Finance Working Group Diocesan Assessment Revision Proposal

This is the transmittal memo from the Finance Working Group to the Executive Council proposing a compromise revision of the Diocesan Assessment formula to address the concerns of St. Timothy’s and other large parishes:

To: The Executive Council of the Episcopal Diocese of California

From: The Dept. of Finance of the Diocese of California

Re: Proposed New Assessment Formula: A Starting Point for Conversation

It has been four years since Bishop Marc became leader of our beloved community. Since his consecration, we have shared profound and unsettling changes all around us in terms of the pace of life, technological interaction and dependence and Christian engagement in general. Missions and ministries are changing to meet 21st  century models, sometimes away from the neighborhood-based, homogeneous congregations of old. The diocese has 18,500 congregants, not the 50,000 we hoped for in 2005. We no longer employ an executive officer, assistant bishop, assistant secretaries, development or stewardship officers. As the body canonically responsible for proposing the assessment formula to convention, the Dept. of Finance feels the time is ripe to revisit our shared purse and how we spend it, to reevaluate how we, as a Diocese, financially support each other, both through the communal work the Diocese does on our behalf and through congregations’ support for each other. The foundation for the new assessment formula is rooted in fulfilling our spiritual call to do God’s work in the world, to mirror and share His generosity with gladness and zeal. The proposed changes don’t make sense without our faith in each other as members of this beloved Diocese.

How the Work was Done. The Department of Finance organized a committee, the membership of which was blessed by Bishop Marc+ to pursue this work, and they came forward with this work which the Dept. of Finance considered and put forward for further conversation. The committee included: Shelton Ensley, chair, Bob McCaskill, Roulhac Austin and the Rev.s Phil Brochard, Tommy Dillon, Paul Fromberg, Terri Gotzinger, Leonard Oakes, Jason Parkin, Lauran Pifke, Chris Rankin-Williams, Steven Strane and Sylvia Vasquez. This group represents each deanery and large, medium and small congregations. The committee presented its consensus to the Dept. of Finance whose membership includes Betsy Munz and Peggy Greene, both of whom also support wider discussion of the assessment formula.

Ultimate Goal. Executive Council will take up the conversation about the assessment formula and go about soliciting input from its own members and growing the circle to include deaneries and other constituents with the hope of reaching its own consensus about what the assessment formula should be going forward. The hope would be to conduct these discussions and negotiations, to refine or revise this input and have a multi-year assessment formula ready for consideration at the 2011 convention to be effective in 2012.

New Budget Model. Chief among the changes proposed is how the budget is presented to vestries, deaneries and to convention. From now on, the budget will be presented as the Ministry and Mission Budget (MMB) which reflects where we want our pastoral and outreach ministries of the Diocese to flourish and grow. The MMB includes ministry development, mission congregations, ethnic and multicultural ministries, area ministries, youth and young adult ministries, campus ministries, and the work of the various commissions of the diocese. The second budget piece is the Diocesan Administrative Budget (DAB) which reflects our largely fixed costs of doing business as a diocese including the salary, pension and other benefits of the Bishop and his staff, utilities, occupancy costs, communications and the like. We are doing this so people can see where and how our assessment dollars are being used.

We are splitting apart the administrative and the ministry aspects of the budget because for an organization to grow generatively, there must be some greater mission that calls people to generosity, empowerment and action. We want a process that will empower congregations to directly determine funding of the MMB. Each congregation is invited to respond, not only with an amount of support, but also with its designation to specific ministries or categories.

For purposes of background, the current assessment formula is 5% of the first $62,000 of income as defined in the congregation’s parochial report and 20% of the balance, yielding a blended rate of 16.89% of all income. For a hypothetical parish with income of $250,000, the assessment for 2010 is $40,700.1,2

Proposed New Assessment Formula. Beginning in 2012 a new assessment formula is proposed, to be fully realized over six years. This new formula will include three categories of payments:

∗ Five percent minimum assessment on the first $62,000 of income PLUS

∗ a declining percentage assessment on income over $62,000 PLUS

∗ an increasing voluntary contribution on income over $62,000.

One-half of the voluntary contribution will be allocated by its congregation to go to several defined programs within MMB. See “What are the MMB funding opportunities?” below.

We propose a phase-in of the formula over six years because we are stretching ourselves to change the way we work together as a community, but we cannot do it in a healthful, sustainable way overnight.  The consensus is that 6 years gives all of us enough time to evaluate how the voluntary giving is going, to educate ourselves about giving and to make adjustments along the way. For instance, if the voluntary giving is not in general what we’d hoped for, we then have the opportunity to examine why: does the mission emphasis need to change or is there an educational component that needs to be addressed? Do we need a longer time horizon or different end goal? In fact, the assessment formula, the DAB and MMB will be reviewed annually to assure appropriate ministry, mission and administrative funding.

1. Assessment of 5% on the Minimum.

The MMB and DAB are both funded by this first category of assessment of 5% on the first $62,000 of

Total Operating Income (TOI) as that term is defined in the parochial report. The $62,000 represents the amount it would cost a parish to hire a full time priest at the diocesan salary minimum for a newly ordained person. Although the actual salaries of clergy vary widely, we believe that 5% of this minimum is a way to have each congregation pay to support the work of the diocese. Every congregation must pay this amount.

2. Decreasing Assessment on Income over $62,000.

This assessment is based on a percentage of each congregation’s TOI in excess of $62,000 and supports both DAB and MMB budgets. This percentage will decrease each year over six years:

Year 1              17% on the amount of income over $62,000

Year 2              16% on the amount of income over $62,000

Year 3              15% on the amount of income over $62,000

Year 4              14% on the amount of income over $62,000

Year 5              13% on the amount of income over $62,000

Year 6              12% on the amount of income over $62,000

For purposes of illustration, in year 6, with 5% on the first $62,000 and the assessment of 12% on the balance of income, the blended rate across all congregations of roughly 10%. For our hypothetical parish, in year 6 the assessment will be $25,660.

1  This assessment amount is based on the current formula.  However, it does not reflect the 10% assessment rebate given by convention to congregations and funded by prior years’ reserves.

2  The Diocese pays to support the Episcopal Church USA (ECUSA). ECUSA asks all dioceses to contribute 21% of their income, but the amount of the contribution is up to the discretion of the diocese.  The Diocese of California gave ECUSA $715,000 in 2010, approximately 21% of our income.

3. Increasing MMB Contribution on Income over $62,000 for Mission and Ministry. Unlike the assessments which support both DAB and MMB, this assessment is a voluntary one directed solely to MMB and based on a percentage of each congregation’s TOI in excess of $62,000. This percentage will increase over each of the next six years:

Year 1        3% Mission and Ministry Contribution

Year 2        4% Mission and Ministry Contribution

Year 3        5% Mission and Ministry Contribution

Year 4        6% Mission and Ministry Contribution

Year 5        7% Mission and Ministry Contribution

Year 6        8% Mission and Ministry Contribution

Each congregation will be asked to designate which MMB funding opportunities it wishes to support with ½ of its contribution. Reservations have been expressed concerning whether the voluntary contributions will in fact be made and whether or not the diocese can operate on the revenues generated in years 5 and 6.

The MMB Funding Opportunities. We are going to begin this new model of generosity by asking congregations to select from five categories of current mission and ministry work in the diocese. These are:

  • Mission Congregations: support congregations moving from mission to parish status and churches with specific development needs
  • Outreach Ministries: Episcopal and ecumenical agencies, networks, diocesan committees and chaplaincies that represent collective efforts to minister to others.
  • Diocesan Support Ministries: resources for congregations through commissions, committees and divisions that work to enable congregational potential.
  • Ethnic and Multicultural Ministries: promoting ministries that cross the cultural, racial and ethnic boundaries of our society and show us more fully the face of the Church.
  • Outside Diocesan Support: supporting the work of the Episcopal Church, Millennium Development Goals and missionary work.

We are asking congregations to declare in writing their selection of ministries and missions that they support, ministries and missions that reflect their own vision and core values. This also provides direct feedback to the diocese on the work it is doing on our behalf.

If a congregation does not pay all or a portion of the voluntary amount, we are asking it to disclose the reasons why. This mechanism creates an opportunity for mutual communication in a non-combative way and adds to mutual accountability and transparency between the Diocese and congregations.

The Budget Implications. The obvious question is: do we know the budget cuts that we will face with these assessment formulas?  The answer is some cuts will be needed, just as necessary cuts in spending affect every person, family, parish, mission, institution and business in the country right now. While the specifics of the budget are proposed by Program and Budget and ultimately approved by convention, we know we can get the savings needed to support the year 1 budget without cutting program and mission. Given our changing diocesan profile and emerging new models for congregational life, the work of our beloved Diocesan community can and will flourish with this funding.


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