Council on Finance and Administration Report to Annual Conference

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1 Council on Finance and Administration Report to Annual Conference John Pearce June 2018

2 CFA Meeting Participants Re: 2019 Budget John Pearce - President Terry Hundley - Vice President Paul Purdue - Secretary Rashad Bailey Jane Turner Deanna McCulley Jim Hughes Drew Shelley Jay Voorhees Karen Barrineau Davis Chappell William McAlilly Bishop Jim Allen Treasurer Phil Jamieson U M Foundation Scott Aleridge District Supt. Melinda Britt CCOCM Lynn Taylor Director of Missional Alignment

3 Today s Main Message Transparency: No Secrets/No Surprises Stewardship: Are we using the gifts entrusted to us by the local churches wisely to shape congregations that offer Jesus Christ to a hurting world one neighborhood at a time Change: How do we prioritize where we spend our limited resources? New Conference: While that work is ongoing, this presentation is not related to a potential new conference

4 2019 Apportioned Budget Headline 2018 Budget $14,457, Proposed Budget $13,734,671 Decrease from 2018 ($ 722,879) % Change (5.0%) ( Details to follow )

5 2017 APPORTIONMENTS RECEIVED Number Amount Paid % of Total Churches Paid 100% Churches Paid 50%-100% Churches Paid 1%-50% Churches Paid Zero Total Churches 395 $11,177, % 82 $1,113, % 64 $380, % 35 $0 576 $12,671, % of $13,969,747 Apportioned

6 Who Paid Apportionments Brentwood $1,258,644 Franklin First $ 609,405 West End $ 407,540 Murfreesboro $ 342,676 Hendersonville $ 272,017 Cookeville First $ 271,030 Hermitage $ 257,856 Belmont $ 250,141 Madison Street $ 235,331 Calvary $ 228,987 Top 10 Total (33%) $4,133,627 (12) $100K-$200K $1,728,053 (30) $50K-$100K $2,266,339 (46) $25K-$50K $1,506,758 (443) $1-$25K $3,036,467 Total Apportionment Giving (541) $12,671,244

7 Who Did Not Pay Apportionments Churches Underpaid by > $25,000 $789, % 131 Churches Underpaid by < $25,000 $330, % 33 Churches Paid Zero <$25,000 $179, % 181 Churches Underpaid for Total of $1,298,503

8 TN Conference Pension Plans TN Conference has three primary pension plans: Pre-1982 Pension Plan Ministerial Pension Plan ( ) Clergy Retirement Security Program (CRSP) (2007 to present) All three plans are fully funded according to the actuaries at WesPath Benefits (actually over funded ) Together the three plans have over $90 million of assets subject to the performance of the stock market

9 Clergy Pensions Four Year Activity Reserve Floor Target = $10,000,000 Beginning Balance 12/31/16 12/31/17 12/31/18 12/31/19 $17,903,676 $16,971,994 $17,574,973 $16,933,976 Earnings/Losses $ 1,248,647 $2,829,595 $1,300,000 $1,300,000 Expense Premium Holiday Apportionment Net Change ($3,366,617) ($3,389,686) ($3,405,077) ($3,364,008) $616,080 $616,080 $1,186,288 $1,163,070 $848,000 $754,960 ($931,682) $602,979 ($640,997) ($692,968) $16,241,008

10 Clergy Health Plan Four Year Activity 12/31/16 12/31/17 12/31/18 12/31/19 Beginning Balance $ 1,797,039 $1,374,931 $1,005,841 $1,011,677 Premiums Stop Loss Rebate Expense Reserves Apportionment $ 457,355 $592,752 $455,000 $455,000 $ 433,142 $79,646 ($4,359,179) ($3,887,730) ($4,341,664) ($4,484,932) $300,000 $3,046,574 $2,846,242 $3,892,500 $3,600,000 Net Change ($422,108) ($369,090) $ 5,836 ($129,932) $881,745

11 2017: General Church Apportionments 2016 Actual $2,379, Actual $2,369, Budget $2,410, Budget $2,418,155

12 2017: Conference Ministry/Programs 2016 Actual $5,632, Actual $6,123, Budget $5,891, Budget $5,573,898

13 Significant Changes 2018 to 2019 Apportionment Budget Pensions Health Plan 5 District Leadership Strategists District Superintendents Equitable Comp Connectional Ministries Archives and History Cabinet Discretionary New Church Development Congregational Transformation Higher Education and Campus Ministry Camping and Retreat Other Line Items ($100,000) ($308,040) $450,444 ($39,345) ($12,196) ($375,408) ($22,951) ($75,000) ($219,975) $54,675 ($34,477) ($10,145) ($30,461) TOTAL CHANGE ($722,879)

14 Other Changes to 2019 Budget Congregational Development is now New Church Development Congregational Transformation Young Adults, Youth Ministries, Children s Ministries, Family Ministries are now Next Gen Archives and History, Board of Laity, Congregational Development, Higher Education and Campus Ministry, Camp and Retreat Ministry, Martin Methodist College, and Miriam s Promise budgets need to have recommendations from Connectional Ministries Connectional Ministries budget needs to support changes made to their structure

15 2019 Gross Budget Total Expenses Apportionments Estimated Unpaid Apportionments Use of Reserves Other Revenue ($18,061,708) $13,734, % ($1,425,658) (7.89%) $3,292, % $2,459, %

16 Tennessee Conference United Methodist Church 2018 Budget Category: Apportioned Amount Budget Amount Other Income Use of Reserves Actual Total Cost % of Total Pensions: 900, ,000 38,000 2,790,693 3,638, % Clergy Health: 4,325,000 3,892, ,000 (5,836) 4,341, % General Church: 2,718,048 2,410, ,410, % TN Conference Ministries: 6,514,503 5,891,986 1,752, ,620 8,212, % TOTAL BUDGET 14,457,551 13,004,578 2,245,213 3,353,477 18,603,268

17 Tennessee Conference United Methodist Church 2018 Budget District Superintendents 768, ,000 35, , % Equitable Comp 150, ,500 36, , % Conference Admin 779, , , % Connectional Ministries 1,238,889 1,102, ,500 1,500 1,281, % Archive and History 101,393 91,254 8,500 3, , % Board of Laity 24,500 21, ,940 24, % Board of Ordained Ministr 202, , , , % Cabinet Discretionary 75,000 67, , % Congregational Developm 500, ,000 18, , , % Higher Education & Camp 880, , , % Camp and Retreat 238, , , ,000 1,097, % Martin Methodist 625, , , % Miriam's Promise 130, , ,000 (23,671) 595, % District Administration 800, , , % Category: Apportioned Amount Budget Amount Other Income Use of Reserves Actual Total Cost % of Total Pensions: 900, ,000 38,000 2,790,693 3,638, % Clergy Health: 4,325,000 3,892, ,000 (5,836) 4,341, % General Church: 2,718,048 2,410, ,410, % TN Conference Ministries: 6,514,503 5,891,986 1,752, ,620 8,212, % TOTAL BUDGET 14,457,551 13,004,578 2,245,213 3,353,477 18,603,268 TN Conference Ministries Detail:

18 Tennessee Conference United Methodist Church 2019 Budget Category: Apportioned Amount 89.62% Budget Other Income Use of Reserves Actual Total Cost % of Total Pensions: 800, ,960 52,000 2,595,048 3,364, % Clergy Health: 4,016,960 3,600, , ,932 4,484, % General Church: 2,698,231 2,418, ,418, % TN Conference Ministries: 6,219,480 5,573,898 1,952, ,900 7,794, % TOTAL BUDGET 13,734,671 12,309,012 2,459,815 3,292,880 18,061,707

19 Tennessee Conference United Methodist Church 2019 Budget District Superintendents 1,179,999 1,057,515 63, ,121, % Equitable Comp 137, ,500 36, , % Conference Admin 769, , , % Connectional Ministries 863, , , , % Archive and History 78,442 70,300 8, , % Board of Laity 21,201 19, , % Board of Ordained Ministry 201, , , , % Congregational Transformation 54,675 49, , % New Church Development 280, ,958 18, , , % Higher Education & Campus 845, , , % Camp and Retreat 228, , ,000 61,000 1,161, % Martin Methodist 625, , , % Miriam's Promise 130, , , , % District Administration 803, , , % Category: Apportioned Amount 89.62% Budget Other Income Use of Reserves Actual Total Cost % of Total Pensions: 800, ,960 52,000 2,595,048 3,364, % Clergy Health: 4,016,960 3,600, , ,932 4,484, % General Church: 2,698,231 2,418, ,418, % TN Conference Ministries: 6,219,480 5,573,898 1,952, ,900 7,794, % TOTAL BUDGET 13,734,671 12,309,012 2,459,815 3,292,880 18,061,707 TN Conference Ministries Detail:

20 CFA Study of Apportionment - Status No report or recommended action yet Significant discussion and analysis Example: Cost of one full-time clergy s health and pension is about $20,000. Need to pay about $40,000 of apportionments to cover that cost. In 2017, only 61 of 576 churches paid $40,000 or more. (10%) Lots of data Many questions No easy answers Lots of opinions Ongoing work

21 Clergy Health Plan Our Plan is Self Funded We are the Insurance Company Stop Loss Policy Covers Doctor Visits, Hospital, Prescription Drugs, etc.

22 Clergy Health Plan Funding Methods 1) Continue to Apportion 100% 2) Clergy help by Paying a Monthly Premium for a small portion 3) Direct Bill full cost to Churches with an appointed plan participant 4) Combination of all of above

23 Clergy Health Plan Issues What is our actual cost per participant in a self-insured plan 564 churches pay an apportionment for clergy health 354 churches (63 percent) that pay have a clergy that benefits 83 churches (larger) pay $1.5 million for other churches clergy 127 churches (mid-size) under pay on average $5,549 How do we help the mid size with this cost? Are there churches that can t afford the salary and benefits of a full-time clergy? What are missional outcomes of our present cost distribution method? Could churches consolidate in order to fully support the full cost of one clergy? Can we control our cost better: Pharmacy Higher deductible with Health Savings Account Can we reduce average age of plan from 51 Should clergy pay some of the premium?

24 Clergy Pension Plan Issues 481 participants and 400 churches 164 churches pay for pensions with no benefitting clergy How big is our pre-1982 plan excess reserves? How many years can we pay current service costs with our reserves? Need to evaluate in terms of decades not years Where are we heading with number of clergy over next 20 years? How conservative should we be re: investment returns on reserves? Will there be changes to our Defined Benefit Plans at 2020 GC? Requested 20 year Wespath economic analysis of TN Conf. plans

25 Future Concerns 1) Can t pay 19 percent of future annual budgets with reserves 2) Can t continue to apportion 100 percent of rising clergy pension and clergy health plan costs 3) Ongoing capital needs at Beersheba and Cedar Crest 4) Potential reduction of apportionment collections below 90 percent - economic or political 5) Potential expected Bear Market s impact on pension plans and reserves

26 Future Action Plan 1) Manage and control costs where possible 2) Continue to push to leave dollars at local church for mission 3) Better match revenues with costs for participating in events 4) Find broad agreement on a new plan to pay for clergy health plan 5) Reduce cost of clergy health plan 6) Obtain help from Wespath re: Understanding our pension plan 7) Invest in areas that support our mission of making disciples of Christ (like new congregation development) 8) Educate broadly the missional impact from apportionments 9) Find ways for CFA to help local churches

27 CFA Recommended Items For Your Action Today 1) That the 2019 total apportioned budget of $13,734,361 be apportioned to the churches using method printed in the 2013 Journal p ) That the approved travel expenses for staff and members of councils, boards, committees, and other entities of the conference be reimbursed at the rate set by the entity, not to exceed the maximum mileage amount allowed by the Internal Revenue Service for business travel. 3) That the expenses for at-large members to the 2018 annual conference be reimbursed at a rate not to exceed $150 per day ($300 max), plus mileage at the IRS rate for business travel. 4) That the housing allowance designated for clergy conference staff pursuant to Internal Revenue Code section 107 be approved for as printed in the 2017 Journal. 5) That the base compensation of the district superintendents for 2019 be set at $106,110.

Mountain Sky Conference of The United Methodist Church 2019 Budget Commentary

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