Archdiocese releases financial report

BRAINTREE -- Officials from the Archdiocese of Boston expressed positive feelings about the financial status of the archdiocese days before the official release of an annual financial report.

In separate interviews with The Pilot June 8, two days before the official release of the financial report for fiscal year 2009, which ended June 30 of that year, Chancellor Jim McDonough said that the archdiocese is making financial progress, and Vicar General and Moderator of the Curia Father Richard Erikson expressed his hope that the archdiocese can make a complete financial recovery and thanked Catholics across the archdiocese for their generosity towards and faith in the work of the archdiocese.

The financial report was to be released to the public June 10 on the archdiocese's web site, BostonCatholic.org.

The report includes financial information on the archdiocese's central ministries budget, parish income, the financial situation of the archdiocese's Catholic schools, pastoral planning priorities, efforts to revise how the parishes provide financial support to the archdiocese, the 2009 Catholic Appeal, financial investments, and clergy and lay pension funds.

"The financial report gives a sense of the challenges we've faced and the hope that we have for financial recovery," said Father Erikson.

The report says that the archdiocese's central ministries budget contains a $2.3 million cash flow deficit, which McDonough says is an improvement over prior years. However, the report also indicates that the archdiocese expects to achieve a balanced budget by the close of the 2010 fiscal year, which ends June 30.

"We're optimistic we can receive a balanced cash flow position within a month," McDonough said. "It will be a great challenge because this is a difficult economic environment in which we are operating."

"Central ministries must have a balanced budget," McDonough added. "We have no pot of gold we can draw from."

Father Erikson echoed McDonough's sentiments, saying that achieving a balanced budget is the goal.

However, the report expresses concern for the financial situations in some of the parishes. According to the report, parish offertory declined 2 percent from 2008 because of the current economic recession, reversing a recent trend. McDonough said that parishes saw an increase in offertory in 2006 and 2007.

Revenue from parish property sales and fundraising declined by a combined 13 percent. Yet, operating expenses rose by 3 percent.

The report also indicates that roughly one-third of the parishes were operating at a deficit and one-third were breaking even.

McDonough said that while a large number of urban parishes continue to struggle, small suburban parishes are impacted as well.

McDonough said that 17 more parishes moved from breaking even to operating at a deficit last year.

"One of the things we continue to be concerned about is the fiscal health of the parishes," McDonough said. "I'm impressed with the pastors' fiscal responsibility."

When asked about the possibility of parish consolidation and reconfiguration as a way to address this financial situation, Father Erikson said that, while a number of parishes have already been collaborating, he does not anticipate a wave of reconfigurations similar to what occurred in 2004. He also said that some parishes have voluntarily approached the archdiocese to merge.

"I see that as more of the future than the reconfiguration process that we experienced in the 2000's," Father Erikson said.

The report also warned that health care costs for clergy and lay personnel continue to increase.

Regarding the status of Catholic schools, the report said that particularly urban schools are at risk because of declining enrollment and tuition is roughly $3,000 less than the actual per-student cost to educate.

"While scholarships and other sources of financial aid have been helpful, they are not sufficient to cover the operating deficits," the report says.

McDonough also said that many families of urban schools pay less than the listed full tuition price because they cannot afford it.

"We have too many schools with low enrollments that have children from families that are unable to pay tuition," McDonough said. "Unless we can find additional resources to support the tuition and the cost, we'll continue to struggle with Catholic education."

"At the end of the day, someone has to pay for the children to go to school," he added.

The report also said that four schools had closed, two had merged, and one had become separately incorporated by the end of 2009. Overall, the report said, enrollment dropped five percent for the 2009-10 school year and said that this month one school will close and five others will consolidate into two regional institutions.

Recognizing the financial situation of the archdiocese's schools, Cardinal Seán P. O'Malley authorized a task force to study the financial viability of the 84 elementary schools in the archdiocese.

The report also acknowledged an effort by the Improved Financial Relationship Committee to move to a new model for parishes to financially support central ministries.

"We're excited about the new opportunities that come with the new appeal assessment-tithe model," McDonough said.

McDonough also said that the archdiocese will not see the impact until 2012. About 30 parishes are launching the first phase in 2011, according to McDonough.

According to the report, the 2009 Catholic Appeal met its $15 million goal.

For 2009, the archdiocese's investment performance dropped by 11 percent, but substantially recovered from July 2009-March 2010, posting a gain of over 17 percent, the report said.

The last section of the report addresses clergy and lay pension funds.

"Both lay and clergy pension funds have been negatively impacted by the market decline," the report says.

The lay pension fund declined to a 75 percent funding level as of June 30, 2009 after being fully funded two years prior. As of March 31, 2010, however, that same fund has recovered to 82 percent funded status. According to the report, the archdiocese's board of trustees is reviewing the plan with the hope of achieving 100 percent funded status by 2014.

The report also addresses the clergy pension fund's financial situation.

"The Clergy Pension Plan continues to be the Archdiocese's largest liability and a major financial concern," the report states.

The report says the plan is underfunded by $104 million, which Director of Finance Glen Mattera said is an improvement from the $114 million gap in recent years. The plan includes retirement payments, housing, and medical costs. However, the report also expresses that the archdiocese can realistically meet its goal of reaching a break-even operating budget for the clergy fund by 2011.

"That has been a Herculean task to get to that point," McDonough said.

"Our most urgent goal was to stem the deficit that was draining us," McDonough added. "The unfunded liability, while important, is part of the longer challenge that we'll face."

The archdiocese has made a copy of its annual financial report available to the public since 2005. Officials from the archdiocese have repeatedly cited Cardinal Seán P. O'Malley's commitment to transparency as a reason for this.

Father Erikson and McDonough said they are aware of the financial challenges ahead of the archdiocese, but both are hopeful for future growth.

"The fact that we were able to sustain our operations so well in the midst of the challenges is a reflection of the generosity of the people of the Archdiocese of Boston," Father Erikson said. "We continue to face financial challenges, but we are looking forward to greater recovery."

"I'm optimistic about the future," McDonough said. "We have to continue to be good stewards of our resources. Hopefully, we're doing that."

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