The Committee on the Office of the General Assembly (COGA) voted recently to cut costs and staff from the 2009 Office of the General Assembly (OGA) budget. Just three months into the budget year, an ecclesiastical budget thought sensible last June has turned out to be in need of some painful pruning. That much we know. Whatever else we may think we know remains tentative, however, since the OGA staff tends to withhold hard data and draw our attention elsewhere.

So what happened between June 2008’s budget confidence and March 2009’s budget cutback? OGA spokesperson Sharon Youngs made it clear that the problem is not the result of a drop in per-capita payments by sessions and presbyteries, which account for 95.7 percent of expected OGA income. “[P]er capita receipts continu[e] at a traditional rate,” she assured readers.

So if the income source providing nearly all of the income is not a problem, what is? According to another OGA press release, “The decision to revise the budgets was prompted by the effects of the current global economic crisis, which has resulted in an approximately $1 million loss to the reserves for OGA through the Presbyterian Foundation.”

At first, the economic-crisis explanation sounds reasonable. Nearly every household and business has felt the effects of the steep recession. However, there’s a fly in the ointment: The OGA budget gets only 2.8 percent of its income from invested reserves (money left over from previous budgets). If every investment had been zeroed out entirely, OGA income would take less than a 3 percent hit.

However, most investments have lost less than half of their value (and thus their return) since June. Thus, the OGA reserves investments might still be expected to contribute at least half of what was once thought likely. That would mean that the OGA budget might take only a 1.5 percent hit—if declining investments alone were the problem.

Most budgets can bear a 1.5 percent income shortfall without having to take draconian measures in response. So what is going on in OGA, necessitating major cuts in spending and the loss of jobs?

Two more clues

Two further facts might help explain the problem: overspending in 2008 and planned deficit budgets for both 2009 and 2010. The two are tied together.

The 2008 overspending was never alluded to in official OGA press releases. Stated Clerk Gradye Parsons has not publicly referred to it as an underlying problem in the premature troubles with the 2009 budget, either. He has not referred to the overspending in correspondence with this writer concerning the 2009 and 2010 budgets. Yet, the overrun from the 2008 budget has obviously contributed to the 2009 and 2010 budget crises.

News of the overspent 2008 budget was reported by Presbyterian Outlook correspondent Leslie Scanlon, who had access to budget papers available at the OGA meeting but not found on the PCUSA Web site. “[E]xpenditures from the per capita budget exceeded revenues by $641,476 in 2008,” she mentioned. “The Office of the General Assembly had budgeted to draw $335,296 from reserves,” she noted, but instead, reserves diminished in 2008 by “more than $1.72 million.”

Why did the OGA need to remove $641,000 from its reserves to cover overspending in 2008, when it had a budget approved by the General Assembly that called for using only $335,296 from the reserves? Scanlon suggests “additional costs for the 2008 General Assembly in San Jose and the accounting of two years’ worth of uncollectable per capita in 2008.” Wait a minute! It looks like uncollectable per capita (from previous years) does play a role in the 2009 financial woes after all.

The OGA spent $306,000 more than budgeted in 2008, and the resulting bailout of the 2008 budget from the invested reserves depleted what was being held in reserve. On top of that, the reserves were depleted by another $1.09 million by the poor economy. Value once there was lost, as the portfolio took the kind of losses everyone else’s investments have endured.

All told, as 2009 began the reserves must have stood at about $1.4 million less than expected, following the 2008 budget bail-out and the portfolio losses. That has led to problems with the expected 2009 and 2010 OGA budgeted income, because both budgets depend on spending more than current income would bring in. The 2009 budget was supposed to use close to $400,000 in reserves, and the 2010 budget had planned to tap another $800,000 from reserves. Apparently that money is no longer there in the reserves to be used.

Unavailable money

Actually, the $1.2 million for the two years may physically be found in the reserves, but it is not entirely available. “General Assembly policy calls for OGA to maintain 30 percent of its income in reserves,” according to the Presbyterian News Service. Thirty percent of the OGA budget for 2010 would be roughly $4.2 million, so OGA needs to plan for at least that much to remain in reserves by the end of 2010.

By current OGA figuring, if a $4.2 million cushion is to remain at the end of 2010, it means that the 2009 budget cannot overspend income by roughly $400,000 as planned. It also means that 2010 cannot project an $800,000 deficit to be covered by reserves, either. Taking that much from the already-depleted reserves over the next two years would drop the reserves below the necessary 30 percent level.

Thus, the planned OGA deficit spending for 2009 and 2010 needs to be ditched. Already the budget approved only last summer must be rewritten to break even.

The cuts remain vague

How will OGA spend $400,000 less than expected in 2009 and $800,000 below what was planned for 2010 (especially after overspending 2008 income by at least $641,000)? Voluntary separation packages are being offered to some veteran OGA staff members who are 60 or older. Because it is not known how many of them will take up the offer, the dollar savings from voluntary terminations is not yet known.

However, some other measures were approved by COGA at its March meeting: “The steps taken by COGA include a 2 percent reduction in all OGA department expenses for the current year, a $96,000 cut in ecumenical grants, and 2010 salary freezes….” The 2 percent reduction in department expenses accounts for a $136,801 savings for 2009. Add in another $96,000 not given to ecumenical partnerships, and that’s a $232,801 savings for 2009. It looks like OGA is hoping to make up about $167,000 by some staff members falling on their swords. That would balance 2009.

The existing 2010 budget, which relies on $800,000 in reserves, will be more difficult to fix. From the public copy of the Per Capita Budget approved by General Assembly last June, it is impossible to determine personnel costs. Thus the savings by freezing salaries for 2010 at 2009 levels cannot be calculated. But those additional savings might not offset another $400,000 in expected deficit beyond what was expected in 2009. COGA will take up that matter at its fall meeting. Perhaps more job cuts are in store, most likely of an involuntary nature.

Sleight of hand

So, what is going on with OGA money? If one reads several accounts, persists in seeking budgetary documents to examine, and does some math on the side and a little conjecturing, it appears that the picture is far more complex than the simple but apparently incomplete excuse provided by the Office of the General Assembly: that per-capita receipts are normal but the economy caused the funding crisis. By directing attention to its hand representing investment income, the OGA has deflected attention from its other hand that overspent its 2008 budget by hundreds of thousands of dollars and needed to write off accumulated shortfalls in per-capita pay-up.

It would seem that a fuller explanation of the budget woes for 2009 and 2010 would include all of these causes:

1. A blown budget for 2008, whose overspending caused an extra $306,000 to be drained from reserves, making the reserves that much closer to the mandated 30-percent-of-budget baseline.
2. Costly write-offs of uncollectable per capita apportionments for 2007 and 2008, leading to the 2008 deficit that diminished the reserves.
3. Deficit budgets planned for 2009 and 2010 that expected to draw down $1.2 million from reserves, because current income would not keep up with current expenses.
4. And finally, a sour global economy that has erased approximately $1.09 million in asset valuation from the reserves.

 Now, given the income predicament, OGA and COGA appear to be moving responsibly to curtail spending in 2009 and 2010 in order to match spending to income. Hard and costly cuts are being made, including laying off staff, which is always painful. Stated Clerk Gradye Parsons explained to this writer that “in order to avoid any large per-capita increases or larger budget cuts later, we are adjusting the budget now.” This, too, is conscientious planning. A tight fiscal hand over this year and next will make budgeting for 2011–12 less shocking or painful.

A routine ‘surprise?’

It would be good, for a change, to avoid another big surprise and painful budget slashing three months into the 2011–12 budget period. This year’s predicament might be thought an anomaly, but the odd thing is that two years ago, at the beginning of the 2007–08 budget period, a similar emergency budget cut was also visited upon the OGA. Then Stated Clerk Clifton Kirkpatrick had to announce the need to cut his OGA staff by 11 percent, due to previously expected funds drying up. Again, the “surprise” and its painful cuts came only a few months after the budget had been prepared, proposed, and promoted by OGA, and approved by General Assembly.

A pattern seems to be forming. It makes one wonder about the quality of the budget planning, if a budget routinely becomes unworkable three months into its cycle and has to undergo an emergency slashing. May the pattern end with the 2011–2012 budget being set appropriately the first time around, so that it, too, will not need to be fixed precipitously.

In addition, more OGA financial transparency and greater availability of facts and figures are needed. It should not require multiple and repeated information requests for the facts of the matter to be revealed, nor should deduction be necessary to arrive at much of the data.

Finally, full disclosure of the roots of OGA financial difficulties ought to be routine—even those causes that may not reflect positively on OGA planning and leadership.