Council on Finance and AdministrationReport to Annual Conference

John PearceJune 2018

CFA Meeting Participants Re: 2019 Budget

• John Pearce - President• Terry Hundley - Vice President• Paul Purdue - Secretary• Rashad Bailey• Jane Turner• Deanna McCulley• Jim Hughes• Drew Shelley

• Jay Voorhees• Karen Barrineau• Davis Chappell• William McAlilly – Bishop• Jim Allen – Treasurer• Phil Jamieson – U M Foundation• Scott Aleridge – District Supt.• Melinda Britt – CCOCM• Lynn Taylor – Director of Missional

Alignment

Today’s Main Message

• Transparency: No Secrets/No Surprises

• Stewardship: Are we using the gifts entrusted to us by the local churches wisely to “shape congregations that offer Jesus Christ to a hurting world one neighborhood at a time”

• Change: How do we prioritize where we spend our limited resources?

• New Conference: While that work is ongoing, this presentation is not related to a potential new conference

2019 Apportioned Budget Headline

• 2018 Budget

• 2019 Proposed Budget

• Decrease from 2018

• % Change

• ( Details to follow )

• $14,457,550

• $13,734,671

• ($ 722,879)

• (5.0%)

2017 APPORTIONMENTS RECEIVED

• Churches Paid 100%• Churches Paid 50%-100%• Churches Paid 1%-50% • Churches Paid Zero• Total Churches

Number Amount Paid % of Total

• 395 $11,177,807 88.2%• 82 $1,113,122 8.8%• 64 $380,315 3.0%• 35 $0• 576 $12,671,244• 90.7% of $13,969,747 Apportioned

Who Paid Apportionments - 2017• Brentwood $1,258,644

• Franklin First $ 609,405

• West End $ 407,540

• Murfreesboro $ 342,676

• Hendersonville $ 272,017

• Cookeville First $ 271,030

• Hermitage $ 257,856

• Belmont $ 250,141

• Madison Street $ 235,331

• Calvary $ 228,987

Top 10 Total (33%) $4,133,627

• (12) $100K-$200K $1,728,053

• (30) $50K-$100K $2,266,339

• (46) $25K-$50K $1,506,758

• (443) $1-$25K $3,036,467

Total Apportionment Giving

• (541) $12,671,244

Who Did Not Pay Apportionments - 2017

• 17 Churches Underpaid by > $25,000 $789,210 61.0%• 131 Churches Underpaid by < $25,000 $330,285 25.2%• 33 Churches Paid Zero <$25,000 $179,008 13.8%

• 181 Churches Underpaid for Total of $1,298,503

TN Conference Pension Plans

• TN Conference has three primary pension plans:• Pre-1982 Pension Plan• Ministerial Pension Plan (1982 – 2006 )• Clergy Retirement Security Program (CRSP) (2007 to present)

• All three plans are “fully funded” according to the actuaries at WesPath Benefits (actually “over funded”)• Together the three plans have over $90 million of assets

subject to the performance of the stock market

Clergy Pensions Four Year ActivityReserve Floor Target = $10,000,000

• Beginning Balance

• Earnings/Losses

• Expense• Premium “Holiday”

• Apportionment

• Net Change

12/31/16 12/31/17 12/31/18 12/31/19$17,903,676 $16,971,994 $17,574,973 $16,933,976

$ 1,248,647 $2,829,595 $1,300,000 $1,300,000

($3,366,617) ($3,389,686) ($3,405,077) ($3,364,008)$616,080 $616,080

$1,186,288 $1,163,070 $848,000 $754,960

($931,682) $602,979 ($640,997) ($692,968) $16,241,008

Clergy Health Plan Four Year Activity

• Beginning Balance

• Premiums• Stop Loss Rebate• Expense• Reserves• Apportionment

• Net Change

12/31/16 12/31/17 12/31/18 12/31/19$ 1,797,039 $1,374,931 $1,005,841 $1,011,677

$ 457,355 $592,752 $455,000 $455,000$ 433,142 $79,646($4,359,179) ($3,887,730) ($4,341,664) ($4,484,932)

$300,000$3,046,574 $2,846,242 $3,892,500 $3,600,000

($422,108) ($369,090) $ 5,836 ($129,932)$881,745

2017: General Church Apportionments

• 2016 Actual $2,379,059

• 2017 Actual $2,369,287

• 2018 Budget $2,410,092

• 2019 Budget $2,418,155

2017: Conference Ministry/Programs

• 2016 Actual $5,632,669

• 2017 Actual $6,123,309

• 2018 Budget $5,891,986

• 2019 Budget $5,573,898

Significant Changes 2018 to 2019 Apportionment Budget• Pensions• Health Plan• 5 District Leadership Strategists• District Superintendents• Equitable Comp• Connectional Ministries• Archives and History• Cabinet Discretionary• New Church Development• Congregational Transformation• Higher Education and Campus Ministry• Camping and Retreat• Other Line Items

• TOTAL CHANGE

• ($100,000)• ($308,040)• $450,444• ($39,345)• ($12,196)• ($375,408)• ($22,951)• ($75,000)• ($219,975)• $54,675• ($34,477)• ($10,145)• ($30,461)

• ($722,879)

Other Changes to 2019 Budget• Congregational Development is now• New Church Development • Congregational Transformation

• Young Adults, Youth Ministries, Children’s Ministries, Family Ministries are now “Next Gen”• Archives and History, Board of Laity, Congregational Development,

Higher Education and Campus Ministry, Camp and Retreat Ministry, Martin Methodist College, and Miriam’s Promise budgets need to have recommendations from Connectional Ministries• Connectional Ministries budget needs to support changes made to

their structure

2019 Gross Budget

• Total Expenses

• Apportionments

• Estimated Unpaid Apportionments

• Use of Reserves

• Other Revenue

• ($18,061,708)

• $13,734,671 76.04%

• ($1,425,658) (7.89%)

• $3,292,880 18.23%

• $2,459,815 13.62%

Tennessee Conference United Methodist Church2018 Budget

Category:Apportioned

AmountBudget Amount

Other Income

Use of Reserves

Actual Total Cost % of Total

Pensions: 900,000 810,000 38,000 2,790,693 3,638,693 19.56%

Clergy Health: 4,325,000 3,892,500 455,000 (5,836) 4,341,664 23.34%

General Church: 2,718,048 2,410,092 0 0 2,410,092 12.96%

TN Conference Ministries: 6,514,503 5,891,986 1,752,213 568,620 8,212,819 44.15%

TOTAL BUDGET 14,457,551 13,004,578 2,245,213 3,353,477 18,603,268

Tennessee Conference United Methodist Church2018 Budget

Category:Apportioned

AmountBudget Amount

Other Income

Use of Reserves

Actual Total Cost % of Total

Pensions: 900,000 810,000 38,000 2,790,693 3,638,693 19.56%

Clergy Health: 4,325,000 3,892,500 455,000 (5,836) 4,341,664 23.34%

General Church: 2,718,048 2,410,092 0 0 2,410,092 12.96%

TN Conference Ministries: 6,514,503 5,891,986 1,752,213 568,620 8,212,819 44.15%

TOTAL BUDGET 14,457,551 13,004,578 2,245,213 3,353,477 18,603,268

TN Conference Ministries Detail:

District Superintendents 768,900 692,000 35,000 0 727,000 3.91%Equitable Comp 150,000 133,500 36,000 0 169,500 0.91%Conference Admin 779,685 693,920 0 0 693,920 3.73%Connectional Ministries 1,238,889 1,102,611 177,500 1,500 1,281,611 6.89%Archive and History 101,393 91,254 8,500 3,843 103,597 0.56%Board of Laity 24,500 21,560 0 2,940 24,500 0.13%Board of Ordained Ministry 202,247 180,000 191,471 0 371,471 2.00%Cabinet Discretionary 75,000 67,500 0 0 67,500 0.36%Congregational Development 500,000 445,000 18,742 484,008 947,750 5.09%Higher Education & Campus 880,000 783,200 0 0 783,200 4.21%Camp and Retreat 238,889 215,000 782,000 100,000 1,097,000 5.90%Martin Methodist 625,000 550,000 0 0 550,000 2.96%Miriam's Promise 130,000 116,441 503,000 (23,671) 595,770 3.20%District Administration 800,000 800,000 0 0 800,000 4.30%

Tennessee Conference United Methodist Church2019 Budget

Category:Apportioned

Amount89.62% Budget

Other Income

Use of Reserves

Actual Total Cost % of Total

Pensions: 800,000 716,960 52,000 2,595,048 3,364,008 18.63%

Clergy Health: 4,016,960 3,600,000 455,000 429,932 4,484,932 24.83%

General Church: 2,698,231 2,418,155 0 0 2,418,155 13.39%

TN Conference Ministries: 6,219,480 5,573,898 1,952,815 267,900 7,794,613 43.16%

TOTAL BUDGET 13,734,671 12,309,012 2,459,815 3,292,880 18,061,707

Tennessee Conference United Methodist Church2019 Budget

Category:Apportioned

Amount89.62% Budget

Other Income

Use of Reserves

Actual Total Cost % of Total

Pensions: 800,000 716,960 52,000 2,595,048 3,364,008 18.63%

Clergy Health: 4,016,960 3,600,000 455,000 429,932 4,484,932 24.83%

General Church: 2,698,231 2,418,155 0 0 2,418,155 13.39%

TN Conference Ministries: 6,219,480 5,573,898 1,952,815 267,900 7,794,613 43.16%

TOTAL BUDGET 13,734,671 12,309,012 2,459,815 3,292,880 18,061,707

TN Conference Ministries Detail:

District Superintendents 1,179,999 1,057,515 63,723 0 1,121,238 6.21%Equitable Comp 137,804 123,500 36,000 0 159,500 0.88%Conference Admin 769,230 689,384 0 0 689,384 3.82%Connectional Ministries 863,481 773,852 225,500 0 999,352 5.53%Archive and History 78,442 70,300 8,500 0 78,800 0.44%Board of Laity 21,201 19,000 0 19,000 0.11%Board of Ordained Ministry 201,964 181,000 206,750 0 387,750 2.15%Congregational Transformation 54,675 49,000 0 0 49,000 0.27%New Church Development 280,025 250,958 18,742 206,900 476,600 2.64%Higher Education & Campus 845,523 757,758 0 0 757,758 4.20%Camp and Retreat 228,744 205,000 895,000 61,000 1,161,000 6.43%Martin Methodist 625,000 560,125 0 0 560,125 3.10%Miriam's Promise 130,000 116,506 498,600 0 615,106 3.41%District Administration 803,392 720,000 0 0 720,000 3.99%

CFA Study of Apportionment - Status

• No report or recommended action – yet • Significant discussion and analysis• Example: Cost of one full-time clergy’s health and pension is about

$20,000. Need to pay about $40,000 of apportionments to cover that cost. In 2017, only 61 of 576 churches paid $40,000 or more. (10%)• Lots of data• Many questions• No easy answers• Lots of opinions• Ongoing work

Clergy Health Plan

• Our Plan is Self Funded• “We” are the Insurance Company• Stop Loss Policy• Covers Doctor Visits, Hospital, Prescription Drugs, etc.

Clergy Health Plan Funding Methods

• 1) Continue to Apportion 100%

• 2) Clergy help by Paying a Monthly Premium for a small portion

• 3) Direct Bill full cost to Churches with an appointed plan participant

• 4) Combination of all of above

Clergy Health Plan Issues• What is our actual cost per participant in a self-insured plan

• 564 churches pay an apportionment for clergy health

• 354 churches (63 percent) that pay have a clergy that benefits

• 83 churches (larger) pay $1.5 million for other churches’ clergy

• 127 churches (mid-size) “under pay” on average $5,549

• How do we help the mid size with this cost?

• Are there churches that can’t afford the salary and benefits of a full-time clergy?

• What are missional outcomes of our present cost distribution method?

• Could churches consolidate in order to fully support the full cost of one clergy?

• Can we control our cost better:

• Pharmacy

• Higher deductible with Health Savings Account

• Can we reduce average age of plan from 51

• Should clergy pay some of the premium?

Clergy Pension Plan Issues• 481 participants and 400 churches• 164 churches pay for pensions with no benefitting clergy• How big is our pre-1982 plan excess reserves?• How many years can we pay current service costs with our reserves?• Need to evaluate in terms of decades not years• Where are we heading with number of clergy over next 20 years?• How conservative should we be re: investment returns on reserves?• Will there be changes to our Defined Benefit Plans at 2020 GC?• Requested 20 year Wespath economic analysis of TN Conf. plans

Future Concerns

1) Can’t pay 19 percent of future annual budgets with reserves2) Can’t continue to apportion 100 percent of rising clergy pension

and clergy health plan costs3) Ongoing capital needs at Beersheba and Cedar Crest4) Potential reduction of apportionment collections below 90

percent - economic or political5) Potential expected Bear Market’s impact on pension plans and

reserves

Future Action Plan1) Manage and control costs where possible2) Continue to push to leave dollars at local church for mission3) Better match revenues with costs for participating in events4) Find broad agreement on a new plan to pay for clergy health plan5) Reduce cost of clergy health plan6) Obtain help from Wespath re: Understanding our pension plan7) Invest in areas that support our mission of making disciples of Christ (like

new congregation development)8) Educate broadly the missional impact from apportionments9) Find ways for CFA to help local churches

CFA Recommended Items For Your Action Today1) That the 2019 total apportioned budget of $13,734,361 be apportioned to the churches using method printed in the 2013 Journal p. 109-110.2) That the approved travel expenses for staff and members of councils, boards, committees, and other entities of the conference be reimbursed at the rate set by the entity, not to exceed the maximum mileage amount allowed by the Internal Revenue Service for business travel. 3) That the expenses for at-large members to the 2018 annual conference be reimbursed at a rate not to exceed $150 per day ($300 max), plus mileage at the IRS rate for business travel.4) That the housing allowance designated for clergy conference staff pursuant to Internal Revenue Code section 107 be approved for 2017-2018 as printed in the 2017 Journal. 5) That the base compensation of the district superintendents for 2019 be set at $106,110.