Boston Archdiocese Reports Deficit, $137m Debt

Boston Catholic Insider
January 24, 2013

http://bostoncatholicinsider.wordpress.com/2013/01/23/boston-archdiocese-reports-deficit-137m-debt/

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[with pdf]

With almost no fanfare, the Boston Archdiocese released the 2012 Annual Report on Friday. This stands in contrast to last year, when the archdiocese released the 2011 results saying they had a “balanced budget,” when that really was not true.  Central Operations for the archdiocese ran at a loss of about $6.8M, and the archdiocese also faces their own “fiscal cliff” of sorts as they have $137M of debt and no obvious way of paying it right now.

For all who care about the future of the Boston Archdiocese and her ability to carry out the saving mission of Jesus Christ for generations to come, there is reason for serious concern.

The report, available here, presents a lot of data, and it is easy to be overwhelmed with the data and miss the meaning of the data, as the Boston Globe did in their article on Friday. Once you look at the big picture, the message should raise alarm bells at 66 Brooks Drive and at the Vatican that we can no longer have “business as usual.”  A few finance experts looked over the report and helped shed insight for us into the data. Here are just some of the key things you should know:

• Despite a “balanced budget” announced for the 2011 fiscal year, the recently released financial statements show (page 24, and page 73–Column 2) that the Central Operations of the archdiocese had an operating loss of $6.8 million in 2012 and $6.3M in 2011 (page 24). BCI pointed out the deception last year, and at least this year, they did not say they had a balanced budget–they just said they had a goal of having one.
• They also reveal that Parish Reconfiguration funds have been tapped out.  $12.3M dollars over the past 5-6 years went for “Distributions to agencies and departments that provided program assistance and support to parishes.” Since almost all Pastoral Center departments support parishes, this really means: “Pastoral Center departments who are normally funded by the Central Fund were subsidized by $12.3M from a source no longer available.
• About $11.1 million from Reconfiguration Funds was used to cover expenses from maintaining the properties of closed churches over the past 6+ years.
• During the past six years, insurance reserves that were $15M in 2006 have been depleted to zero or near zero (see this 2010 BCI blog post and p. 16 of the 2012 Annual Report)
• The Catholic Appeal raised $13.6M in the 2012 year, missing their goal ($14M) once again and raising $100K less than the year before, with a bigger staff than the prior year. This is the third consecutive year they have missed their goal.  The Globe article was in error, incorrectly stating they raised $1M more than in 2011.  In fact, as you can see here, the Catholic Appeal actually raised $13.7M in 2011.
• “A number” of the 78 parishes that were in Phases I and II of the Improved Financial Relationship Model program as of June 30, 2012 saw improved operating performance when compared to fiscal 2011. We are not told exactly what number “a number” means.  If it were more than half, the archdiocese would probably tell us. That suggests the majority saw worse results.
• The archdiocese has “major liabilities” of $93.9 million for unfunded clergy pension and post retirement obligations and $43.5 million in debt owed to St. John’s Seminary. As of now, we are not told how they intend to fund these.  Nothing is said about the roughly $50M or so that is owed to employees and former employees when they changed the lay pension plan and cut pensions back in 2011.
• Virtually nothing has been done to address the problem of excessive six-figure salaries. The long-awaited report by the Compensation Committee found that of 16 lay executives paid $150K+, 6 are way over-paid–making above the 75th percentile for that they found were comparable roles, 6 are somewhat overpaid–making between the 50th and the 75th
  
  
  percentiles for comparable roles, and 5 have positions somehow “unique to our Archdiocese and are paid comparably to peers in the Archdiocese with similar levels of responsibility.”  That last part in quotes sounds like those 5 people are overpaid in a manner comparable to how their peers are overpaid.  In other words, just about everyone is overpaid. The only cost-saving action being taken is to not give a cost of living increase to the 6 who are way over-paid.

1. What funds are going to get tapped or looted in the coming years to pay the bills?
2. How will the Clergy Funds debt and St. Johns Seminary debts of nearly $140M be paid? (And will the $50M+ in unpaid lay pension obligations currently not on the balance sheet ever be dealt with?)
3. Is the new Pastoral Plan, “Disciples in Mission” expected to somehow miraculously solve all of the financial problems and concerns above during the next 5 years? What else will the leadership and management team of the Boston Archdiocese really do differently in running Central Operations?