Serial:

AC07-B01-01

PEP Argument Briefing Paper

Title:	Underlying Trends in 2008 Budget
Applicable to:	2008 Diocesan Budget
Author:	Joan R. Gundersen
Date:	10/19/2007

Summary

Substantial increases in total compensation for the bishops and diocesan staff in 2006 and 2007 have made the diocesan budget much less flexible. When the diocese increased its legal costs, it had to reduce staff and cut programs. Despite doing both, the percentage of the budget devoted to compensation of personnel increased when compared to program and administrative expenses other than legal costs.

Analysis

·         Legal costs are projected at $500,000 each for 2007 and 2008. The diocese inflated legal costs by engaging a larger firm based in Philadelphia. Because its headquarters is several hundred miles away, the travel costs, billable hours (during travel) and appointment of a local representative have all added to the costs.

·         Throughout this budget, program cuts are explained as necessary because of the ongoing legal action with Calvary Episcopal Church. However, if diocesan leaders would demonstrate to the court that they did not intend to remove assets from the Episcopal Church by claiming them for their new separated entity, or cease their efforts to separate from TEC, the legal cause would disappear.

·         Despite eliminating the only staff position held by an African-American in mid-2007 and despite modest savings projected in 2008 for medical insurance, total compensation is reduced by only $27,252. One option apparently not considered was a rollback of any of the $72,367 in compensation increases made in 2007 (of which slightly mores than one-third went to Bishop Duncan). This year there is no pool for possible increases.

·         If legal expenses are excluded from the budget, personnel costs have gone from being 46% of the budget in 2003, when the current controversy started, to 59% of the budget. The 2008 budget (excluding legal costs) is about $148,000 less than the 2003 budget. The personnel budget is $139,000 more.

·         Congregational Mission program areas are again facing cuts for the fourth year in a row. Urban Outposts and New Initiative grants are each reduced by nearly $10,000—a cut in each of 22% in this budget. New church support also has been reduced 22%.

·         The program part of the Transformational Networks budget for 2008 is $20,677 less than the actual expenses for the program five years ago. Once again, the hospital ministry, Resource Center, Absalom Jones Day, Commission on Racism, Commission on Aging, and Commission on Ministry all face new cuts on top of the cuts made in these ministries last year.

·         The category of Contributions Beyond the Dioceses shows a laudable resolve to maintain the full 0.7% commitment to the Millennial Development Goals endorsed in the 1998 Lambeth resolutions. The overall decrease in this category is explained by a dropping of any line item for Province III dues, a reduction in National and International Giving, and in expenses for participation in The Episcopal Church governance. There is a strange comment in the footnotes that National giving is lower because Calvary Church is allowed to redirect $22,773. Since all of this money (except for that sent directly to The Episcopal Church by 14 parishes) has been redirected away from The Episcopal Church and, before 2003 was a simple “pass-through” item not touched by the diocese, the comment is specious.

·         Having realized that the $2,000 line item in the original 2007 budget for the Anglican Communion Network was a violation of the signed stipulation in the Calvary lawsuit allowing parishes to opt out of the Network, this item was removed as a “mistake” in mid-2007. There is no allocation this year. However, in 2007, the Anglican Communion Network received $37,748 from funds originally intended for The Episcopal Church. Since 2003, these funds have been under the control of vestries and Diocesan Council. The diocese sent a special letter to vestries last fall requesting that parish budgets in 2007 send their redirected funds to the Network. While $37,000 is a substantial sum, it is only 24.4% of redirected funds. Furthermore, it is only about $4,000 more than was sent in 2006. Thus, the appeal had minimal effect.

·         The addendum report shows what happened to the funds that formerly went to The Episcopal Church. The Episcopal Church received $48,510 directly from parishes, and its relief and mission agencies received $4,010 from redirected funds. Calvary Church is shown as not having sent in a commitment form. The diocese thus shows Calvary’s portion of $22,521 as funds the diocese was to distribute. However, Calvary did send the sum to The Episcopal Church, thus making direct contributions to The Episcopal Church $70,761.

·         The Office of the Bishop section of the budget shows a decrease of only about $6,600, about half of which is attributable to reduced costs for diocesan convention. However, the “reduced budget” is still almost $25,000 larger than in the budget approved by the 2006 convention. The increase is a result of $29,100 that Diocesan Council moved from an unallocated salary in order to increase compensation for Bishop Duncan.

·          The Office of Administration 2008 budget shows an approximately $4,300 increase over the most recent budget for 2007. There are small decreases in a number of items such as supplies, tech support, and staff development, and noticeable increases in two. Liability insurance costs are up $7,500 because of a new “directors and officers” liability policy taken out by the diocese. Just last year, the diocese cut this insurance by $6,500. There is also a $5,000 increase in rent for the office space in the Oliver Building. The biggest item in this section of the budget is the projected legal costs of $500,000 discussed above.

Conclusions

The budget shows reductions that will damage the ability of the diocese to do what Christ has commanded—feed the hungry, tend the sick, etc. It also reduces the funds available from general revenues for support of parishes and parish ministries. Granted that the Board of Trustees can and does make grants to support ministry and parishes, but this money should be in addition to those funds we commit from operating revenue. The large increases in salary granted last year and the unwillingness to consider salary rollbacks has left the diocese with few resources to meet legal costs. Diocesan endowments managed by the Board of Trustees are actually funding much of the legal expenses of the diocese. One might ask whether the Board of Trustees is, in fact, exercising appropriate fiduciary responsibility in allowing the endowment to be used in a legal action caused by the stated intent of the diocesan leadership to separate from The Episcopal Church. The Trustees are, after all, required by the constitution and canons of The Episcopal Church to manage assets for the benefit of that church and its mission.