For the sixth time in the past seven months, August apportionment receipts declined. For the first eight months of 2019, our churches contributed 49.6% of their apportionments. As you can see from the detailed report, this was 3.8% (and $327,000) below last year and 3.3% below our average apportionment contributions through August for the last ten years. At this rate, we project an overall year-end apportionment contribution percentage of about 80%. That would be the worst year by far in our Conference’s history.
The West district apportionments were up 0.2% from last year, the East district declined 3.7%, the South District declined 5.8%, and the North District was down 8.5%. Our overall year-to-date apportionment contributions through 8/31/19 are shown in the following graph:
Based on the low current projection for 2019 apportionment receipts, the Desert Southwest Conference Council on Finance & Administration (CFA) recently considered various spending reductions in the Conference budget based on input received from the Extended Cabinet. I want to share some of their considerations of the good news and the struggles we face in terms of the Conference’s financial situation.
We are certainly not at a point of panic, so I don’t want anybody getting overly excited. But we will be dealing with many new challenges in the coming year or two, and we need to understand what this may mean in terms of our ministries. I think we all realize that things will likely be much different in the coming years than they have been in the past.
First, the good news. We have a bunch of money in the bank. Think of it as being like your own personal savings account. Money that you have put away for a rainy day. Much of our cash has to be set aside since it can only be used for specific purposes based on restrictions the donors have placed or designations that the Conference has made. But we still have a good amount of free and clear cash that we can use for whatever we want. That is the savings that we can use to cover any operating shortfalls we may experience in case those rainy days arrive. As of 7/31/19, we had about $1.4 million of such free and clear cash.
So that’s pretty good news. Why worry? Because it’s starting to rain a little bit.
We all understand that the large majority of our funding for Conference ministries comes from our local churches in terms of apportionments. Apportionments are simply a way for us to ask each of our churches to contribute their fair share of our Conference budget so we can do the ministries we are called to do. Historically, we have received about 90% of the apportionments we ask from our churches. We have never received below 85% of our apportionments in any given year. We budget our spending expecting to receive 86% of our apportionments. In addition, for many years our CFA has authorized payment of our general church apportionments at 100% even though we expected to receive only 86%.
So that has been our history. But as noted above, through August 31 we were on target to collect only about 80% of our apportionments for the full 2019 year. Obviously, if our money comes in at 80% and we pay our general church apportionments at 100% and spend the rest of our budgets at 86%, we will start to use up our savings pretty quickly. In fact, CFA estimates that we will use up our entire $1.4 million of savings within 3 years if we don’t start implementing some spending reductions.
None of us would use up all of our own savings without cutting back on our spending, and CFA is no different in terms of Conference spending. So, CFA considered various spending reductions proposed by the Extended Cabinet, separated into different tiers, depending on whether apportionment receipts are received at various levels between 86% at the upper end and 60% at the lower end. CFA based their current decisions on the assumption that we will collect 80%, at least for this year. (It is interesting to note that the general church also projects apportionment receipts at the 80% level for 2019.) After much discussion, CFA has decided to adopt the following tier-one spending reductions as recommended by the Extended Cabinet:
- Pay general church apportionments at the 80% level we expect to receive rather than at 100%.
- Use designated funds, rather than apportionments, to pay for all non-administrative costs for New Faith Communities and Pension & Health Benefits.
- Reduce funding for Equitable Compensation subsidies by 30% starting 1/1/20.
- Reduce funding for Claremont School of Theology and Arizona Faith Network by 25% per year starting 11/1/19.
- Reduce funding for relatively inactive conference committees to current low spending levels.
- Don’t fill any new staff positions or any positions that come open through retirement or attrition.
CFA and the Extended Cabinet will continue to work collaboratively to monitor apportionment receipts and spending very closely over the next few months, throughout 2020, and beyond. If necessary, further spending reductions will be implemented. Those could include reductions in ministry subsidies (such as urban ministries, campus ministries, etc.), a combination of staff positions, and/or reduced hours or benefits.
It is important to note that none of these possible additional spending reductions are imminent. None are likely this year. Next year – who knows. Two years from now, very possibly. Five years from now – pretty likely, at least in my personal opinion. So, as I said earlier, there is no need to panic, but we should all keep our eyes open. And we will certainly keep you updated. One of the best things about having the money in the bank that we do is that we don’t have to make any knee-jerk reactions. We have time to be thoughtful.
One last point is that the current financial decline, as far as we have been able to determine, is based on the financial challenges faced by many of our churches based on the long, gradual decline that The UMC has been experiencing for many years. It has not yet been significantly affected by the turmoil in the denomination based on the human sexuality issue. The impact of that issue on our denomination could certainly accelerate future financial challenges, but that is beyond CFA’s ability to forecast right now.
So, in summary, I would say don’t panic, but be alert. And let’s continue to remind ourselves that apportionments are a way to look beyond our own community. They are a way to connectionally reach our brothers and sisters throughout the world. Let’s do all that we can to help our churches and our ministries continue to change lives by contributing apportionments as fully as possible in the last four months of 2019. Thank you for your commitment; it provides financial stability for our connectional programs to work.