South Carolina Episcopalians

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2019 Breakaway Convention Guide - Part III

March 14, 2019

Budget Gimmick May Create False Confidence in Financial Health of Breakaway 'diocese'

Budget writers anticipate supporters and parishes will come up with $543,000 for lawyers in 2019;  Unrealistic projection disguises excessive administrative spending and guarantees future budget deficits

Since the August 2017 decision by the state Supreme Court that the "Diocese of South Carolina' belongs to teh Episcopal Church, the Lawrence 'diocese' has shown a greater sensitivity to spending financial resources that belong to the Church.  The breakaway 'diocese' appears to have been using close to $300,000 a year in proceeds from trust funds that were created to underwrite the work of the Church in eastern South Carolina. 

Now, that practice seems to have stopped.

As a result though, there is increased pressure on the organization to cut its operating budget or create new revenue sources to bolster its annual operating budget.  That has not happened, at least not to the extent needed to avoid some fairly significant deficit spending.

With deficits of $280,144 in 2017 and $495,289 in 2018, it appears delegates to this weekend's annual convention on James Island have their work cut out for them if they intend to get diocesan spending under control.

Click here to see proposed 2019 budget delegates will be voting on

3.1  The Devil is in the footnotes

In our experience, limited resources inspire budget-writers to get overly creative in making their organization's financial prospects rosier than they really are.  The result is that policy-making bodies, like church conventions, unwittingly make ill-informed and unwise spending decisions. 

We suspect that is happening with the budget projections for 2019 spending and income that has been provided to the delegates for this weekend's convention of the breakaway 'diocese'.

Our review of those numbers in Part II of this series led us to a highly unusual footnote by budget-writers, admitting that all of the $788,520 they were requesting for legal services this year was not intended for legal services. (Line item #73172).

It reads… “Legal expenses for 2019 are expected to be $700,000.  This is offset by anticipated income from churches and gifts shown on page 2.  The additional amount budgeted is to help offset losses for the prior year.”

What in the world?  Let's address this piece by piece.

3.2  "The first thing we do, let's kill all the lawyers."

                                                                   - Henry VI by Wm. Shakespeare

Actually we are not suggesting killing lawyers, but the time has long since passed for delegates to the convention to rein in the phalanx of law firms that is making a killing on this lawsuit ... and producing only negative outcomes.  

The estimate of $788,520 in the proposed budget (or $700,000 if you go with the footnote) raises the question of why diocesan lawyers are going to be billing this extraordinary amount to the 'diocese' when no trials or courtroom activities are even scheduled.  (A hearing is planned in the Federal false advertising case against Bishop Lawrence in May of this year, but both sides have already filed their briefs with the judge, whom they have asked to simply render a decision based on what they have given him in their briefs.  In other words, no trial.)

This estimate for lawyers becomes even more mystifying when you consider that the Lawrence 'diocese' just paid nearly $1 million for legal services in 2018, which also seemed like a low-energy year for them from our perspective.

If this $788,520 number does not concern to you, consider that from 2012 through 2015, the four-year total paid by the breakaways for legal services  was only slightly more than $700,00... and those were years in which we know the lawyers were busy.

3.3   Truth in budgeting

Even if you think these legal services are worth this money, there is still a second, equally as troubling question:  If the 'diocese's' estimated 2019 legal bills are only $700,000, why are the Convention delegates being asked to approve $788,520?  An excess of $88,520 is a lot of money to ask delegates to simply sign off on without any idea where it is going.

And what are the 'losses from last year" this $88,520 is supposed to be paying for?

3.4  Gimmick?

Okay, so you are good with the $788,520 for legal services and you're not bothered by the mysterious $88,520 going somewhere unknown.  Still you might want to do what we did and follow the instruction in the footnote and head back to page 2. 

There you will discover a brand new revenue line item in the operating budget called “Income designated for legal expenses."  Yes, it means the congregations and individuals in the Lawrence 'diocese' are expected to be kicking in another $543,000  by the end of the year. 

Not going to happen, in our view.

Never in the history of fundraising for this lawsuit have donations in a single year even come close to this amount.   The greatest amount received by the 'diocese' in a single year was  $374,876 in 2015, but it dropped to $111,789 in 2016.

Now that the case has been resolved, it is very unlikely that breakaway supporters are going to actually continue to give money to the cause.  In fact, congregations loyal to Lawrence have already been bailing out on further financial commitments to the lawsuit.  They have budget problems of their own, and their congregations want to move on.

Since these congregations have consistently refused offers by the bishop of the real Diocese of South Carolina to settle things and move forward, they are going to need their financial resources to  deal with the heightened scrutiny they will face as their buildings are returned to the Church.

In our view, this new budget item is a gimmick.   We suspect it is a made up figure that has been put in the 2019 budget to create the appearance that there will be more unrestricted money coming into the operating account than is realistic. 

However, it also has the effect of making diocesan finances in 2019 look stronger than they really are ... and provides cover  for raises and other excessive spending to continue without restraint.

3.5  Legal Defense Fund reincarnated

We were intrigued to see how much this new income line item sounds like the restricted account known for the past 12 years as the diocese's "Legal Defense Fund". 

To us, it looks like the 'diocese' is moving the line item into its operating account, apparently freeing it from its current restricted nature and allowing the diocesan powers to treat it simply as direct income.  In those years in which income supporting the lawsuit exceeds the bills for legal services like in 2014 and 2015, we have to ask;  What happens to the surplus? 

Part I:   Convention Faces Disarray, Declining Membership, & Deficit

Part II:  The Mystery of the Legal Defense Fund Explored