DioVT grabs the bull by the horns, announces looming financial catastrophe

By | August 5, 2021
The Rt. Rev. Dr. Shannon MacVean-Brown

One of the problems facing many Episcopal churches, dioceses, and the national church itself is a lack of willingness to look the truth in the eye. That’s especially true when it comes to finances.

Fortunately, small glimmers of hope come from the tiny diocese of Vermont, which recently announced that it faces a looming financial catastrophe and is taking steps to proactively address the situation.

Pining for the good old days

For context, consider other mainline denomination,  which long ago pulled the plug on costly, Manhattan-based headquarters. But not so the Episcopal Church, which clings to its costly, Madmen-era heap, located at 815 Second Avenue, near the United Nations. That, despite the resolution some years ago at General Convention calling for sale of the building.

And while senior church officials responded by arguing that the proximity to the UN and other levers of power was essential, that claim is belied by the fact that there is no visitor center or other meaningful outreach at headquarters. Besides, these days, who works from the office?

Dioceses are no different

Here in Virginia, for example, the church clings to Mayo Memorial House as its headquarters, a brooding antebellum mansion in need of major structural repair. Sitting across from the four-star Jefferson Hotel, the front lawn overrun with weeds, and featuring a locked front gate guarded by a small, faded sign that sends the initiated to a badly-designed entrance at the rear of the building, the harsh grey and white facade sends an icy message of unwelcome to passers by. The place is hot in summer, cold in winter, costs a fortune to operate and maintain, has no insulation, and serves as a daunting reminder of the Old South. Nor is there any effort to trade on the proximity to the Jefferson Hotel; the building has no welcome center, is dark at night, and has little connection to the surrounding community.

And while some dioceses have offloaded costly and burdensome diocesan offices and other relics of a bygone era, the situations at church headquarter and here in Virginia aptly illustrate the overall lack of leadership and courage within the denomination.

Problems to the north

The Diocese of Vermont, a small backwater of the church with a tiny footprint, knew when it called its current bishop in 2018, the Rt. Rev. Dr. Shannon MacVean-Brown, that it had budget issues. To its credit, it was upfront about the fact that it was not sure it could sustain a full-fledged episcopacy over time.

Moreover, +Shannon was aware of these issues, and asked experts to take a look. The report came back and its conclusions were consistent with those of even the largest dioceses, comprising the following:

  • A staggering number of financial committees made decision-making difficult and prevented an accurate understanding of the situation.
  • A looming financial shortfall existed, with a cliff existing likely in the first quarter of 2023, in which expenses would far exceed income.

In response, +Shannon announced the Taskforce for Hope, Revitalization, Innovation, Vitality, and Efficiency (THRIVE), comprising leaders from across the diocese to map out a plan for the future. The group includes leaders from across the tiny diocese as well as investment advisors and others with subject matter expertise.

Near-term +Shannon also has reached out to the neighboring dioceses of New Hampshire and Maine to talk about sharing structure and resources, while maintaining local control and governance.

Also announced were a series of short-term cost-cutting measures, including leaving an open position unfilled and other changes.

Said +Shannon:

However, let me be clear. Cost-cutting and streamlining alone cannot solve our diocese’s financial issues. If we were to cut expenditures enough to survive on current revenues, which are declining as our congregations grow smaller and older, we would have virtually no capacity for congregational support, social justice ministry, care of creation programs, or participation in the wider Episcopal Church—all things that the people of the diocese treasure and that are essential to God’s mission in Vermont. Cost-cutting is only a short-term survival strategy that will help us build a bridge to our new future.

Clearly, a bishop who’s got her act together and is willing to call a spade a spade.

Prophetic voices, beware

Of course, we can’t know how all this will play out. Indeed, it’s fair to assume that +Shannon will face strong headwinds, given the denomination’s ability to avoid, deny, equivocate and evade.

Nor is fate always kind to prophetic voices.

In 2014, I began to warn my former parish — name omitted here, to avoid making it look like a “gotcha” — that a big budgetary cliff loomed.

Reaching that conclusion was not difficult.

Finances over time were remarkably predictable, even going back more than 10 years. Indeed, there was a predictable 2.1 percent annual decline in revenue, without adjusting for inflation. Meanwhile, inflation steadily nibbled at the church’s buying power, which were never factored into the equation. Thus, a key area of the budget, the $150,000 annual expenditure on the physical plant — already much too low — became steadily more dire over time. The same paradigm could be seen through the entire budget, in line items both small and large.

The calculus itself was simple. Factor in the small average annual delta between budget and actual, add inflation on the expense side, then adjust revenue per the established trend line, which reflected annual decline. Thus, costs were continually trending up, while revenue was trending down — an unsustainable pattern for any budget.

The result was alarming.

Assuming steady-state, the parish was unable to pay its bills from income, most likely in June 2020, and possibly as soon as June 2017.

Why those dates?

Simply put, coming into the summer, pledge income starting in mid-June was not enough to cover expenses, meaning there had to be extra cash on hand to cover the lean summer months. That trend typically reversed in mid-September, when vacations were over, kids, back in school, and the program year restarted. December then was the time to regroup, when year-end donations of appreciated stock served to balance the budget.

Thus, June 2020 would be the point where, assuming a few tweaks here and there, the church would dip into savings to cover operating expenses.

Steady-state expenditures would accelerate the trend by as much as three years, resulting in June 2017 being what I called, with gallows humor, “D-Day.”

And there was also a big unknown that couldn’t be factored into my calculus, which was the date on which big capital expenditures occurred. That was concerning, as some — like the HVAC systems in the building, which were long past actuarial life expectancy — would be seven-figure expenditures.

By now, alert readers have already guessed the response. The rector, nearing retirement age, brushed off my concerns, dismissed them on the basis that the church had an endowment fund, and treated the situation as a personal attack, inviting me to “find another church where you can be happy.”

But having invested heavily in the church, I wasn’t eager to find a new one, and the funds from the endowment came nowhere close to covering the expenses.

Rearranging the deck chairs

True to form, the vestry remained oblivious, voting to pay the rector a 100K bonus in 2014, and to draw $3000 from savings for a party for a departing church school staffer. Partying from savings? Yikes.

And while there were some tweaks, including imposing a regressive tax on staff by making already already underpaid junior staff pay a portion of their health insurance costs (a decision ostensibly to balance the budget and announced just weeks after the 100K bonus), these and other vestry decisions were minor measures that bought only a brief respite from the looming disaster.

Iceberg, to port!

Sure enough, the HVAC failed precipitously the following year, in part due to its advanced age, and in part due to volunteers not heeding warnings about needed maintenance and timing. As a result, much of the building had no HVAC for a year, even as the church scrambled to figure out next steps.

Next steps that any rational actor knew were needed, but for which no plans had been made.

When the church finally did replace the HVAC, it went for a state-of-the-art system. The details aren’t important, but it’s not the sort of system that works well for a volunteer-driven organization. Ongoing operation and maintenance will be difficult, costly, and require the ongoing use of professionals.

Near-term, the HVAC debacle had another dangerous result, in that it cleaned out much of the church’s cash on hand, eliminating this safety net. And the church took out a loan to cover expenses it could not cover from cash — a loan that is being repaid in part from income from the endowment. Thus, $70,000 a year is being paid from an already sharply diminished budget, leaving the church even less wiggle room, even as it continues to ignore maintenance issues large and small.

As a result, today the church has eliminated two full-time positions. The rector from 2014 has retired. And the remaining staff from that time have all resigned, even as the church has slashed its giving to the diocese, all while running a deficit.

Meanwhile, giving and attendance is down sharply, and the turbulence within the church bodes ill for the future. Moreover, the church faces a tsunami of bad publicity, including several lawsuits.

No lessons learned

But the most troubling aspect of the situation is that the parish in question has learned almost nothing from the debacle. It recently launched an unneeded campaign to restore the valuable stained glass windows, which only a few years earlier had been evaluated by the original maker and found to be in excellent condition, leading it to ask its remaining members, already struggling to ramp up giving, for donations to cover the cost.

Meanwhile, the church is still running a deficit.

And the church still has made no effort to address deferred maintenance, to save part of its income for future expenses, or to develop an honest budget based on accurate projections and real budgetary needs.

In short, while there’s lots of talk in that particular church about listening, about dreaming of the future, resurrection moments, and more, nothing’s changed. It’s still the same badly governed non-profit, feckless about decision making, with no plan for the future.

Put another way, it can’t plan for resurrection, as it hasn’t died to the practices that got it in this mess in the first place.

What’s next for DioVT?

Needless to say, my experiences on the local level, combined with my observations about the national church, lead me to be skeptical about DioVT’s efforts. Specifically, I am dubious that stakeholders can look past their self-interest and examine the bigger picture. I question their stomach for difficult decisions.

On the other hand, I am reassured by +Shannon’s remark that the problem has been decades in the making. That is true not only for her diocese, but for the entire denomination, where there is a strong preference for transactional “solutions,” passive-aggressive behavior, conflict avoidance, committees, and tinkering around the edges. In short, even as the denomination pays lip service to annual audits and the highest standards of good governance, the reality often is the polar opposite.

Nor is there leadership at the top.

While +Curry carries on about “loving, liberating, life-giving,” this is nothing but a thin public relations ploy, pasted on top of business as usual.

Indeed, the national church remains feckless, indifferent, and largely unresponsive to the realities on the ground, instead offering siren songs that pretend all is well. This includes recent statements touting a healthy financial posture, due primarily to decreased expenditures during the pandemic and a declining membership base that is stepping up giving in an effort to stave off the end. But it ignores the fact that the rate of decline has accelerated in recent years, and will continue to gain ground as existing membership dies off. Nor is the messaging helpful, for it fails to apprise members of the disaster that looms.

Even recent statistics, which show a precipitous decline in weddings within the Episcopal church and other indicia, all of which should be holding steady despite declines in membership, and all pointing to a dire future, have not been enough to nudge ++Curry and other so-called church leaders into action.

Yes, ++Curry has made some recent remarks in the context of race calling for revolution within the church, versus reform, but these were made to church insiders, with no signs of any plan to actually do anything.

Let’s hope that +Shannon and her diocese are successful, and that others in the church treat this as a clarion call for revolution from within.

If that does not happen, the Episcopal Church will soon cease to exist.

Those interested can find +Shannon’s letter below:

Building a Bridge to the Future: A Letter from Bishop Shannon

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