Unexpected Expenses, Investment Income Woes Add up to $5 Million

Nov 08, 2002 03:00 AM EST

LOUISVILLE - Unexpected expenses and a scaled back investment income formula

mean a total of at least $5 million is going to have to be trimmed from the

next two General Assembly mission budgets - at least $1 million in 2003 and

$4 million in 2004.

A similar reduction in the 2002 and 2003 budgets was made last April,

resulting in the elimination of more than 50 positions at the Presbyterian

Center. The 2003 mission budget approved by last June's General Assembly

totals just over $130 million. The 2004 cuts will be about 4 percent.

In messages to the General Assembly Council and national staff members last

week, GAC executive director John Detterick said, "This is obviously not good

news, but we are moving ahead to begin developing appropriate actions."

In a Nov. 6 interview with the Presbyterian News Service, Detterick said,

"Because we budget so far out in advance, our figures aren't always clear -

they're our best estimates. For 2003 and 2004 there's a clear need for some


Four factors are contributing to a shortfall of somewhere between $1 million

and $1.5 million next year:

* Increases of more than $400,000 in insurance premiums on the Presbyterian

Center in Louisville and the PC(USA)'s conference centers in New Mexico and

New York;

* An increase in medical dues to the Board of Pensions - which rise 1

percent on July 1, 2003 - which will cost $100,000 next year and $200,000 in

2004 and beyond;

* Systems maintenance costs for the computer systems at the Presbyterian


* A slight reduction in shared (unrestricted ) mission giving from

congregations and presbyteries.

Detterick insisted that giving by Presbyterians to the work of the General

Assembly is "not the culprit." On the contrary, he said, "Mission giving is

relatively stable and I continue to be impressed with Presbyterians'

commitment to mission. Mission giving is not the driving concern here."

Investment income - which accounts for about two-thirds of the General

Assembly's revenue - is, however. And in 2004, the formula by which money

flows from the church's investments - most of which are administered for the

denomination by the Presbyterian Church (USA) Foundation - is dropping from 6

percent of the average balance of funds to 5 percent.

Two other changes in the formula will have a lesser financial impact:

calculating the payout on a rolling five-year average rather than a fixed

five year average (which Detterick said will make the payout more closely

follow market trends) and calculating the payout on June 30 rather than Dec.

31 each year (which will make budgeting more precise).

"The bottom line is that the new spending formula will mean that our revenues

for 2004 will be about $2.5 million less than in 2003," Detterick told the

GAC in his "weekly letter." He said the shortfall will be about equally

divided between the unrestricted and restricted portions of the budget and

"is entirely due to the impact of the drop in market values of investments."

Asked how the impending budget cuts stack up against last April's, Detterick

said "we realized significant savings from tightening up operations last

spring, so we won't be able to save that much this time."

"In the past our tendency has been to simply spread existing work thinner,"

Detterick added. "That's not healthy. Last year and this year, we're striving

not to do that."

Detterick told GAC members he's planning to present a "detailed outline of

some alternative approaches" to the budget cuts at the council's January

meeting, with a final plan ready for a vote at the April 2-5 GAC meeting.

American Baptist News Service (11/7/02)--J. David Follett, vice president

for Loan Services and treasurer of The American Baptist Extension

Corporation (ABEC), will retire Nov. 15.

At ABEC Follett has coordinated the loan documentation process and the

disbursement and repayment of funds, as well as helped prepare loan packages

for review. He joined ABEC in 1986 and became vice president for Loan

Services in 1998. Follett also was commissioned as a home missionary in


"The organization will miss David's commitment to assisting local churches

and ensuring their ability to meet their obligations without causing their

ministries to suffer," said ABEC President Valoria L. Cheek, Esq. "David

was a true advocate for the ABEC mission of supporting church extension. I

pray that God continues to use David's skills and gifts in ministry."

Prior to joining ABEC Follett served American Baptist Churches of

Connecticut as minister of Business and Finance for 21 years. His service

to American Baptist Churches has spanned 37 years.

ABEC provides financing, facilities planning and investment services for

American Baptists.

By Jerry L. Van Marter