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Dear Fellow Members of Winnetka Congregational Church As members of WCC, we have some important issues to address to keep our congregation financially healthy and vibrant. First, our projected 2011 income is coming in $65,000 below our budgeted level. We need your help to close this gap. Second, we need to broaden and increase participation in the financing of the church. Too much depends on too few. This is not new but it is not sustainable over the long-term.
As your Council, we believe these financial situations arose because we have not effectively communicated our “operating” financial condition. The desire is that we, as members of Winnetka Congregational Church, take steps to address our collective financial responsibility for the mission of our church.
To facilitate our collective understanding of the financial picture, the Council is publishing this special edition of the Messenger. In the Messenger, we will cover the important facts regarding our income and expenses. We are also holding informational sessions this spring and summer to answer questions and get your feedback.And we will contact members directly to make sure that all voices and opinions are being represented in these dialogues.
Sincerely,
The WCC Council
Chair: Steve Huels Vice Chair: Judy Archambault Clerk: Bob Smith Treasurer: Clyde McGregor Worship Councilors: Peggy McNamara, Brad McLane Education Councilors: Ed Katzman, Chuck Dowding Nurture Councilors:Carla Vorhees, Nick Schoewe Support Councilors: Bob Linn, Bob Ebersole Outreach Councilors: Bruce Kelly, Patti van Cleave |
Summary
2011 Budget Shortfall
We have a $65,000 income gap in the 2011 budget.Current pledging is only $850,000, $25,000 short of our original goal. In addition, due to the passing of a generous benefactor, a large annual contribution of $40,000 will not continue. If we don’t address this shortfall, we’ll run a very large deficit this year, not the balanced budget that the congregation passed unanimously in February.
To avoid a very large deficit, the Council has prepared a contingency plan with identified reductions totaling $58,000 in Outreach, planned personnel compensation and other ministry group program support.However, that is not how we want to solve this gap. Rather, we want to raise the income through incremental pledges.If every member family increased their pledge by $500, this income gap would be closed.
This is our immediate appeal. We need all members to help close this gap.
Long-Term Sustainability
The good news is that our balance sheet is in very good shape. We do not anticipate any short or long term capital needs over the next few years, we have no debt, and we are in a good cash position.
We have a more fundamental issue, however, that everyone needs to understand and help us address. The facts are that not enough of the annual budget is covered by our annual pledges and we rely heavily on the continuing generosity of a few members to meet our annual pledge goal.
This creates a risk to the congregation’s long-term financial stability. The loss of one or two large sources of income creates a “crisis” that must be addressed within the current year through short term budget adjustments. This can be a very difficult situation to manage while maintaining a balanced budget.
To assure our continued longer term fiscal health, we need to expand the depth and breadth of our church support from members. Over the longer term, we must not remain overly dependent on the generosity of a few.
Income Facts
Income is budgeted at $1.18M in 2011, $6,000 lower than 2010 actual income. The 2010 income was boosted by a generous bequest of $37,000.
Here is what makes up the Income portion of the budget. Income from pledges is the primary source of annual funds for the church operations, programs and charity. In 2011, pledge income was budgeted at 74% of Total Income, $8,000 lower than actually received in 2010. At the time we set the budget, we recognized that the departure of a few families would decrease 2011 pledge income relative to 2010. Though pledge income is the largest portion of the income budget, we believe that it should be higher. It only covers 74% of our annual expenditures, and only 88% of the Support Group (personnel, building, grounds and administrative expense) expenditures. We believe that pledge income should at least cover Support Group expenditures. Based upon the amount of pledges to date, however, we are $25,000 short of the budgeted level.
The second largest portion of the income budget is Bequests/Memorials, budgeted at 8% of total income. For 2011, this source was budgeted $24,000 lower than 2010 results, recognizing that the $37,000 bequest that boosted 2010 revenues would not repeat in 2011. We do look for positive outcomes from the effort to increase memorial gifts. However, due to the passing of a generous benefactor, a large annual contribution of $40,000 will not continue. We now expect the Bequests/Memorials to total approximately $60,000. This creates the second portion of the budget gap. Between pledging and bequests/memorials, we are projecting a $65,000 income budget gap.
Investment income is budgeted at $90,000, also 8% of total. This reflects the lower revenue projection derived in part from lower budgeted income transfer from the Collective Investment Reserve (CIR) Fund. The CIR Fund income is down based on using a 3-year moving average to smooth withdrawals. Annually the amount of income transferred from the CIR is calculated using a 3-year moving average. This provides a cushion against a steep drop in income during a market decline, but also does not immediately recognize a rise in the income earned on our investments. Starting next year, we project the contributions from the CIR will increase.
Other contributions are budgeted at 6%. These include prior year's pledges received after the books closed, plate offerings, and support from members who have not pledged.
Other income and Fund Transfers account for 1% and 3%, respectively. Other income includes user reimbursement fees for use of the building, fees from weddings/memorials, interest income from the Harkness Outreach Center Loan, interest income from our bank account and other miscellaneous items. The Fund Transfers represents using contingency funds to support the budget in 2011; these funds were set up for this purpose.
What we can tell from these income facts is that our budget relies too heavily on non-pledge sources. As it has for many years, 2011’s income budget includes over 25% from sources other than pledges. We have been blessed to have so many generous benefactors and sources of funding for our church and works. But to keep our congregation healthy and vital, we must reduce our dependency on these sources.
This is the first long term issue that we must address – we need to increase pledges to cover a greater portion of our annual expenditures.
Expense Facts
The Expense Budget calls for a slight increase over last year’s actual expenses and budget.
The budget includes moderate expense increases in every ministry group except Outreach. The biggest increase is in Nurture, the smallest budgetary area, reflecting some new program initiatives along with moving the Family Night Dinners into this group. All areas of the budget are closely inspected and tightly managed to keep overall expenditures low while maintaining our breadth of offerings.
Outreach
For the last decade, our church has allocated 10% of our total revenues to Outreach. Most of the Outreach budget supports outstanding local agencies meeting basic human needs in the Chicago area. In many cases, specific program initiatives or the financial well-being of these local agencies are dependent on our continuing support.
As a Council, we have struggled in the last few years as we have tried to keep faith with our long-term commitment to our Outreach mission while still being good financial stewards of the church resources. When current year budget adjustments have been required, Outreach tends to bear a disproportionate share of the overall burden because there are a limited number of short-term adjustments in other budget areas that do not have longer-term consequences on church operations.
To address the uncertainty regarding current year income, the Council has adopted a year-end procedure for restoring any reduction in the Outreach budget by an amount equal to any surplus ultimately realized in a church year. Funds set aside under this procedure are incorporated in the Outreach giving plans for the following year.
Personnel
The personnel component is the largest part of the budget at 67%, down slightly over the last few years. We have continued to leverage a part-time model for both pastoral and staff positions. The Personnel budget continues to reflect part-time staffing for music, education, and pastoral staff. The 2011 budget reflects last year’s change of two administrative positions to part-time from full-time. We continue to consider other opportunities. The Personnel budget includes a salary increase for pastors and staff – they have not had their salaries increased for the last four years.
When
allocated between various functions, the single largest part of the budget (32%)
is devoted to pastoral and worship related activities. Over 25% of the budget is
devoted to Mission, Education and Music. Maintaining the church facilities
consume 20% of the budget and 21% is used in administrative functions.
Historical Expense Splits (% of total expenses)
|
|
2007 |
2008 |
2009 |
2010 |
2011 |
|
Worship |
3% |
3% |
2% |
3% |
3% |
|
Nurture |
1% |
1% |
1% |
1% |
1% |
|
Education |
2% |
1% |
1% |
2% |
2% |
|
Outreach |
10% |
10% |
10% |
10% |
9% |
|
Bldg/Ground |
10% |
11% |
11% |
10% |
10% |
|
Personnel |
68% |
69% |
69% |
68% |
67% |
|
Other Support |
7% |
6% |
7% |
7% |
7% |
Staff Allocated to Ministry Groups
Contingency Plans
In an effort to manage with our current income, many tough choices have already been made (no raises, no bonuses, position restructuring, and selective use of reserves). We are at the point where further shortfalls will have significant, immediately noticed impacts either to staff (programming) and/or outreach. While we believe we are going to close that gap, we have developed contingency plans to address expenditures in case we fall short. You expect us to manage our resources wisely and we have promised to be fiscally prudent. So these contingency plans are in place to adjust expenditure if the income shortfall persists.
If we are not able to close the gap through increased pledge income, we will take the following actions:
· cut Worship, Education and Nurture budgets by 10% ($8,000),
· defer $20,000 in raises in Support Budget, and
· cut $30,000 in planned contributions from Outreach budget.
Pledging Facts
Here is some data from this year’s pledging.
· The lower 25% of pledges (those <$1000) account for only 2.5% of the pledged amount.
· The lower 50% of pledges (those <$2000) account for approximately 11% of the pledged dollars.
· In contrast, the top 3% of pledges (those $15,000 or higher) represent over 35% of the pledged dollars.
The table below illustrates the concentration of pledges. The chart shows data for 2011 pledges grouped by amount or value. In the chart, the number of member family pledges (the blue bars) are plotted next to the cumulative value of those pledges from those members (red bars). This 2011 data is much like previous years.
This is second fundamental problem that we must address - too much of our annual pledge income is coming from a very few, very generous members.
We need to change this distribution. Specifically, we need more members contributing in the $3,000 or higher levels. We cannot be financially sound with 60% of the congregation’s pledges covering less than 20% of the budget.
Our request of all members remains the same: please pledge. Of active families, we estimate that 14% have not pledged. If you have not contributed, please do. It is one of the responsibilities of membership.
Our additional request of all members - please pledge generously. If you are pledging less than $1,000, please increase your pledge to $1,000. If you pledged $1,000, please increase your pledge to $1,500 or $2,000. An increase of $500 from all members below $3,000 would eliminate this year’s income gap.
Finally, if you did not increase your pledge in 2011, please consider doing so. To date, our pledge profile shows 64 pledging families increased their giving by an average of 21%. We also had 24 new pledges. That’s great news! The opportunity is in the other categories - 113 showed no change and 28 decreased. Please consider increasing your pledge in 2011.
And for those that have contributed significantly to the church for many years, we thank you. Your generosity has kept us healthy for many years.
We also recognize that some members can’t participate or increase their contribution at this time. We recognize that experiences of serious illness, divorce, unemployment or underemployment are all too common in our church family. If you can't increase your pledge now, that’s ok - we want you here. We want you to be with your church family. We will strive to make this a place of comfort and support for you during your time of need.
Assets and Liabilities
Our balance sheet is strong and improving on many fronts. We are debt-free, having retired the outstanding loan from the Sanctuary Renewal. Our cash balance at this time of year is very strong because of pre-paid pledges. The Collective Investment Reserve (CIR) Fund is growing again, both through Sanctuary Renewal gifts and investment returns. The CIR Fund balance as of March 31st was $2,564,920, 14% higher than at the end of 2009 balance.
