WHAT HAPPENED?
The economic avalanche of 2008 swept over virtually all U.S. industries and market segments, including private enterprise, municipal governments and non-profit organizations. Virtually all segments of the economy were affected with revenue declines, capital shortfalls and equity erosion. This, in turn, resulted in a year-end budget and fiscal plan polarization for business, governments and non-profit organizations, as worry, fear and uncertainty gripped investors, workers and consumers alike.
The dramatic reversal of a boom economy that seemed invincible came at a stunning pace. Beginning in the second quarter of 2008, a series of interrelated events cascaded like toppling dominoes tumbling down one upon the other in a free-fall of markets, institutions and economic principles. None of the so-called economic experts had predicted the near collapse of the U.S economy. It seemed, as reporters scrambled to fill their notebooks and newscasters headlined wave after wave of “bad news,” that no one had an explanation or an answer, although with the political season in full swing, it wasn’t surprising that politicians promised a resolution to the economic uncertainty.
When the housing market peaked with banks and insurance companies holding tens of thousands of at-risk, floating rate mortgages, financial stability at household-name institutions first wobbled, then began to tumble. The fear of “failed banks” and a banking crisis featured prominently in the news media and fueled a “run” on some banks, which saw significant deposit erosion. Banks began to falter and Congress began attempts to shore-up the banking system to avoid a panic in the financial markets. Even while banking giants struggled to grasp the weight of their own portfolio risk, they began to tighten commercial credit, reduce loan exposures and limit new lending, which in turn, began a not-so-slow strangle on a business economy built on the ready availability of capital. Suddenly many firms awoke to find their investment capital or bank lines of credit greatly reduced, unavailable or altogether withdrawn, in many cases over-night. In some cases, banks significantly raised rates at the same time bank-to-bank borrowing costs were falling. In other cases, banks “called” loans (demanded immediate repayment) when commercial borrowers’ revenues, assets, profits, liquidity or equity fell below pre-set financial “performance ratios” and benchmarks. The FDIC quickly closed several wobbly banks, leaving those borrowers with no borrowing capacity whatsoever and no other institution available or willing to lend to them. Near panic was setting in. Hardest hit were real estate-related businesses, developers, realtors and large landowners whose greatest assets, were now overly-inflated real estate values. When real estate values began shrinking, developers and land owners found they had no ability to borrow, nor to resell these once prized assets, while, at the same time, their loan obligations and debt service requirements remained constant. The collapse of the real estate market had begun when at first residential housing buyers stopped buying, then most development projects were halted, then commercial development ceased. As a result many developers and other firms related to the real estate industry, such as realtors and loan brokers, failed or closed their doors.
As the diving economy entered an accelerating phase, where liquidity was shrinking, real estate asset values declined, credit availability was reduced, and financial markets were paralyzed with worry, fear and uncertainty. Retail sales, in general, began a slow stall, and the cloud of recession began to impact commercial, industrial and retail goods, products and services. The media maintained a heightened focus and spotlighted every morsel of negative news, economic measurement factor or dwindling facet of the economy. Just as it had with financial decision makers at the country’s business institutions, the same kind of worry, fear, uncertainty and a lack of confidence invaded the mindset of nearly every person, family or group in the U.S.
WHAT HAS BEEN THE IMPACT TO CHURCHES?
The overall impact of wave after wave of negative economic events was that hundreds of thousands of workers were displaced, resulting in the highest unemployment rate since the recession of the late 1970’s. In addition, the reduction of housing sales, auto sales and many other types of goods and services resulted in lower commissions, reduced or eliminated bonuses and lowered salaries. All of which resulted in a cycle of less to spend on goods and services, which in turn resulted in more layoffs and reduced hours for many workers.
To make ends meet, to continue to pay regular installment debts, mortgages, utility bills many individuals and families were forced to draw on their life savings, their retirement “nest egg”, and their cash reserves. Some borrowed on what remained of home equity lines of credit. Some borrowed on credit cards. Many retirees and soon-to-be retirees found that as stocks and real estate values plummeted so did their hope for work-free retirement. Many people lost their entire savings, and many of the “baby boomers” who had planned to live a carefree retirement began a slow realization of a new economic reality for their senior years.
These dramatic and rapid changes in the basic economic fabric of the country had a profound effect on nearly every individual and family. In turn, the members of congregations of nearly every church and ministry were affected from a financial and personal standpoint. For churches it became evident that combined “offerings” in the form of tithing, contributions and donations would adjust to reflect a new era of conservatism, caution and uncertainty. From a practical standpoint many members of congregations had lost their jobs or their hours were greatly reduced, or their salaries were reduced or their commissions or bonuses were either non-existent or greatly reduced. Members of the congregation came to Saturday and Sunday services with financial concerns. Many churches reported increased attendance. And, at the same time, churches reported that requests for financial assistance from members of the congregation and non-members from the local community had risen as much as 30%. In other words, while giving was down the need to help had increased.
The National Association of Church Business Administrators, on April 3rd, 2009, released a survey of its member’s responses in answer the question: “How is the economic recession impacting your congregation?” Highlights of the survey include:
32% of church respondents stated that their church was experiencing financial difficulties related to the current economy. This figure was up from 14% reported in a similar survey in August of 2008.
63% of respondents said their church experienced steady or increased giving by the congregation in 2008.
24% of churches said that they have curtailed some mission activities as a result of the economy, which was an increase up from 10% in August of 2008.
47% of churches reported that they have frozen or reduced staff benefits, which was up from 18% in August of 2008.
26% of churches reported postponing a major capital project.
Although the NACBA survey reported stable or increased giving in 2008, a November 2008 poll conducted by Church Solutions Magazine found that 53% of churches surveyed said that giving had decreased, 29% said that giving had remained about the same and 18% said that giving was up in 2008.
In their March 30th, 2009 article in ??? “Lifeway Biblical Solutions For Life” the authors point to their survey of 1000 Protestant pastors who reported that giving in 2008 was up an average of 4% of 2007. “While many sectors of the economy have taken a step back in the last year Protestant churches have held their own,” said Ed Stetzel, director of Lifeway Research.
Why such differences in the perception or result of giving throughout one of the most difficult economic periods in recent memory? There appear to be several factors including the uneven geographic impact of unemployment and job loss. Just as some physical storms seem to render destruction unfairly, so have the economic tornados and hurricanes as they have hit some communities far harder than others. Another factor in sustained giving may be in the power of “intention”. Writing on behalf of Cargill Associates, a Christian stewardship development firm, Pat Graham, president of the firm reports, “the interesting thing is this – most of the churches we’ve worked with in the fall of ’08 saw record giving levels achieved, right during the worst financial collapse since the Great Depression.” Dr. Steve McSwain, senior vice president of Cargill and author of “The Giving Myths” further explains; “the difference is internationality.” He adds, “If ever there was a time to teach giving, to encourage generosity, to step out in faith, now is the time.”
Writing for CBN News in March 30th, 2009, as published in U.S. News, Dan Busby, president of the Evangelical Council for Financial Accountability states, “The impact of the economy is uneven across churches and other Christian organizations. I think some of the organizations that came into the recession in a weak financial position have been impacted the greatest because they simply don’t have the flexibility that organizations that came in better prepared.” Busby adds, “We are very blessed people even though all of us may have been impacted by the economy. I think it’s a time for prayer and for both the churches and the para-church organizations and a time to pray for donors that God will bless them so they can bless the churches and para-church organizations as well.”
While giving at churches is uneven from community to community, stable in some communities or even up in some churches and communities, one thing appears to be certain across most churches; that is the need for help from within the congregation and from the local community at large, has increased. Writing in Church Money in October 2008, the Reverend Howard White of Pierce Chapel United Methodist Church in Midland says, “What I have primarily seen as a result of this economy (so far) is that the kind of help people from outside our church, and from within our congregation, are calling about is more dire and from people who would not normally need help – the employed, people living in their own homes. This is new.”
David S Bell writes for the Center for Christian Stewardship. In an article entitled “Sluggish Economy Increases Financial Pressure for Church Leaders” he writes, “People have primarily two “pockets” for giving – giving from earned income and giving from assets. As congregations age or an earned income decreases giving through the offering or annual campaign often decreases. Churches that are thriving financially promote giving from both earned income and assets. They promote annual gifts, major gifts and estate planning gifts. Major and estate planning gifts are generated from people’s assets.”
This would leave one to surmise that future giving may be impacted by the viability of the job market, in a community, as well as the future of asset values. The decline of asset values, such as real estate and home values, may affect future asset giving and major gifts, as defined by Mr. Bell.
Another factor that could affect giving in churches would be a surge in church attendance. However although this writer found spotty evidence that some churches have experienced modest increases in attendance, most research does not appear to support a wholesale or massive gain in congregation as a result of economic difficulties. In fact, most increases in attendance appear to be more related to a certain church’s ministry growth, expanded facilities, modernized campus, or integration of media technology, most of which were begun prior to the effects of the 2008 economic slide.
WHAT NOW?
Pastors, church executives, facilities managers and financial stewards understand that there is divine purpose in all things that happen in life. God’s message is to be heard among the chaos, fear and uncertainty of economic challenges and changes. Part of the events of the past year appear to represent an opportunity for us all, including the church, to get back to basics. There seems to be a re-adjustment in the order of our thinking, a kind of re-setting of priorities. As individuals and as institutions, we seem to be discovering that a new reality is emerging concerning our financial health and well being.
In speaking with church leaders it is clear that that many churches are taking action to help members of their congregation with special prayer sessions and practical workshops. Many churches are striving to help members and non-members with financial aid and assistance, financial counseling, life staples and basics such as shelter, food and clothing. From an operational standpoint, fiscally responsible church leaders have taken steps to adjust to new economic realities by rethinking budgets, re-evaluating expenditure plans and reshaping priorities. Financial stewards in churches are acting to sustain their church’s financial viability and lead their congregations with specific initiatives aimed to manage through these uncertain economic times. Examples of these steps include:
1) Reality Check:
Assess the impact on the congregation from the local and national economy. What are the issues facing members of the congregation? How can the church best help? What does the church need to do remain financially viable?
2) Immediately assess and adjust Budgets & Expenses
For most churches this is a good time to study the tithing of the congregation. How committed is the congregation to weathering the storm? Where can the church “tighten its belt”? What expenses can be reduced or forestalled?
3) Priorities and practicalities
Now is the time to sort out what is the “need to have” and what is the “nice to have,” whether it be a project, a mission, equipment or technology. For many churches media technology has been a new “engine” that drives and sustains attendance and participation. Is the congregation stable, falling, or growing? Invest in equipment, technology and projects that build and sustain the ministry.
4) Spread costs where possible.
Like many businesses, churches have historically funded capital equipment costs or even real estate out of the annual capital budget. If surplus cash and fund balances are abundant, that still may be a good strategy. However, if cash and fund balances are tight, it may be a better strategy to spread capital equipment or real estate costs over their useful life. For instance, a $100,000 media system may be a significant outlay in 2009 but spreading those costs with 60 monthly payments results in a monthly cost allocation of just $1950 a month, which aligns naturally to monthly contributions and tithing.
5) Increase savings and build an emergency fund balance
If business, government, non-profit organizations and we, as a people, have learned anything during this economic crisis, that is that it is critical to have an emergency fund to sustain us during the unexpected event or catastrophe. During this difficult economic period it is essential to develop the habit of building and maintaining a fund balance that would sustain operations for several months should there be a catastrophe that would undermine member donations, tithing and contributions. Also, as we have learned, in the midst of those difficult periods, the church will be called upon by those in need of assistance for basic life staples. A fund balance not only is a tenet of good financial stewardship but, as a practical matter, it offers the church financial leverage when negotiating with vendors, suppliers and even lenders.
6) Pay down debt.
Those churches with no debt or nominal obligations are in the most advantageous position to weather financial storms and the rise and fall of a roller coaster economy. Lack of debt plus a healthy fund balance allows the church to self sustain through good and difficult times. Lack of debt allows the church to negotiate the lowest interest rates when it does borrow. Having no or little debt is a hallmark of good financial stewardship. It is also a good example for members of the congregation who may be struggling with control of their personal finances. For churches that have debt, now may be a good time to refinance mortgages and commercial loans to fixed, low rates.
7) Find the opportunities
In the midst of a tough economy, the church can manage the uncertainties by defining what is certain and helping members to refocus on what is important and where the opportunities lay. Some of the strongest character growth comes during the most difficult challenges we are asked to face. God does not give us a task without the tools to achieve that task. Look for the blessings. Have gratitude. Allow the moment to lead us in a new direction. While the economic market may be in the midst of a “correction,” let the lesson for us all be a correction in thinking, hope and belief.
SUMMARY:
Financial stewardship means that church financial decision-makers pray for guidance and make adjustments to budgets, plans and church business strategies, with an inner peace grounded in the knowledge that God’s purpose in our financial lives is just as relevant as his “light” is in our spiritual lives. The underlying emotion felt by so many people touched by the economic events of the past year has been worry and fear. Yet it is in the midst of fear that more people come to the church ready to embrace God to find relief and answers. Many people will find a new life and God’s grace and blessing in the midst of these unsettling times.
