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Jerry Johnston/First Family foreclosure

September 22, 2011 Leave a comment

Here’s a great article [link] from the Kansas City Star, written by Judy Thomas and Laura Bauer, about the foreclosure on First Family Church in Overland Park, Kansas. It’s medium-long and full of facts, and it supports the thesis that even in hard times churches don’t fail financially unless there’s been some sort of pastoral malfeasance. Here’s an example:

Neither Johnston nor the church board has ever revealed his compensation. But a February court filing by Regions Bank related to the foreclosure put Johnston’s annual salary as of August 2010 at $400,000; his son, Jeremy, at $210,000; and son-in-law Christian Newsome at $180,000. Johnston’s wife, Christie, made $60,000, the document said, and his daughters, Danielle Newsome and Jenilee Johnston, earned $40,000 and $25,000. That totals $915,000.

I’ve said it before and I’ll say it again: if a pastor puts family members on the payroll it’s a good indication something fishy’s going on.

Oh and: as a Liberty University graduate I’m disappointed to see Jerry Falwell’s name mentioned repeatedly in this article, including

For example, Johnston referred to himself as “Dr. Jerry” for years until questions were raised, and the title was prominently displayed on a large sign at First Family Church’s entrance. It was an honorary Doctor of Divinity degree he received from Falwell’s Liberty University in 1998 when he was the speaker for a baccalaureate service.

Scottsdale Bible Church

Scottsdale Bible Church gives every indication of being a well-organized church. The bulletin lists phone numbers and/or email addresses for the elder board, senior pastor, executive pastor, the leads for various efforts that aren’t strictly speaking pastoral but are apparently paid staff, the pastoral care coordinator and the pastor emeritus. There’s a substantial schedule of activities with dates, times, locations and contact numbers. There’s the usual contact card and executive summary for first-time visitors. And there’s a summary of financial information for the fiscal year to date, showing that giving is up very slightly, and they’re running a small  (1.5%) budget surplus through 45 weeks.

This is no mean feat given that the Phoenix area is one of the places worst-hit by the collapse in housing prices. It is reasonable to expect that people who attend SBC have as they say participated fully in the current recession. I think their budget/attendance numbers bear this out.

If I focus on the people who carry the ministry I end up with something like an 80/20 model, where I assume that 20% of the people give 80% of the money. If I project the 45-week giving number ($7,672,601) to a full 52-week year that’s $8,866,116 for nominally 6000 people. If we extract the 80/20 number that’s about $5900. If for comparison’s sake we do the same with the Mars Hill Church 2010 annual report, which covers a different but overlapping period of time, the comparable number is more like $7500, or 27% more. In other words, Scottsdale Bible Church may appear to be a church full of rich people, but it isn’t necessarily a rich church.

This may be due partly to the fact that it is chock-full of retirees as well. I’d say roughly half of the people attending the 8AM service had gray hair; I rather doubt that’s the case at any of the services at any of the Mars Hill campus churches.

But I digress; I wanted to be sure to mention something that’s been on my mind regarding churches and the current recession. I had expected that there would be lots of foreclosures and bankruptcies; instead I’ve seen churches selling their buildings to formerly renting churches (this has happened twice that I know of here in Santa Fe alone) or merging with financially healthier churches. See e.g. the new arrangement between Thomas Road Baptist Church in Lynchburg, VA and its new satellite Airlee Court Baptist Church in Roanoke, an hour away [link]. While I’m not overly thrilled at the idea of satellite churches or campus churches, where they gather to watch television and have at best a local assistant pastor, I have to admit this is better than an established church going dark altogether.

Regardless, I appreciate this minimal amount of apparent disclosure regarding money on the part of SBC. I wish this were the norm among independent churches; in my experience it is not.

financial realities of the LCMS

So there are two fairly common counterfactual games a person can play when considering another tradition in the light of one’s own tradition or experiences. They are roughly these:

  1. Why are you not X?
  2. What would it take to make you X?

The former category seems to be more popular; the latter requires a bit more intellectual honestly and is sometimes tougher. It’s relatively easy to say why you’re not Emergent, or Roman Catholic, or whatever; it’s harder to picture what you’d do if you had to make do. Sometimes the two questions are duals; sometimes they’re not.

I sometimes wonder what I’d do if, say, I were in some tiny town in the Dakotas and had to pick between a shouting church and a Lutheran church. Hint: I’d probably settle for the Lutheran church, especially if it were LCMS. As much grief as I give them here from time to time, the LCMS offers several things I wish every church organization or denomination had. In particular, they have a catechism, and they at least pay lip service to financial accountability.

Regarding the latter please consider the following artifacts: a summary of budget shortfalls from the Board of Directors [link, PDF] and an appearance by President Matt Harrison on Issues Etc [mp3].

The former is chock-full of numbers of the sort I don’t ordinarily see from a denominational board:

Looking ahead, prospects for the 2011/2012 fiscal year look even more dire. According to Rhodes, “the best numbers available” show an anticipated decrease in undesignated support to the Synod (district pledges and other sources of income) from $23,025,000 in 2010/2011 to $19,529,000 in 2011/2112. Income from the Synod’s 35 districts constitutes the major portion of the undesignated income of the Synod. District pledges demonstrate that many districts are being adversely affected by economic hard times, which in turn affects the financial support they are able to remit to the Synod.

Executive Director Rhodes also called the board’s attention to the additional concern that the current year’s budget has almost no flexibility. The nearly $86 million budget includes only a budgeted $250,000 surplus, which provides less than one-half of 1 percent flexibility—a concern also to be taken into consideration as the board develops and ultimately adopts the coming year’s budget during its May 2011 meeting.

Never mind for the moment the question of whether the surplus is properly contextualized against the total budget or the undesignated income; these are better-quality (not to say more-encouraging) numbers than I’m accustomed to seeing from a ministry with a sizable budget. I’m more familiar with a mindset that doesn’t share bad news until it’s too late, shares too little detail along the way, etc. for fear that donors will come to believe that the Spirit of the Lord has left the organization when the financial numbers are poor and stopped giving altogether.

Apparently LCMS Lutherans are not subject to these inclinations.

The appearance by Matt Harrison is less encouraging; to my ears he points his finger at the $66 million unmentioned in the summary above, namely the designated income, and suggests that church leadership should have more say over how money is spent. Broadly speaking, designated income, as Harrison explains, is money that has been given but earmarked for a specific purpose. He doesn’t explain how this money would be repurposed to cover the shortfall: whether there are surpluses hiding all over the place in the designated income, or whether some items that were important to donors would be cut so the money could be diverted to the general fund.

I am a little disappointed to hear his line of reasoning not include some suggestion that perhaps the Synod has overspent from its undesignated income in the past, doesn’t have a history of saving money, etc. It sounds to me like he’s locating, as they say, the budget problem in the pews rather than in the leadership. Still, it’s easy to imagine why: cutting budget is hard and unpopular; suggesting the leadership should have more control is easy.

All that being said, the LCMS is miles ahead of most ministries of comparable size; how many $90 million ministries make their financial statement and auditor’s report [link] available for download on the Web?

please bear with me while I pick nits

March 23, 2011 Leave a comment

Joe Carter at First Things comments on a recent update on the size of America’s largest megachurches [link] and gets nearly everything wrong. First of all he quotes a secondary source [link] rather than the primary source [link]. Then in an attempt to be cute he refers to the largest churches as “gigachurches.” I hesitate to mention here that the prefix mega- has an actual meaning [link], meaning a million of something. So far as I know there’s only one church that claims to have a million members [link] and it isn’t in the United States. The term megachurch refers to a Protestant church self-reporting 2000 in regular attendance, so it’s a coinage that doesn’t admit upscaling the way Carter does here. Even if it did a church running self-reporting 4000 in attendance wouldn’t be a gigachurch, since the prefix giga- has a literal meaning too [link]. It would be a neat trick to have a billion people show up for church one Sunday morning. I believe it could be done within the city limits of a moderate-sized American city, if they sat close together, but parking and similar logistics would be well nigh impossible.

Second, he misstates the content of the original article; the 100 largest churches didn’t double in size between 2000 and 2010. The churches listed 100th in the survey doubled in size, from roughly 4000 to roughly 8000. There are 12 of them.

The original source notes that there are 1.2 million people reported to attend the 103 churches in the top 100. This should be 1.176 million in 100, but you get the idea. The total for the top 100 in 2000 isn’t given, so the conclusion Carter draws can’t be drawn from the data given. Then again, at least one of the conclusion the original author draws:

Church lists are a trust and a living record of God’s mighty acts in our generation.

Can’t necessarily be drawn either.

The Grassley staff report: 50/25/25

I realize there are readers who might reasonably think I’m beating this Grassley thing to death, but I think it’s the gift that keeps on giving. One section of the report tries to get a fix on the scale of the money handled by megachurches and/or “media ministries” with no real balance sheet transparency (due to the fact that there are no Form 990 requirements) and no external oversight:

This lack of governmental, independent or denominational oversight is troubling when considering that churches can reach the size of large taxable corporations, control numerous taxable and non-taxable subsidiaries, and bestow Wall Street-size benefits on their ministers. The 2005 megachurch survey found that there were 1,210 megachurches (i.e., Protestant congregations that draw 2,000 or more attendees in a typical weekend) in the United States, nearly double the number that existed five years earlier. The survey also found that average annual expenditure of a megachurch in 2005 was $5.6 million. A follow-up study conducted in 2008 found that average megachurch income in 2008 was $6.5 million. Generally, fifty percent of income went to salaries, a quarter to buildings, and a quarter to missions and programs.  (pages 30-31)

Let’s just note that the “2000 Protestants” is a restriction of convenience; in many ways churches of 1900 or 2100 people are virtually the same, and the term “Protestant” here is a grab-bag term meaning “not Roman Catholic,” mostly because there just aren’t any non-Christian church-like groups drawing 2000 people on a weekly basis with megachurch-like buying power.

I probably should mention here that it is in this part of the document that the Grassley report comes closest to Establishment Clause trouble, because it is suggesting that it is the independence (read: lack of denominational affiliation) that makes these church organizations troublesome. I’d hate to see the final recommendations from this process suggest that of the 1400+ churches on the Hartford Institute list, only those with particular affiliations need to find some ECFA-like body to approve their balance sheets or face losing their 501(c)(3) tax-exempt status.

Anyway, if we roll the megachurch count forward to today’s list and leave the dollar figure at its 2008 level we end up with an aggregate of more than $9 billion tax-free dollars being handled annually by Hartford Institute churches. That’s a substantial amount of money for there to be no external accountability.

Finally, the last figure is of particular interest. Of that $9 billion total half, or $4.5 billion, is spent on salaries, $2.25 billion on facilities, and $2.25 billion on everything else. I might gently suggest that as Christians we’re getting a poor return on our investment if only a quarter of every dollar is actually spent on ministry. No wonder the modern megachurch doesn’t feature foreign ministries as prominently as the small independent churches I attended in the Seventies.

I’m tempted to take this 50/25/25 as sort of a pass-fail line, meaning that churches that spend 50% of their money on salaries are overspending, etc. But it seems kind of outrageous in and of itself. I’m not sure I’d be comfortable (for example) writing two checks to my local church: half to the church and half directly to the pastoral staff.

It also suggests to me that there may be no economy of scale for churches, if small churches and large churches alike are following roughly a 50/25/25 breakdown.

Of course, and this is the point of the Grassley staff report, it’s hard to know if you don’t know how your local church is spending the money it receives.

 

Mars Hill Church and the 80/20 Rule

February 26, 2011 5 comments

Mars Hill Church released its Fiscal Year 2010 Annual Report back on February 16 [link]; I’ve cached a copy [PDF] and recommend reading it. Also, I need to get back to it to refine some wild guesses I made about Mars Hill Albuquerque salaries.

This is an annual report, and as such is a mix of numbers and stories. Most annual reports are a mix of real information and public relations, meant to convey a sense of both transparency and enthusiasm. Sometimes it’s hard to tell one from the other. There is no Securities and Exchange Commission monitoring these reports and making minimal guarantees under threat of force the way there would be for a for-profit company. Churches especially aren’t obligated by the government to be accountable for every dollar they touch, etc.

All that being said the Mars Hill Annual Report makes for an interesting read; it makes clear what Mars Hill considers its distinctives (pages 14-15) and what distinguishes them from e.g. Calvary Chapel or Sovereign Grace Ministries or any other paradenominational organization.

One of the nuggets is on page 54-55 under the heading “Mars Hill Church Attendees by Annual Giving Range,” where there’s a pie chart with slices representing people who attend Mars Hill campus churches and and their giving levels: 21% give $0, 43% give $1-500, 15% give $501-1500, 11% give $1501-4000, and 10% give >$4000.  This general pattern is familiar among churches: a small number of people give most of the money, most people give little or nothing, and there’s a third group in the middle that’s hard to describe.

Here’s how the annual report describes giving overall:

The top 21 percent of givers made up 86 percent of all of the 2010 donations. Among those who contributed nothing, some were non-Christians or visitors. As long as Mars Hill continues to grow at the present rate, these ratios will likely remain static as new attendees join while present attendees mature spiritually. The goal is not that 100 percent of attendees would give over $4,000, but that all Christians would learn to give regularly, generously, and sacrificially, each according to their means. Because giving is an act of worship and love for Jesus, we don’t expect non-Christians to give. Therefore, since we want non-Christians to continue coming to Mars Hill Church, there should always be some $0 givers. Christians who give $0 may need to repent, but non-Christians who give $0 should feel welcome as guests.

Yeah there’s a fair amount of Christianese here, but basically they’re saying that their donors more or less follow the 80/20 rule [link], which is fairly typical for churches generally. They don’t touch the question of tithing (the word “tithe” doesn’t appear in the report), so there’s no discussion of giving as a percentage of income. I am guessing this is because they were able to calculate this number (how they estimated donor numbers for cash donations I can’t imagine), whereas they would need a lot of personal data to calculate tithing rates accurately.

I don’t know why the Pareto number describes above tends to settle where it does, nor do I know how one would go about shifting it. Ideally a church would consist of believers who are giving (somewhere) at a sacrificial level; I’m not sure that money should all always go to their local church. It’s not reasonable to expect the Pareto number to be 50 (50% of the people giving 50% of the money) since almost any church has rich people and poor people. Having the donations concentrated in the hands of a relative few (where a power clique sponsors most of the church’s activities) tends to concentrate power in a handful of pews; I’m not sure what happens on the other end of the spectrum. I’ve never seen it.

How Evangelicals Give

February 2, 2011 1 comment

The most fascinating article I’ve read recently (on a per-word/per-number basis) appeared in Monday’s Christianity Today web feed; it’s a little infographic called How Evangelicals Give [link, PDF]. It’s a presentation of three collections of data: one from the Chronicle of Philanthropy/Giving USA [link], underlining the importance of religious charitable contributions as a portion of overall charitable giving (hint: religious charities are the most popular at 33%, followed by education charities at 13%, and ten other categories; the study included criteria that classified e.g. World Vision as International Affairs and Catholic Charities as Human Services; equally good criteria would produce different pie charts), and one from something called Empty Tomb Inc [link] on how different denominations fund overseas missions. The numbers on historical trends in individual giving came from Empty Tomb Inc as best I can tell.

From what I can read of the Empty Tomb Inc report, they calculated individual percentages based on disposable (after-tax) income using published government figures; this part of their analysis was included in the Amazon preview of their $34 report. This number is harder to grasp for a given church member (we can look at our paycheck and figure what 10% of the gross is, or even 10% of the takehome, but neither of these is necessarily the number the report uses), but more meaningful in an economic sense. They do inflation adjustments as well, so they’re effectively talking about transfer of buying power from donor to church.

The bottom line: well, they distinguish regular giving from special offerings, and say that in 2008 (their most recent year) church people gave 0.35% of their income to churches as special offerings, 2.07% as regular giving. This is a pretty useful distinction: regular giving usually forms the basis of a church’s annual budget, while special offerings are one-time items that may not contribute to the financial health of the church. They may go into a reserve fund, they may be spent immediately on a special project, or they may be one of the “love offerings” that featured so prominently in the recently concluded Grassley investigation.

Disposable income is just household income (the number you see in e.g. census figures) minus taxes; that’s income tax, not property tax, sales tax, etc. So if your household income is $42,000 your disposable income would be your total less your real tax rate (federal, state, and city, as applicable), not your marginal tax rate, or say $31,500 at 25% total tax. In yesterday’s hypothetical church example, an average family would at the 2.45% level give their church $31,500 x 0.0245 or $772 annually. At 3 people per family that’s $257 per person per year; scaled to 150 people that’s less than $40,000 a year, or about 15% of a hypothetical $230,000 annual budget.

There are a bunch of assumptions here, but if I picked different values from their various ranges (slightly higher giving levels, slightly larger or smaller families, slightly more affluent typical families, etc.) it’s hard to make the numbers sensibly double.

At first glance I think this suggests what anyone who has spent time in a smaller, older, mature church suspects: a handful of donors give most of the money, and most of the people who attend church give very little. I guess it’s no surprise, then, that the same handful of people end up in positions of authority year after year, making most of the spending decisions.