Chicago's Catholic Church: Putting Its House In Order

The Archdiocese may show the way to the U.S. Church, which has `lost its financial moorings'

When the Archdiocese of Chicago announced early last year that St. Bridget's Catholic Church would close, the surrounding neighborhood of Bridgeport seethed. Angry parishioners circulated a petition urging Joseph Cardinal Bernardin to keep open the parish. They even picketed the Cardinal at Holy Name Cathedral on Palm Sunday. Says parishioner Karen Abenate, who attended grade school at St. Bridget's during the 1970s: "That church was part of our history, and we wanted to save it."

No such luck. St. Bridget's was closed last July. Bridgeport, the Archdiocese explained, simply couldn't support 11 parishes anymore. Gone were the working-class European immigrants who had sustained the neighborhood's parishes for more than 150 years. Non-Catholic Chinese were moving into the area, and church attendance was falling. Indeed, declining rolls had already forced St. Bridget's parishioners to shutter their parochial school in 1979.

CALL FOR HELP. St. Bridget's is far from an isolated case. The Archdiocese, reeling from a $47 million deficit in 1989, closed 47 churches and schools last year. But these were only the most visible--and traumatic--elements of a radical financial restructuring. Two years ago, Bernardin turned to Chicago's Catholic business leaders for help in repairing the diocese's finances. Their advice: Impose basic business discipline to slash the deficit, and step up marketing to increase revenues.

The resulting solution could revolutionize the way strapped big-city dioceses manage their affairs nationwide. Over the past five years, the 55 million-member U. S. Catholic Church, like many a giant ailing corporation, has battled stagnant revenues and bloated costs. "The Catholic Church is in deep financial trouble," says Catholic sociologist and novelist Reverend Andrew M. Greeley. Hardest hit: dioceses with large inner-city populations too poor to fund their parishes. Last year, for example, the Archdiocese of Los Angeles posted a $9.2 million operating deficit. And the Archdiocese of New York rang up a $40 million shortfall.

The Church's problems go deeper than inner-city blight, though. For years, the U. S. Catholic Church hummed along without much concern for the bottom line. Budgets were perfunctory. Priests, unschooled in business, didn't press parishioners to increase their giving as they became more prosperous (chart).

In the meantime, teachers' salaries, utility bills, and maintenance costs for aging church buildings soared. The number of diocesan priests has fallen from 35,000 in 1966 to 26,000 today, forcing U. S. dioceses to hire more expensive lay helpers. Concedes Archdiocese of Chicago Finance Director John Benware: "The Church lost its financial moorings."

The Church's enormous decentralization doesn't help. The U. S. Catholic Church is divided into 190 dioceses and more than 19,000 parishes. Each diocese, in accordance with Roman Catholic canon law, is an independent power that a bishop governs as he sees fit.

HITTING HOME. The effect of the Church's woes reaches beyond Catholics. Its schools educate more than 2.5 million students nationwide, many non-Catholic. Chicago's 138 inner-city Catholic schools, for example, educate 45,000 students, almost half non-Catholics. These schools ran a $15 million deficit last year. If the Archdiocese were to abandon them, says Commonwealth Edison Co. Chairman James O'Connor, who heads a fund-raising drive for Chicago's urban Catholic schools, public-education costs would soar $175 million a year. Catholicism's fiscal crisis is even hitting world headquarters. Rome controls just a small portion of the Catholic Church's finances but expects its budget for worldwide activities to show a $90 million deficit on revenues of $165 million this year.

If the American Catholic Church is to pull itself out of its financial tailspin, it could well emulate Chicago. Back in 1989, more than 100 of the Archdiocese's 400 parishes were so poor they required $20 million in grants to fund operations. Education was the biggest drain: School programs cost $163 million, but tuition covered only $104 million. The future looked even grimmer. According to Finance Director Benware, the Archdiocese would have exhausted its cash reserves and chalked up a $71 million deficit by 1993 if nothing had been done.

The impetus for change came from business leaders. Exasperated by the Archdiocese's inaction, Eileen Corcoran, a senior manager at Ernst & Young, says she threatened to quit the Cardinal's financial advisory committee unless he moved to stop the bleeding. That prompted Bernardin to ask Corcoran, First Chicago Chairman Barry F. Sullivan, Motorola Chairman Robert W. Galvin, Sears Roebuck Chief Financial Officer James M. Denny, and McKinsey & Co. Director R. Michael Murray to design a restructuring plan with Benware. Sullivan assigned five First Chicago staffers, full-time and without charge, to work on the plan. "We had to help out," he says. "The Church is crucial to the fabric of this city."

The committee made its recommendations in late 1989. Besides urging a consolidation of parishes and schools, it called on the Cardinal to rein in spending and track costs more closely. Parishes and schools, the committee recommended, should adhere to budgets, and the archdiocesan offices, which were running a $20.8 million deficit, needed trimming. Moreover, the committee told the Cardinal to speak openly with Church members about the Archdiocese's woeful finances. Says Benware: "Most parishioners weren't aware there was any problem."

By early 1990, Benware was hauling the Archdiocese into the 20th century. Some of his moves were typical of any large corporation. Sales of assets, mainly land, raised $6.2 million. A restructuring of archdiocesan offices, including 50 layoffs, should save an additional $1.5 million. Parishes are now required to submit three-year budgets and quarterly financial reports. Pastors exceeding their budgets are called in for consultation and urged to cut expenses. Says Benware: "We've just begun implementing basic business practices." Such changes helped to slice the deficit by 40%, to $29 million, last year (chart). Says Bernardin: "We've made big strides."

Bernardin hopes to make the new focus on financial management a permanent part of the Archdiocese. He has hired financial managers for each of the Archdiocese's six regions to help pastors make budgets. And seeking to promulgate his own success with finance councils, he decreed that by the end of last year, each parish would have a local council of parish business leaders.

The Archdiocese also began to scrutinize its lending practices. Before the late 1980s, it made operating and capital loans to parishes on little more than a handshake. By 1989, more than 33%, or $16 million, of such loans were delinquent. St. Kevin's Catholic Church Pastor George Schopp recalls receiving a $46,000 loan in 1982 to repair the church's roof, which was never repaid. "We didn't have a plan," he says. To encourage fiscal responsibility, Benware began devising loan-repayment plans and charging interest on loans equal to 90% of the prime rate.

CONSOLIDATING. Perhaps the most important changes came on the revenue side. Seeking to make Catholic schools more self-supporting, the Archdiocese demanded that they pay 65% of their costs through tuition by 1990, up from an average of 60% two years earlier. Tuition jumped 10.1% last year, hitting many inner-city schools hard. At St. Benedict the African Academy in Chicago's poverty-ridden southwest side, tuition has jumped 22% in the past two years, to $1,100. Critics charge that the Archdiocese is balancing its budget at the expense of those who need its programs most. "Tuition increases are tough on the poor," says one inner-city pastor. "Many are already working two jobs just to pay for school."

Bernardin went even further: He raised taxes. The Archdiocese offices are funded by an assessment paid by the parishes. Last year, the assessment jumped to 10% of parish revenues from 6.5%. This move virtually wiped out the Archdiocese deficit but hit the parishes hard. Last year, for example, prosperous Faith, Hope & Charity parish in subur Archdiocese jump $40,000, to $125,000.

Parish consolidation also raised hackles--but reined in costs, too. Prior to 1990, one impoverished six-square-mile area, for example, had been served by 10 churches and 6 schools--or one church for roughly every 200 parishioners, down from 10,000 in the 1960s. Bernardin consolidated the area into one parish with two churches and three schools. The renamed St. Benedict the African parish required only a $700,000 subsidy last year, down from $1.4 million in 1989. During 1990, overall parish operation expenses fell 6%, to $132 million, reversing a 12% rise, to $140 million, in 1989.

CREATIVE SOLUTIONS. The Archdiocese also kicked into high gear something similar to a new marketing plan. Priests were urged to adopt a "stewardship" program, which beckons church members to give more generously of their "time, treasure, and talent," says Bernardin. The Cardinal hopes the approach, rooted in the Old Testament notion of tithing, will increase giving and make parishes more self-sufficient. To encourage donations, some parishes are sending members monthly statements, which they can pay along with their other bills. Bernardin says that more than 25% of the Archdiocese's parishes have implemented the stewardship approach so far, and their Sunday collections have risen 25%.

Some parishes are getting even more creative. Old St. Patrick's Catholic Church, a once-decaying parish that borders downtown, has shifted its focus to meet the needs of young adults who work in nearby offices. Pastor John Wall opened a center that gathers groups of professionals together to examine questions of work and faith and offers workshops on such topics as how to write a resume. He also opened a school that provides day care for the children of downtown workers. By marketing to young adults, he has attracted 1,200 new members, almost all from outside the parish, since 1985.

Certainly these reforms have their critics. Sociologist Greeley believes that emphasizing stewardship will do little good unless pastors also involve their members in church life. And that, he says, will be difficult as long as many U. S. Catholics remain alienated by traditional church doctrine on such social issues as birth control.

Bernardin insists that the financial crisis requires first priority. "To fulfill our mission, we have to have the resources," he says. But for church members such as Karen Abenate, that approach doesn't come without pain. She hasn't attended mass since St. Bridget's closed.

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