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Would your church offerings be used to settle sex-abuse claims in Harrisburg Diocese?

By Sam Ruland
York Daily Record
February 25, 2020

https://bit.ly/2HUAuIS

The Diocese of Harrisburg administrative office at 4800 Union Deposit Road in Dauphin County is seen in this photo.
Photo by Dan Rainville

As the sun began to go down and the shadows of the church vanished from the sidewalk, Shannon Bailey hustled up the steps of St. Patrick’s Church of York, eager to get a good seat before the service started Sunday.

A lifelong Catholic, Bailey, 54, attends Mass weekly, praying for everyone she knows — her dozens of nieces and nephews, the neighbors in the house next door, her daughter’s volleyball team, the feral cats that infiltrate her back yard. She hasn’t let her faith be dissuaded by the sex abuse crisis that’s engulfed the Catholic Church.

It’s not her place to pass judgment, she said.

“This whole thing just makes me pray more,” Bailey said. “It makes me pray for forgiveness, pray that those victims find peace. And I pray that the church is different now. They’re not perfect, nobody is, they make mistakes just like the rest of us.”

But not everyone is as steadfast as Bailey. Following the release of Pennsylvania’s sweeping grand jury report, charitable giving suffered its biggest drop since the Great Recession — evidence that more Catholics are deciding not to contribute to their bishops' diocesan appeals because of the scandals.

The Roman Catholic Diocese of Harrisburg has spent close to $12.7 million in the last year to investigate claims of clergy sex abuse and compensate the victims for the harm they've suffered.

And as those expenses have risen, the church has had to make some changes within the diocese. At least 21 dioceses since 2004 have filed for bankruptcy protection to provide financial compensation for clergy sex abuse survivors.

Last week, the Diocese of Harrisburg became the latest to petition the federal courts for Chapter 11 reorganization, meaning there may be some changes coming to the church soon — the diocese may have to lay off staff, sell property, liquidate some assets.

The word ‘bankruptcy’ rolls off the tongue like a dirty word, said Matt Haverstick, attorney for the diocese.

“People are upset with the Catholic church, and they’re confused,” Haverstick said. “They think this means their church is broke, or that every penny they give will be given to pay out lawsuits, but that’s not how it works.”

“Parishioners still should be confident giving at the local level,” Haverstick said. “They shouldn’t take their frustration out on the people that really need help.”

So, when a diocese does file for bankruptcy, what does that mean? And when parishioners throw loose change in the collection basket, where does that go?

Who pays when a Catholic diocese files for bankruptcy?

A portion of the money to pay abuse claims comes from insurance companies that provided liability and defense coverage to dioceses and parishes. And bankruptcy cases provide a clue of how much insurers can contribute.

For instance, in 2007, the Diocese of San Diego agreed to pay $198 million to 144 survivors after filing for Chapter 11 bankruptcy. Insurers were responsible for paying $76 million of the diocese’s $198 million settlement, according to Bishop Accountability.

The Archdiocese of Milwaukee filed for Chapter 11 bankruptcy in January 2011. It wasn’t until 2015 that the diocese reached a settlement — nearly half of the $21 million paid to abuse victims came from insurers, according to reports.

Those payments only come after tough negotiations or lawsuits though.

Marie T. Reilly, a Penn State University law professor who has written about bankruptcies, said a diocese’s use of bankruptcy court has proved to be rather successful.

“The diocese right now has multiple claims with similar facts,” Reilly said in an interview on Thursday. “Separately, that would be insanely expensive to litigate, so it makes sense in terms of economy of scale to have all of those claims managed under the supervision of a bankruptcy judge.”

Where else does the church's money come from?

On paper, the Harrisburg Diocese appears to be in OK financial shape.

The most recent audit of the diocese shows the Harrisburg Diocese documented $181 million in total assets in 2018, with properties valued at $20.4 million.

“Financially, we had a very good year finishing in the black for the sixth consecutive year,” Mark Totaro wrote in the diocese’s annual report for the 2018-2019 year. Totaro is the CEO of Catholic Charities for the diocese. “This was achieved through hard work, meeting our metrics and monitoring our income and expenses.”

But how much of that money can be used to pay damages in child sex abuse cases, and whether that’s all the money the diocese has, are topics likely to be wrangled over in the coming years. In its bankruptcy filing, the diocese estimated that its worth was only $1 million to $10 million. That, Haverstick explained, does not include parish assets.

The diocese says, for instance, that the bulk of its investments came from donors who designated how the funds must be used, and legally, they’re bound to honor those designations, Haverstick said.

How will parishes be affected by the Harrisburg Diocese bankruptcy?

The activities of individual parishes should not be affected in the short term, Haverstick said.

Chapter 11 allows for the day-to-day operations of the diocese to continue, including payroll for employees.

“The ministries and operations of parishes and entities such as our Catholic Charities agencies should not be directly affected by the diocese's Chapter 11 proceeding,” he said.

Parishes are separate corporations under state law and thus should not be impacted.

“We can’t predict yet what the diocese is going to look like at the end of this process,” Haverstick said. “Because the way parishes can be subsidized by the diocese, or how a school can be subsidized by the diocese, or how money flows back and forth, we just don’t have the ability to predict right now how this is going to look at the end. I can only comfortably predict there will be change.”

Where does the money from the collection basket go?

Haverstick said that money parishioners put into offering plates or donated would not be used to pay settlements in sexual abuse claims.

“I think there’s a misperception among the uninformed public, as opposed to Catholics who are pretty active in their parishes, that all the money collected at the parish level flows up to the diocese and that all of that money ends up in some general diocesan bank account — and that’s not so,” Haverstick said. “The bulk of the money collected at the parish level stays at the parish level and under parish control.”

But the fate of those funds and the independent status of each parish may be subject to change in the course of the bankruptcy negotiation, he said.

“People should still give at their parish level and be confident that what they expect to be spent locally will be spent locally,” he said.

If you donate to Catholic charities, are you paying for abuse settlements?

Money donated to the annual Catholic Ministries Appeal also cannot be used to pay settlements in sexual abuse claims, Haverstick said.

The diocese reports that the bulk of its investments come from donors. However, since those donors typically designate how the funds must be used, they're legally bound to honor those designations, Haverstick said.

“If parishioners are giving in to restrictive funds or for restrictive purposes, for bankruptcy purposes it cannot again go into this general asset pool,” he said. “Because we do have funds of restrictive gifts, they’re for restrictive purposes.”

What about local Catholic schools in the Harrisburg diocese? What is my tuition used for?

“Each parish is a separate entity and should not be directly impacted,” said diocese spokesman Mike Barley. “Ultimately, the plan for the diocese moving forward will be determined as we go through this process.”

Most of the larger Catholic schools and secondary schools in the area are operated independently, by employees of the parishes, and are not under diocesan control.

“The school tuition that’s paid, the money that’s donated at the parish level, that doesn’t really go to pay for lawyers,” Haverstick said. “The money by and large stays where it's received.”

Are my churches or schools going to be closing?

The diocese has not announced any plans for church or school closures amid the bankruptcy filing.

“A reorganized diocese might need to subsidize a school, or maybe some parishes can’t exist without sufficient support from the diocese,” Haverstick explained. “Anytime you're reorganizing finances, changes are going to be made.”

The filing is intended to preserve the ability to carry out the church's ministries within the diocese, parishes and schools.

What's next?

The diocese anticipates that the accumulating weight of abuse payouts could consume their remaining assets and threaten their financial foundation.

The bankruptcy filing halts all action on the civil suits that have been filed against the diocese and shifts the claims to the bankruptcy proceeding, as well as any claims waiting in limbo with the compensation fund. The court will set a deadline by which any new claims over historic abuse must be filed.

We can now expect a lengthy period during which the diocese’s finances will be monitored and all assets cataloged, according to Richard Serbin, who practices law in Altoona and represents survivors of sexual abuse.




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