The Budget Team has been meeting since late January and come up with a proposal for a budget that will increase staff time but requires investing from our endowment approximately $243,000 (The intent would be to use some of the proceeds from the Holly House sale to repay the endowment). Please note that the $243K does not include the $43K of earnings sharing that we are currently receiving from the endowment. This will be highly controversial among some of our members. The Board has sent out budget materials and a webinar, and it is not my intention to re-hash those materials. I would like to add some of my own perspectives on the budget.
The alternative to tapping our endowment is making cuts to our program funds, which are not that big to begin with, and would likely require elimination or reduction of two to three staff positions. In my opinion this would be a disaster for the church and mistreatment of our devoted staff. The positive news is that we know how to fix this, and we have the resources available to do it. As our five- year financial plan points out, the only solution to our church’s long-term financial stability is growth. The Board and Staff propose a budget that uses our resources to grow the church, starting with an investment from the earnings of our endowment in 2019-2020, and continuing with using a portion of Holly House proceeds after restoring the money used from endowment in 2020-2021.
This budget news may be a surprise to some members, so it is important to provide some background. Over the last few years, since I ran the 2015-16 operating fund drive, I have been analyzing our pledging trends. Since the beginning of this year, with the help of Ruth Edwards, I have also been looking at our long-term membership and budget trends. The bottom line is that we have been a shrinking church. Through the early 2000’s we were growing and making investments such as the Education building as well as calling an Associate Minister. These moves assumed the church would continue growing. Instead, the recession of 2008 marked a high point when we had nearly 700 members. Today we are at approximately 425, and we have seen similar drops in our religious education participation.
Membership and Pledging Trends
As we began to decline, our pledge income was unable to sustain our operations. Staff went for years with no increases to their already insufficient incomes. Our Associate Minister resigned when she was informed that we likely had only one more year of funding for her position. Our Senior Minister resigned the following year, leaving us without a minister for one full year but with the burden of nearly a full year’s salary. Our decline has been steady and does not reflect the arrival or departure of any specific staff person (except Peter’s departure).
Over the past four years since our Senior Minister’s departure, our financial position has stabilized due to several factors. Despite continuing decreases in membership and pledges, our average pledge amount has been increasing, and Jason Puracal has done outstanding work to reduce costs, streamline financial operations, and realize more income from our facilities. We have had operating surpluses the past three years. For the current year, last year’s Board brought all staff salaries to midpoint for regionally-adjusted UUA recommended levels. The Board also recognized Jason’s contributions by adjusting his salary to the UUA upper level of administrator compensation, still well below private sector levels. As we have moved through the 2018-19 fiscal year, pledge income fell short of budget assumptions and we had additional expenses in setting up our Developmental Minister position. We are currently projecting a 2018-2019 deficit that is largely being made up from reserves built up from past surpluses. That said, the 2019-2020 budget reflects the limitations of our ability to continue to find new revenues and cut costs in the face of membership declines. We are at a point where we need to decide whether or not to grow.
Growth can be achieved by enhancing the worship and the programs that bring people in the doors, and the community building work that transitions them into membership. The basic approach the board is taking with 2019-2020 budget is making investments in growth, specifically:
- Increasing Eric Lane Barnes, our Music Director’s, time to enhance our music program. Music and exciting worship services bring people in our doors
- Enhancing our Lifelong Learning program
- Returning Aisha Hauser, our Director of Lifelong Learning, to full-time compensation from the current 75%
- Hiring an Office Assistant part time to free Nicole Duff, Our Membership Development Manager to focus her skills on membership, especially retention
- Investing in outreach
- Recognizing the time Pam Orbach is putting on right relations including our anti-racism work
This is not a complete program for growth. Over the coming year we need to develop a more comprehensive growth strategy in concert with decisions on our uses of Holly House money and our long-term campus plan.
Why use the endowment earnings (not principal) this year? The endowment was created to support the church through crises. This is not a fire. This is not an earthquake. But shrinkage is a slow developing, quiet crisis that is no less threatening to the sustainability of the church. A major reduction in program funding and/or staff will leave critical areas of church operation poorly functioning and promote a self-reinforcing downward spiral.
We do need to monitor our progress to assure our resources are being well spent. The Board’s strategy is not simply spending money to cover the costs of maintaining the status quo. There is no sustainability in that approach. The 10-year plan is based upon increasing our membership by 40 members (net) and 30 pledging units (net) each year over the next 10 years. These net increases (new members and pledging units less those resigning) are the basis behind making the 10-year plan and our church sustainable. We have built into this an expectation that the average pledge will decrease, as newer members pledge less and grow in their giving over time, and also it brings our average pledge and cost per member more in line with other churches in the UUA.
Budget Projections with Membership Growth
We have a big choice to make. Do we want to grow, or do we want to shrink? There is no guarantee the growth strategy will work. But we should still decide how much to invest and try growth first. The Board’s strategy invests (over the next ten years) about $1M of our Holly House money. It leaves the social justice fund intact and still has over $1-$1.5M left in un-allocated money from the Holly House sale. The endowment remains intact. I think our faith and our principles deserve that investment.
The process on the budget involves the following steps:
- The Budget Team creates a budget including input from all groups and town hall meetings
- The Board votes on the budget for presentation to the annual meeting
- The Board holds additional town halls to discuss underlying assumptions and get more feedback
- The congregation votes to accept, reject, or amend the budget at the annual meeting.
We are currently between bullet’s 2 and 3. We are presenting one budget, as we have done in the past, but we have also looked at budgets that do not use our resources. We will be discussing these at the budget town hall meetings on June 2 and 3. Please attend with open minds to our proposal, and the Board will listen with open ears to your concerns and suggestions. As noted in bullet 4, its up to all of us as Members in our annual meeting to accept, reject, or amend the Board’s budget. It’s our collective decision.
The Senior Leadership Team and your new Board will be soliciting input from you during the development of the strategies that will become our growth plan. Ideas have been shared, but more input will be solicited. It is up to all of us to help grow our church so that it will be sustainable and a welcoming beacon for generations to come.
Finally, I will be stepping down as President after the June 9 meeting, so this is my last report. Thank you for letting me serve you this past year as President and the previous three years as a Board Member.
Sincerely
Tom Doe