Sunday, July 14, 2002

Church finances tight, but sex scandal isn't why

Purses take bigger hit from slumping stocks

By James Pilcher
The Cincinnati Enquirer

Usher Marshall Lieberman collects offerings at St. Pius X Church in Edgewood.
(Steven M. Herppich photo)
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        Financial worries are dogging the Roman Catholic Church locally, but the sex scandal isn't directly to blame.

        Records of the Archdiocese of Cincinnati and the Diocese of Covington obtained by The Enquirer show that Wall Street's poor performance over the past few years has cost the local church far more than the scandal, at least so far.

        Donations to dioceses in the Tristate, where roughly 30 percent of the population is Catholic, haven't wavered from previous years. Officials from both dioceses report that they have either exceeded their annual fund-raising goals or are close to doing so.

        That's in contrast to dioceses such as Boston, where donations are off by as much as 40 percent. Church leaders there blame the scandal, in which priests sexually abused minors while higher-ups looked the other way.

Where the money goes
        The local church hasn't escaped abuse accusations. Several adults in Northern Kentucky claim they were abused by priests as minors, and a Cincinnati grand jury is looking into possible abuses.

        Still, diocesan officials on both sides of the river say donations continue to flow. The Cincinnati archdiocese, which oversees 227 parishes in Southwest Ohio, says its Archbishop's Annual Appeal is close to meeting a $4.5 million fund-raising goal - and probably will exceed it.

        The Diocese of Covington this month announced that it had received pledges for nearly $1.5 million during its Diocesan Annual Appeal, which had a $1.45 million goal.

        “We've had maybe 20 individuals send us letters, telling us they were withholding their donations from the annual appeal out of anger over the scandal. And that's out of more than 11,000 donors,” says the Rev. Robert C. Wehage, administrator for the Covington diocese, which oversees 47 parishes throughout Northern Kentucky.

        But if donations are holding steady, the church's bottom line is not. That makes for tough times for the Catholic church, which operates schools, charities and other social services throughout Greater Cincinnati. Both dioceses traditionally have pulled in more than they've spent. But now, they're beginning to report losses, largely due to the declining value of stock investments and the uncertain, post-Sept. 11 economy. Covington has been in the red for the past two years. Cincinnati lost nearly $8 million in investment value last year, leading to its first deficit in at least six years.

        At the same time, personnel costs are rising, primarily because teachers, administrators and other officials are increasingly lay people, rather than lower-paid priests or nuns.

        And all dioceses and parishes nationwide are facing huge increases in the cost of insurance, which helps cover settlements to abuse victims, as a result of the scandal.

        Over the past two decades, the two local dioceses have paid victims a total of $5.7 million, most of it covered by insurance. The Cincinnati archdiocese paid $24.2 million for insurance last year, by far its biggest single expense and an increase of more than $2 million from the previous year. Of that total, $21.4 million came from the parishes to cover their own insurance needs.

        Officials from the Covington diocese won't say how much they pay for insurance, but both they and Cincinnati church leaders expect costs to rise even more because of the scandal.

        “This trend is nothing new, and we're feeling it as other dioceses are feeling it,” says Dan Andriacco, spokesman for the Cincinnati archdiocese.

National impact?

        The sex-abuse scandal broke in January, just as the Cincinnati archdiocese and the Covington diocese were beginning their annual fundraising drives.

        The annual drives are for one-time donations to the diocese and are the best barometer to date of the scandal's financial impact. Analysts expected that donors outraged over the church's handling of the scandal might withhold funds from the diocese, which pays priests and finances the Catholic hierarchy that many blame.

        Separate are donations to parishes, which typically are dropped in the collection basket at weekly Mass. The most recent Tristate parish donations won't be estimated until year's end, and national estimates are unavailable. Analysts, however, expect parish donations to be largely unaffected by the scandal. In contrast to diocese expenditures, parish money goes almost exclusively to run local schools and churches, most of which had nothing to do with the scandal.

        “It's too soon to say what the overall impact would be, but if I had to theorize, I would say that the church will be able to continue as it always had,” says Sylvia Ronsvalle, executive vice president of Empty Tomb, a Champaign, Ill.-based, nonprofit research firm that studies donations throughout all U.S. Christian denominations.

        Mr. Andriacco says that in Cincinnati, several donors increased their contributions to the archdiocese to make up for any perceived shortfall caused by the scandal.

        Other areas haven't been so fortunate. A Gallup/USA Today poll conducted in March found that 30 percent of U.S. Catholics said they were less likely to give the church money because of sexual abuse by priests. The Archdiocese of Dallas, for example, had to cancel building a high school because it couldn't raise enough money.

        “Dioceses usually have money, but it's in assets and not a lot of cash, and you have to go looking for it,” says Sylvia Demerest, a Dallas lawyer. She successfully sued the Dallas archdiocese for $36.5 million in 1998 on behalf of 18 people who claimed they were abused as children by priests

Number crunching

        The Roman Catholic Church has long had the reputation as being one of the wealthiest institutions in the world.

        But while the church may be rich by way of massive property holdings and long-term investments, annual operations are funded by a constant inflow of cash from numerous sources. If any one source falls short, or expenses in any one area skyrocket, an entire budget can be thrown off.

        In the Cincinnati archdiocese, losses on the stock market contributed to an $8.3 million deficit in fiscal 2001. A sharp increase in property maintenance costs caused the Covington diocese to end the fiscal year with a $3,339 shortfall after a $16,419 deficit the year before.

        In each case, the dioceses made up the differences by selling other investments, such as mutual funds or stocks.

        The Vatican is not immune from losses, either. The center of the Catholic Church earlier this month reported its first deficit in nine years and blamed the shortfall on a worldwide financial slump aggravated by the Sept. 11 terror attacks. The Vatican says it took in $173.5 million and spent $176.5 million in fiscal 2001.

        In the Catholic Church, funding starts at the individual parish, where the faithful attend church. In Cincinnati and Covington, about 95 percent of parish donations remain in the parish for work there. The remaining 5 percent is funneled to the next level, the diocese, which oversees the religious affairs of its numerous parishes. Covington parishes also send along an additional 5.75 percent of all contributions to pay for the diocese's nine high schools. Just as parishes send some money to their diocese, each of the 194 dioceses in the United States and 2,565 worldwide sends a small, undisclosed amount to the Holy See, which funds the Vatican's annual operating budget

        .For the most part, the three levels manage their finances independently. a setup that's the antithesis of centralized chain of command on matters of theology and dogma. The Vatican rarely, if ever, becomes involved in finances at the diocesan level. And dioceses rarely influence the finances of individual parishes.

Past performance

        Both dioceses provided the Enquirer copies of their annual financial reports, which they publish in their respective diocesan newspapers.

        Cincinnati has been publishing such reports since the 1970s; Covington began in 1980. Publishing budget reports is rare among U.S. Catholic dioceses, many of which keep church finances secret.

        Independent accountants also audit the local reports, which are the only glimpse that the public has into Church finances. As a religious charity, the Catholic Church is not required to pay taxes or even file tax returns.

        Local church officials, however, would not provide more detailed financial data than what they publish. Nor would they attempt to put a net worth on their property - including parish, church and school buildings - and total assets, saying they are not required to keep those records.

        Officials with both dioceses do say they pay their priests about $20,000 a year, with older priests earning more based upon length of service.

        According to the documents made available, revenues in Covington have grown 60 percent between 1980 and 2001, even though the diocese became considerably smaller in 1988 with creation of the Diocese of Lexington.

        The Cincinnati archdiocese did not report revenues until 1996. Before that, the best indication of income came from annual pledges from individual donors and parish assessments. Pledges quadrupled from just $2.6 million in 1980 to $11 million in 2001.

        The records also show that scandals had no detrimental effect on church donations.

        A former Cincinnati diocesan priest, George Cooley, was convicted of sexually abusing minors in 1991. Yet the archdiocese reported a jump of nearly $300,000 in pledges the following fiscal year.

        Former Covington diocesan priest Earl Bierman was convicted of sexually abusing boys in 1993, yet that diocese reported nearly $200,000 more in revenues in 1994 than 1993. Like Cincinnati, Covington also reported no drops in income throughout the early 1990s.

Backlash coming?

        Still, there are some protesters. Linda Lykins of Mason÷ says she has stopped going to the Catholic Church, and stopped giving.

        “We'd been giving about $100 a month, but we've cut it all off, including buying raffle tickets or even giving to the building fund,” says Mrs. Lykins, 45, a lifelong Catholic who has stopped attending St. Susanna in Mason. “I'm concerned that they are using our money to settle with these victims.”

        Officials with both local dioceses say that money raised from their annual fundraising drives has never has nor ever and never will be used for settlements with abuse victims. But they say that whatever is not covered by insurance is paid for with general fund money, part of which comes from parish donations to the diocese.

Parish sees no decrease in offerings

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