Diocese of Washington Budget Illustrates Pandemic Pain

By | February 9, 2021

The Episcopal Diocese of Washington (EDOW) recently published both its projected 2020 year-end budget numbers, as well as its approved budget for 2021. The numbers are a frightening illustration of just how hard COVID-19 is eroding income for many Episcopal entities.

Background and Context

EDOW is a study in contrasts.

On the one hand, it is a relatively small diocese, with 38,000 members or fewer. Contrasting with that is the elevated public visibility of the diocese, including the National Cathedral, St. John’s Lafayette Square, and several other well-known parishes.

At the same time, the diocese overall is highly affluent, including as it does Georgetown, Chevy Chase/Bethesda, and many of the more affluent suburbs. At the same time, there are swaths of the diocese that face profound socio-economic challenges, including large portions of southeast DC, the Anacostia area, and sections of Maryland.

The presence of the national government, the relatively stable, robust local economy, and ongoing population growth also afford the diocese advantages that don’t exist in smaller, more rural dioceses.

EDOW has a further ace up its sleeve in the form of the Soper Trust, a gift from the late Ruth Gregory Soper. Originally controlled by PNC, the diocese managed to take control of the trust several years ago via litigation. On the one hand, this removed PNC’s burdensome management fees from the mix. On the other, by taking over ownership of the asset, the diocese renders the corpus of the trust susceptible to legal judgment — never a good thing in these litigious times.

Be that as it may, the trust throws off about $1.27 million a year in operating income for the diocese, accounting for about one-third of total diocesan revenue. Thus, this income remains stable, and has increased in recent years due to the surging stock market. Thus, while affording a measure of stability to the diocese, these funds can be excluded when considering the financial health of the diocese and the affect of the pandemic.

Congregational Giving

One key indicator of diocesan health is congregational giving. Originally projected at $2,600,000 for 2020, diocesan projections show a decline to $2,231,043 for the year, accounting for a roughly 14% decline.

But this number is undoubtedly cushioned by parishes that have done their best to honor their commitments, despite the trying times. While it is not possible to quantify this, every parish leader and clergyperson I have spoken with has said they would do their utmost to continue to provide support, even as many indicate that giving in their churches has declined by more than 14 percent.

Bishop’s Appeal

The other indicator of diocesan health — and one that speaks more loudly to the true state of affairs in the diocese — is the annual bishop’s appeal, which is largely used as operating income.

The appeal involves funds given directly by church members to the diocese, and involves no prior pledge. Thus, it is immune from the cushioning effect likely to occur when giving flows directly from parishes.

For 2020, the bishop’s appeal was projected to bring in $180,000. In reality, it brought in just $68,000, or just 37.78% of anticipated revenue. Thus, it’s safe to conclude that parishioners are fearful for their financial future — not to mention possibly unhappy at the ongoing closure of EDOW parishes. (For the record, I support the closures. Dead parishioners generate little operating income, not to mention the underlying ethical issues.)

2021 Budget

There’s good news and bad news about the 2021 EDOW budget.

On the good news side, the diocesan budget contemplates a further decline in congregational giving, to $2 million for the year. And other numbers are, generally speaking, realistic. Thus, it is clear the diocese hasn’t resorted to fictions on either the revenue or the expense side — a favorite game of far too many vestries faced with making hard financial choices. And while we probably would all hope for an increase in income, failing that, it’s best to be realistic.

But the bad news is that the diocese may not be sufficiently pessimistic, particularly in light of the fast-spreading, more infectious strains of COVID that are now emerging.

Specifically, the precipitous decline in giving to the bishop’s appeal suggests that the average person in the pews may not be willing, or able, to donate at a level that allows parishes to pony up $2 million in 2021. That’s particularly the case when COVID is known to have disproportionately high mortality rates for older Americans, of which Episcopal parishes have much a much greater percentage than the population at large.

Not only that, but forecasting a return to the $180,000 projection of 2020 for the bishop‘s appeal appears misguided.

Right now, we are in the eye of the storm, but the rapidly spreading UK COVID variant, which may be up to 75 percent more transmissible than the previous strain, portends a difficult spring for much of the nation. Thus, there are two safe bets:

  1. Churches will not be reopening any time soon.
  2. Things will get worse before they get better.

As a result, I strongly suspect we will see a decline in congregational giving below the $2 million mark, as well as continuing erosion of giving to the bishop’s appeal.

It’s also worth noting that, earlier in the pandemic, the diocese talked about drawing on investments to preserve its human capital. That clearly was the case with the 2020 draw on Soper Trust retained earnings, which came to almost $71,000. While there’s no plan in the 2021 budget for further draws on retained earnings, it is clear that staff cuts occurred anyway. Indeed, while some salary and compensation categories went up in the 2021 budget, most notably in the area of congregational development, overall salary and compensation is projected to decline by $450,576 this year. And while the closing of many churches undoubtedly has led to some cost savings, given the relatively modest salaries of most church jobs, total salary cuts of this magnitude suggest multiple positions have been eliminated.

No one can predict the future, but despite what the SEC says, the past indeed is a pretty good indicator of future results. And based on 2020 numbers, 2021 is not going to be a great year for the Episcopal Church.

Governance geeks like myself can access the 2021 EDOW budget here.

What do you see in your diocese or church? How is 2021 shaping up? And do you think EDOW’s forecasts are realistic.

 

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