparing the budget have reasonable expectations of substantial gifts from particular donors, funding the Development Office with monies drawn from the endowment seems more likely to worsen rather than to ease future financial shortfalls. If budget drafters have reasonable expectations of substantial gifts from particular donors, why does TEC need an expanded Development Office? Why not solicit the gifts today?

Fourth, the budget proposal lacks a clear vision of, and focus on, mission. Given TEC’s numerical and financial declines, this lack of clarity and focus is an existential issue that threatens TEC’s future. Although each issue considered at General Convention (GC) is somebody’s passion and each TEC program office linked to one more interest groups in the Church, the larger reality is that the majority of Episcopalians cares little about these matters. The diocese evokes somewhat more interest and slightly stronger feelings. However, most Episcopalians care only about what happens (or does not happen) in their local congregation.

A minority of us (including me) greatly appreciates the importance of being a connectional church. A larger number pay lip service to the importance of being a connectional church, actually recognize a few of its benefits, and support the status quo primarily out of inertia. An even larger number of us (probably a majority) tolerate our connectional system but increasingly voice doubts about its utility and the value of giving the diocese/national church such a large percent of local income. In short, Episcopalians have lost confidence in TEC, its structures, and programming. If this were not true, then Episcopalians would enthusiastically fund dioceses and TEC. Episcopalians – like most Christians – give willingly and generously when passionately committed to a cause.

What can TEC do? The second part of this post answers that question.

George Clifford is an ethicist and Priest Associate at the Church of the Nativity, Raleigh, NC. He retired from the Navy after serving as a chaplain for twenty-four years and now blogs at Ethical Musings.

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