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Diocese of Newark The 131st Annual Convention will be held on January 28 & 29, 2005 |
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2004
ADOPTED BUDGET NARRATIVE |
| The budget committee of the Diocesan Council is pleased to present the proposed
2004 Diocesan Budget to the Diocesan Council and the Diocesan Convention. This marks the fifth consecutive year
that the budget has been provided to Convention Deputies at the earliest possible date. To do so means that the
Diocesan Council must adopt the budget at its December meeting. In order to do this in a responsible way diocesan
pledges must be submitted by the December 1st deadline. Unfortunately this continues to be a problem. While there
was a significant improvement compared to 2003, 70% compliance compared to 57% in 2003, the number of pledges that
are not submitted on time is simply unsatisfactory. The budget committee will make a final review of the 2004 budget
just prior to the Convention and, if necessary, will propose changes to the Convention. Income The Diocese of Newark continues to operate on the stewardship model of diocesan giving which is known as 50/50 giving. The basic premise of this approach is that each congregation has a goal of giving 25% of general purpose income to the diocese and another 25% to other outreach. The Diocese also has a goal of giving 25% to the National Church and 25% to other outreach. The total estimated dollar giving for 2004 reflects a slight improvement over 2003, for 2004 pledge income is projected to increase by $54,000 or just under 2%. Since only two churches have reduced the percentage pledge for 2004 this means that overall congregational income is projected to increase only slightly from 2003. Over the past few years a major structural problem has developed in the diocesan budget with regard to the prior year's surplus. Under Convention action which predates the 50/50 giving system, any operating surplus becomes an income line in the budget two years later. That is, the operating surplus from 2002 is an income line in the 2004 budget. When this system was put in place, the diocese operated under an assessment system where there was very little fluctuation in income. Since under the 50/50 giving system actual giving is based upon the actual income for the year there is the potential for significant swings in pledge income and operating surpluses. This is especially true of 2003 and 2004 where the prior year's surplus line has decreased from almost $126,000 to just over $17,000. These kinds of fluctuations are problems for sound financial planning and budgeting. As a result a two part process is being recommended to deal with this issue. The first part is to use retroactive total return investment income to gradually phase out the dependence on operating surpluses. The second step will be to look at alternative ways of handling operating surpluses with a recommendation to be made to the 2005 Diocesan Convention. Part of the goal of any such system is to insure that surplus funds are not just allowed to accumulate, but are used to support the mission and ministry of the diocese. The objective of this analysis will be to look at different ways of achieving this objective, but without the severe fluctuations of the past few years. The retroactive total return investment income is based upon the total return system that the diocese has used since 1995. Under this approach investment income equals the actual income earned on bond investments and 5% of the three year average market value of equity investments. Consistent use of the 5% figure allows for the use of some capital appreciation as income without using the original principal. Although the diocese has been using this approach since 1995, the endowment funds were invested in the equity portion of the Diocesan Investment Trust in 1981. This means that the total return approach has not been applied for the years 1981 through 1994. On that basis there is some $120,000 in total return income that has not been used. The recommendation is to use $80,000 of those funds in 2004 and the balance in 2005. This will gradually phase out the dependence on the unusually high 2001 surplus and allow for the development of a new means of handling operating surpluses. Disbursements Even with the use of the retroactive capital gains the overall budget will increase only slightly over 2003. This is similar to 2003 and the highest priorities were given to maintaining our commitments to outreach and to preserving existing mission and program. Some funding for new programs was available and funding for reserves will gradually be reintroduced in this budget. Outreach The proposed 2004 Budget maintains the Diocese of Newark's commitment to give 25% of pledge and investment income to the National Church. This is especially important at a time when other dioceses are reducing such giving based upon the actions of the 2003 General Convention. In addition to maintaining the 25% commitment to the National Church an increase in giving to other outreach is also proposed. Unlike past years, however, the proposed increase is ¼ of 1% compare to ½ of 1%. This is being done as part of balancing a difficult budget while at the same time maintaining our commitment to increase giving to other outreach. The outreach category also includes funding for international outreach which complies with the resolution on international giving passed by the Lambeth Conference in 1998 and the General Convention of 2000. Mission and Program Although total funding in this category is down from 2003, it appears that most of these ministries will be able to continue without too much difficulty. Part of the reduction is caused by a lower request from the Department of Missions which is part of a planned phase out of some congregational funding. The difference between the requested and proposed funding for the Commission on Ministry is due to some special needs funding that is being sought from other sources. The budget line that was known has Youth Ministry is now called Christian Formation. This line continues to receive funding from the Gertrude Butts Memorial Home Association and total funding for this area will provide a full time staff person as well as program funds. While it was very difficult to include any new funding in this budget, $7,000 is proposed for the Companion Diocese Committee so that this work can continue in 2004. The joint venture with the Lutheran Synod at Cross Roads Outdoor Ministries suffered significant financial problems in 2003. Although the plans for 2004 are not yet finalized, it appears that only a minimal summer camping program will take place. However, as equal partners in this joint venture the diocese is responsible for 50% of the costs of maintaining this facility. The proposed budget will pay about 1/3 of that cost with the balance coming from camp capital funds. Funding for the Ward J. Herbert Fund will increase over 2003 with a goal of reaching the requested figure in 2005. Staff It will be recalled that the 2003 budget froze staff salaries for the first time in many years. The 2004 budget includes a 4% salary increase which is considered to be essential for staff morale. However, at the same time cost sharing for medical insurance premiums will be introduced for the first time. This is the norm in both the for-profit and not-for-profit world and it is only reasonable for staff to pay a portion of these costs. The specifics of the cost sharing will be worked out to create a fair a system as possible. The budget includes a new line for an Assisting Bishop. This will be a part time position which will take the place of the support provided by Bishop Brome in 2003. Although it does not appear in the staff section, the position of Resource Center Director, line 12, will become full time on July 1, 2004. Another change in the staff area is in the Property Manager position, in the past this was a full time position divided between managing Episcopal House and working on church property especially with the Ward J. Herbert Fund Board. This budget includes funding for a half-time position that will take over the latter responsibilities. Senior staff at the diocese will be responsible for Episcopal House during 2004 and the situation will be evaluated as part of preparing the 2005 budget. Operating Expense, General Expense and Conventions and Other Meetings As in 2003 every effort was made to limit expenses in these categories while at the same time taking care of all necessary items. The Trustees of the Episcopal Fund helped with the 2003 budget by paying the full debt service on the Episcopal House mortgage, the budget resumes paying 25% of that cost in 2004. Group medical insurance expense is projected to decline primarily due to the full annual effect of less expensive coverage being provided through the Episcopal Church Medical Trust. Some reserve funding cut from the 2003 budget has also been restored. |
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2004
ADOPTED BUDGET |
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