An interesting phenomenon developed during the Great Recession of 2008. Faced with sudden revenue decreases of 30 percent or more, some churches were forced to quickly make dramatic expense reductions. These churches reduced or eliminated multiple programs, ministries, and staff positions to avoid catastrophic cash flow deficits. In some cases, when the churches informed their congregations of the massive expense reductions, members remarked that the expense cuts had "no noticeable impact." Such perceptions on the part of congregations raised some interesting questions such as: How was a church able to reduce its operating expenses by 30 percent with no noticeable effects on the key elements of the church's activities? Was the church previously wasting that money? Why can't the church ordinarily operate with a lower level of expenses?
Church leaders should contemplate the answers to such questions as part of their overall evaluation of the effectiveness of the church's spending. They should also evaluate whether a particular program, activity, or initiative contributes to the church's mission and purpose before committing funds to it.
Mission and purpose
Clearly identify your church's specific mission and purpose. Next, critically evaluate each program, activity, and initiative through the filter of your mission and purpose. Doing so can ferret out waste or marginally beneficial expenses. Coupled with a zero-based budgeting approach (see chapter 1 in Church Finance), such an exercise can help identify areas that are prime candidates for expense reductions. It can also assist church leaders in reallocating expense priorities toward activities that more effectively accomplish the church's mission and purpose.
Obvious places to look
Churches looking to reduce expenses will typically look first at these rather obvious areas for cost savings:
- Reducing or eliminating specific programs, activities, and initiatives
- Reducing staff work hours and compensation
- Reducing employer-paid staff benefits
- Renegotiating costs with vendors
- Renegotiating debt terms
- Deferring maintenance on property and equipment
- Eliminating staff positions
Think carefully before eliminating staff
Church leaders who consider terminating employees for expense reduction purposes should remember churches are exempt from both the federal and state unemployment compensation tax and benefit systems. Accordingly, terminated employees will not be eligible for unemployment benefits. Church leaders may wish to consider offering a severance package to terminated employees. Of course, the cost of any severance benefits must be considered when evaluating savings associated with terminations.