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BOB ABERNETHY, anchor: The Roman Catholic Archdiocese of Chicago this week announced a four-million-dollar sex abuse settlement. The case involved four men who, as boys, had been abused by their parish priest.

The extra costs to the Church of payments to sex abuse victims, plus lower income because of the national recession, have triggered even more problems. For instance, in the Archdiocese of Los Angeles, the country's largest, the way officials tried to balance their budget produced sharp criticism of Church priorities. It also revived old resentments about how hard it is to know how much money the Church really has.

Judy Valente reports from Los Angeles, where no one from the Archdiocese would talk to her, but where a lot of critics did.

JUDY VALENTE: Just last September, Cardinal Roger Mahoney and the Catholic community of Los Angeles were celebrating the city's new, 189-million-dollar Cathedral. But the triumphant mood of that day has given way to anger and criticism. In a case of unfortunate timing, the Cathedral was dedicated last fall, just before the Archdiocese announced it was cutting ministries that help people, for lack of money.

Faced with a sluggish economy and falling contributions, the Archdiocese slashed $13.4 million, or nearly a third of its annual budget. The clergy sexual abuse scandal alone drained $7.7 million -- costs not covered by insurance. Many Catholics objected to the kind of services the Archdiocese chose to cut.

The Archdiocese laid off half of its ministers to prisoners and their families. It eliminated offices that served African Americans, Latinos, gays and lesbians, and the disabled.

Monsignor David O'Connell felt the cuts fell unfairly on services to the Church's most vulnerable people, like the poor immigrant parishioners at his church in south Los Angeles.

Monsignor DAVID O'CONNELL (Ascension Catholic Church): I disagree with the cuts that were made. I think the cuts should have been made to other departments and services rather than the cuts that were made to the prison ministry or the ministries to the disabled.

VALENTE: Among the hardest hit was campus ministry. Only three of 15 campus ministry programs in the Archdiocese remain in place.

CINDY YOSHITOMI (UCLA Campus Chaplain): It appeared no matter what kind of ministry they had, if it was a vibrant one, if it wasn't such a vibrant one, they were totally cut. It was devastating. I mean, they felt abandoned. I think what we've done is we've created a group a young adult refugees.

VALENTE: Some Catholics questioned how Cardinal Roger Mahoney could raise so much money for the Cathedral, and then claim there isn't enough money for ministries. They nicknamed the Cathedral the "Taj Mahoney."

Mary Jane McGraw spent 10 years working in parish ministry and is now with the lay reform group, Voice of the Faithful.

MARY JANE MCGRAW (Voice of the Faithful): My sense of the cutbacks is that they are a very clear, very broad-based statement of how lost our Church has become. Our shepherds are just lost.

MARY GRANT: I was abused by a Catholic priest starting when I was 13years old.

VALENTE: Groups that represent victims of clergy sexual abuse fear the archdiocese may try to use its financial difficulties to evade paying reparation to victims.

Ms. GRANT: Cardinal Mahoney issued a statement basically trying to convince the faithful Catholics that somehow victims were going to be taking money from them that would have been going to charitable programs they wanted to see happen. Nothing could have been farther from the truth.

VALENTE: Cardinal Mahoney declined to be interviewed, as did a spokesman for the Los Angeles archdiocese. However, the archdiocese issued a statement saying it is dedicated to reporting sex abuse allegations to authorities and that it continues to support victims with financial assistance and counseling. Meanwhile, some critics question whether the financial crisis the archdiocese says it is in, is real.

Patrick Wall is an ex-Benedictine monk who was once a trouble-shooter for the Church, sent in to straighten out parishes tainted by scandal. Now he works for a law firm representing dozens of sex abuse victims. Wall maintains the Los Angeles archdiocese -- indeed the entire Catholic Church -- is in far better shape than its financial reports suggest.

PATRICK WALL (Manley McGuire Law Firm): It's amazing what the faithful will give you, give to the Church. They'll give oil wells. The Church, the faithful will give over stock. They'll give apartment buildings. They'll give farms if they live in rural areas.

VALENTE: The Catholic Church owns significant amounts of real estate, like this sprawling complex surrounding St. Paul the Apostle Church in an upscale neighborhood of Los Angeles. St. Paul's is the parish Bing Crosby attended. Wall says the actual value of St. Paul's real estate isn't in the financial statements.

Mr. WALL: When the diocese reports the value of a property, it reports what it cost when it purchased it. For example, in the Archdiocese of Los Angeles, we're going to report property at a value of $270 million. The reason that is so low is that most of the property was owned before 1950, when there was a huge explosion in property values in the entire U.S. but especially here in California.

VALENTE: Church officials say they use the same accounting principles as business does, and they argue that they can't just up and sell real estate that a Catholic school or cemetery is sitting on. Direct contributions to the Archdiocese in the past year declined, while contributions to individual parishes were generally unaffected. Monsignor O'Connell says that is understandable.

Monsignor O'CONNELL: I think people distinguish between the parishes and the archdiocese. Right or wrong, I think people see that the Church is the local church. The Church, for people in this area, is their home. It's their family, their community. It's where they find a place in society.

VALENTE: Campus chaplain Cindy Yoshitomi says more and more Catholics are designating where they want their contributions to be spent, for example, marking weekly envelopes "parish only" so their donations won't go into the pool of money each parish gives annually to support Archdiocese programs.

Ms. YOSHITOMI: It's the only power right now that the laity have -- is to move their money around and give it to the places that they believe are doing the best good. And where there's transparency, where we know where the money is going.

VALENTE: Some see the unfolding crisis as a catalyst for positive change.

Mr. WALL: The bishops have a chance here, they really have a chance to be able to turn this around. But they are going to have to become more transparent.

VALENTE: Monsignor O'Connell says, in spite of the complaints, most Los Angeles Catholics remain loyal.

Monsignor O'CONNELL: For us here in the city and many places around the Archdiocese there's not a depression about things, that everything's falling apart.

VALENTE: But others say the many problems of the sex abuse scandals have been aggravated by the kinds of budget cuts the Archdiocese has made, and by its continuing financial secrecy.

For RELIGION & ETHICS NEWSWEEKLY, I'm Judy Valente in Los Angeles.

ABERNETHY: As we said, the Archdiocese of Los Angeles would not comment for this report. We spoke with Joseph Harris, a budget analyst who studies the finances of the Catholic Church. He told us that, because of "significant" investment losses, the Archdiocese of Los Angeles had no choice but to make cutbacks. As for transparency, Harris said the financial reporting by the Los Angeles Archdiocese is better than most.

One concern of Church officials has been whether the handling of the sex abuse scandal would affect American donations to the Vatican. But the Vatican reported this week that its donations from the United States actually went up last year.