October 13 transcript of Finance Summit

October 13th Special Meeting on Diocesan Finance / Increased Offertory

Echoing Bishop McManus, I also want to tell you how much I appreciate your presence here this afternoon. The two largest groups represented here today are our priests and the finance representatives from the parishes who are able to join us. There are others as well, and we welcome all of you.

In my memory, a meeting like this has never occurred before in our diocesan history, where the time is taken to address our overall financial challenges as a Diocese.

I want you to know that we had a similar, early-morning meeting last week for all those who are members of the various diocesan committees and boards which address finances in some way - Diocesan Finance Committee & its ‘subcommittees’ (the Diocesan Investments Committee and the Diocesan Audit Committee); the Board of Governors of the Diocesan Expansion Fund; the Diocesan Building Commission; the Diocesan Pastoral Planning Committee; the leadership of the Central Catholic Schools; the Director of the St. John’s Cemetery System; the editor of The Catholic Free Press; and the Director of Catholic Charities.

Most of you know, I’m sure, that Catholic Charities is an independent corporation, with its own special challenges, but which requires diocesan support along with considerable funding from government.

The audiences for these two meetings are broad-based and we all need to work together in dealing with our shared concerns.

A little over a year ago I became the Director of the Office of Fiscal Affairs. Though I have collaborated with that office for the past 14 years, you never have a chance to absorb all the data until you take on a new role.

Throughout the past 14 years, I’ve always had a great deal of respect for the staff of our Diocesan Finance Office. There are 9 employees there. They’re at their work all day long and often put in overtime. They all multi-task.

Because of my other diocesan roles, I especially rely on the excellent work of Carol Adams, our Manager of Accounting, and Jerry Jussaume, our Manager of Finance. Both of them have served over 20 years in our Finance Office and bring the ‘institutional memory’ that is so important to our operations. They have assisted me greatly in preparing for this presentation.

We also appreciate the voluntary contributions of time, talent and treasure of all of you who serve our parish communities. Our parishes and our Diocese are much stronger for having your advice.

I want to say at the outset that many, many of our pastors are excellent administrators, who act with great prudence, and meet not only their spiritual challenges on a daily basis but their fiscal ones as well. Many don’t spend what they don’t have. Many make sound fiscal decisions and do so in dialogue with their parishioners. Many sacrifice a lot.

It is also true that many, if not most of our parishes are pressed by a whole new set of challenges – the aging of parishioners, the changing demographics of our cities and towns, and our whole state for that matter, and changes in our society where church participation just isn’t what it used to be.

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One of the key tasks we have is educating. If we know the problems we can begin to address them. So, comes from a need to educate.

There is an abundance of misinformation about the Diocese, as there is often enough within our own parishes and among our parishioners. It is probably a pretty fair statement that most of our parishioners just don’t appreciate the strain that either parish or diocese are under.

For example...

Every year the Diocese conducts an official audit.

Every year we make an audit report to the people of the Diocese.

We invite the people to ask for a copy. Anyone can get a free copy.

No one ever asks.

From that audit, in recent years, Ray Delisle, in his Communications role, prepares an annual report. In it we include a colorful, easier-to-understand, 4-page report on finance and ministry to the people of the Diocese. It is widely distributed. Still, most are not aware of our challenges.

As you know, each parish is required by Canon Law to have an active Finance Committee, prepare an annual budget, and make a report to their people. All of that is required by Canon Law.

Some parishes do all of that. They have an active finance committee that meets regularly, has a voice, works together to prepare an annual budget, and makes a report to the parishioners.

Some do that. Others don’t.

For those that do, I’m sure that many of those pastors wonder if their parishioners really understand the picture or “get it.”

From whatever our vantage point, we know that today the great financial burdens are being shouldered by the few.

I often think of the words of Winston Churchill when he spoke about the herculean heroics of the Royal Air Force after the Battle of Britain and said, “Never have so many owed so much to so few.”

For years now, the financial vitality of our parishes and our Diocese have fallen to a relatively small minority of donors.

So, ‘education’ and understanding is central and the primary purpose of our meeting is to provide a view of the true overall picture of diocesan finances.

Though it is less true of those on those parish or diocesan committees, who grapple with the financial challenges, often on a daily basis - thousands of laity and some clergy as well - have a view that the Diocese has plenty of money.

We will learn today that this is not true. And, together, we need to dispel the illusions.

What we will also purposefully avoid today, is laying any blame for our challenges at the doorstep of any person, parish, diocesan agency or institution, or even groups of such.

The issues are far too complex to lay blame or become negative.

The issues we’ll review have been developing over a period of years, in some cases decades.

No person, parish, school or diocesan agency is to blame for the overall picture.

The indebtedness of some parishes and institutions have been more recent in some cases, and older in other cases. Some pastors have inherited fiscal problems that have been developing for many years.

So, one purpose for this meeting is ‘educational’

- to share information

- some of which you might be aware

- and some of which you are unaware

- so as to come to deeper awareness of our challenges

The second purpose is to address the importance of a new diocesan initiative.

Thus, our meeting will fall into two parts - first, a kind of state of the union, with a pause for some questions and a brief dialogue, and second, to focus on a plan to increase our income, with the recognition that this new initiative will only begin to address some of our concerns.

This meeting may also inspire other suggestions, other outcomes, other strategies, other initiatives with a far greater result down the line. We’d like to think it would.

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With those things said, I would like to offer a brief overall glimpse of our Central Administration, that is to say the Bishop’s Office and some of the essential departments in the administration of our diocese. Some of them are funded through the Cathedraticum. Most aren’t, but are funded completely through the Annual Partners in Charity Appeal (there are 29 departments and agencies funded from that).

For those unfamiliar with the concept of the cathedraticum, it refers to that small portion of the ordinary annual income of the parish that is shared with the Bishop or the Central Administration of a Diocese...to sustain the Diocesan operation. In our Diocese the cathedraticum has been set at 7.5% for many years. That means for every dollar the parish raises, seven-and-a-half cents is given to the Diocese. In some dioceses that number is higher. I believe that one New England diocese has a cathedraticum of 25%.

The special concerns of the indebtedness of the Central Administration of the Diocese has been more of a concern in the last decade or so, which is to say that until about 1998, the Diocese was able to fund all of its expenses. In the past ten years, however, the Central Administration has had to borrow many millions of dollars from the Diocesan Expansion Fund to meet its own obligations and those of some parishes.

When the Central Administration borrows to meet its obligations, it pays interest to the DEF, which while on the one hand is a helpful thing for the DEF, diverts critical monies away from our ministries simply because of interest fees. Thus, this limits what our Diocese can do in our various ministries.

In recent years, for example, over a million dollars a year is expended from the operating budget of the Central Administration for interest payments. This represents about one-half of the annual budgeted cathedraticum income.

So, if about $2 million is generated from the cathedraticum of all our parishes, about $1 million is expended annually simply to pay interest on loans, without impacting the principal owed to the DEF.

Last year, in order to reduce the amount of interest paid, to bring those interest payments under $1 million, the Diocese had to sell $6 million of its very limited invested holdings. Even though that had some fiscal impact, we still had to borrow additional monies from the DEF to make it through the fiscal year. We spent $6 million and really only paid down $2 million - because of the increased need to borrow from the DEF.

It is not a good thing when 50% of what you receive in the Cathedraticum is paid out in interest expense. This means that over 30% of our overall operations budget is being paid out for interest expense. This has severely impacted our ability to enhance our pastoral ministries, add needed staff support, or save any money.

The Chancery staff, for example, is much smaller than it was just a few years ago.

Without resolving the deeper issues the interest expense will creep upwards again.

Recently, with the economic downturn and some parishes generating lower offertory overall, the cathedraticum, still set at 7.5%, as it has been for decades, produces fewer dollars for our diocesan operations, and the interest payments could conceivably require greater than 50% of the Cathedraticum.