In Uncategorizedby tfwm


The economic avalanche of 2008 swept over virtually all U.S. industries and market segments including private enterprise, municipal governments and non-profit organizations. Virtually all segments of the economy were affected with revenue declines, capital shortfalls and equity erosion. This, in turn, resulted in a year-end budget and fiscal plan polarization for business, governments and non-profit organizations as worry, fear and uncertainty gripped investors, workers and consumers alike.

The dramatic reversal of a boom economy that seemed invincible came at a stunning pace. Beginning in the second quarter of 2008 a series of interrelated events cascaded like dominoes toppling down one upon the other in a free-fall of markets, institutions and economic principles. None of the so-called economic experts had predicted the near collapse of the U.S economy. It seemed, as reporters scrambled to fill their notebooks and newscasters headlined wave after wave of “bad news”, that no one had an explanation or an answer although, with the political season in full swing, it wasn’t surprising that politicians promised a resolution to the economic uncertainty.

When the housing market peaked with banks and insurance companies holding tens of thousands of at risk, floating rate mortgages financial stability at household name institutions first wobbled, then began to crumble. The fear of “failed banks” and a banking crisis was featured prominently in the news media and fueled a “run” on some banks, which saw significant deposit erosion. Banks began to falter and Congress began attempts to shore up the banking system to avoid a panic in the financial markets.

As banking giants struggled to grasp the weight of their own portfolio risk, they began to tighten commercial credit, reduce loan exposures and limit new lending, which in turn began to strangle a business economy built on the ready availability of capital. Suddenly many firms found their investment capital or bank lines of credit greatly reduced, unavailable or altogether withdrawn.

In some cases banks significantly raised rates while their own money costs fell. In other cases banks “called” loans when commercial borrower’s revenues or equity fell below pre-set financial “performance ratios”. The FDIC closed certain banks leaving those borrowers with no borrowing capacity whatsoever and no other institution available or willing to lend to them.

Hardest hit were real estate related businesses, developers, realtors and large land owners, whose greatest assets were inflated real estate values. When values began shrinking, developers and land owners found they had no ability to borrow, to resell these once prized assets while, at the same time, their loan obligations and debt service requirements remained constant. The collapse of the real estate market began when at first residential housing buyers stopped buying, then most development projects were halted, then commercial development ceased. As a result many developers and other firms related to the real estate industry, such as realtors and loan brokers failed, or closed their doors.

As the economy entered a phase where liquidity was reduced, real estate asset values declined and credit availability was reduced. Markets became paralyzed with worry, fear and uncertainty. Sales in general began a slow stall and the cloud of recession began to impact commercial, industrial and retail goods, products and services. The media maintained a heightened focus on every morsel of negative news, economic measurement factor or dwindling facet of the economy. Just as it had with financial decision makers at the country’s business institutions the same kind of worry, fear, uncertainty and a lack of confidence invaded the mindset of nearly every person, family or group in the U.S.

The overall impact of wave after wave of negative economic events was that hundreds of thousands of workers were displaced resulting in the highest unemployment rate since the recession of the late 1970’s. In addition the reduction of housing sales, auto sales and many other types of goods and services resulted in lower commissions, reduced or eliminated bonuses and lowered salaries. All of which resulted in a cycle of less to spend on goods and services which in turn resulted in more layoffs and reduced hours for many workers.

To make ends meet and continue to pay regular installment debts, mortgages and utility bills, many individuals and families were forced to draw on their life savings, their retirement “nest egg”, and their cash reserves. Some borrowed on what remained of home equity lines of credit. Some borrowed on credit cards. Many retirees and soon-to-be retirees found that as stocks and real estate values plummeted—so did their hope for work-free retirement. Many people lost their entire savings and many of the “baby boomers” who had planned to live a carefree retirement began a slow realization of a new economic reality for their senior years.

These dramatic and rapid changes in the basic economic fabric of the country had a profound effect on nearly every individual and family. In turn, the members of congregations of nearly every church and ministry were affected from a financial and personal standpoint. For churches it became evident that combined “offerings” in the form of tithing, contributions and donations would adjust to reflect a new era of conservatism, caution and uncertainty. From a practical standpoint many members of congregations had lost their jobs, or their salaries were greatly reduced. Members of the congregation came to Saturday and Sunday services with financial concerns. Many churches reported increased attendance. And, at the same time, churches reported that requests for financial assistance from members of the congregation and non-members from the local community had risen as much as 30%. In other words while giving was down, the need for help had increased.

Pastors, church executives, facility managers and financial stewards understand that there is divine purpose in all things that happen in life. God’s message is to be heard among the chaos, fear and uncertainty of economic challenges and changes. Part of the events of the past year represent an opportunity for us all, including the church, to get back to basics. There seems to be a readjustment in order of our thinking, a kind of resetting of priorities. As individuals and institutions we seem to be discovering that a new reality is emerging concerning our financial health and well being.

In speaking with several church leaders I have discovered that many churches are taking action to help members of their congregation with special prayer sessions and practical workshops. At the same time churches are striving to help members and non-members with financial aid and assistance, shelter, food and clothing. From an operational standpoint, fiscally responsible church leaders have taken steps to adjust to new economic realities by rethinking budgets, re-evaluating expenditure plans and reshaping priorities. Financial stewards in churches are acting to sustain their church’s financial viability and lead their congregations with specific initiatives aimed to manage through these uncertain economic times. Examples of these steps include:

1) Reality Check
Assess the impact on the congregation from the local and national economy. What are the issues facing members of the congregation. How can the church best help? What does the church need to do to remain financially viable?

2) Assess and adjust Budgets & Expenses
For most churches this is a good time to study the tithing of the congregation. How committed is the congregation to weathering the storm. Where can the church “tighten its belt”? What expenses can be reduced or forestalled?

3) Prioritize
Now is the time to sort out what is the “need to have” and what is the “nice to have”, whether it be a project, a mission, equipment or technology. For many churches media technology has been a new “engine” that drives and sustains attendance and participation. Is the congregation stable, falling, or growing? Invest in equipment, technology and projects that build and sustain the ministry.

4) Spread costs where possible
Like many businesses, churches have historically funded capital equipment costs or even real estate out of the annual capital budget. If surplus cash and fund balances are abundant, that still may be a good strategy. However if cash and fund balances are tight it may be a better strategy to spread capital equipment or real estate costs over their useful life. For instance a $100,000 media system may be a significant outlay in 2009 but spreading those costs with 60 monthly payments results in a monthly cost allocation of just $1950 a month which aligns naturally to monthly contributions and tithing.

5) Increase savings and build an emergency fund balance
If business, government, non-profit organizations and we as a people have learned during this economic crisis it is critical to have an emergency fund to sustain us during the unexpected event or catastrophe. During this difficult economic period it is essential to develop the habit of building and maintaining a fund balance that would sustain operations for several months should there be a catastrophe that would undermine member donations, tithing and contributions. Also, as we have learned, in the midst of those difficult periods the church will be called upon by those in need of assistance for basic life staples. A fund balance not only is a tenant of good financial stewardship but, as a practical matter, it offers the church financial leverage when negotiating with vendors, suppliers and even lenders.

6) Pay down debt.
Those churches with no debt or nominal obligations are in the most advantageous position to weather financial storms and the rise and fall of a roller coaster economy. Lack of debt plus a healthy fund balance allows the church to self sustain through good and difficult times. Lack of debt allows the church to negotiate the lowest interest rates when it does borrow. Having no, or little debt is a hallmark of good financial stewardship. It is also a good example for members of the congregation who may be struggling with control of their personal finances.

7) Find the opportunities
In the midst of a tough economy the church can manage the uncertainties by defining what is certain and helping members to refocus on what is important and where the opportunities lay. Some of the strongest character growth comes during the most difficult challenges we are asked to face. God does not give us a task without the tools to achieve that task. Look for the blessings. Have gratitude. Allow the moment to lead us in a new direction. While the economic market may be in the midst of a “correction” let the lesson for us all be a correction in thinking, hope and belief.

In closing I would like to add that I believe good financial stewardship means that church financial decision makers will pray for guidance and will make adjustments to budgets and plans and church business strategies with an inner peace grounded in the knowledge that God’s purpose in our financial lives is just as relevant as his “light” is in our spiritual lives. The underlying emotion felt by so many people touched by the economic events of the past year has been worry and fear. Yet it is in the midst of fear that more people have come to the church and turned to God to find relief and answers. In turn the church will reach and touch more needy souls now, then before. And many will find a new life and God’s grace and blessing in the midst of these unsettling times.