THIS STORY HAS BEEN FORMATTED FOR EASY PRINTING

Archdiocese regaining its financial footing

By Lisa Wangsness
Globe Staff / June 11, 2010

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The Catholic Archdiocese of Boston, weathering the aftermath of the sexual abuse crisis, as well as a devastating national recession, reported yesterday that one-third of its parishes were operating at a deficit and that its pension account for priests remained seriously underfunded at the end of the last fiscal year.

But archdiocesan officials say the church’s long-term financial situation has improved dramatically since Cardinal Seán P. O’Malley arrived in 2003, when the archdiocese was staring at a $15 million annual operating deficit. The archdiocese cut that gap to $2.3 million in fiscal 2009 and is on track to have a balanced budget by the end of this month, according to the report.

“The challenges are substantial,’’ James P. McDonough, the chancellor of the archdiocese, said in a statement. “The parishes have to increase revenues to fund staffing in order to provide adequate services for parishioners. Our schools must raise tuitions to cover operating expenses and also seek additional financial support to subsidize students from low-income families. Central ministries must achieve a balanced budget and also increase financial support for Cardinal Seán’s mission and vision.’’

The report, released yesterday, covered the fiscal year that ended June 30, 2009. The archdiocese releases financial reports to the public annually in an effort to fulfill a commitment to greater openness following the abuse crisis.

The report says that the priest pension fund, which for several years has been the archdiocese’s most pressing financial problem, is currently $104 million underfunded.

“The period of time that this report tells us about was a time of great financial distress, and families and individuals and organizations all faced very deep financial challenges,’’ the Rev. Richard M. Erikson, vicar general of the archdiocese, said in an interview yesterday.

But Erikson said he is upbeat about the archdiocese’s financial situation. “While there are many challenges, the outlook is anything but grim,’’ he said.

The archdiocese does not plan another wave of parish closings, he said, but there is a growing need for parishes to share priests, as well as other resources.

“We will not have the priests to meet the number of parishes we have now,’’ Erikson said, “so in the future, I see far greater cooperation among parishes.’’

The economic downturn and other factors have forced the archdiocese to make difficult decisions. The archdiocese has closed parishes and schools, sold property, and laid off employees over the last several years.

In fiscal 2009, four employees were laid off, and more will probably lose their jobs in the coming year, church officials said.

The reports released by the archdiocese and posted on its website, bostoncatholic.org, contain a variety of information about the church’s salaries, spending, fund-raising, and investments.

The annual list of the archdiocese’s top earners reflects a salary reduction for most; employees earning more than $200,000 received a 10 percent salary cut because of the recession, and those earning between $100,000 and $199,000 took a 5 percent salary cut.

With those cuts, the five highest paid church executives were Mary Grassa O’Neill, superintendent of schools and secretary of education, who earned $292,500; F. Beirne Lovely Jr., general counsel, who made $270,000; McDonough, who earned $225,000; Scot Landry, secretary for institutional development, who made $225,000; and James Walsh, associate superintendent of Catholic schools, who made $176,000.

Many top church officials are priests who are paid small salaries. O’Malley, a Capuchin Franciscan friar, earned $33,800 last year. The cardinal, like all friars, donates his salary to his religious order.

The archdiocese also reported its top-paid vendors, most of which were insurance and construction companies. Ropes & Gray, the law firm that handles sexual abuse claims for the archdiocese, was paid nearly $1.4 million in 2009.

The archdiocese spent a total of $3.6 million in fiscal 2009 on sexual abuse claims, including payments to 27 victims. In all, the archdiocese has spent $145 million to settle 1,097 civil abuse claims, including 800 since O'Malley's arrival in 2003.

Total expenditures related to sexual abuse — not only settlements but also legal costs, therapy for victims, and prevention training — was $185 million.

The archdiocese said that parish collections dropped by 2 percent in fiscal 2009, as parish operating expenses rose by 3 percent. Mass attendance dropped by 2 percent during that year, the archdiocese said.

Gifts to the Catholic Appeal, an annual fund drive that pays for most of the archdiocese’s central operations, also dropped by 2 percent, to $15.4 million. The report said that while the number of major donors remained consistent, the average contribution dropped.

The report also says that parish schools continue to present challenges because of a 5 percent enrollment drop, as well as tuition rates that are lower than the cost of educating students. But archdiocesan officials said they were encouraged by efforts to consolidate parish schools and improve curriculum and educational offerings, which they said had helped attract students to some schools.

The archdiocese lost an average 11 percent on its investments in fiscal 2009, which the report said was “disappointing but better than the outcomes for most of the markets during that period.’’

The report said that in the current fiscal year, the church’s investments have been rebounding and were up by an average 17 percent on March 31.

McDonough said pension fund trustees are developing plans to improve the financial condition of the accounts, which provide benefits for sick and retired priests and lay employees.

The clergy pension fund, which was nearing the brink of insolvency a few years ago, is on track to a break-even operating budget by 2011, the report says.

The clergy pension fund, which was nearing the brink of insolvency just a few years ago, is on track to a break-even annual operating budget by 2011, according to the report, though the trustees still have to address the long-range problem of the $104 million funding gap.

“We are taking the steps that we need to make sure that our promises to our current employees are kept, and that whatever commitments we make for the future, we’re able to keep,’’ Erikson said.

Lisa Wangsness can be reached at lwangsness@globe.com.

Correction: Because of a reporting error, the original version of this story incorrectly characterized the number of abuse cases settled by the archdiocese and the period of time in which they occurred. The archdiocese has spent $145 million to settle 1,097 such claims, 800 of them since Cardinal Sean P. O’Malley arrived in 2003.

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