Like many congregations and organizations with an endowment, at the beginning of 2009 Western Presbyterian Church faced a painful situation. Despite our endowment outperforming the market benchmarks by six points, it had suffered a huge loss of value in the last quarter of 2008. As our session convened in January 2009, the endowment’s equity losses were growing larger and we faced a budgetary shortfall of $200,000. With a proposed budget of a little over $830,000, 24 percent of our budget was in jeopardy.
To deal with this situation, our session needed to exhibit both leadership and management skills: leadership skills to bring our congregation along with us, management skills to work the numbers. We also needed to devise a transparent decision-making process.
Our congregation is not unfamiliar with financial challenges. When I was called to Western in 1983, nationwide unemployment was at 10 percent and the congregation had shrunk to less than one hundred in worship. Meeting payroll was a bimonthly challenge. So, as a family system, we have developed some financial coping skills. We knew we would survive the Great Recession of 2008–2009. The only question was what survival strategy we should use. Could we find a way to continue our growth as a congregation? Or would we retrench into an ecclesiastical shell?
Developing a Process
As a session, our first challenge was to develop a process to make the tough decisions we had to make. A flawed decision-making process could divide the congregation and us. Much to my surprise, a rather heated debate developed over this question. We were far from united about how to move forward.
Some elders wanted to move quickly to cut the deficit. They argued that dollars spent while we waited to make decisions were dollars no longer available to us. If we were going to reduce staff, we needed to do so quickly so that some salaries and benefits would stop being paid. If we were going to reduce benevolences, they needed to stop immediately before the treasurer dispersed them.
Other elders wanted to take a slower planning approach. They said we needed to pray about and meditate upon the overall direction of the congregation, and that we needed input from the congregation. All of this, they said, might well take most of 2009 to complete.
By the end of our January session meeting, the elders merged the two approaches. Wherever possible, they froze payments that didn’t need to be made until May. They asked committees to look for immediate cuts they could make to their budgets. They also authorized a condensed five-month planning process—complete with time for prayer and reflection—that would end no later than the June session meeting.
In February the session had an all-day retreat led by one of our members, a skilled facilitator. There was frank discussion as to what changes might need to happen to resolve the budget crisis. At times, “frank” became “contentious.”
We began the retreat with small-group discussions about what we most valued in Western’s ministry. People were asked to speak from their hearts, not their heads. They spoke about the way they valued Western’s openness to various theological positions, our investment in helping the marginalized to gain control of their lives, and the power of our worship. As we focused on values rather than budgets, it provided a lot of unity. When things got heated, we kept coming back to the unity we embraced during this part of our meeting.
As with most congregations, the biggest single piece of Western’s budget is personnel. Some members stated unequivocally that there was no way to address a $200,000 budget problem without reducing staff. I was grateful to those who raised this issue because I knew it was being discussed in the parking lot and elsewhere. It is always better to have these conversations where they belong—among elected leaders—rather than among folks who may or may not have access to all the information.
Some, including me, argued that reducing staff would cause some members to leave (I had already been warned/threatened by a few members in this regard). Therefore, the net gain from salary reductions might well be offset by the lost pledge revenue from members who left the church. To our objections, several elders responded, “Okay, then what are you going to cut? Where are you going to find $100,000 or more to cut?”
There was an equally heated discussion about the benevolence budget. Some elders viewed it as discretionary spending. Others saw it as money that had to be spent. They also argued we would lose members who were proud of and committed to our mission efforts.
Finally, there was a lengthy discussion about revenue. If we went back to the congregation and asked them to increase their giving, how much could we expect them to give? Some thought it would be very difficult for people to increase their giving in such a financial crisis.
Fleshing Out the Possibilities
The major issues identified, the session created small groups to flesh out information and possibilities in four discrete areas of our ministry: mission and benevolences, program, building/administration, and personnel. They asked a fifth group to think about creative ways to generate additional revenue, and they asked the Stewardship Committee to conduct a special fundraising campaign with a goal of $50,000.
We planned a retreat in early April to hear the reports of the work groups and make decisions on a revised budget for 2009. Finally, the elders decided to create a budget not just for the rest of 2009 but for eighteen months (June 2009–December 2010). They hoped this would preclude facing another crisis in the near future.
Stewardship: The Stewardship Committee had met prior to the session’s February retreat. As the committee discussed the options, Hal, a newer member, said, “I believe we are thinking way too small.” Hal said that he and his wife would add an additional $1,000 to their 2009 pledge. Each of us on the committee then made spontaneous financial pledges of our own. By the end of the meeting, we had $8,000 from our committee. The Stewardship Committee then challenged the session to make similar commitments.
By the time the entire special campaign was finished we had raised an additional $80,000 from the congregation, a 21 percent increase over our initial pledge total for 2009. Approximately $30,000 of the total was from one-time gifts. The remainder of the gifts were increased pledges. Hal was correct. We had been thinking way too small, perhaps for a long time!
This excellent response also reinforced the feeling I (and others) had that the congregation was dead-set against cutting the size and scope of the church’s ministry. They voted with their pocketbooks to sustain our current staff and goals. It was now up to the session to find the way to make that work.
Personnel: As head of staff, I was adamant that any discussion about the reduction of our staff take place in a small group, not in the session as a whole. We would be talking about the futures of individuals and their families. It was simply too personal and nuanced a discussion to take place in a bigger forum.
My insistence that the conversation take place in a small group was not without controversy. There were a few elders who wanted the discussion to take place in a committee-of-the-whole environment. However, a large majority agreed that such a quasi-public conversation could create bad feelings for a long, long time.
In the small group, we were able to massage some important variables in our situation. For example, several members of the staff—including me—will be retiring within three years; we have some staff who may very well move on in the same time frame; the severance costs involved in eliminating a staff person would eliminate any short-term gain for the budget; and all o
f us had heard various people threaten to leave the church if staff member x, y, or z was laid off.
Given these realities, the personnel group recommended that we not reduce the staff. It decided that the staff would reduce itself naturally through attrition in the short term. The group recommended we increase salaries for 2009 but freeze salaries at that level in 2010. Finally, given the reality of near-term staff departures, the personnel group asked the session to engage in a planning process to evaluate and project a future staffing structure.
Building and Administration: This group realized some significant savings for us by studying three areas: insurance, capital reserve, and utilities. By raising our deductible and eliminating a special rider for terrorism, we were able to eliminate $11,000 from the insurance budget. Competition has recently entered the utility industry in Washington, D.C., so, by switching our electrical provider from Potomac Electric to Washington Gas Electricity, we were able to save $11,000 annually ($5,500 in 2009)! The group reluctantly decided to reduce our contribution to the Capital Reserve Fund (used to fund major building maintenance) from $50,000 to $30,000, but recommended reinstating the full contribution in 2010.
Benevolences: The Mission Committee decided to make dramatic cuts in our benevolence budget. Since those most involved in the benevolences made the decision, it was much less controversial than it would have been otherwise. But it was still controversial.
The committee decided we had been extremely generous for years when we had money to spend on big ticket items (new church developments, medical mission in Ethiopia, school in Soweto, etc). We now needed to cut back to a level consistent with our reduced capacity to give. Believing it would be an incentive to give more, they tied future benevolence budgets to a percentage of member giving. They asked that this percentage be increased dramatically as the economy recovered. In the process of reducing benevolences, they decided to stop or reduce some benevolence funding that probably should have been evaluated a long time ago.
Program: Very little was cut in this area because we have a small program budget. We view our staff as our program. The staff has to create ex nihilo—just as God did!
Other Fundraising: This group proposed a benefit concert and auction of donated items to raise approximately $7,000. They also raised our fees for nonmember weddings and other building use.
Other Revenue: In 1983, Western helped found and became home to one of Washington’s best programs for the homeless: Miriam’s Kitchen for the Homeless. For twenty-five years the kitchen has basically had a free home. With the current crisis, we needed to revisit that situation.
We weren’t looking for rent. But we did talk to the program’s board about Miriam’s making a contribution toward building operating expenses. We settled on an amount that represents a bit less than one-half of our actual costs for being the kitchen’s home.
It was opportune that Miriam’s had decided to add a dinner program to its breakfast and day programs. The additional costs stemming from the new program would have required some discussion about cost-sharing anyhow. The contribution from Miriam’s was established for a three-year period, at which point the question of whether or not it needs to continue will be revisited.
Going to the Congregation
Prior to finalizing their decisions, the session sent a detailed, seven-page letter to the congregation explaining the issues, the decision-making process, and the proposed outcomes. For the next three weeks the elders held four focus groups to which members of the congregation were invited. The feedback was extremely positive with several helpful fundraising suggestions, including better stewardship education with new members and small group stewardship meetings in the homes of members. With the feedback in hand, a relieved and excited session gathered. As it turned out, the June session meeting was anticlimactic. The combination of budget cuts, increased giving by the members, and additional revenues from other sources (Miriam’s Kitchen, auction, etc.) effectively closed the $200,000 gap. By putting a salary freeze in place, the new budget should be stable through the end of 2010.
What We Learned
Our process was educational. Here is a summary of what it made clear to us:
- Communication between the pastors and elders, the session and congregation was crucial throughout. We used e-mail letters to the congregation, announcements in worship, one-on-one conversations with key players, and small, open discussion groups to keep the process participatory and transparent.
- It was very important that we had an active strategic plan in place. (It is reviewed annually by the committees and session). The plan gave us our starting point.
- Our priorities were already established, our values clear. Therefore, we were able to move directly to the question, “What do we want to eliminate from the plan?” When the answer was “very little,” we knew we had to solve most of our problem on the revenue side of the budget (through things like pledges, building rental, and fundraisers).
- Growth fuels a commitment to growth. Despite fears that the congregation would devolve into competing interest groups (mission vs. music, education vs. personnel, etc.), it never happened. As a growing congregation, our members did not want to step back from our strategic plan for growth. To sustain growth they put their treasure where their vision is.
- They also realized that everyone was going to have to experience some cuts in their favorite budget line items.
- Resolving the personnel piece was crucial. It was clear to everyone that we couldn’t move forward with our staff intact if we didn’t get more money. This was a key to members deciding they wanted to contribute more financially. To protect the core of our ministry, sacrifices by members were required and made.
- Working in small groups was very successful. When the session discussed issues as a bigger group, things got heated. When we talked in small groups people were pragmatic and in a problem-solving mode. The small groups unleashed a lot of creativity on issues ranging from fundraising to cutting building expense.
- Trust builds trust. Prior to the crisis, the congregation had a high level of trust in the session. While the swift decline of the endowment’s value shook this confidence for a few members (“How could they have let this happen?” was a comment I heard several times), most people looked at their own investments and realized that one didn’t need to be negligent to lose money during the market crash. While there was some impatience that the process took months, most members realized the decisions being made required time. At every stage of the process, the session kept the congregation informed as to what was happening.
- It is alright for people to have heated exchanges in a time of crisis. At one point in a session meeting, I clashed with an elder who is also a friend. We raised our voices as we argued with one another. Everyone wondered what would happen to our friendship. We remain friends, that is what happened. As a rule, most congregations fear conflict. When it happens naturally and we don’t fall apart, the church is a much better place.
Hopefully, Western has not only resolved its own financial challenge but has been a good model for our members as they face their own personal financial challenges. An economic crisis isn’t a time to panic. It is a time to pray, to clearly identify issues, to utilize—not abandon—the strategic plan, and a time to have open communications with all stakeholders.
Questions for Reflection
- Does your congregation have a strategic plan? Is it reevaluated annually? Does it have metrics to measure whether any progress is being made on the goals?
- Has your governing board devoted a significant amount of time to discussing how the congregation can maximize its revenue possibilities?
- If your congregation has financial reserves, has the investment strategy for those funds been reevaluated recently?
- Is someone in charge of having regular cost-savings conversations with utility, copier, and other companies with whom the congregation does business?
- Does your congregation have a comprehensive communications strategy to utilize the amazing opportunities new technologies provide us for ministry?