DALLAS (ABP) — According to a Baptist General Convention of Texas report, the group's anticipated 2008 income falls $5.3 million short of budget, requiring cutbacks in spending and staffing for the second time in as many years.
The report calls on the Executive Board to provide greater financial oversight — particularly regarding the convention's use of investment assets, which have dropped about $27 million in seven years.
“The BGCT has come to this point because we sought to sustain and even expand our ministry during a time of financial challenge. The desire to promote kingdom work exceeded the level of financial resources available at a prudent level,” said the report, compiled by board members Fred Roach and Elizabeth Hanna. “In the newly reorganized board, it became evident that the process review and oversight of the budget and financial condition of the convention was inadequate.”
The 2008 budget anticipated “higher levels of income than can reasonably be expected,” the report said.
In response to the anticipated budget shortfall, six convention positions have been eliminated in a cost-cutting measure. BGCT leaders also expect additional staff cuts in response to the report. However, they do not promise to be comparable to a large round of layoffs in 2007.
Roach served as chair of the BGCT Executive Board's ad hoc subcommittee for review of investment spending and is chair of its finance subcommittee. Hanna is chair of the board's administration support committee.
The budget called for an approximately 8.5 percent increase in Texas Cooperative Program giving — about $3.4 million. Through March 31, actual receipts are running at just below 95 percent of budget and at 94 percent compared to last year's giving.
“On the investment side, the BGCT projected use of about $6.8 million, which is $1.9 million beyond the level recommended by the Baptist Foundation of Texas for 2008,” the report states.
In response to the anticipated shortfall, staff will cut spending to 90 percent of budget. Full details of the necessary cuts have yet to be determined, BGCT Executive Director Randel Everett said. The convention staff's leadership council, is in the process of deciding which specific budget items to reduce.
The Baptist Building already has shut down its outbound calling effort effective March 31, according to Gus Reyes, director of the BGCT congregational relationships team. Six BGCT Service Center positions were cut. Of those six, one employee left the BGCT for another ministry, two employees were reassigned and three were transferred to fill vacant positions.
Some other positions will need to be eliminated in order to reach the 90 percent budget level, Everett said, but not on the scale of the 2007 layoffs.
“It is always difficult when any person loses his or her job, and the leadership council is committed to a minimum reduction of personnel while at the same time identifying and sustaining the priorities of the BGCT — especially the programs that relate directly to the support of the churches,” he said.
The report by Roach and Hannah notes a combination of factors contributing to the anticipated shortfall — decreased Cooperative Program giving, a general economic downturn and a decline in investment assets.
In part, the report attributes the drop in BGCT investment assets — close to $27 million in seven years, despite overall market growth during much of that period — to unusually high use of those funds.
“In the six years prior to 2006, the BGCT had expenditures that averaged 7.1 percent on its investment assets, while investment earnings for this period averaged 2.6 percent,” the report states. “In the past two years, the average rate of expenditures was 13.4 percent (15.5 percent in 2006 and 11.2 percent in 2007), while investment income for the two years averaged 11.8 percent.
“The change in investment assets from Jan. 1, 2001, to Dec. 31, 2007, which was $27 million, means that we will receive less income in the future on these decreased assets. If investment assets were still at the 2001 level and if the 12.5 percent rate of return experienced in the past five years continued into the future, then there would be $3.4 million more available every year for use in BGCT missions and ministries. In other words, such a drawdown of assets negatively impacts our future by millions of dollars per year.
“It should be noted that these expenditure levels were pursued with the best intent of sustaining important ministries to and on behalf of Texas Baptist churches. There was a genuine hope that [budget] giving would rebound in order to continue these efforts. That hope, however, has not been realized, at least not to the level that would be required.”
The report also notes that in 2007 the Texas Legislature adopted new regulations regarding the prudent management of institutional funds.
“In short, the new regulations recognize that organizations go through periods of economic upswing and downturn. They set forth that to expend more than 7 percent of investment assets in any given year would be imprudent. This should be the benchmark by which the BGCT operates in the future,” the report states.
The Baptist Foundation of Texas, which manages the majority of BGCT investment funds, has recommended a regular distribution of about 5 percent of assets per year, the report says. Taking both the state regulations and foundation guidelines into consideration, “the BGCT should generally be expending between 5 percent and 7 percent of its investment assets during any given year,” report concludes.
— Ferrell Foster contributed to this story.
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