Archdiocese Cites "Financial Turnaround"

By Michael Paulson
Boston Globe
April 30, 2009

[read the full finance report]

Richard Mawson installing stained glass windows in the chapel at the Archdiocese of Boston's new pastoral center in Braintree on 7/31/08.
Photo by Matthew J. Lee

BRAINTREE -- The Archdiocese of Boston is continuing its slow but steady progress digging out of a deep financial hole triggered by the clergy sexual abuse crisis, but is still facing an enormous challenge in the form of a pension fund for retired priests that will run out of money in two years without major change, church officials are announcing today.

The archdiocese, for the fourth year in a row offering the public a detailed look at the finances of the region's largest religious institution, today is releasing the annual financial reports for the central administration and, in aggregate, the 292 parishes, as well as for more than 60 other Catholic organizations, including schools, hospitals, cemeteries and social service agencies, overseen by Cardinal Sean P. O'Malley. For the first time, the archdiocese also is releasing individual financial reports for 102 parishes; a significant step toward fulfilling O'Malley's delayed goal of reporting every parish's finances publicly each year.

Archdiocesan officials said they were heartened that contributions to parishes rose 4 percent in fiscal 2008, and the archdiocesan annual fundraising campaign slightly surpassed its $15 million goal. And they said that indications are that contributions are holding steady this year, despite the recession.

"The continued generosity of the parishioners in the Archdiocese of Boston, despite very challenging times, is inspirational,'' said the Rev. Richard M. Erikson, the archdiocesan vicar general. And Erikson credited the archdiocese's financial officials with transforming "a diocese that was in economic freefall" to one that he described as now "in the midst of a major turnaround financially, and in many other ways.''

The archdiocese is hoping to balance its budget by fiscal 2010, which begins this July 1.The deficit in fiscal 2008 for its central administration was $4 million, which the archdiocese said was a decrease from about a $15 million annual deficit when O'Malley first arrived in Boston.

The reports are rich with detail about many aspects of the Catholic Church's complex financial situation, but perhaps the numbers that will most raise eyebrows among the public are the salaries the archdiocese is now paying the new employees O'Malley has brought in as he attempts to modernize and professionalize the church administration: the new superintendent of Catholic schools, Mary Grassa O'Neill, is being paid $325,000, and the new general counsel, F. Beirne Lovely Jr., is being paid $300,000. Two other top officials, chancellor James P. McDonough and development director Scot Landry, are being paid $250,000 each.

Erikson noted that the highest salary is for the church's top education official, which, he said, reflects the archdiocese's priority on strengthening its struggling schools. And, he said, the salaries generally reflect the cardinal's decision to recruit experienced laypeople to help transform an oft-criticized church administration.

"The salaries we have are an indication of the cardinal's commitment to attracting the most talented and gifted people we can find to serve in the church,'' he said.

The reports also reveal that the archdiocese's new headquarters, in Braintree, was valued at $25 million when it was given to the archdiocese, in a complex transaction, by one of the archdiocese's biggest donors, Thomas J. Flatley, who died shortly thereafter. The archdiocese spent $8 million renovating, furnishing, and equipping the building -- money that came from a portion of the proceeds from selling the church's former headquarters, in Brighton, to Boston College.

"We see the pastoral center as an investment in the future of the archdiocese," Erikson said, noting that the building, which houses 225 employees formerly spread across six different structures, is already being heavily used by a variety of groups for training sessions and other kinds of church meetings. He also said the building's chapel is proving a draw, saying that about 100 people attended daily Mass there during Lent.

The report is largely backward looking, reflecting on the fiscal year that ended in June 2008. But it also includes several predictive comments that shed light on how the archdiocese is being affected by the economy, and what its concerns are going forward. Among the projections is a grim forecast for the troubled Catholic schools of the region: the archdiocese expects enrollment at its parish elementary schools to drop by 4 percent next year, and at the few remaining parish high schools to drop by 9 percent.

The archdiocese, which recently assigned a single priest to oversee three parishes in Dorchester in what it said could be a model for how to handle the dwindling number of priests, suggests in the report that some parishes should now begin to share employees such as business managers.

"It is critical that parishes begin collaborating and sharing staff and costs whenever possible,'' McDonough wrote in the report. "Going forward, parishes will need to plan for increased payrolls, as more lay staff will be needed for operational responsibilities previously handled by clergy or religious.''

The economy really began to tank after the fiscal year covered by the report, but the archdiocese says in supporting documents that it has been affected in several ways by the recession and the stock market collapse. O'Malley, in a letter that accompanies the report, says the archdiocese is seeing "an unprecedented number of requests for services for the poor and those who find themselves in a never expected circumstance of need.'' And the report indicates that a pooled investment fund for many Massachusetts Catholic institutions, including the archdiocese, lost 18 percent of its value between July of 2008 and March of 2009.

The church investment fund appears to have significantly outperformed the broader market -- it lost 6.4 percent in fiscal 2008, a period when the Standard & Poor's 500 index dropped 13 percent, and it lost 15.8 percent in the first half of fiscal 2009, when the S&P dropped 29 percent. McDonough attributed the church's success to a combination of fortune and skill -- the church's fund had minimal investments in financial services and limited exposure to the sub-prime mortgage market, and also had a relatively high amount of cash, rather than stock, when the steepest market declines began..

As has been the case for several years, the archdiocese says its biggest financial problem is the weak health of the funds it sets aside to care for disabled and retired priests; the funds are short $114 million. The church's historic handling of those funds, which were largely built based on contributions made by churchgoing Catholics at Easter and Christmas, has been angrily questioned by both priests and laypeople, some of whom suspect that the money was mishandled, and others of whom question to what degree the funds were used to quietly support priests accused of sexual abuse over the years. McDonough has commissioned an investigation of how the funds were handled over their 27-year-history, and has pledged to release it in June or July; he said this week that thus far there is no indication of any criminal misconduct.

McDonough said that, in order to shore up the funds, the archdiocese will need to increase revenues and reduce expenses. He said the archdiocese will take several steps to raise money for the funds -- the party-shy cardinal has agreed to headline a gala benefit this year, pegged to the 25th anniversary of his becoming a bishop, that will raise money for the fund, the archdiocese will add a third annual collection, each June, to supplement the Easter and Christmas collections, and the archdiocese will launch a major gifts campaign to benefit retired priests. The archdiocese, chastened by the furious reaction from priests and the public to an earlier proposal to cut clergy retirement benefits, has also held multiple meetings with priests to discuss proposed changes to benefits and housing; church official say they plan to roll out those changes over time, but pledge that retired priests will be well cared for.


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