Analyzing the PB's budget proposal

Steve Smith and Susan Snook have analysed the Presiding Bishop's budget.

Steve Smith, Deputy from Vermont offered this on the Deputies and Bishops listserve (shared with permission):
Musings on the Presiding Bishop’s Budget Draft compared with the Executive Council’s (EC) Budget Draft

What follows are one deputy’s initial reactions to the budget document that ++Katharine released on Friday as compared and contrasted with the EC draft.

I thought it might be useful to our forthcoming discussions in the Program Budget and Finance Committee (PB&F) to share some of the differences that strike me. As members of PB&F and some others will know, I serve on the President of the House of Deputies’ Council of Advice. That said, these are my own thoughts, not hers.

On the spending side, this proposal makes explicit ways in which the budget relates directly to the Five Marks of Mission. Several initiatives in support of those Five Marks are given quite significant funding;

• $2 million for starting new congregations
* $1 million for strengthening Province IX toward sustainability
* $1 million to make missionary service available for young people
* $2.3 million supporting the Diocese of Haiti
* $1 million to engage Episcopalians in eradicating domestic poverty
* $1 million for environmental care

In addition, this budget corrects two mistakes made in the preparation of the EC budget by restoring Formation & Vocation funding to prior levels and increasing Development Office expenses to equal the proposed endowment draw.

How are all of these initiatives and corrections paid for?

* Some is accomplished through relabeling, e.g. money for the Province IX initiative is simply moved from line 627 in the EC draft to line 61 here.
* Some appears to be accomplished through re-purposing funds while remaining close to EC budget’s intent. For instance, the $1 million to make missionary service available to young people is funded almost fully by reductions in the EC’s Mission Personnel budget (lines 704-709); and the Millennium Development Goal commitment of .07%, which the 2009 General Convention and the EC budget had designated for Episcopal Relief and Development, is now directed fully to Haiti, becoming part of that $2.3 million initiative.
* Some is from new revenue sources. Most notably, the Development Office is tasked to bring in $1.5 million during the triennium to fund the remainder of the Haiti initiative.
* Some is from expense reductions. Here are some notable ones:
* Both the Finance Office and the Governance budgets are called to make 5% cuts from the EC draft. That produces $546,000 from Finance and $631,000 from Governance entities or activities.
* The EC budget had accepted Church Center staff’s recommendation for cost of living increases at 3% per year. This budget lowers the COLA to 2% per year. The Treasurer can provide the actual impact on expenses of that reduction. When the lower COLA is combined with the further reduction in Church Center staff size, total staff costs are lower by about $600,000 than the EC budget.
* The EC budget included more than $1 million for two other initiatives proposed by Bishop Sauls: $550,000 for a Purchasing Cooperative and $500,000 for a church-wide consultation about structure. This budget trims both of those initiatives substantially. The Cooperative is reduced to $326,000 and the consultation to $100,000, freeing up another $0.5 million to be spent elsewhere.
* And most importantly, some is from information not available to Executive Council.
* First, the Treasurer has increased his estimate of revenue from dioceses by almost $3 million for the triennium.
* Second, he has corrected his calculation of the debt service required on the 815 building loan and determined that we actually need pay $800,000 less than he'd originally calculated for Executive Council. (Lines 329 and 367 in this draft compared with line 285 in the EC draft.)

There are myriad smaller increases and reductions in the various lines. Hopefully, Susan Snook will do a complete analysis on her blog. (see below ~ed.)

Apologies in advance for any errors in the above. I’m just one guy with a computer and some Excel software……..and a garden to go weed. See you in Indianapolis.

Steve Smith
Lay Deputy from Vermont
President of House of Deputies representative to Program Budget & Finance Committee

At her blog, A Good and Joyful Thing, Susan Snook offers a 2 part analysis with part 1 "The Good" and Part 2 "The Bad and the Ugly." From "The Good":

1. This budget is framed in terms of mission. ....

The PB’s new proposed budget shows exactly how each of the priorities are being met. I find a few of the classifications a bit questionable – for instance, the PB and almost her entire office spend all their time doing nothing but Proclaiming the Good News of the Kingdom (Mark 1)? Really? And the House of Bishops Theology Committee and the College for Bishops belong in Mark 2 – Teaching, Nurturing, and Baptizing New Believers? Seriously? (If the bishops are new believers, I guess we should give thanks that they have finally seen the light.)

2. This budget increases the percentage of funds devoted to mission as opposed to administration and governance. ....

Most of the change in percentages happens because things have been reclassified from one category to another. (More in “The Bad,” tomorrow.) I think the percentage of real, new funds devoted to mission are increased here by 2 or 3 percentage points at most. But in a $100+ million budget, you know, a million here, a million there, soon you’re talking about real money. There is an increase.

3. Some of that real money comes from new initiatives. Again, not as much as you would think at first glance. But some. Each Mark of Mission category includes a large new line item that wasn’t there before. But a great deal of this money was just reclassified to this line item from other line items that were already in the budget. According to information provided by 815 staff, here is the actual new money for new initiatives this budget contains:

Mark 1: $2 million includes $175,000 from line 174 (Latino/
Hispanic Ministries); new money is $1,825,000
Mark 2: $1 million is entirely reclassified from line 157 (Grants);
no new money here
Mark 3: $1 million includes $380,000 from line 94 and $560,000
from line 95 (Young Adult Service Corps);
hardly any new money here
Mark 4: $1 million includes what was formerly on line 182
(Jubilee Ministries), which spent almost $1 million last
triennium; hardly any new money here
Mark 5: $1 million includes $106,000 from line 180 and
$200,000 from line 236; new money is $694,000

In other words, the increases in Marks 2, 3, and 4 are negligible. There are new programs – I think – in Marks 1 and 5.

I believe there NEEDS to be new money in Mark 1 if we are to grow, and this money is supposed to go to church planting, a vital cause for our church. I am a bit unclear about the relationship between this new money and the Church Planting office that already exists at 815. The “Reclassified” money in this category comes from the Office of Latino/Hispanic Ministries.

I am not sure that new money is required at the churchwide level in Mark 5, Care of Creation. If ever there was a ministry that cried out to be accomplished at the local level, this is it. If I were PB&F and were looking for money to cut from the budget, I would look for it here, in this new $694,000.

815 has also not released any details of how these new initiatives are to be carried out. If there is a plan, I would like to see it. If there is no plan, I would like to know how one is going to be created, and by whom. If there is no plan for creating a plan, I would like to know why we need these initiatives. Other, that is, than to increase our percentages devoted to mission.

4. This budget accomplishes staff cuts in a much more reasonable way than anything Executive Council or PB&F could come up with. I know, because I tried creating a budget proposal on my own, and it basically involves applying across-the-board percentage reductions without any knowledge of the underlying staffing needs. 815 has access to the information needed to analyze particular positions. This budget decreases the cost-of-living increase from 3% to 2% and eliminates 12.75 positions. Many of these are positions that are presently unfilled. At least one is a program officer who will no longer be an 815 employee, but will receive funding to work for a churchwide network and accomplish the same mission. The other positions that are being cut have not been released – but I will have to say that 815 leaders are in a much better position than anyone else to make these assessments. They know their people and their staffing needs – we don’t.

The cuts are deeper in the area of administration and governance, including a percentage cut in each area, in addition to deep cuts in Human Resources, IT, finance, etc. More cuts could be realized if we didn't have to pay for 815 (the building) - but any savings to be realized from a sale or lease there won't come this year, maybe not this triennium. It takes time to sell a large building like that, even if it is the right thing to do.

5. The income projections, for Diocesan Commitments and for investment income, appear to be reasonable. Contrary to some reports, the Diocesan Commitments line does NOT contain the full 19% as if every diocese was going to pay its full share. These amounts have been carefully counted for reasonableness, and take into account partial (or no) payments by many dioceses. And my understanding is that the investment income is counted here at about 5% - also reasonable. Development Office and Haiti Collection, I'm not so sure about, but these are "wash" items - income and expense cancel each other out.

6. This budget restores Christian Formation and Vocation. Executive Council didn’t mean to cut it – how it got cut is lost in a bureaucratic maze. It’s back in the budget. Thanks be to God.

Read all of Susan's comments at A Good and Joyful Thing.

You can comment on the budgets at the PB&F blog

Comments (2)

I have made one correction to my point 5, above. Actually I learned from Bishop Sauls that investment income is counted at 8%, and I am sorry for publishing incorrect information I previously received. I leave it to more experienced investment advisers to determine if this is a reasonable investment return.

Now I'm going to comment again, arguing with my own comment. Bishop Sauls clarified my statement on investment income. I was right about the 5%, AND about the 8%. The investment committee has projected 8% growth on investments, but this budget asks for only a 5% draw. So this seems reasonable and conservative to me.

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