Archdiocese Reports Roughly $9 Million Deficit; Considering Bankruptcy

Pioneer Press
November 21, 2014

http://www.twincities.com/localnews/ci_26977088/archdiocese-reports-roughly-9-million-deficit-considering-bankruptcycbd6.html

The full moon is seen behind the Cathedral of St. Paul as it leaves a total eclipse about 6:30 a.m. Oct. 8, 2014. (Pioneer Press: Andy Rathbun)

The Archdiocese of St. Paul and Minneapolis reported a $9.1 million operating deficit for fiscal year 2014 and reiterated Thursday that it's considering filing for bankruptcy because of the potential for more lawsuits by victims of clergy sexual abuse.

The archdiocese released its financial information in its newspaper, the Catholic Spirit, more than a week after it said it was cutting its central office budget by 20 percent, including 11 jobs. Archbishop John Nienstedt called the situation "disheartening" but wrote that the chancery's finances won't directly affect parishes, schools or other Catholic institutions.

"I am determined to see that the ministries and essential services provided by the Chancery Corporation will continue," he wrote.

The archdiocese said its operating deficit can be partly attributed to $4.1 million spent to address allegations of clergy sexual abuse since May 2013, when a three-year window opened for abuse victims to file claims that were otherwise barred under the statute of limitations.

The archdiocese's chief financial officer, Thomas Mertens, said that outside professionals were brought in and that most expenses were related to a review of priest files, investigation of insurance coverage and analysis of financial options.

Nienstedt said that since the statute of limitations was lifted, the archdiocese has settled two cases and 20 trials are scheduled. Victims of past abuse still have about 18 months to pursue litigation.

"We have no idea how many more legal claims may be made against us in the time that is left," Nienstedt said. Mertens said the chancery has received a "significant number" of notices that claims will be filed. Mike Finnegan, an attorney for victims, said more lawsuits were possible.

"There's no doubt that if they are not being serious and not treating victims fairly, that we'll be right back in court and fighting with them again," Finnegan said.

Vicar General Charles Lachowitzer said, "we have experienced significant expenses in connection with the overall claims made against the archdiocese and can no longer draw from remaining archdiocesan reserves so that they may be potentially available for future restitution and resolution. Therefore, our goal is to get to a balanced budget," according to the Catholic Spirit.

The archdiocese has said previously that bankruptcy might be an option, and Mertens noted Thursday that officials haven't made a decision. But, he wrote, it's being considered with fairness to victims in mind.

"Importantly, the archdiocese would not use reorganization as a tool to avoid compensating victims/survivors," he wrote. Instead, it would allow funds to be "equitably distributed to all who have made claims."

In the past year, the archdiocese has dealt with abuse lawsuits and a former church official who went public with concerns about leaders' handling of abuse cases. A settlement last month outlined protocols to protect children and has led to the disclosures of more priest files. Financial terms of that settlement weren't disclosed.

The archdiocese explained in the newspaper how a potential reorganization would affect operations.

The Chancery Corp. would expect to be allowed to function as usual, and separately incorporated parishes, schools, charities and other organizations would not be part of a reorganization. The archdiocese said it was too early to speculate on whether a bankruptcy filing would affect pensions or priest and employee benefits, but it would seek approval to keep such plans going.

Total operating revenue for the year ending June 30, 2014, was $25.5 million, compared with $32.7 million in 2013.

That decrease was largely due to a $7.7 million drop when the Catholic Services Appeal was shifted into a separate nonprofit organization Jan. 1. The move assured donors that their contributions would go directly to specified ministries, instead of flowing through the chancery.