BOP Assistance Program
faces challenging financial forecast
By Carmen Fowler, The Layman, October 22, 2010
FORT MYERS, Fla. – The 10-year financial forecast for the Presbyterian Church (USA)’s Board of Pensions (BOP) assistance programs requires a reduction in the Core Fund spending policy from 6.5 percent to 4.5 percent by 2017. The net result will be a multi-million dollar projected reduction in funds available for direct assistance to church workers. The step-down is scheduled to begin in 2012.
The funds under discussion are generated from investment of the Core Fund, which ended 2009 with $84 million in net assets. The investment rate of return assumption for 2010 and 2011 is 7 percent for long-term and 3 percent for short-term investments.
In 2009, the assistance programs provided $7.54 million to needy retired church workers. In 2010, the forecast is $7.682 million and in 2011 the budget calls for $8.168 million. Laird Stuart, committee chair, said, “In 2011, the budget is to spend 6.2 percent with the allowance to spend up to 6.5 percent. If things change during the year, we can adjust. At this point, the plan is to begin reducing down to 4.5 percent in 2012.”
The problem is that when you take into account income projections and the long-term goal of the preservation of capital, spending must be reduced. Although an active initiative for funds development is proposed and the forecast includes a projected 12 percent increase in gifts, cutting expenses will be required.
The committee was asked to imagine a combination of options that might include a moratorium on increases to housing and income supplements, a 5 percent reduction in total benefits and expenses, as well as a 16 percent increase annually in contributions and the expectation of receipts from the Christmas Joy offering remaining flat. The last two numbers are significantly more optimistic than is actually forecasted.
In terms of Core Fund spending, it was agreed that “a long-term spending formula of 4.5 percent is where we need to be in order to meet our capital reserve expectations.”
Recommendations from the assistance committee to be considered over the next year before consideration by the full board include:
- Reaffirming the financial objectives of the assistance programs of maintaining a spending formula in the range of 2-7 percent
- Maintaining the purchasing power of the assistance program.
- Reducing the spending formula to 4.5 percent within five years
- Developing funds from other sources beyond the investment income from the Core Funds; ideas included:
a. maximizing funds development efforts
b. maximizing Christmas Joy Offering efforts
c. exploring the transfer of charitable funds held by outside trust companies and the Presbyterian Foundation to the Board of Pensions where a higher rate of return would be anticipated.
It was recognized that the long-term forecast is dependent on a number of highly volatile variables.
One of the challenges faced by the assistance fund is the unpredictable nature of receipts from the annual Christmas Joy Offering, which is presently under review by a General Assembly committee.
The committee discussed the reality that the BOP assistance program was once the sole recipient of the Christmas Joy Offering. After the last round of assessment by a General Assembly committee reviewing special offerings, the BOP assistance program lost out on half of that offering. It is now divided with racial-ethnic schools. There is concern that the General Assembly’s review of special offerings may result in another degradation of the percentage of the Christmas Joy Offering allocated to assistance to retired church workers.
Currently, the BOP seeks to encourage participation in the denomination’s Christmas Joy Offering by sending a letter to all congregations prior to the collection of offering and then having regional representatives make thank you calls to churches that participate. They also send short e-mail stories to supplement denominational efforts.
The assistance program of the Board of Pensions helps church workers whose needs exceed the bounds of the benefits plan, personal resources and other means. It also provides grant opportunities and programs to build the practical skills needed to minister in today’s world.
The assistance program comprises a range of discretionary grant programs that complement the benefits plan including emergency assistance for church workers, income and housing supplements for retired church workers, and help with educational debt and other vocational support of clergy.
Unlike the benefits plan, which is funded by dues, the assistance program relies on other funding sources, including half of the Christmas Joy Offering, gifts and legacies directed to the Board of Pensions and income from endowments.