The BGCT Executive Board and the BGCT Executive Board staff received a report today concerning the current financial situation of the BGCT.
To read the complete report that was sent to the board, click here.
Read more below:
DALLAS – The Baptist General Convention of Texas staff is planning to spend only 90 percent of its 2008 budget in order to bring spending in line with anticipated income, and a report to the BGCT Executive Board indicates initiatives are now in place to help the convention live within its means.
“Our financial future is bright if the BGCT makes appropriate adjustments to its processes of developing, adopting and managing the annual budget,” said the report from board members Fred Roach and Elizabeth Hanna. “What the BGCT needs more than anything on the financial front is a commitment to living within the resources God provides.”
The initiatives call for closer oversight of the convention’s finances by the Board’s Finance Subcommittee. BGCT Executive Director Randel Everett said the initiatives will be implemented in consultation with the board.
In the short term, however, the Executive Board staff is dealing with the 2008 budget realities. The total budget (Cooperative Program and investments) “anticipates income that is about $5.3 million more than is prudent to now anticipate,” the report says.
“The current economic downturn is an important factor in this situation,” it continues. “The budget for 2008 was developed in mid-year 2007 before meaningful knowledge was available of the economic slowdown that has occurred in the past six months. Therefore, the BGCT’s projection for income was much higher than is presently being realized, particularly as to gains on its investment assets.”
Trimming about $5 million from an approximately $50 million budget will require spending at a 90 percent level. Full details of the necessary cuts have yet to be determined, Everett said. The Leadership Council, made up of 11 team directors, Interim Associate Executive Director Jan Daehnert and Everett, are in the process of making the decisions.
The BGCT already has shut down its outbound calling effort, which was part of the Service Center, effective March 31, according to Gus Reyes, director of the Congregational Relationships Team. Six Service Center positions were cut. Of those six, one employee left BGCT for another ministry, two employees were reassigned and three were transferred to fill vacant positions.
Everett said some other positions will need to be eliminated in order to reach the 90 percent budget level but not on the scale of layoffs last year. “It is always difficult when any person loses his or her job,” Randel said, “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.”
The 2008 budget anticipated “higher levels of income than can reasonably be expected,” the report to the board says. “It called for an increase in CP giving of about $3.4 million, or 8.5 percent. Through March 31, 2008, actual CP Texas giving is running at 94.97 percent of budget and 94.22 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 two together create the $5.3 million gap between updated anticipated receipts and budgeted expenses.
Looking at the recent past, the report says: “The BGCT’s financial condition has undergone serious challenges during the past eight to 10 years as many churches left to start a new convention and as investment resources have been drawn down to sustain existing ministries and to start new ones. The ad hoc committee looked at the investment side of that equation, while recognizing that the CP giving aspect created financial pressures on the use of investment income.”
On Jan. 1, 2001, the BGCT had investment assets, including reserves, of about $150 million, the report says. As of Dec. 31, 2007, those assets were about $124 million, “despite a number of years of healthy investment gains. This came about because of higher than normal usage of such funds and changes in revenue due to the economic downturn during the early part of this period.
“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 continues. “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 2001 to 2007, which was a decrease of $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,” the report says. “There was a genuine hope that CP 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 “that will help guide organizations in the appropriate use of funds available from endowment.”
Endowment funds have been a “tremendous asset in aiding the BGCT in accomplishing God’s purpose in reaching out in ministry both in Texas and around the world,” the report says. “They have been built up over many years from wills and trusts established by men and women dedicated to maintaining the missions and ministries of the BGCT into perpetuity. They also include convention-mandated and other reserves that add significantly to investment assets.”
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 says.
“It should be noted that the Baptist Foundation of Texas, which manages the majority of BGCT investment funds, have recommended a regular distribution of approximately 5 percent of assets per year,” the report says. Taking both the state regulations and BFT guidelines into consideration, “the BGCT should generally be expending between 5 percent and 7 percent of its investment assets during any given year.”
The BGCT arrived at the current situation “because we sought to sustain and even expand our ministry during a time of financial challenge,” the report continues. “The desire to promote kingdom work exceeded the level of financial resources available at a prudent level.
“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 subcommittee that reviewed investment spending considered several key principles that should be regularly questioned by the Board and its committees: ‘Are we properly balancing our expenditures with our income and the prudent use of resources generated from our investment assets?’ and ‘Are the funds expended being used in the most effective way to accomplish the mission of the convention?’
“These principles were recommended to the Finance Subcommittee and Administration Support Committee and accepted at the February 2008 board meeting as guidelines to begin implementing as soon as possible.”