A Case Study: When Shortfalls Cloud the Big Picture
Three experts weigh in on a church's budget crisis.

The Scenario

Mike Newson* and the rest of the leadership of Trinity Church were at a crossroads. It was January—midway through the fiscal year—and Trinity's income projections weren't looking any better. It seemed like cuts were inevitable. But the timing of this conundrum was especially awkward.

It was only back in October when Don Farfrae had stepped in as Trinity's new senior pastor. The previous pastor had retired after a fruitful 18-year tenure. It was a seamless transition, with Don overlapping one month with his predecessor. The congregation was at peace—in fact, they were excited to welcome Don.

In November, Don launched a project to "refresh" Trinity's mission. The church's board would go through months' worth of exercises, discussions, meetings, and retreats to evaluate the direction of the church. Mike, who was the executive pastor, was excited for the church to clarify and affirm its mission. So he, along with the rest of the board, was prepared to be patient and do this right; the process was expected to last a year and a half.

By January, however, the financial situation looked grim. The downward income trend they had seen for some time wasn't improving. Out of the church's $10.1-million budget, it appeared as though cuts in excess of $1 million could be necessary. This would probably include laying off as many as 20 full-time employees, as well as some part-timers.

As Mike and the rest of the board faced these numbers, they saw a new problem come to the fore. Cutting more than $1 million from the budget—no matter which staff or programs were affected—would significantly reshape the structure and focus of the church. And yet the church was only two months into their 18-month-long mission re-alignment. If the church made decisive changes now, would it short-circuit their long-term strategic discernment? No one on the board wanted that.

*Names have been changed for this case study.

A few board members suggested telling the congregation about the financial need and asking them to give more. They're in denial, thought Mike. We've already been bringing this kind of need before the church. The congregation has already done all it can. Most of the other board members did believe that cuts were inevitable. And many of them felt like the cuts needed to happen right away, in spite of the mission re-alignment. After all, the longer the board waited, the more deeply Trinity would have to dip into its reserves.

But Mike saw it differently. "Look," he said, "we can take a bush and prune it back one and a half million dollars, symmetrically—that's what immediate cuts would be like. Or we can bring in an arborist and prune it wisely so that, even if it looks sparser at first, it will in the long run grow more healthily."

Mike's idea for wise pruning was to accelerate the mission re-alignment process so that the budget decisions could be integrated into it. Then the board could feel confident that these dramatic cuts would be more in line with the long-term direction of Trinity.

But, said the board members in favor of making cuts sooner, what good will our mission re-alignment be if we rush it? Why not make the cuts we have to make now, and then proceed deliberately with our mission re-alignment within the boundaries of our new reality?

Another challenge was the size of the board: 46 members. How could the leadership possibly accelerate a long-term, strategic process with such a large board? And the money was a ticking time bomb. Waiting even an extra few months could cost Trinity hundreds of thousands of dollars. For Mike and the rest of the church board, then, the decision wasn't just what to cut; the decision was how and when they should decide what to cut.

Problems

• The church must cut more than $1 million from its $10 million budget.

• The leadership is only a couple months into its 18-month mission re-alignment.

• A deliberate process drains the budget; a rapid process shakes up the re-alignment.

Expert Perspectives

Mark Buchanan, lead pastor of New Life Church in Duncan, British Columbia:

The board is in a race against the clock. What makes things worse is the board's own systemic barrier to progress—46 members! To resolve that issue alone requires more time than the board can afford.

Mike's counsel about an arborist rather than a lumberjack approach to budget cuts is brilliant, but it's a risky gamble: will his long-term approach resolve the short-term emergency? It's like planting an orchard to feed starving masses. It's a good idea, but doesn't solve the immediate problem.

I would suspend the "refreshing" exercise, buy two to three months on the budget decision through a combination of lay-offs, program cuts, and one clear and candid appeal to the congregation, and then trim the board by at least half before resuming the "refreshing." I would communicate all of this to the congregation and then, during the interim, appoint a team of staff and elders to hold a series of listening sessions with the congregation to solicit feedback and build trust.

Gary Fenton, senior pastor of Dawson Family of Faith in Birmingham, Alabama:

There are only two ways a church changes direction—either alter how the money is spent or alter who spends the money. Vision on paper is powerless, but vision is potent through personalities. This sounds like a great time to implement the new direction.

1. Review the new direction for the church. Usually vision and direction need tweaking within the first 18 months. This crisis provides that opportunity.

2. Make the big changes in the budget now and explain the changes in terms of direction rather economic downturn. Acknowledge that the economy did determine the timing, but the change was eventually going to be done.

3. If the direction-related cuts are not enough, then selectively make others that are downturn related; however, clearly indicate why the changes are being made.

John Koessler, professor and chair of the Pastoral Studies Department at Moody Bible Institute:

A great deal depends on how far along the church is in its mission re-alignment process. If Trinity's leaders already have a clear sense of what their new mission looks like and have kept the congregation in the loop, this budget crisis may actually be an opportunity. It provides motivation for change and could be God's way of confirming their direction. If, however, they are still in the early stages, integrating the one with the other will be detrimental.

Financial pressure will tempt the church's leaders to address the "how" question before they have adequately answered the "what" and the "why." If the church's large board plays a critical role in congregational buy-in and implementation of these changes, rushing the process will be especially damaging. In view of these factors, although the church's budgetary problems will inevitably provide a sense of urgency, the re-alignment and the budget decisions should be kept as separate as possible.

This article first appeared in "Budget Pinches," an electronic training resource from our sister site BuildingChurchLeaders.com.

This content is designed to provide accurate and authoritative information in regard to the subject matter covered. It is published with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. "From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations."

Due to the nature of the U.S. legal system, laws and regulations constantly change. The editors encourage readers to carefully search the site for all content related to the topic of interest and consult qualified local counsel to verify the status of specific statutes, laws, regulations, and precedential court holdings.

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