IT’S TIME FOR AN ACCOUNTING
Since I was designated as delegate to the 2007 WELS Convention in New Ulm, MN, I decided to do some research. The Book of Reports and Memorials (2007 BORAM) which is prepared for the delegates, is typically a report on the previous two years and also plans for the next biennium. I hope the delegates read and study it carefully and rejoice in the things that are being accomplished. For some issues, however, a longer point of view would seem to be significant. Such a long range view is what I wanted to research.
As I heard of the budget problems, which might lead to a drastic change for the Board for Ministerial Education (for example, the closing of the Prep Schools), it seemed prudent to dig deeper to determine why, during a very prosperous time in U.S. history, such a drastic step would have to be considered. How did we get to this point.
The materials I have gathered are from the printed reports made by the Synodical leaders to the constituents of the Synod. My investigation is “broad stroke” and does not pretend to be a CPA’s report, accounting for every penny and knowing exactly when it was spent. Further, I believe that I have understated many things, so that, if one item or another is challenged, I am convinced I could find other specific items that concern me. In this way, if anything, I think my concerns are understated.
My research is presented in the following outline:
I. COVER LETTER (Page 1)
II. DEFINITIONS (Page 2)
III. OVERVIEW (Page 3)
IV. COMMENTARY (Page 4ff.)
V. PROPOSALS FOR ACTION (Page 12ff.)
IV. APPENDICES: A through I (Pages 16-28)
A—Timeline; B—Gift Trust Fund; C—Revolving Funds; D—World Missionaries; E—A 2003 Letter; F—WELS Constitution, Object & MOV; G—Statistics; H—A Parable; I—SC Executive Summary Nov. 3-4,2006 and News Release.
As I put this on the internet and wonder whether other people have similar concerns, I will allow people to pass it on. My email address is in the Synod’s directory.
I am also aware that the Synodical Council has a meeting at the end of February. The 2007 Book of Reports and Memorials will be published some time after that. I really don’t think that anything significant enough to change the general premises of this presentation can be made in those events. However, I reserve the privilege of making an addendum to this presentation, if it should be indicated.
Though I have very, very serious concerns, I have tried to view the people involved according to the English political term: “loyal opposition,” i.e., loyal to the cause of Christ but making decisions which evoke my opposition. As I stated above, there are a lot of things going on that are really very commendable.
Paul W. Kuske, pastor
Standish, MI 48658
I. Non-recurring Income – The Synod receives estates, one-time large gifts, special gifts, and other non-budgetary income. Because such income is not received from the same source year after year, it is prudent to classify such funds as non-recurring income. Further, there can be a considerable fluctuation in the amounts received in a year, since, for example, some estates are large and others far more limited. A prudent way of dealing with non-recurring income is in the next paragraph.
II. WELS Gift Fund (a.k.a. Gift Trust Fund) – A fund designated to receive non-recurring income. It is designed to turn non-recurring funds into a stream of predictable income. The formula that has been used is: Calculate the total of the previous balance plus investment income plus new gifts during the year; then release 30% of that total to the budgetary fund. Since the funds released are always proportionate to the total, this smooths out the fluctuations and also provides a 7-8 year lead time for adjustment, if non-recurring income starts to decrease.
III. Revolving Funds (a.k.a Restricted Funds, Auxiliary Funds, Gifts Funds) – Various units (schools, missions, etc.) of the Synod also receive non-recurring gifts. These are tracked in the umbrella unit called Revolving Funds. The individual unit of the Synod has some control over the use of the funds.
IV. SC (the Synodical Council) is the group within the organizational structure of the WELS which is charged with financial matters. Included in the decision-making process are the Praesidium of the Synod and an advisory subcommittee, known as the MOT. In this study this combination of people is designated as SC.
V. BME (the Board for Ministerial Education) is the group within the organizational structure of the WELS which administers the schools that prepare young people for the public ministry. Most of its work focuses on two prep schools, one college and one seminary.
VI. Infrastructure is any facility or service which is essential to another facility or service. In buildings, for example, infrastructure includes the electrical, sewer, and water lines. In this presentation it is the opinion of the author that recruiting and preparing well-trained pastors and teachers is infrastructure for every congregation and mission in the Synod. For more detail see page 13.
VII. Prep Schools are schools with the primary purpose and the curriculum through which high school students are recruited and prepared for further study toward the public ministry of the WELS,
VIII. CMO (SMO) (Congregational Mission Offerings, formerly Synod Mission Offerings) is used to refer to the offerings that congregations provide for the WELS Operating Budget. These offerings are combined with other streams of income (for example, Individual Mission Offerings and interest income) to provide the funds to operate the individual units of the Synod.
IX. Operating Budget is the part of the financial structure of the Synod which receives CMO, interest, and other streams of income and parcels it out to the various units of the Synod.
X. “Prudent man” principle — The business world has a principle that is called: “The Prudent Man Principle.” A business leader can defend a decision, if he can demonstrate that he has acted as any prudent man would have acted in similar circumstances. Note the following guidelines:
1 Don’t use non-recurring income (e.g. probated estates) to start programs which involve on-going costs.
2 Plan on the basis of income, not “IF-”come.
3 Using non-recurring income to balance an operating budget is not sound practice.
4 Don’t plan expansions when your income base is shrinking (whether in percentage and/or due to inflation).
5 Keep prudent, adequate reserves.
6 Don’t commingle designated funds with operating funds.
7 Sound expansion is built on a healthy infrastructure.
8 When expansion is pitted against infrastructure, the infrastructure must be considered paramount.
IT IS TIME FOR AN ACCOUNTING!
By Paul W. Kuske 12/15/06
· Since 1996 at least $60,000.000.00 of non-recurring funding has been spent, i.e., $60 million more than actual income has been spent. To spend more than income is imprudent. (More details in Appendix A- TIMELINE, which is based on supporting data in Appendices B through E. My comments on page 4ff.).
1. From 1996 to 2003 over $30 million of non-recurring funds were spent
2. Off-budget, almost $1.7 million in non-recurring funds was assigned to missions in Russia and Bulgaria. Off-budget means that it does not appear on the reports of the Operating Fund (See Appendix A).
3. The $22 million in the WELS Gift Fund (a.k.a. Gift Trust Fund) had been considered a “rainy day fund.” It was spent down to nothing by 2002. (See Appendix A for details)
4. In May of 2003 it was reported that $8.1 million (Later reports said $7 million) had been borrowed against trust funds and that there was a $1.5 million shortfall in the current fiscal year. The money borrowed against trust funds was scheduled for repayment, but repayments have been delayed.
5. One example of starting on-going programs with non-recurring funds is the addition of 19 world missionaries during this period. (See Appendices A and D.)
· By 2002 the consequences of the imprudence of using non-recurring dollars to fund on-going programs was very evident. A prescription for the serious problems that follow: More commitments, less income!
1. The “rainy day” fund was no longer available, when the cyclical economic downturn in late 2000 (exacerbated by 9/11) had adversely affected the WELS and the country. Further, after 2002 the Schwann Fund was not contributing the sizable gifts it had been sending to WELS. Restarted several years later.
2. The non-recurring funds that had accumulated over the year had been gaining interest that was used to support the budget. For each $20 million removed from the non-recurring funds $1,000,000 (or more) income in some form needed to be obtained. But the reality was that CMO offerings weren’t even keeping up with inflation. (See Appendix G.)
· The consequences of the imprudent use of non-recurring income resulted in budget cuts on the order of 25% to 30% starting in 2003. Use of non-recurring funds, both directly and indirectly, continued to the present and another $30,000,000 was disbursed, producing a total expenditure beyond income of $60,000,000. (See above)
1. More work of the Synod was moved off-budget (e.g. evangelism and youth ministry, which are now funded by the Revolving Funds) so that the non-recurring income and its income were reduced even more.
2. The world missionary corps was reduced by 17, but there were still more world missionaries in 2003 than in 1995. (Appendix D)
· The Board for Ministerial Education (BME) bore a disproportionately large proportion of the cutbacks.
1. The budget cutting for the BME was approximately doubled in percentage because the money that parents/students paid for tuition/fees was commingled with CMO. Details and illustrations are on Page 7.
2. The funds that had been given directly to the schools and were therefore in the Revolving Funds, were used to balance the budget over the last couple of years. (See Appendix C.)
3. After $20,000,000+ of these non-recurring funds was spent, it has been suggested that the schools should solicit a $300,000,000.00 trust fund to keep themselves going.
· In its November meeting the SC was planning to spending $5.8 million more of non-recurring funds. Of that amount only $2.6 million will be used to fund the prep school for one more year. Prior to that, the recommendation was made to defund the prep schools almost immediately, even though they serve a very significant function of recruiting and training (especially) future pastors, teachers, and lay ministers. (See Appendix I.)
· After serious consideration was given to defunding the prep schools, the SC and the President of the Synod decided to explore alternate methods of recruiting workers. (See Appendix I.)
· Other topics included (Page 9ff.): Communication, Priorities, Area Lutheran High School (ALHS) vs. Prep School, Fragmentation, Reorganization, What Lies Ahead?
SUPPORTING DATA and COMMENTARY
Scope of work
Christ defined the whole world as the field of labor for his believers. However, by the resources that he provides Christ also defines the extent to which any particular Christian group can do world-wide missions.
A corollary: Because of the sinfulness of all the members of the WELS, we will probably never reach the potential that would properly reflect our Lord’s generosity to us.
Did our Synod really do so badly between 1950 and 1990?
A) The home mission program spread over the entire United States (from a primarily upper Midwest base); Communicant membership grew just less that 50% during that period.
B) In 1950 the Apache mission was our only effort at reaching people in a different culture. By 1990 we had 50 pastor trained (and 17 teacher trained) workers in World Mission efforts. Is a 1000% increase in mission workers such an inadequate effort? While our membership increased 50%?
Prudent man” principle
In financial circles people speak of a “prudent man principle.” In legalese it states: A financial officer can defend himself against the charge of an actionable criminal offense (i.e. breaking fiduciary trust) by demonstrating he has acted as any prudent man would have acted in similar circumstances. I laid out some the implications of this principle in the definitions, however, I was thinking more in terms of using the words ‘prudent’ and ‘imprudent’ as it is used in common language.
Application of the “prudent man” principle to budget preparation.
The SC is constitutionally bound to do its work in view of the purpose expressed in the Synod’s constitution (summarized as, prepare workers, missions, publishing and counseling) and the resolutions of the Synod conventions. The Synod’s priorities are the priorities of the SC.
One function of the SC is to present a “balanced budget” to the Synod in convention. By definition a balanced budget is one in which income matches (or exceeds) the planned expenditures. When 1) IFcome 2)reserves, 3) non-recurring monies and 4) borrowings against designated funds are included in projected income, it is not truly a balanced budget.
Just as contrary to the prudent man rule is starting on-going programs “off budget” or balancing the budget by placing on-going programs “off budget” (e.g. evangelism, youth ministry).
When priorities must be applied it is important to maintain infrastructure over expansion. Expansion makes good news copy, but infrastructure must be adequate to support the expansion.
ILLUSTRATION: When a congregation is approaching a building program, a continuum can be imagined between the financial people and the visionary people. The financial people will advocate having all the money FIRST (“Show me the cash!”). The visionary people will point out that the goal of a larger membership will take care of all problems. (“Let’s make the investment; The Lord will provide, if we only trust.”)
All the members can probably be aligned at some point along the continuum. In most situations the building program will be undertaken when the people in the middle are convinced that both the financial and the visionary aspects are adequately addressed.
If, however, a disproportionate number of people are financial people, the program may not happen, because it seems the needed money never quite catches up with the proposed needs. On the other hand, if a disproportionate number of people are visionary people, the program will go forward but the congregation will overspend and a long period of serious difficulties in debt management follows.
It can also be noted that when either end of the continuum dominates a very real arrogance develops: “We know what is best for the group. Don’t disturb us with contradictory facts.”
Observations About WELS History:
A pendulum swing between financial conservatives (We need the cash first) and visionary spenders (Go for it; the Lord will provide; THE work of Synod is World Missions) is evident in WELS history
· Phase 1: In the euphoria of the 1920’s visionary excess was evident in the Synod. My father’s peers talked of the fragmented support of missions that were started on a shoe-string. Examples of “build and the Lord will bless” occurred. Of course, the Synod itself had also borrowed in the period before the Great Depression.
· Phase 2: The synod, to preserve its reputation, rolled its debt and the fragmented commitments into “the debt,” which in modern dollars approached $100 million. The iron hand of the financial people maintained the educational infrastructure even as there were payless paydays and unassigned seminary graduates. After the debt was cleared in the late 40’s the principle that “We need the cash first!” prevailed into the 60’s.
· Phase 3: The pendulum was moving through the center from late 60’s to the 80’s as ”Every state by ‘78” was an unofficial rallying cry. There was a balance between the visionary people and the financial people. Many missions were started and the world mission program that was started in the ‘50’s was expanding. The sub-structure of fiscal soundness made the expansion possible and synodical membership also grew.
· Phase 4: In the ‘90’s & 00’s the pendulum has swung to the visionary people. As has now become public knowledge, we are currently in a position where vital programs of the Synod are at risk, even as there are very few funds left that can be classified as reserves. The general tenor of this presentation will be to show why it is prudent to move the pendulum back to a central positioning and to suggest some steps that can start to bring that goal to reality.
· OVERVIEW: Since 1996 at least $60,000.000.00 of non-recurring funding has been spent, i.e., $60 million more than current income has been spent. To spend more than income is imprudent. (More details in Appendix A- TIMELINE, which is based on supporting data in Appendices B through E.)
As I have researched The BORAMs, RTTTDs and PROCEEDINGS back into the ‘80’s, it is quite evident that in the mid-90’s a switch to using the non-recurring funds to start and maintain on-going programs was initiated. For example, the missions to Russia and Bulgaria were originally funded in 1996 through an assignment of funds within the Revolving Funds (apparently $1 million apiece). This approach was eating away at the financial foundation of Synod, even as some things were being accomplished elsewhere. Therefore the basic thrust of this presentation will be that there has been imprudent management. The continued imprudent use of non-recurring funds is documented in Appendix A, which is supported by documentation in Appendices B through E. One really has to ask: Didn’t the SC realize that, as every time $10 million of non-recurring income was spent, it meant that CMO had to be increased by about $500,000/year, just to stay even? And CMO was not even keeping up with inflation! (See Appendix G)
The Background: Congregational Mission Offerings (CMO) Falling Behind Inflation
It is a fact that between 1975 and 2005 (as reported by congregations) CMO as a percentage of the total contributions fell from 14.74% to a low 6.72% in 2001 and has rebounded only to 7.33% in 2005. (See Appendix G) During the same time total congregational contributions for local purposes increased by an average of 6.55% per year which was clearly above average inflation. The average CMO increase for the 30 years was 4.00% and would have been about 3.00% without the Work While It Is Day stewardship effort in 2003.
Note especially that during the ‘90’s the increase in CMO contributions averaged only 1.17% per year. (See Appendix G.) I suggest that this fact could be interpreted as a vote of “no confidence for the SC” rather than that pastors and members were losing sight of the great commission and the Synod’s part in carrying out that commission.
The “Gift Trust Fund”
See Appendix B for the policies under which the “Gift Trust Fund” was established. Note especially the prudence involved in converting non-recurring income into an income stream for the Synod’s program by a controlled payout. Besides, the fund served as a reserve for any economic downturns and other unexpected events that might adversely affect the economy or the income of the Synod.
The SC apparently ignored the good counsel that it did receive. (See Appendix E.) Note that three people who were financial advisors (at the time when the spend down was in progress) showed the seriousness of their objections by resigning, rather than participating in such an imprudent action.
Anyone who has worked with CPAs must assume that the management letters each year pointed out the imprudence of spending down the non-recurring income for on-going programs. So there is reason to assume that the elected officials had good advice also from the CPAs, but didn’t follow it. This also makes it sound a bit hollow when in 2005 there is an eager desire to hire a good financial manager.
Another part of the imprudence in spending down the gift trust fund involves the fact that during this time period (’96 – ’01) the corps of world missionaries was increased by 19 men (See Appendix D). When it became obvious that the non-recurring funds could only sustain the budget inflated with non-recurring funds for a year or two, there was a cutback in world missionaries, but not quite to the level of the early ‘90’s. So while other divisions of the Synod had budget cuts to levels CONSIDERABLY BELOW pre-1996 levels, World Mission was not even cut TO 1996. (See Appendix F.)
This is not (repeat: NOT) a diatribe against World Missions—it is a statement of reality about the imprudence of starting long term programs with non-recurring funds. The World Mission program will truly be healthy when a sound infrastructure supports it.
Another bit of history: When the WELS first ventured into world missions in the 1950’s careful efforts were undertaken to get the entire Synod behind the move. When the program was adopted by the Synod, the membership rose to the occasion and at the time sent almost 20% of their total contributions to the Synod (Compare that with the current 7.33% in 2005. See Appendix G). Therefore the expanded program was possible. Similar efforts were made in the ‘60‘s and 70’s as people rallied round the idea of getting out the Word after the suspension of fellowship issues had been addressed in 1961.
As stated previously, God has made the world our field for missions. God has also supplied us with specific, finite resources, so that we are only able to reach specific, limited areas of our world. World Missions has a vital role in supporting the infrastructure. Instead of saying, we have started a mission and now we expect our members to support it, World Missions has to be in the forefront of appealing to members about the need of those in areas of the world where no gospel is being preached and in building the infrastructure. In other words, World Missions is a vital part of raising the whole budget, including the infrastructure that supports the whole Synod. That is difficult, patience-testing activity. It doesn’t have a lot of pizzazz, but it builds soundly as it appeals to the members for the CMO which is a vital engine in the Synod’s work.
The Board For Ministerial Education (BME)
A Bit of History
Historically, the principle under which the WELS operated its ministerial schools for many years might be expressed in the following words: When parents are willing to offer their children (a God-given gift that is far more precious than money) to the church, the members of the Synod will only require the parents to provide the food, shelter, and other personal needs. The WELS was willing to supply most of the facility and the staff. Though there were adaptations along the way and there is clearly legitimate debate about what belongs in each category, the system has served the Synod well. Another aspect of the proportion paid by parents/students is the relative ability of the students to earn money as they grow older.
The function of the BME in providing well-qualified church workers for all churches has been considered vital—so vital that during the Great Depression the schools were maintained even when there were payless paydays and when one spring only one seminary graduate was assigned a call. Going back even further, having a qualified ministerium led all three constituent Synods (Minnesota, Wisconsin and Michigan synods) of the WELS to start there own seminaries. In other words worker training was considered as infrastructure or foundation. Infrastructure is not glamorous, but it is vital. (A person who wants to expand his house better be sure the water/sewer service, the electrical service and the gas service are adequate. A business man must provide adequate instruction to all personnel so that they can do their jobs efficiently and well.)
That emphasis was also evident in the Synodical budgets from 1962 to 1987. Over those 25 years between 35% and 40% of the budget was assigned to the BME. During that time the Home Mission program completed the spread throughout the U.S. The World Mission program was growing at a measured pace. Howeever, in 1988 World Mission and Other made considerable jumps and have been increasing ever since. The expansion of Wrold Mission and Other has been accomplished at the expense of the infrastructure.
Spenders are often very impatient with infrastructure, as has been evident in the timeframe being discussed here. (Financial conservatives can also distort, of course. For example, I have heard of a business that had nine CPA’s crunching numbers and only one salesman. The company failed under the burden of excessive infrastructure. I have also heard of businesses that ignored the number crunching and soon had the IRS on their back.)
When the training begins in 9th grade, I think it is pretty terrific that 40-50% of the graduates continue toward full-time ministry. For those who do not continue, we can note that in spite of appropriate recruitment efforts the Lord has not chosen to lead them in that direction. It is true that the education of the ones who do not continue may have been a bargain, but most of them more than make up for those dollar costs in the service that they bring through personal service and through their influence in the church at large.
The BME Has Borne a Disproportionately Large Burden of the Cutbacks
· OVERVIEW: The Board for Ministerial Education (BME) bore a disproportionately large proportion of the cutbacks.
1. The budget cutting for the BME was approximately doubled in percentage because the money that parents/students paid for tuition/fees was commingled with CMO
2. The funds that had been given directly to the schools and were therefore in the Revolving Funds, were used to balance the budget over the last couple of years. After $20,000,000+ of these non-recurring funds was spent, it has been suggested that the schools should solicit a $300,000,000 trust fund to keep themselves going. (Did you notice the words: “Keep themselves going.”)
The money parents/students provide for education is really ‘designated money.’ They have the right to expect that 100% of it will be used for their schooling. Over clearly expressed objections, the budgeting process was distorted when the money that parents/students provided in the various charges at the schools was equated with the CMO, and other income categories. By commingling such designated money with budgetary funds the SC was highly imprudent. To equate those funds with CMO funds is to take those funds and subject them to the same percentages as other budgetary funds. The net result was that when the budget crunch first hit, the schools were cut back at a much faster rate than the other divisions of the Synod. Especially in a budget cut, the money that people thought they were paying for education was being diverted to pay for other divisions of the WELS. As far as the BME was concerned, its budget was being cut at a rate twice as high as other divisions.
An illustration of the consequences of the commingling of funds from the Consolidated Statement of Financial Position for June 20, 2001 (2002 RTTTD p. 105): (The figures show what would have happened in 2001.)
COMMINGLED NET COST TO BUDGET
Expenditures, BME $30,581,481 Expenditure, BME $30,581,481
Subtract tuition and fees ($13,507,707)
Subtract Activity fees1 ($2,000,000)
Net cost $30,581,481 Net cost $15,073,774
x 25% x 25%
Budget cut at 25% 2$7,645,370 Budget cut at 25% 23,768,443
1 Since I know of nothing outside of the BME that has “activity fees,” I have assigned $2 million here of the $14+ million reported for “Activity Fees And Retail Sales.”
2 In this illustration the difference between $7.6 million and $3.7 million is the distortion that would have occurred because of imprudently commingling tuition with CMO.
As shown in the chart, when the budget cuts were applied, a highly disproportionate reduction in the support provided to the Synodical schools occurred. Some of the budget shortfall was covered by increasing tuition and fees. As a result parents were expected, not only to offer their children for strong encouragement toward full-time ministry, but also to increase payments to the schools sharply. Many apparently could not afford the increases. Enrollments have dropped. The dropping enrollment adversely impacted the funding of the school even further. Since the decreased enrollment was caused ultimately by the imprudent use of non-recurring funds, as explained above, it is disingenuous to now fault the schools for the drop and therefore withdraw even more support.
The revolving funds, especially of WLS and MLC, were used to support the budget
After the predicted drop in enrollment became reality, the SC turned to another direction. The schools of the BME (especially WLS and MLC) had over the years received donations that weren’t specifically designated. These non-recurring funds were next used to shore up the Synod’s budget. The amounts that were taken from these non-recurring funds crept up from about $4 million to $13 million. Details are in Appendix C. The term to accomplish this transfer of funds is “reclassification.” The mechanism that makes it difficult to follow this reclassification (which was done openly in the 2003 report) is that the amount from income used for BME is reported in the Operating Budget. That amount plus the amounted used from non-recurring funds is reported as the total expenditure for BME in the report of Consolidated Statement of Financial Position. (See Appendix C.)
One solution that has been put forward to the BME is that, even though the Synod has not even been able to raise the $5-$10 million per year that would truly balance the budget, the schools should go out and get $300 million as a trust fund to support the schools. HOW STRANGE! And they are to do this when more that $20 million of the schools’ gifts funds have already been used to balance the Synod’s budget.
In November after approving a recommendation to defund the prep schools within two years, the SC has directed the Synod’s president to explore alternate methods of recruiting full-time workers.(See the WELS website, Synodical Council, Executive Summary for November 3-4, 2006). HOW STRANGE! Shut down the system that has served us well and ONLY THEN explore alternatives. Stop the funding of the agency that recruits 56% of our pastors BEFORE research is done on how an adequate number of pastors and teachers will be recruited. Another strange thing is that the issue is described as “the schools are $2-$4 million short” in the SC executive summary, NOT that the Synod is $2-$4 million short.
Every Congregation in the Synod Has a Stake in the Decisions About the Worker Training Schools
The BME monitors an education system that has over the years provided our congregation with well-trained workers. Committed to and knowledgeable about the Bible, language skills in the Biblical languages as well as the languages of church history, language skills to communicate the Gospel—These are elements of the overarching training that cover the history, science, world history, computer skills and other assorted courses. How thankful we should be for the pastors, teachers and lay ministers. To be sure, there is an occasional misfit in the ministry.
Aside from the financial issues, a vital feature of the system involves the efforts at recruitment. In the volatile adolescent years, as each day may bring a new choice of vocation, it is really helpful to keep the Lord’s view of full-time service to the church before the students. In this way the prep school provide 56% of our pastoral candidates and 33% of our teacher candidates. Much more data in support of this point of view is in the 2005 PROCEEDINGS in the PSSC-2 report.
The SC, instead of owning up to the negative ramifications caused by a) using non-recurring income to start on-going programs, and b) spending down all of the reserves, and c) using uneven reduction in the budget for the various divisions of the Synod, has made decisions that have impacted the BME especially hard—the recommendation is that a very significant element of the BME is to be defunded!
Some projections compel us to ask the question: “Can MLC, our Synod’s college, be far behind?”
Can we ignore the schools in the U.S. that had to find their own funding and ended up as wholly secular schools (e.g. Harvard)? Can we ignore the experience that a Baptist church that defunded its college is going through, as it is trying to get the college again to present acceptable doctrine?
Obviously the means of communication can be improved, especially using advances in technology.
But another aspect of communication is involved. I have observed over several years, as I traveled around the Synod for LACE, that there has been a growing split between “us” and “them.” When people say: “What did they do in Milwaukee now?” they are not asking for information; they are expressing concern about some aspect of the direction of the Synod. In other words, people are receiving communication quite well, but they don’t agree with what they are hearing.
I suggest that the same conclusion could logically be drawn, when during the ‘90’s total contributions in congregations increased by an average of 6.6%. However, the increase in CMO contributions has only averaged 1.17% during the ‘90’s. I suggest that this was a vote of “no confidence” for the direction the SC was leading, rather than that pastors and members are losing sight of the great commission. (See Appendix G.)
When people began to realize some of the serious problems of the Synod, there was a notable increase in 2003; but note that the following year a sizable portion of the gain was lost. Whatever communication occurred in 2003 didn’t have a lot of “sticking power.” Why?
The priorities of the Synod ARE the priorities of the SC. This is the normal relationship between any sub-unit and its legislative group. (See Appendix F.)
Yet the SC set its own priorities as it spent non-recurring funds to start on-going programs in world mission without making full disclosure to the Synod. (Non-recurring funds were assigned to other divisions of the Synod also. The central issue is the imprudent use of non-recurring funds.)
The SC set its own priorities through the mechanism of commingling tuition and fees with CMO, because this protected the mission program from the consequences of the spend down in non-recurring funds.
The 2005 convention has several very explicit resolutions that legislate that funding for the prep schools should be continued, protected and increased. Yet the SC has indicated its willingness to let the prep schools be defunded in the next two years, rather than spread the shortfalls over the entire program of the Synod. Another aspect of this is in the wording that the BME is short $2-$4 million. The priorities set by the 2005 convention clearly imply that it is the Synod that is $2-$4 million short.
It would seem that it is time for the Synod to reassert its prerogative of setting priorities.
Area Lutheran High School (ALHS) vs. Prep School
About 1965 I first heard the claim that ALHS could supply the full-time workers. What Pres. Carl Lawrenz (WLS) said then still holds true: “The ALHS’s have good intentions, but the intentions have not become reality.” In the years that followed, a number of the language requirements were relaxed, as an accommodation to the high schools. An ALHS student no longer has to put in extra hours (or a year) to complete the course at MLC. Yet the recruitment, which has grown from 2/3 students to 14 over the years, is not sufficient for replacing workers in Synod, much less expansion.
The purpose of the high school and purpose of the prep school is distinct and different. A high school is supported by an association of congregations in a local region for the purpose of providing spiritual guidance throughout the high school years as the students prepare themselves for the full range of occupational possibilities. A prep school has as its central focus the preparation of future church workers in our Synod by providing a pre-college course with special emphasis on knowledge and skills that will serve in the ministry.
The parents of the high schooler can continue to encourage their children to prepare for the vocation with the best income available for his talents. The parent of the prep schooler implicitly agrees to having his child encouraged toward the ministry in many ways. Obviously many of these parents would be delighted if their child continues on to the public ministry. In a few cases students may feel that they have been pressured to enter the public ministry.
Currently 56% of the freshman pastor track students at MLC come from the Prep Schools (28 out of 50). Area High Schools produce 28% (14 out of 50). For the teacher track at MLC Area High school produce 33.3%; Prep School produce 33.3%; and other sources produce 33.3%.
Food for thought: Each year as 45 pastors at ALHS carry out their call, 14 students are enlisted to replace them. Each year at prep schools 24 pastors are involved in recruiting 28 students.
The prep schools are in a specific locality and the local people do use them as high schools. This is really a mutual back-scratching, as I see it. The money paid for tuition really helps to reduce the cost to the Synod in a large measure (e.g. 1/25 of a classroom). More important, some of those students are recruited for the ministry, so the Synod gains. As an example, St. Paul’s in Saginaw has over the years offered over 100 students to the church for public ministry. (I have no idea how this compares with Watertown or New Ulm.) Obviously church workers that serve at MLS provided some of those children. But the Synod has benefited from a sizable number of additional workers that St. Paul’s did not use up in its own ministry.
The prep schools also serve the WELS churches that are not within commuting distance of an ALHS. Since the prep schools provide the majority of those going on to the ministry, it would be interesting to investigate what percentage of our people in public ministry originally comes from areas where there was no high school during their teenage years. (Other interesting data is the MLS website.) By the way, I have some experience in dealing with the difficulties that arise when parents try to board their children in private homes. It is a solution with many difficulties.
I personally feel that there is an inherent unfairness in comparing the costs of our college students with the costs of students in a public university. Some of the graduates will be assigned to mission congregations or to schools whose pay scale is considerably below the local public school. Should our students be saddled with the same debt as a graduating MBA or public school teacher? Perhaps the raises in tuition should be linked in some way to the amount that the Synod is paying its missionaries.
The constitution of the WELS has included functions that are assigned to the Synod. Those functions can be summarized as: training church workers, missions, publications and counseling. Though members of Synod have always been able to send support directly to ministries that especially interested them, it certainly is counter-productive for the administration of the Synod itself to be encouraging a fragmentary support of programs that the Synod has undertaken. As one person said to me: “Every member of Synod has a vital interest in the recruitment that goes on at the prep schools, the colleges and the seminary. How can I decide to support one rather than the other?” The same principle also applies to every single mission, whether home or world. The reality is that the support of the Synod’s total program suffers when one program is pitted against another and people get multiple appeals for donations.
In a Synod our churches join together to carry on that part of the Lord’s work that we can not carry out as individual congregations or smaller groups of congregations. The strength is in the unified effort. Another strength is that appropriate criteria can be assigned to the various individuals units. How easily a charismatic person can attract attention to a ministry that to most others appears to be of secondary importance.
Perhaps the ancient fable would apply here. The father gave each of his sons two lengths of tree branches. First, he told each of them to take one of the branches and break it. Each of the sons was able to do that easily. Then he told them to tie all of the remaining branches together. Then he directed each of them to try to break that bundle. None of them could break the bundle of branches.
While the current financial situation would seem to be solved, if the Synod would shuck its responsibility for the schools, it would seem to me that the far better solution is to focus on getting us all to pull in the same direction again. To accomplish such a goal now will have to start with establishing and communicating a clear record of a financially sound approach to the whole work of the Synod.
Businesses can be run from the top down, i.e., decisions are made at the top. The control the employer has on the employment of the employees leads to success of this method. In a church, however, decisions at the top have no compelling force for the constituency of the church. For example, the world mission board can start a new mission before enlisting the support of the constituency of the Synod, but there is no way to compel the constituency to make the necessary offerings. The data given above shows that very clearly as there was no support from the constituency of the Synod for the missions started with non-recurring funds..
A bit of history: It took three conventions for the WELS to start the mission in Rhodesia (Zambia). When it was approved in the ‘50’s, the congregations sent almost 20% of the total contributions in the congregations to the Synod. (Compare that with the current 7+% of total contributions that are currently being forwarded to the Synod. See Appendix G.). It just might be worth the effort (and frustration) to be less efficient, but be enlisting participation at all levels of the Synod.
Therefore the pleas for centralization based on greater efficiency of a top-down organization are self-defeating, because they do not enlist the commitment of the constituency. The more we become centralized, i.e., the more we are being told from “Milwaukee” what we ought to be doing, the less ownership the pastors and people of the Synod feel.
Over a number of years the WELS constitution has been changed in the direction of more centralization. The appeal is made to “efficiency” and “ability to react quickly.”
I can sympathize with the Synodical Council as it has to determine both the revenues and the expenditures. How easy it is to say, “The revenues won’t cover that, but we have these non-recurring funds. So we will approve the expenditure.” The prudence of having checks and balances is well established. It would seem that we need a system that has more checks and balances. (See the proposed Resolution)
If you have reached this point and your head is spinning, you are welcome to turn to the “Parable” that is in Appendix H, which attempts to present the issues in every day terms.
What Lies Ahead?
Everything lies in the direction and course along which the Lord will lead us.
As I discussed this with a person who had experience as a loan office in a bank, he noted that he would have real difficulty approving a loan to WELS. (He actually used the term ‘functionally bankrupt,’ which means that imprudent management by spending down non-recurring income has reached a point that vital programs are about to be curtailed.) Since that conversation jolted me to attention, I started to explore in my mind where we should go from here.
As we under God seek to be wise as serpents and harmless as doves, I would suggest that we can expect a progression similar to the progression that occurred in the Pacific Theater during WWII.
The progression was defined in the four steps:
· DEFENSE/ defense – with a navy decimated at Pearl Harbor, we had to try to contain Japan
· Defense/ Offense – Counterattacks were begun at the farthest extensions of the Japanese conquests.
· Offense/ Defense – More aggressive attacks as our power mounted, moving closer and closer to Japan
· Offense/ OFFENSE – The circle of steel tightened and tightened.
I suggest that our planning will do best by following a model like this:
· DEFENSE/ defense – Get BME, World and Home Missions stabilized; Build some prudent reserves.
· Defense/Offense – Be sure the recruitment is again in place and begin to expand home missions
· Offense/ Defense – While nurturing the BME, we can again turn some attention to world missions
· OFFENSE/ Offense – In all areas the Synod is aggressively carrying out its mandate.
The PROPOSALS that follow now are focused only on “DEFENSE/ defense,” since that must be successfully accomplished before we can move to the next level.
PROPOSALS FOR ACTION
I. Elections We have every right as members of the Synod to vote for a different direction. Elections can provide the change. The following offices are up for election:
President 2nd Vice President
Synodical Council — Pastor World Missions, chairman
Home Mission, chairman World Mission, layman
Board for Parish Service, chmn Commission on evangelism, chmn
· Others that might be investigated: World Mission administrative committee members.
Some general thoughts:
· Since the buck stops at the top with the elected officials, I recommend that the delegates to the Synod Convention need to elect officials whose priorities more accurately reflect a desirable balance between the divisions of the Synod. (See Appendix I, Constitution, Article IV Object.)
· Emergency approaches are necessary NOW!
· The reserves HAVE BEEN SPENT.
· Newly elected officials need accept the responsibility for laying before the members of Synod the potential there is for doing great things for the Lord, if we indeed “walk together” in supporting the Synod in the programs approved by the convention.
II. The Core Work of the Synod
In the crisis that has been brought on by imprudent actions listed above, we need to define our core work in the very narrowest way. I suggest that the core work of the Synod be defined as 1) those activities which train the future workers until they are installed in a call and 2) those activities which actually bring people from darkness to light, from death to life. 3) Publishing is left to NPH for now.
Consequently, for example, holding meetings about evangelism is not part of the narrow definition of core work. Further, it might even be appropriate to defund the full-time office of Vice President. Instead of centralizing and hiring additional staff, we should be expanding the services that are provided by volunteers.
III. Division of Resources
Since neither congregations, nor home missions, nor world missions can carry out their work without workers, the BME should be considered part of the infrastructure of the Synod. Every congregation world-wide has a vital interest in the workers recruited and trained by the BME.
Therefore, instead of the 25-25-25-25% model for the division of resources that has been recently adopted by the SC, I suggest that a pyramid model is far more appropriate.
Funding decisions would be made from the bottom up. Thus the supporting infrastructure receives priority over expansion of program. This does require that we support the infrastructure of our Synodical program, SO THAT WE CAN ALSO AGGRESSIVELY BUT PRUDENTLY CARRY OUT THE OUTREACH RESPONSIBILITIES WE HAVE BEFORE THE LORD.
It therefore seems prudent to me to work our way back to the priorities that were in place from 1962 to 1987 (Ask President Prange of MLS for his graph that shows budget percentages during those years.) During that time BME received between 35% and 40% of the Operating Budget. Until viable, proven alternate methods of recruiting and training pastors, teachers, and lay ministers, are available, the infrastructure must be maintained.
The stylized triangle that follows on the next page illustrates this approach.
Scope of work
Christ defined the whole world as our field of labor. However, by the resources that he provides Christ also defines the extent to which any particular group can do world-wide missions.
A corollary: Because of the sinfulness of all the members of the Synod we probably never reach the potential that would properly reflect our Lord’s generosity to us.
A PYRAMID FOR SOUND GROWTH
Principle: Expansion can be soundly built only on a sound infrastructure.
Observation: This triangle is focused on the function of the Synod’s Operating Budget.
1. When many people want to carry out a joint program, sound administration is necessary. Therefore administration is a part of the infrastructure. Ideally the least administration possible is desirable.
2. In a church, since proclaiming and teaching the gospel are the central function for the great commission, a well-trained corps of workers is necessary. Therefore the BME is part of the infrastructure
3. The congregations of the Synod, for which the BME also prepares workers, can also be considered a part of the infrastructure of the Synod, for it is the resources that they provide which support the work that the Synod undertakes. Note that the workers for specialized ministries are also supplied by the BME. The BME also provides the workers both for Home Missions and World Missions.
4. Home Missions is in one sense expansion and in another infrastructure. They are expansion in the sense that they are part of any increase in membership. As the Home Missions mature in their financial stewardship they become part of the infrastructure for World Missions.
5. In World Missions the expansion into the whole world is realized in the measure that the Lord provides the resources.
Addressing the immediate budget crisis, I suggest either Resolution 1 OR Resolution 2:
WHEREAS 1) defunding the prep schools has far-reaching, serious consequences because no adequate alternative has been established to recruit and train workers, and
WHEREAS 2) the fine intentions of ALHSs are to be commended and we gladly note the workers they have recruited, yet we also note that their efforts and their purpose have not to this point adequately addressed the needs of the Synod, particularly in regard to recruiting pastor track students , and
WHEREAS 3) the current financial situation of our Synod could legitimately be labeled a crisis, which deserves emergency action, and
WHEREAS 4) reserve funds have already been expended and there is no “magic bullet” that can restore fiscal integrity, and
WHEREAS 5) we agree in the priorities in the triangle approach to setting budget priorities, and
WHEREAS 6) when the hard realities require manpower cuts, we endorse the narrow definition of the core work of the Synod, and
WHEREAS 7) although we acknowledge the commendable service to the Lord that is provided by para-church organizations, we need to keep clear for ourselves and our members that the work of the Synod has a very high priority just because the work of the Synod is defined under the Great Commission as the work that individual congregations or smaller congregational associations can not do on there own; and
WHEREAS 8) the program of the Synod would not be in crisis, if 15% of total contributions were being sent to the Synod, as has been done in the past; and
WHEREAS 9) it may be prudent for us to strive for such a 15% proportion for CMO; and
WHEREAS 10) it is disturbing that the drop in percentage forwarded to the Synod occurred during one of the most prosperous decades in the history of the U.S.A., and
WHEREAS 11) every effort should be expended so that the gains we have made in missions worldwide can be maintained, even though they may have been started by the imprudent use of non-recurring funds, and
WHEREAS 12) we need constantly to ask ourselves, “Has our love for the Lord grown lukewarm?” (Cf. the letter to the Laodiceans in Revelation 3), and
WHEREAS 13) the Lord will both lead and empower our Synod according to his will,
THEEFORE BE IT RESOLVED 1) that the current situation be declared an emergency, and
BE IT FURTHER RESOLVED 2) that we authorize the administration to borrow up to $6,000,000 to fund the ’07-’08 budget; (NOTE: The amount here is to be determined by expert advice at the Synod convention), and
BE IT FURTHER RESOLVED 3) that all divisions of the Synod evaluate their budgets according to the narrow definition of core work, and
BE IT FURTHER RESOLVED 4) that the convention authorize a special collection of $26,000,000, which shall be designated a) first to repay any borrowing authorized in Resolution 2) above and b) to reestablish the gift trust fund both for reserve and for investment income; (Personal note: I would really like to recommend $66,000,000, but I believe in the reality of the possible), and
BE IT FURTHER RESOLVED 5) serious efforts be made to determine what has caused the decline in support of the Synod (apathy, disagreement with direction of Synod, general anti-establishment sentiment fostered in the 1970’s, confusion between Synod and para-church organizations, etc.), and
BE IT FINALLY RESOLVED 6) that serious efforts be made to get everyone in Synod to recognize and support the overarching purpose of the Synod, as well as, the priorities, and the general direction of the Synod, so that we gladly aspire to emulate the zeal of those who have gone before us in their support of the Synod’s program.
WHEREAS 1) we agree with the approach used during the depression that ministerial education is an absolutely essential element of the Synod’s work, and
WHEREAS 2) the proposed crisis management suggestions of the previous Resolution may not be adequate (or may be rejected by the Synod), and
WHEREAS 3) the imprudent actions of the past years in using up all reserves may make extreme actions necessary to avoid seriously harming the Synod’s work, and
WHEREAS 4) we acknowledge that this resolution will present an extremely unpleasant and undesirable solution. and
WHEREAS 5) the budget of Synod is “labor intensive,” i.e., a large percentage of the budget is expended for salaries, and
WHEREAS 6) it is only the urgency of the situation that compels us to consider putting a very onerous burden on the called workers, while efforts are made to enlist increased support from the constituency of the Synod (for example, $1.00 per Sunday per communicant member),
THEEFORE BE IT RESOLVED 1) that the budget provide at least the necessary funds to the BME to maintain the schools at current levels, and
BE IT FURTHER RESOLVED 2) that, if necessary to accomplish Resolution #1, the SC plan a budget in which salaries of Synodical paid workers be reduced in an amount that guarantees the survival of the ministerial education system as now constituted, and
BE IT FURTHER RESOLVED 3) that an effort be made to minimize the impact on the lowest paid levels of workers by assigning an incremental percentage to each higher pay level (e.g. 5% per level), and
BE IT FURTHER RESOLVED 4) that the SC determine whether payless days, partial pay paydays, or a reduced salary over the course of a year minimizes the impact, and
AND BE IT FINALLY RESOLVED 5) that every effort be made to inform the members of the Synod of the burden that we have placed on our called workers by this decision so that they can act in Christian love to alleviate the burden.
I also suggest
WHEREAS 1) concentrating a) the responsibility for fiscal soundness and b) the decisions about program budgets into one group (i.e. the SC) has not served us well (See page 9 “Reorganization”), and
WHEREAS 2) assigning the responsibility for fiscal integrity to the Board of Trustees and the responsibility for program development Coordinating Council served the WELS well, and
WHEREAS 3) a system with checks and balances served our Synod well during the time that we did have a significant expansion both in home missions and in world missions during the mid-20th century,
THEREFORE BE IT RESOLVED 1) that the President be directed to formulate a proposal for constitutional change that would reinstitute such checks and balances, and
BE IT FURTHER RESOLVED 2) that the proposal be submitted to the districts for debate and reaction in 2008, and
BE IT FURTHER RESOLVED 3) that such a proposal be presented to the 2009 convention after the reactions of the districts have been gathered and included in the presentation to the convention in 2009, and
BE IT FINALLY RESOLVED 4) that in the meantime the SC must submit its estimate of income to the COP, which has the responsibility for funding the budget, and the SC must get approval of the COP of the estimate of income BEFORE proceeding to develop the budget.
The resolutions included here can only address the immediate emergency situation. Please, review the section “What lies ahead?” on page 10 for a stylized outline for getting the Synod’s financial house in order, so that we can be a better instrument in carrying out the Lord’s Great Commission.
TIMELINE ON SIGNIFICANT ACTIONS
Year Issues and CommentsStatements in quotes are taken from Appendix B and C and occurred either in a BORAM, a RTTTD or a PROCEEDINGS. Follow the quotations in Appendix B and C according to the matching year.Note: The change in the number of World missionaries is intended only to illustrate that the non-recurring funds were used to start on-going programs, which could not be sustained by non-recurring funds. But I did note that, while the budgets of other divisions were definitely cut World Missions is not cut below the ‘96-‘97 levels. Traceable Non-recurring funds USED IN THE BUDGET World Mission Pastors (See note)
From 1950 to 1995 the world mission corps grew from a few in the Apache mission in 1950 to 54—slightly better than one a year. During this same period the communicant membership of the Synod grew from 214,000+ to 315,000+ to support that expansion
Jul-95 Gift Trust Fund: “a large annual gift to the Synod. The most recent gift was $5 million. Its February 28, 1995 fund balance was $16.4 million.” According to policy $5,240,000 was distributed to budget. 54
Jul-96 According to policy $6,074,000 was distributed to budgetBy June 30, 1996 $1.7 million of Restricted Funds (non-recurring funds) had been assigned to Russia and Bulgaria $ 1,698,516 52
Jul-97 According to policy $5,283,000 was distributed to budget 61
Jul-98 “$3.4 million gift” TO Gift Trust Fund 69
Jul-99 “gift was $5 million June 20,1999, had net assets of $21.7 million.” $ 4,500,000 70
Jul-00 “The last gift was $2.5 million, received in August 2000.” $ 6,800,000 74
Jul-01 At June 30, 2001 net asets were $8.1 million. $ 6,800,000 71
Jul-02 The assets are earning interest so the total spend down of the gift trust fund from fiscal ‘99 to fiscal ‘03 totals $23.3 million. $ 4,300,000 71
Meanwhile the Revolving Fund was also being spent down. An effort to show some of the details is in Appendix C. My comments at the beginning of Appendix C points out that the Revolving Funds started with assets of $63.9 million in 1999, and were spent down to $35.4 million by June 20, 2003. Rather than try to determine exact amounts for each year, I am splitting $28.5 million equally between 2002, 2003, and 2004 $ 9,500,000
Jul-03 “The (Gift Trust) fund is now totally exhausted” $ 900,000 59
In May of ‘03 recently hired financial managers reported that an error had been made: $8.1 million (later reported as $7 million) had already been borrowed against reserved funds, had already been spent and therefore could not be reborrowed. It was also pointed out that a $1.5 overspending of the previous budget had not been accounted for in the budget plan printed in the ‘03 BORAM. This was spent and the resolutions to repay it have not been fully carried out. $ 7,000,000
The spend down of the Revolving Funds $ 9,500,000
Jul-04 The spend down of the Revolving Funds; No report in the RTTTD. $ 9,500,000 57
Jul-05 No report included in either the BORAM or the PROCEEDINGS. 53
Jul-06 Currently under preparation.
Nov-06 The Synodical Council discussed how to assign $5.8 million in non-recurring funds in the budget for 2007 and following. I have chosen to include only: $ 2,000,000
Without being able to pin down every transaction, my intention is only to show that the $60,000,000 on the Precise is probably not an overstatement. Before conceding a lower figure, I would need data from 2004 and 2005.Total: $ 62,498,516
THE GIFT TRUST FUND (a.k.a. WELS Gift Fund)
(In the BORAMs and RTTTDs from 1995 to 2004 the purpose and broad policies of the Gift Trust Fund are explained in virtually identical words. I have presented those paragraphs first and have then included several specific paragraphs from different years that show how this cache of non-recurring funds was spent down. PWK)
WELS Gift Fund (From 1999 BORAM p. 104)
Gift funds are a middle ground between placing offerings directly into a fund for current use (like the Operating Fund) and placing them into an endowment fund (like the WELS Endowment Fund). Gift funds can be a “buffer” between “lean” years and “fat” years.
Placing a large gift into the budget has several disadvantages. It can make the financial health appear better than it really is. Resources may be put into ministry work without provision for maintaining it in future years, and other revenue sources may decrease because of a false view that the need for mission dollars is decreased.
Placing a large gift into an endowment fund, with the earnings annually benefiting the Operating Fund, also has several disadvantages. Ministry work is dependent on the amount of earnings generated, and because the principal cannot be used the potential exists that we may accumulate unspendable funds when ministry expansion is needed.
By using the WELS Gift Fund the synod is supporting the work of preaching and teaching and helping others with the confidence that there is a buffer to give us planning time to respond to changes in the size or number of gifts.
Each fiscal year, the trusts transfer 30% of the prior year ending trust principal plus all interest earned during the year to the Budgetary Fund. … In this way gifts are completely utilized over a nine year period.
(So far the general paragraphs.)
Results reported in 1995 BORAM (Page 183):
The WELS Gift Trust Fund supports general Budgetary Fund expenditures. Its February 28,1995 fund balance was $16,458,631. Distributions to the Budgetary Fund during 1994-95 will be $5,240,000. Expected distributions for 1995-96 and 1996-97 fiscal years will be $6,074,000 and $5,283,000, respectively. The WELS Gift Trust Fund has been the beneficiary of a large annual gift to the Synod. The most recent gift was $5,000,000.
Results reported in 1998 RTTTD (Page 161):
The WELS Gift Trust Fund supports general Budgetary Fund expenditures. Its December 31, 1997, net assets total was $19,335,259. Distributions to the Budgetary Fund during 1997-98 are expected to be approximately $9,988,000.
Results reported in 1999 BORAM (Page 104):
The WELS Gift Trust Fund supports general Budgetary Fund expenditures. Its December 31, 1998, net assets were $17.7 million. Distributions to the Budgetary Fund are planned at $6.1 million plus earnings estimated at $1.5 million or about $7.6 million for 1998-99. The expected expenditures for 1999-2000 and 2000-01 fiscal years total $10.3 million and $11.2 million respectively. The WELS Gift Fund has been the beneficiary of a large annual gift to the synod. The most recent gift was $3.4 million.
Results reported in 2000 RTTTD (Page 104):
The WELS Gift Trust Fund supports general Budgetary Fund expenditures. Its June 30.1999, net assets were $21.7 million. Distributions to the Budgetary Fund were $5 million for 1998-99, less than planned at this time last year. The expected distributions for the 1999-2000 and 2000-01 fiscal year total $10.3 million and $11.2 million respectively. The WELS Gift Fund has been the beneficiary of a large annual gift to the synod. The most recent gift was $5 million.
Reported in 2001 PROCEEDINGS under “Budgetary (Operating) Fund” (p. 72)
The increased revenue available in the coming biennium allows for some very limited expansion of our ministry, with plans to continue the transition to an environment of stable-vs-increasing major gifts to WELS, the planned exhaustion of the gift fund (italics mine; this is the first open reference to the spend down of the “rainy day fund. PWK) a more aggressive use of our restricted (revolving) funds, and the continued reexamination of effective methods to achieve the WELS Mission, Objectives, and Vision (MOV).
Results reported in 2001 PROCEEDINGS (p.73)
(The report repeats the policies under which money was transferred to the Budget Fund and continues:) Historical numbers over the past years ranged from about $5 million to about $7 million. In the current biennium we accelerated that to transfer about $10.1 million and $10.5 million from the Gift Trust Fund to the Budget Fund to support planned ministry. (approved transfers by the previous convention were $10.3 million and $11.2 million.)
At June 30, 2001 net assets were $8.1 million. The expected distribution for the 2001-02 and 2002-2003 fiscal years decline to about $4.9 million and $2.9 million, respectively. In the past the WELS Gift Fund had been beneficiary of a large annual gift to the synod. The most recent gift was $2.5 million, received in August 2000. No gifts subsequent to the date are expected. The Synodical Council and your WELS staff began work in the summer of 1999 to help transition the WELS to revised gift giving levels identified at that time, and to a revised giving process identified in the winter of 2000. That work continues today.
Results reported in 2004 RTTTD (Page 95):
The WELS Gift Fund on June 20,1999, had net assets of $21.7 million. Transfers to the Operating Fund were $4.5 million for 1998-99. Transfers for the 1999-2000 and 2000-01 fiscal years were accelerated to $9.8 million and $10.5 million respectively, to support ministry needs. Transfers for fiscal ’02 were $4.3 million and for fiscal ’03 $0.9 million. The last gift was $2.5 million, received in August 2000. The fund is now totally exhausted.
(A.K.A. THE GIFT FUNDS, RESTRICTED FUNDS, OR AUXILIARY FUNDS)
(Considerable detail is given below, because there were changes in financial managers and changes in the reports and the reports don’t all have the same closing date. If you are not interested in all the details, the basic thrust of this section is that the Revolving Funds started with assets of $63.9 million in 1999, and they were spent down to $35.4 million by June 20, 2003. No official, public reports on Revolving Funds were made in 2004 and 2005. While those funds were indeed spent for ministry, the inexorable fact is that large amounts of the money were spent trying to recover and get a balanced bndget. PWK)
1998 RTTTD – “Auxiliary Funds” are reported in detail on pages 169-170; “Gift Funds” were reported in the narrative and apparently referred to the “Gift Trust Fund” as detailed in Appendix C.
The 1999 PROCEEDINGS page 64 uses the terminology “Restricted Funds” and “Auxiliary Funds” The distinction between these two funds is reported as:
“Restricted Funds receive special gifts whose use is determined by the donor or the synod. These gifts support some non-budgeted program of the synod such as Administrative services, Committee on Relief, world mission in Russia and Bulgaria, and ministerial education student assistance. In addition, Restricted Funds play an important role for WELS because many transfer dollars to the Budgetary Funds each year to support program expenses. Their use is planned and coordinated by each area of ministry through the Synodical Council. Restricted Funds saw growth during the prior year, growing by a combined $1.5 million since June 30, 1998 to $63.9 million at Dec. 31, 1999.
Auxiliary Funds account for separate operations that generally have their own sources of income and are self-supporting. They are usually programs of a larger scale such as the Central Africa Medical Mission and Mass Media Ministry. The Christ Light curriculum is funded through the Publications Coordination Fund, which is an auxiliary fund. Collectively, Auxiliary Funds had net assets totaling $4 million at June 30. 1999, a decrese of $0.8 million over June 30, 1998, balance of $4.8 million.
The 2000 RTTTD uses the same general description of the two funds and reports the following results on page 104:
Restricted funds saw use during the prior year. Net assets decreased by a combined $2.6 million since Dec. 31 1998, to $56.4 million at Dec. 31. 1999.
Collectively, Auxiliary Funds had net assets totaling $3.9 million at Dec. 31, 1999, a use or decrease of $0.7 million over the Dec. 31 1998 balance of $4.5 million.
The 2001 PROCEEDINGS uses the same general description of the Restricted (Revolving) Fund and reports the following results on page 72:
Restricted Funds saw heavy use during the prior 12 months, decreasing by $5.2 million since June 20, 2000 to $52.2 million at June 30,2001. Details are in Appendix 1 (Of the proceedings PWK). (Comment: The “Revolving Fund – Statement of Activities on page 89 reports the $5.2 million draw down on the fund; But note that the report for June 30, 2000 reports a $10.5 million draw down, which is significantly more than the $5.2 million reported in the previous paragraph. PWK)
Auxiliary Funds are now reported as part of the Restricted (Revolving) Funds…Collectively, the old Auxiliary Funds category have net assets totaling about $4 million at June 30,2001. Reporting frequency increases to monthly when we include them with the Restricted (Revolving) Funds.
The 2002 RTTTD uses the same general description of the Revolving Funds and reports the following results on page 101:
Revolving funds saw heavy use during the eight months between July 1, 2001 and Feb. 28, 2002, decreasing about $3 million. See more details and a summary for the quarter ended Dec. 31. 2001, in Appendix 1 (p. 118).
Note: a) The 2002 RTTTD is the last of the reports to the Synod that includes the detail on the Revolving Funds. One explanation is that there was an effort to save printing costs. b) On page 105 a new term is introduced: “reclassification.” Please, note that a line is added to Support and Revenue – “Net Assets Released From Restrictions.” Such a term probably includes both the normal transfers plus the money that was a spend-down of the Revolving Funds. c) Even with the inclusion of $13 million in monies released from classification, there was overspending of $2.5 million. d) On page 106 similar comments can be made about the financial statement for June 30, 2000. The numbers are $12.7 million in released funds and $5.2 million in overspending. PWK)
The 2003 BORAM uses the same general description of the Revolving Funds and reports the following results on page 100:
Revolving funds (excluding the four ministerial education schools) saw income during fiscal year 2002 of $12.6 million and expense of $20 million, shrinking by $7.2 million to 44.6 million at June 30, 2002. Including the four schools, we see WELS receiving about $23 million and $20 million during the next two years into revolving funds, and spending about $23 million in each of the next two years. More funds were included in the decision packaging analysis this year, including the revolving funds of the four ministerial education schools.
(NOTE: a) The last sentence of the report seems harmless enough. But by turning to pages 106-7 the implications of this sentence are shown in the term “reclassification.” Thus on the line item Ministerial Education Ministry—Special Funding under columns 5 & 6 the monies to be reclassified are listed. One is the fees received at the schools (4.9 million for ’03-‘04). The other (7.6 million, some of which may have been earnings) must be non-recurring funds from the revolving funds. The non-recurring figure for’04-’05 was $5.5 million. b)The WELS Gift Fund has resurfaced again in the report including several paragraphs about the efforts that were made to encourage donations to cover the budget shortfalls caused by the spend down of non-recurring funds. PWK)
The 2004 RTTTD reports the following on Restricted Funds (Revolving Funds) on page 94:
(After listing the activities that the Restricted Funds support, including some that were formerly in the budget – e.g. Evangelism; Youth Discipleship the reports states:) – Restricted Funds (excluding the four schools) saw income during fiscal year ’03 of $12.7 million, and expense of $21.9 million, shrinking by $9.2 million to $35.4 million at June 30. 2003, as more restricted funds were used for planned ministry. Including the four schools, WELS is expected to receive about $23 million and $20 million during the next two years into restricted funds and spend about $23 million in each of the next two years. More funds were included in the decision packaging analysis this year, including the restricted funds of the four ministerial educations schools.
(NOTE: The use of non-recurring money from the Revolving Funds is presented again in a simple sentence. The amounts must be determined by finding the difference between the figure reported on page 101 (Revenue and Expenditure) and page 97 (Consolidated Statement of Activities). Thus for Ministerial Education in 2002 page 101 reports $21.1 million provided by the Operating Budget but Page 97 reports $29.4 million in expenditures—another $8 million in non-recurring income spent. The figures for 2003 are $20.8 and $34.4 or $13 million in non-recurring income spent. PWK)
The 2005 BORAM makes no report about the Restricted (Revolving) Funds or the WELS Gift Fund nor is there adequate data to compare the Operating Fund with the Consolidated Statement of Activities.
The 2005 PROCEEDINGS also makes no report about the Restricted (Revolving) Funds or the WELS Gift Fund nor is there adequate data to compare the Operating Fund with the Consolidated Statement of Activities.
APPENDIX D—World Missioanries
The following information was gathered from the Statistical Report of the Wisconsin Evangelical Synod for the years indicated. The reports gives an end of the year number (12/31). There are also about 17-19 teacher-trained workers in World Mission. This Appendix tracks the number of pastor that were serving in each of the years in a Foreign Mission field.
Please, note the sudden increase between 1996 and 1999 and the continued higher level till 2002.
1985 42 1995 54
1986 40 1996 52
1987 44 1997 61
1988 45 1998 69
1989 45 1999 70
1990 50 2000 74
1991 54 2001 71
1992 57 2002 71
1993 58 2003 59
1994 58 2004 57
As a reference point the LC-MS has 369 called workers in foreign missions (they do not list teachers separately). The LC-MS claims a membership of 2.5 million. For comparison purposes an interesting exercise is to compute the number of members of each Synod that is required to support each worker. (The membership for WELS is 300,000+.
Did the Synod in convention authorize the increase in missionaries for the years that are highlighted?
APPENDIX E—Maaterials from a Letter Sent to 2003 Convention Delegates
(Note: The materials in this Appendix were prepared by Cal Patterson, chief financial officer prior to 1992, who resigned in objection to some of the financial policies that were being undertaken in the Synod. These pages are a public document because he distributed these pages to the delegates prior to the 2003 convention. Many statements are prophetic. His emotions do show
Paul W. Kuske 12/15/06)
Re: What went wrong in WELS?
We have been shocked and saddened with the events that have become public in the last eight months at the Synod level. These issues are to be discussed at this summer Synod convention. You as a delegate to that convention will have some weighty matters to consider.
You are to get reports at the convention that are intended to give you more information on what went wrong in WELS. Attached to this email is the assessment of a former chief financial officer and an appeal to the current Synod president for your consideration before you get to Watertown.
These documents are being distributed for two reasons. To provide information that is not readily available and to ask that you prayerfully consider the leadership issues facing this church body.
Are we going in the right direction?
Do we have leaders to take us in that direction?
You will have the awesome responsibility on the first day of the convention to nominate those you believe would serve us best in the next four years. Take this responsibility to heart, pray, discuss this issue with those you represent. The decision you make on the first day of the convention will be one of great importance to the organization.
Thanks for taking time to consider this issue. If your email does not support attachments, email me at cjpatter@execpc.,cpm and I will send you the two attachments in an email.
Calvin A. Patterson
New Berlin, WI
July 8, 2003
What went wrong in WELS?
Synod called workers were informed by the Synod President in November (Note: November, 2002, PWK) of a projected budget shortfall of $4.3 million by June 30, 2003 and a projected $8 million shortfall for the next budget year. In the following months actions were taken to reduce those deficits. Then in late April another communication from the Synod President indicating that $8.1 million in money expected to support the current years budget wasn't removed from "revolving funds" and was committed to supporting next years budget. (Note: Later this has been reported as $7 million. PWK) Additionally the $1.5 million shortfall from the prior biennium hadn't been considered in the budget planning for the next two years.
The obvious question is "How could all this have happened? The leadership team has committed to provide an explanation to the delegates at the Synod convention. That explanation will not include the issue that I and many people believe is the core issue behind these difficulties – leadership. Listed below are actions taken over the last six years. Because of these actions leadership in the future is the key issue facing this convention.
In 1997 the new Synodical Council was formed. A group within was convinced that they could "get the Synod moving". They influenced decisions from the selection of the first Executive Director of Support Services to the replacement of individuals with years of financial and administrative experience. A rigid and bureaucratic environment in the Support Services area of ministry developed. That environment has also caused the turnover of other positions in this area over time.
To "get things moving" requires money. Prior to the establishment of the Synodical Council some on the Synodical Council had made attempts to accelerate the spending of the Gift Trust Fund. They, along with the new leadership team, renewed those efforts. One of the resources of the organization was the $22 million in the Gift Trust Fund. Part of the policies of the Gift Trust Fund was an annual payout of 30% of the beginning of the year balance. That calculation allowed the fund to provide $6 to $7 million in annual support to the budget based on the receipt of a $5 million annual gifts to the fund. Since it is difficult for the Synod to quickly reduce ministry programs and staffing, this 30% provision provided time to reduce programs in a manageable way if future contributions were not received. Then the fund would be paid down over an eight year period.
By the spring of 1999, the Gift trust policies had been changed and the monies were programmed into the next biennial budget at a level that would eliminate them by 2003. What they had done was to create a "structural deficit" (one time revenue supporting continuing expenditures – much like what has been done in the State of Wisconsin and other states with detrimental results). However, they had a plan. After past capital offerings, congregational offering increased by about 30%. They expected a similar increase, after the capital offering that was in progress, to provide them with the ongoing revenue to replace the Gift Trust revenue that they were spending. Only subtle references to this plan were mentioned in the reports to the 1999 convention.
The first communication regarding the decision to eliminate the Gift Trust Fund was in the spring of 2001. This communication was the first general information made available to Synod members. Continuation of current spending was made possible and possible contraction of mission and ministry was avoided due to this strategy of betting upon a 30% increase in giving from congregations to make up for the Gift Trust liquidation.
By the fall of 2001, Synodical Council was beginning to talk about cutbacks and requested that areas of ministries prepare a 25% cutback exercise "just in case". By the fall of 2002 their 30% increase plan was not being realized and the exercise had become reality. This was compounded by the poor economic climate that also caused the Schwan Foundation to cut back its contributions. Yet the synod has been told, "Most of the downturn in our mission revenue was unforeseen and unavoidable".
The outcome had been a rapid contraction of the ongoing mission and ministry that we do together as members of the Synod. Resulting in faithful called workers being put into a period of uncertainty over job security and the mortgaging of our future mission and ministry efforts.
This was a major failure of the leadership team's responsibility over the stewardship of the resources placed in their control.
The second major failure has been the oversight of the financial operations of the synod. This too has been a crisis in the making over the last five years. When those with experience are eliminated and major financial systems that control how resources are received and disbursed are changed, the transition had better be done right or the result will be chaos. Those directly responsible for the financial operations need to be held accountable for the $8.1 million (Note: Revised as $7 million PWK) and $1.5 million in oversights.
However, the leadership team and the Synodical Council also need to bear responsibility for this second major failure in stewardship responsibility. They should have known that they had problems. They were not insisting on timely, accurate financial reports. For example, the annual audit report that had historically been completed in eight to ten weeks had in the last two years taken eight to ten months to get completed. Their failure to act in a timely manner resulted in an environment where failure to transfer resources from revolving funds to support the current Synod work program was possible. This led to the situations that actually occurred; using the same resources in the current biennium while also programming them into the revenue forecast for the new biennium and ignoring the deficit from the prior biennium.
The result will be less ministry work being accomplished over the next ten years due to this administration's mistakes and shortcomings.
APPENDIX F—WELS Constitution, Article IV Object and MOV
The WELS Constitution states in “Article IV Object” (Page 5, March 2006)
The object and purpose of the synod shall be to extend and conserve the true doctrine and practice of the Evangelical Lutheran Church:
(a) By assisting and counseling in every appropriate way the pastors, teachers, and congregations affiliated with the synod;
(b) By establishing and maintaining theological seminaries, colleges, academies, schools, and other institutions of learning;
(c) By establishing and maintaining home and world missions and such charitable institutions as it may deem appropriate to its calling;
(d) By printing, publishing, purchasing, selling, and disseminating literature that maintains Lutheran doctrine and practice;
(e) By furnishing appropriate literature for parish schools, Sunday schools, missions, institutions, and churches.
The MOV printed in the 2004 RTTTD, page 109 states:
As men, women and children united in faith and worship by the Word of God, the Wisconsin Evangelical Lutheran Synod exists to make disciples throughout the world for time and for eternity, using the gospel in Word and sacrament to win the lost for Christ and to nurture believers for lives of Christian service, all to the glory of God.
1. To uphold and testify to the truth of God as fully revealed in the inspired, inerrant, infallible Holy Scriptures and articulated in the Lutheran Confessions, and to use Scripture as the sole authority.
2. To foster a sense of urgency for the lost and to seize every opportunity the Lord provides to evangelize lost souls.
3. To establish churches where Christians help each other grow and mature in the faith through public worship and a life-long study of the Word of God.
4. To encourage and equip each other for the application of our faith in lives of Christian service for the Lord, his church, and his world.
5. To mobilize our people, as member of the universal priesthood, in ministry using the Word.
6. To recruit and train candidates qualified for public ministry and provide for their continuing education so that the Word of God is proclaimed faithfully and effectively in accord with the Lutheran Confessions.
Challenging Opportunities for WELS
· Lead people to a passion for ALL the lost and equip them to reach these people
· Focus ministerial education on outreach.
· Individual spiritual growth and person witnessing.
Our WELS Vision
The gospel in Word and sacrament is everything!
There are four more headings: Go with it! Study It! Apply It! and Teach It!
Comment: I don’t know what the authors of the MOV intended, but I do note that preparing the workers for leadership in the public ministry of the church is 6th in Objectives and that references to worker training are made in the “Teach It” section. Our WELS Vision seems a bit distorted when Teach It! comes after Apply It!
I do know that the BME’s budget bore a disproportionately large proportion of the cutbacks. This would seem to indicate that some of those involved in the budgetary process have concluded that the MOV places the work of the BME at the bottom of the priorities. Please, see the discussion of infrastructure in the main body of comments.
TOTALCONTRIBUTIONS SMO CONTRIBUTIONS
Year WELS Member-ship Total Congregational Contributions Net Increase (Decrease) -- Total Contributions Percent INCREASE in total contributions per year SMO Contributions Percent INCREASE/ DECREASE in SMO contributions per year Average percent of INCREASE/ DECREASE by decades SMO as a Percent of Total Contribu-tions If SMO had increased in Proportion to Total Contriburions
1974 $ 42,686,361 $ 6,815,258 15.97%
1975 293,982 $ 47,102,268 $ 4,415,907 10.35% $ 6,943,210 1.88% 14.74% $ 7,520,296.91
1976 298,614 $ 51,318,093 $ 4,215,825 8.95% $ 7,472,945 7.63% 14.56% $ 8,193,390.95
1977 302,687 $ 56,276,061 $ 4,957,968 9.66% $ 7,985,606 6.86% 14.19% $ 8,984,974.73
1978 304,677 $ 63,216,424 $ 6,940,363 12.33% $ 8,770,961 9.83% 13.87% $ 10,093,065.54
1979 306,995 $ 69,449,553 $ 6,233,129 9.86% $ 9,224,209 5.17% 6.27% 13.28% $ 11,088,240.14
1980 309,342 $ 76,846,892 $ 7,397,339 10.65% $ 10,042,588 8.87% 13.07% $ 12,269,291.25
1981 312,049 $ 86,593,253 $ 9,746,361 12.68% $ 11,512,499 14.64% 13.29% $ 13,825,384.65
1982 312,917 $ 90,568,800 $ 3,975,547 4.59% $ 12,229,622 6.23% 13.50% $ 14,460,116.17
1983 314,792 $ 100,727,743 $10,158,943 11.22% $ 12,770,309 4.42% 12.68% $ 16,082,081.96
1984 316,228 $ 106,301,675 $ 5,573,932 5.53% $ 12,996,116 1.77% 12.23% $ 16,972,009.89
1985 316,297 $ 109,571,312 $ 3,269,637 3.08% $ 13,736,454 5.70% 12.54% $ 17,494,036.58
1986 317,332 $ 115,559,718 $ 5,988,406 5.47% $ 14,249,632 3.74% 12.33% $ 18,450,138.97
1987 318,037 $ 120,234,950 $ 4,675,232 4.05% $ 15,071,092 5.76% 12.53% $ 19,196,581.43
1988 317,430 $ 124,866,544 $ 4,631,594 3.85% $ 15,265,610 1.29% 12.23% $ 19,936,056.69
1989 317,914 $ 133,914,098 $ 9,047,554 7.25% $ 15,375,123 0.72% 5.31% 11.48% $ 21,380,579.33
1990 317,720 $ 140,904,457 $ 6,990,359 5.22% $ 15,368,884 -0.04% 10.91% $ 22,496,652.45
1991 317,793 $ 146,894,421 $ 5,989,964 4.25% $ 15,508,165 0.91% 10.56% $ 23,453,003.59
1992 317,088 $ 155,119,783 $ 8,225,362 5.60% $ 15,849,726 2.20% 10.22% $ 24,766,255.95
1993 316,748 $ 162,683,930 $ 7,564,147 4.88% $ 15,780,815 -0.43% 9.70% $ 25,973,939.44
1994 316,221 $ 167,574,037 $ 4,890,107 3.01% $ 15,422,928 -2.27% 9.20% $ 26,754,688.61
1995* 315,127 $ 184,861,125 $17,287,088 10.32% $ 15,700,000 1.80% 8.49% $ 29,514,726.29
1996 315,377 $ 202,294,882 $17,433,757 9.43% $ 15,973,756 1.74% 7.90% $ 32,298,180.98
1997 315,355 $ 211,925,446 $ 9,630,564 4.76% $ 16,296,082 2.02% 7.69% $ 33,835,786.36
1998 315,581 $ 223,183,803 $11,258,357 5.31% $ 16,831,935 3.29% 7.54% $ 35,633,283.40
1999 315,637 $ 231,400,914 $ 8,217,111 3.68% $ 17,249,146 2.48% 1.17% 7.45% $ 36,945,218.41
2000 316,386 $ 247,798,147 $16,397,233 7.09% $ 17,581,715 1.93% 7.10% $ 39,563,182.81
2001 315,847 $ 257,825,097 $10,026,950 4.05% $ 17,331,704 -1.42% 6.72% $ 41,164,074.75
2002 315,312 $ 261,852,046 $ 4,026,949 1.56% $ 18,468,488 6.56% 7.05% $ 41,807,013.05
2003 314,840 $ 279,600,740 $17,748,694 6.78% $ 23,153,731 25.37% 8.28% $ 44,640,750.24
2004 314,842 $ 298,089,609 $18,488,869 6.61% $ 21,369,098 -7.71% 7.17% $ 47,592,662.97
2005 313,553 $ 300,844,064 $ 2,754,455 0.92% $ 22,044,475 3.16% 4.65% 7.33% $ 48,032,436.26
AVERAGES 6.55% 4.00%
APPENDIX H--A Parable
Joe was a reasonably successful family man; a 3-bedroom house in the suburbs; A wife and three children to fill it and had put some savings into long term investments. WELS from 1950 to 1990—Synod had done pretty well on the unofficial slogan “Every state by ‘78” and world mission corps had grown from 6 (or 7) to 50
One day Joe decided he really wanted to impress his boss. So he purchased a house with 15 rooms, five baths. He used up the money he had been saving for a rainy day, because it seemed that his income was growing adequately. “We are going to get the Synod moving,” so we are going to put this money lying in the investments (the gift trust fund) to work. Nineteen (19) additional world missionaries are sent out and budgeting is planned on the projected carry over from a special offering.
For Joe the heating and maintenance of his mansion soon drained any savings he hadn’t previously spent. So he started to do more borrowing in order to make the budget balance. To cut down on heating bills the family only used six rooms. Seventeen world missionaries are recalled and throughout the Synod a 25% reduction in budget is first projected as an “exercise,” and within a few months became the hard reality.
Joe begins to draw on the money that he had set aside for the children’s education. That helps him through a year or two. Then the children are required to use their birthday savings account, first, just for clothes but eventually the funds are used also for taxes. The special non-specifically designated gifts that had been given to the Synodical schools are used to maintain the schools budgets. Through that method the budget of the entire Synod is “balanced.”
Joe manages to get through another year or two but the tax bill has to be paid. By now he is desperately trying to look under the cushions on the couch to find enough money to buy some groceries. To keep the family bucked up he is constantly telling them how he is impressing his boss and he has his most naive child actually cheering him on. For the 2007 budget plan efforts have been made to review all the designated funds, to find enough where the designation has in some say lapsed. $2,000,000+ in non-recurring funds are being use to fund the budget after fiscal 2006.
APPENDIX I—SC Executive Summary, November 3-4, 2006 and News Release
(Bold was in the original. Underlining and notes at the end are mine.)
Synodical Council Meeting
November 3-4, 2006
Some committees met prior to the 8:30 starting time in order to complete their business. Pastor Mueller opened the plenary session with the second of a two part Bible study on the End Times. The signs of Christ’s imminent return are not to scare but to prepare believers. When the Son of Man comes in judgment, we will be judged by a peer, one who became fully human to live our life under the law and to die our death on the cross. Thus we wait in eager expectation of his return, because we are confident of the verdict at the final judgment.
The minutes from the April SC meeting were adopted. There was discussion on the printed reports by district lay representatives. Comments noted that there is general knowledge that our budgets and expenditures have stabilized, but that significant challenges in maintaining our ministerial education system still face us. Discussion also noted the COP report and the president’s state of the church report.
The president then gave the floor to Mr. Seth Hansen, the chairman of the SC Finance Committee for his report. The SC adopted the support forecast for fiscal year 06-07 and for fiscal years 07-09. The council also adopted the president’s proposed budget allocations for fiscal years 07-09. The adopted allocations leave all areas of ministry short of covering their annual increases in expenses and leave our schools with large challenges. Yet, because three quarters of operating support goes to missions and ministerial education, the allocation falls in line with the spirit and letter or convention resolutions.
The council also adopted a resolution to apply monies in unallocated special funds to paying off negative balances in the vicar program, the Forward in Christ thank-offering commitments, the Ministry of Planned Giving, and in the WELS Investment Funds.
The Finance Committee did not recommend an MOT proposal that the remaining $2,608,039 of unrestricted special fund money be allocated to Ministerial Education. The president allowed a lengthy discussion on this matter. Discussed were the rationale for the recommendation; the lack of wisdom in allocating one time money for ongoing expenses1, the failure to address the long term viability of the ministerial education system; the need to get to the point where we can living (sic) within available resources for all of our ministries and a summary review of current and future Ministerial Education budget. After the discussion, the president directed Finance to return to committee sessions to rewrite their recommendation.
FROM SATURDAY AFTERNOON SUMMARY
The Finance Committee returned to present their reworked resolution. After discussion, the motion was withdrawn in favor of a second resolution which was also withdrawn. The council adopted a third resolution to apply the balance of $3,608,039 of the wells Unrestricted Fund to the Board of Ministerial Education (BME) during the 2007-2009 biennium. Ministerial Education was asked to come back in February with a budget plan that includes the incorporation of these funds. President Gurgel indicated that he would initiate a study of how to replace pastoral candidates if the prep schools were defunded in future plans2.
WELS news release
November 6, 2006
Synodical Council discusses preliminary plans and budgets
The Synodical Council met at the Synod Administration Building in Milwaukee, Wis., on Nov. 3-4. According to his Word and promise, God guided the church’s leaders through two days of very difficult decision-making. Bible studies on the End Times by WELS President Karl Gurgel and Vice President Wayne Mueller at the beginning of each session set a spiritual tone for the meeting.
Most of the meeting was devoted to reviewing plans and the resulting summary budgets for each area of ministry. The Synodical Council confirmed the allocation percentages approved last spring, which earmarked 75 percent of the total operating budget to ministerial education and mission outreach. The remainder of the budget is for the Conference of Presidents and its district ministry, Christian Giving, Parish Services, Finance, Technology, and Communication Services.
To ensure a balanced budget the council limited ministry plans to available funding. Plans for the operating budget show small increases in ministry support for each of the next four years. Significant ministry needs, however, are unfunded in these proposed budgets. Minimum support for mission work prevents WLES from taking advantage of pressing opportunities. Parish Services will struggle to maintain basic service to congregations. Funding for the Conference of Presidents, the Ministry of Christian Giving, and Communication Services is very tight.
Most challenging is the anticipated projected deficits at the ministerial education schools. Primarily because of lower enrollment3, the schools are facing shortfalls of $2-$4 million in each of the next four years4. To minimize the impact these shortfalls will have on educating future called workers, the Synodical Council approved a special one-time grant to Ministerial Education of an additional $2.6 million for the next biennium (July1, 2007-June 30,2009). Ministerial Education is to return in February 2007 with a plan to manage the remainder of its budget shortfalls. That plan may have to include defunding Michigan Lutheran Seminary, Saginaw, Mich., and partially funding Luther Prep School, Watertown, Wis., after the 2007-2008 schoolyear. In late February 2007, the council will give final approval of all ministry plans and budgets for the next biennium and then submit the information for consideration at the 2007 synod convention.
Although lacking the financial resources to maintain and expand gospel ministry, the Lord is providing great blessing to WELS. Home Missions is planning to help with 150 ministry opportunities in the next two years. World Missions has added a mission professor at Wisconsin Lutheran Seminary, Mequon, Wis. Enrollments at the ministerial schools continue to provide the workers WELS needs for the harvest fields5. Electronic communication, the Multi-Language Publications Committee, and a newly reopened seminary in Hong Kong are allowing WELS to lift high the cross in fields where it cannot send missionaries.
Says Gurgel, “As we struggle with our human frailties, our eyes rise heavenward in thanksgiving and with trust that the Lord of the Church will bless our efforts fot the salvation of many souls and the coming of his kingdom.”
1. If only this discussion had been seriously considered before the 1996 to 2002 spend down of funds. See the Comments.
2. After making decisions that will most likely defund prep schools, if the SC budget is adopted, the president is going to start research on recruitment, a primary function of prep schools.
3. After decisions at the SC level have made it necessary to raise tuition and fees in big chunks, it seems in appropriate to use that as a reason to put the BME under even more budgetary pressure.
4. Shouldn’t this rather be: “The Synod is facing shortfall of $2-$4 million” rather than “the schools are facing a shortfall of $2-$4 million.” The Synod’s purpose includes the schools.
5. What a jumble! Apparently ministerial schools here means WLS, because enrollments have fallen at MLC and the prep schools. The workers are there for the immediate future, but the very fact that President Gurgel is to study how to replace pastoral candidates indicates a long range problem."
The report can be dowloaded from http://www.issuesinwels.org/