Decision #3 - Shared Finances

Problem to be Solved

How do parishes which maintain separate finances deal with shared expenses?

Background

Civil Law

In civil law, the Archdiocese of Seattle is registered as a corporation sole, a special legal structure that allows the office holder of the Archbishopric of Seattle to own every piece of Catholic property personally. The Vatican, since 1911, has pushed the bishops of the United States to abandon this practice (letter), but few have.

Church Law

In church law (“canon law”), however, parishes are considered separate entities from the Archdiocese and from each other (see this excellent Pillar explainer). The Archdiocese can tax parishes, and parish priests are required to provide an accounting of their administration to the Archbishop, but the relationship between the two is far more like a franchise than a branch office.

Canonically, each separate legal entity is referred to as a juridical person (as opposed to a physical person, which is an individual), and “ownership of goods belongs to that juridical person which has lawfully acquired them” (can. 1256). Which means that money and property belong to the parish that raised/bought them, not to the Archdiocese.

Partners in the Gospel

Partners in the Gospel deliberately does not change the canonical status of any parishes at the beginning of the process. In fact, the three-year process is specifically a process to prepare us for a change to our legal status, from many different parishes to one single parish. Meaning that all of our parishes remain legally, and therefore financially, separate until we submit a request to Rome (likely in 2027) to combine all of our parishes into one.

Whatcom County

In Whatcom County, there are four juridical persons: Assumption, Sacred Heart, St. Joseph (Ferndale), and St. Joseph (Lynden). All of the other entities belong to one of these four juridical persons. Specifically:

Assumption Parish (includes Assumption Catholic School)
Sacred Heart Parish (includes Viking Catholic)
St. Joseph, Ferndale (includes St. Anne and St. Joachim)
St. Joseph, Lynden (includes St. Peter)

Right now, all of these entities keep separate books - for a total of nine sets! - but it does not have to be this way. We technically only need four sets of books, as the money and property from the entities in parenthesis legally belong to their sponsoring parish. And we must maintain at least these four sets of books, as it would be illegal to combine finances until we are legally joined.

Shared vs. Local Expenses

What are the expenses that need to be shared?

A shared expense is something from which multiple parishes benefit. These might include:

All clergy salaries / benefits
Regional staff salaries / benefits
Shared contracts (e.g. tech management company)

A local expense is something that only benefits a certain community. These might include:

Local staff salaries/benefits
Local operating expenses (utilities, etc.)
Building maintenance / improvement

An interesting case study is rectory expenses: ongoing expenses like rectory utilities would be considered regional, as housing expenses are included in priests’ benefits package; however, building maintenance and improvements on those buildings would be considered a local expense, as the building itself belongs to the local parish.

The above is a list of examples and is not exhaustive. There will be many items which will need to be classified as they emerge.

Multiple Models

Ultimately, a formula must be developed to determine how much of the regional expenses are covered by each parish.

At its regional Partners in the Gospel trainings in March 2024, the Archdiocese provided a list of factors that might be considered in this formula:

Number of Masses
Square footage
Number of registered parishioners
Number of givers
Ordinary Income
Mutual agreement

We might classify these factors into three categories: (1) based on parish size [number of registered parishioners, square footage], (2) based on amount of activity [number of Masses], and (3) based on strength of giving [number of givers, ordinary income]. This list can be modified. Factor #1, for example, might consider Mass counts rather than registration, and Factor #2 could be made even more granular by accounting for daily Masses or even priest office hours. One could also imagine a hybrid formula that uses some factors for certain expenses and other factors for other expenses.

In every case, these factors are trying to define what is a fair apportionment; however, what we consider “fair” will depend on how we see the mission of the Church and the nature of a parish.

Whatcom Proposal

I am proposing that the Whatcom Family use a formula based on Ordinary Income (Ordinary Income includes things like Sunday collections but excludes things like fundraising for a specific purpose). Specifically, I am proposing that an annual percentage be set and that each parish pay the same percentage of their Ordinary Income into the regional pool each year. So, for example, if the percentage is 10%, and Parish #1 receives $250,000/year while Parish #2 receives $100,000, then Parish #1 would pay $25,000 to the regional pool and Parish #2 would pay $10,000.

I am proposing this because it means that every dollar donated in Whatcom County supports our regional efforts equally. It does not matter whether someone gives a dollar in Blaine or Deming, our Family is equally supported by that dollar.

This approach also helps us avoid two powerful temptations:

The temptation to tribalism

Much of our work over the next decade will be shifting our identity -

FROM : “I am a parishioner at [place], who is working with the other parishes.”
TO: “I am a Whatcom Catholic who often attends Mass at [place].”

This shift has to happen with our money, too. We want to shift -

FROM: “My donation is primarily for [my place], and whatever is left over can go to the regional mission.”
TO: “My donation is primarily for the regional mission, and what remains goes to supporting [my specific place].”

By giving an automatic percentage to the region, we preserve some of the logic of the tithe, which says “My first x% goes to God, and the rest I can use on myself.”

The temptation to consumerism

We will also be tempted to think of the regional expenses as contracted services and the regional employees as contractors rather than ministers. Again, we will want to shift our thinking

FROM: “My parish raises 40% of the money for the county, so we should have 40% of the Masses.”
TO: “Masses should be scheduled wherever they are evangelically most effective, rather than where there is the most money.”

By shifting the thinking away from “My parish pays for what it gets,” to “My parish equally contributes to the regional mission,” we become more effective at fighting the temptation to consumerism.

Procedure and Some Initial Numbers

NOTE: These are very rough numbers, and we will be having our Finance Councils and finance employees do the actual calculations for implementation.

Step 1 - Determine Total Family Ordinary Income

Actual Ordinary Incomes from July 01, 2022 - June 30, 2023

Step 2 - Determine Approximate Regional Expenses

VERY rough estimate of initial regional expenses. Assumes 3 regional employees: Director of Facilities, Director of Finance, Executive Assistant for Priests

Step 3 - Set Percentage

$608,000 is just under 25% of $2.5 million, so the regional percentage would be set to 25%.

Last column shows a 25% share of regional expenses.

Step 4 - Finalize

The initial percentage is an estimate that allows parishes to pay into the regional fund throughout the year, so that the regional fund can pay out its expenses throughout the year. It is very akin to pre-paying a specific percentage of one’s income in taxes each pay period.

However, by the end of the year, ordinary income and regional expenses will have been different than expected. During end of the year financial reconciliation, the actual ordinary incomes and the actual regional expenses will be calculated, and the actual per-parish percentage will be set. Then, any parishes that overpaid/underpaid relative to their ordinary income will be credited/debited going into the next fiscal year.

Extra Note - Schools

Family #2 (Whatcom Catholic) also supports both Assumption Catholic School (ACS) and Viking Catholic, so there might be questions about how these fit into the above financial system.

Both ACS and Viking Catholic are mission-oriented ministries and so are legitimate parish expenses, but they are also ministries that serve more than Whatcom parishioners. Approximately 30% of ACS students are not Catholic, and of course the vast majority of Viking Catholic students come from parishes outside of Whatcom. As such, while our churches have some responsibility to fund these ministries, I do not consider it our responsibility alone. We should make sure that non-Catholic students at ACS and other Catholic parishes for Viking Catholic are helping us fund these ministries.

As such, I (currently with ACS, plan to with Viking Catholic) isolate the finances of these institutions, as though they were completely financially independent, and then record the support from the Whatcom Catholic Churches as “school support”. This allows us to see how much revenue comes in from tuition (ACS only), from fundraising, and from parish support; and further allows us to invite other entities, donors, and Catholic parishes to support these ministries at a similar level.

With Assumption Catholic School, the Whatcom parishes together currently contribute approximately $200,000 in scholarships each year to reduce the tuition burden on Catholic families. Shortly after July 01, I will be discussing with the various Finance Councils the idea of regionalizing this expense, since we want to support every Catholic child, regardless of what Mass they attend.

For Viking Catholic, Fr. Tyler will spend approximately 2/3 of his time on that ministry, so if Viking Catholic pays a proportional share of his expenses, I estimate it will cost them approximately $48,000. That amount is currently being covered by Sacred Heart Parish implicitly (at a slightly different proportion). Come July 01, I am asking Viking Catholic to pay that amount explicitly to the Whatcom Catholic Churches; but I have also agreed to pay them back the same amount in school support, to honor Sacred Heart’s current agreement. This may seem like a silly accounting trick, since it does not change our revenues or expenses, but by separating out the expense it allows us to try to raise that additional money from other Catholics in the Archdiocese, so that the cost of the Viking Catholic chaplain does not rest solely on the shoulders of Whatcom Catholic.