What 'The Economist' Meant to Say …



"Earthly Concerns," an Aug. 18 article in The Economist on Catholic Church finances, sharply criticizes the Church’s management of her temporal resources in the wake of the sexual-abuse scandal.

The criticism is made along three lines: Firstly, the Church does not manage her financial affairs well; secondly, she is irresponsible with regard to accounting and transparency; and, finally, the U.S. taxpayer is largely and unwittingly paying for the Church’s sexual-abuse settlements.

These three appear as questions that The Economist wishes to investigate, but instead are made as assertions with questionable supporting data.

At their base, these questions appear to be a call for reformation or improvement in the stewardship of the Church’s assets. However, in the article, it becomes clear that The Economist, unfortunately, does not understand the Church per se.

The Economist questions the Church from a corporate view of the world, not from the framework by which the Church herself makes decisions. This means the answers The Economist provides neither serve to inform the reader nor to reform the Church. There is no argument that the Church can improve in her handling of temporal resources; however, what makes the Church impactful to society is not her economic prowess, but the activity of the people of God geared toward building a more just society as the Church proclaims the Gospel to all nations.

The Pope does not serve as the CEO of a corporation, and the Church in America is not a single entity; it is massively decentralized — a reality that is profoundly misunderstood, and one The Economist seems to find inconvenient.

A simple civil analogy given by the judge in the Ronan case in Portland sheds light on how the Church operates. The judge ruled that the Vatican is not an employer of priests any more than the Oregon Bar Association is the employer of lawyers because it has the power to disbar them.

The temporal gifts (assets) of the Church are to be used, understood and valued only within the context of the transcendent. If we seek to understand the Church’s financials (a temporal reality) outside the context of what those financial resources make possible (a spiritual reality), we fail to understand the reality through which they have any meaning to the Church at all.

This meaning is in service to the economy of salvation by which people are reconciled to their Creator and each other through the death and resurrection of Jesus Christ. Only in this context can we properly address the questions asked by

The Economist.

Is the Church a good steward of her assets? Is she accountable and transparent regarding her finances? And is the taxpayer subsidizing her sexual-abuse settlements?

Or even more appropriately for a periodical like this one, for what purposes is the Church using her money? How many young people does she educate? How many of the hungry are fed? How many of the naked are clothed? Are the imprisoned visited? Is the full development of man being assisted? How many are baptized, receive religious instruction and marital instruction and are buried? How many are served in orphanages, hospitals and youth ministries?

When we answer these questions, we then have a metric that allows us to determine if the dollars are being well used. This is where we need the transparency called for by the Church herself: "Administrators are to render an account to the faithful concerning the goods offered by the faithful to the Church" (Canon 1287, §2).

There have been many good responses written to elements of "Earthly Concerns," most notably one from Nineteen Sixty-Four, the blog for the Center for Applied Research in the Apostolate (CARA), but none deals with the essence of the criticisms. The final allegation, taxpayer subsidization of sexual-abuse settlements, is the most alarming, and it’s a subject to which I will return.

The Economist, in proposing a response to the questions of how much debt the Church has and whether she is using this to cover deficits created by a fall in donations, answers clearly that the Church is suffering from a liquidity crisis that "seems to have encouraged a pre-existing trend towards replacing dollars from the faithful with publicly raised debt as a way of financing church business."

The result, according to the article, is that local and federal tax revenue is flowing into the Church. These propositions are without merit under any possible interpretation of the facts.

The Catholic Church is not a single, monolithic organization, just as the auto industry is not a single organization. There are 196 separate and distinct dioceses in the United States that all have autonomy, with more than 20,000 parishes and missions that have rights and responsibilities as unique juridic persons recognized in canon law and, as such, recognized in civil law. (See Milivojevich v. Serbian Orthodox, 1976.)

Catholic universities, independent schools and Catholic Charities are also distinct within the Catholic Church. Catholic Charities in most dioceses has been separately incorporated precisely so that it can administer federal-aid programs that strengthen families (counseling and mental-health services, as well as immigration, refugee, pregnancy and adoption services), build stronger communities and provide food, housing and other basic needs such as clothing and utility assistance.

In the past year, these services were provided to approximately 10.3 million individuals. Federal dollars made up approximately 62% of Catholic Charities’ revenues, with the remaining $1.8 billion coming from other sources.

So when we speak of any federal dollars going to the Catholic Church it is imperative to understand where they are actually flowing; and only after such distinctions are made can there be any constructive criticism.

Just as troubling is The Economist’s fundamental mischaracterization of tax-exempt municipal bond financings as some sort of government subsidy funded by the U.S. taxpayer.

To put this in context, of the $12 billion the article cites as having been raised in California through tax-exempt debt, less than 1/2 of 1% of that debt was for dioceses or parishes. The two largest borrowings by dioceses in California in the last decade would have accounted for just over 2% of that figure, but they were taxable borrowings for precisely the reason listed above — the public good was not being served, and it was going to be for the service of Catholics only (i.e., the building of a cathedral).

The article claimed, "Muni bonds are generally tax-free for investors, so the cost of borrowing is lower than it would be for a taxable investment. In other words, the Church enjoys a subsidy more commonly associated with local governments and public-sector projects." 

This is simply incorrect. In 2002, the courts rejected the argument that the benefit provided by the tax-exempt status of bonds is equivalent to a tax subsidy: "The difference between subsidies and tax exemptions is that in giving tax exemptions ‘the government does not transfer part of its revenues … but simply abstains from demanding the [entity] support the state’ [sic]." (See Steele v. Ind. Dev. Bd. of Metropolitan Gov’t. of Nashville, 2002).

In fact, these are not subsidies, but conduit financings, where the bond is issued in pursuit of a particular public benefit, such as education or feeding the hungry.

If the Church failed to provide these services, in many areas they would cease entirely or need to be performed by the local, state or federal government at significant cost to the taxpayer.

Consider the $20 billion of aid to the taxpayer provided by Catholic schools; the direct aid provided to more than 100 million poor by Catholic Relief Services; the 629 Catholic hospitals that account for 15.6% of all U.S. hospital admissions, 19 million emergency-room visits and 100 million outpatient visits; the 1,900 nursing and specialized homes; 418 Catholic residential homes for children; and the work of the 230 Catholic colleges and universities serving nearly 950,000 students. (Statistics provided by the Association of Catholic Colleges and Universities.)

America’s dioceses receive generous donations from parishioners, despite The Economist’s claim that contributions have fallen perilously. The magazine supposes this because the Church does not have a central office with which to check. But with some research and diligence, this information can easily be collected from the various dioceses around the country or from the International Catholic Stewardship Conference (ICSC) offices.

A simple Google search for audited financials for U.S. dioceses by name would have produced the audited financials of every diocese listed in the article.

The article questions the Church’s financial viability as a whole based on data from a few dioceses. This is like casting aspersions upon the entire American manufacturing industry simply because a few firms are struggling.

Certainly, there are some dioceses that have financial challenges, but there are others that are fiscally strong and getting stronger. A prime example is the Archdiocese of Chicago, which today enjoys a higher credit rating than the city of Chicago or even the state of Illinois.

The Economist cites 10 dioceses that have declared bankruptcy due to sexual-misconduct lawsuits. Each of these dioceses has used bankruptcy as a mechanism to respond as justly as possible to the victims of these horrible crimes.

To say that the financial health of all 196 dioceses can be determined by the legal strategy of settling sexual-abuse claims by these 10 eliminates any possibility for the article to have a true reforming effect upon the Church.

Unfortunately, The Economist’s broad-brush analysis, seemingly constructed to support its own preconceived criticisms, at best sheds little light and at worst perpetuates long-standing misconceptions and myths about the Church and money.

Patrick O’Meara is the president and founder of O’Meara, Ferguson, Whelan and Conway,

a firm that provides advice and counsel to Catholic organizations on the best possible

use of their temporal resources as they work to further their missions.