Wednesday, August 14, 2013

LDS church finances

The financial situation of the church has always been interesting for me.  Maybe it is a spillover from my interest in football.  Since the NFL has the salary cap my interest in the 49ers also has me interested in their finances.  Poor cap management means a bad team.  The LDS church doesn't have a hard salary cap, but it does have a soft cap, tithing revenue.  They can certainly spend more than they get for a little while but to be sustainable the church needs to spend what the receive.  The church also has other business branches, you can read an interesting article here by Businessweek. Many have criticized the article (read this piece by the Deseret News).  I thought the article was excellent, it certainly did not do a good job grasping the goal of the church but I don't think that was the article's point. I also agree with the implied criticism that the church could have given more towards humanitarian projects. While the cover page and images were a bit tasteless I understand that the media needs to sell. To be honest when a church builds a 2 billion dollar luxury shopping mall, it is only inviting these types of media stories.  Given the church's reluctance to open up about finances the story was enlightening and welcome.  But the interesting investments that the church has (cattle ranch for example) are insignificant in terms of church financing.  They generate huge amounts of revenue, but most of that goes to maintaining the businesses. The profits are usually reinvested in the businesses or used in other business ventures such as the city creek project.  While there is a legal distinction between business revenue and profit revenue to me it is still the church's money.  The biggest reason why these interesting investments aren't that important is because of the difference in revenue.  The church is still heavily reliant on tithing as its main source of revenue, this model will continue for the foreseeable future.  The vast majority of yearly revenue for the church is tithing, not investment income.

Currently tithing revenue has flat-lined due to demographic and geographical factors both inside and outside of the US.  As baby boomers retire their income decreases significantly.  Families are having fewer kids and younger people are taking longer to get going in their careers.  This coupled with high unemployment for the last five years or so (and likely the next five years or so) all have a negative impact on tithing revenue.   Geographically more and more members are joining from poorer places in the world (Africa for example) and even in the rich parts of the world, like Western Europe, it is immigrants who are more likely to join who tend to be relatively poor.  This also has negative consequences for tithing revenue. The weak global economy shows no signs of roaring back to life anytime soon.  While the perpetual education fund has done some to increase the earning potential of some members, its impact is not enough to offset major demographic and geographic factors.

Meanwhile demands on tithing revenue continue to increase.  New missions need new mission homes, rapid church expansion in many remote areas means more chapels and temples that need to be built.  Run away costs in higher education make subsidies at BYU, BYU-Idaho, and BYU-Hawaii go up as well.  The spreading of the gospel to every nation and tongue also means an increase in spending on translation and publishing.  It is not a surprise to read about a reduction in church employment.

Over the next week I will be writing several blog posts relating to church finances with specific ideas and thoughts about several sectors.  Hopefully they will be interesting to read and maybe even helpful to someone as the LDS church continues to adapt and adjust to the changing world. 

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