Christian Science Board Outlines Restructuring of Church Finances
Plans for dismantling or sale of cable TV channel, balancing of church budget are explained
OFFICIALS of The First Church of Christ, Scientist, in Boston Wednesday announced plans to resolve the church's fiscal challenges. These include a balanced budget for the next fiscal year and moves to bolster confidence in pension reserves.
On the final day of operations for the Monitor Channel, the church's cable television network, officials also said the operation's shutdown would cost about $45 million.
The Christian Science Board of Directors, the church's governing body, made the announcements several weeks after revealing that the church had borrowed $41.5 million from its employee pension reserve to finance its activities, and that the Monitor Channel would be shut down or sold.
In a statement released to employees and the press, the directors said the budget for the new fiscal year, which begins May 1, would balance income and expenses. This is based on expected revenues of about $70 million annually over the next several years. The $70 million in expenses does not include the shutdown costs of television. The estimated income, the board statement said, "is based on a historical projection from all sources (contributions, legacies, and investment income)...."
Church managing treasurer Donald Bowersock told the Monitor that the projections take into account decreased investment income. The church received $65 million in revenue during fiscal year 1991-92, which ends April 30, and member contributions are higher so far in 1992, he said.
Regarding the large expenditures for television, Mr. Bowersock recalled: "I said we would never get below the point where we couldn't pay our bills. If we had kept up spending at last year's rate, we could have reached that point.... But we didn't. We are not going to go bankrupt."
The directors believed strongly in the need to expand Monitor journalism into television and other media, board member and treasurer John Selover told the Monitor. "There was every hope the business plan would be achievable," he said. "We had good expectations of possible partners and participants...."
"We took our resources to the edge because we believed in what we were doing," Bowersock said.
The board statement said that the expense of closing down the Monitor Channel will include $27.7 million in personnel termination costs; $2.5 million for employment contracts; $3.0 million for leases; $3.8 million for operating contracts; $4.2 million for program rights on WQTV, Channel 68 in Boston; and $3.0 million for "contingencies." It said $22.7 million of these costs will be paid directly from the pension reserve.
Bowersock and Mr. Selover said no decision has yet been made on whether to close WQTV. The Monitor Channel will cablecast reruns with minimum staff until June 15, while efforts continue for sale of the channel. Ventures explained
The board's critics charge that it had ignored warnings from officials and consultants that the television effort was beyond the church's ability to pay. "The business plans we were offered, to our best lights, would have factored those risks into it," Selover said. "Any business plan carries an element of aspiration and hope."
The board statement said approximately $235 million has been spent on television since 1985. During the same period, the deficit of The Christian Science Monitor newspaper was $127.9 million, or $108.4 million after income from the Monitor Endowment Fund was added in.
Bowersock said the current value of the newspaper's endowment fund is $45 million. There are no plans to borrow against the fund, he said, but it remains available to pay Monitor expenses in an emergency. Downsizing of offices
Bowersock said that besides layoffs of television employees there would also be some downsizing of offices in the church and Publishing Society that directly supported television.
The remaining part of the Monitor Channel shutdown will be financed by exchanging $22.3 million from the pension reserve of the general fund for the assignment of unencumbered income-producing church property worth $24 million, the board said. It said the property generates $1.8 million in income each year.
Since the pension reserve is part of general unrestricted funds, and not a restricted fund, the transfer "is not intended to give retirees extra rights in that or any other property, but rather it is intended to augment an actuarially recognizable pool of assets from which the actuarial soundness of the plan can be examined and confirmed," the board statement said.
The properties in question are the Midtown Motor Inn on Huntington Avenue in Boston; Horticultural Hall; two blocks along Massachusetts Avenue north of the Christian Science Center; and a block of apartments on Clearway Street behind the Publishing Society. Also included are The Christian Science Monitor Building in Washington, D.C., and associated property.
The board said it had consulted an independent actuary and legal counsel to structure the plan, which the church will voluntarily continue to keep in line with the Employee Retirement Income Security Act (ERISA), the federal law governing most pension arrangements.
As a "church plan," the church's retirement plan is exempt from that law. Reserve fund disclosed
Bowersock said the pension reserve is currently valued at about $90.5 million: $24 million in real estate, $25 million in cash and securities, and $41.5 million in a church promissory note at 1 percent interest over the prime rate, representing previous borrowing from the reserve. The board will pay $3 million into the reserve annually to cover allocations required by ERISA, and $3.1 million in interest under the terms of the promissory note.
According to the actuary (who was not identified), "projected benefit payments to retirees and beneficiaries will be fully covered in each of the next five years," the board statement said.
The legal counsel for the board, Finnegan and Stanzler, advised that the pension restructuring was legally permissible as part of a plan to discontinue the church's loss-generating activities, balance its budget, and maintain the actuarial soundness of the retirement plan. Income from the real estate would be put into the pension reserve, the board said, and the church treasurer would be required to submit a plan within one year for repayment of the $41.5 million loan.
Bowersock said the church's income projections do not include a $98 million legacy from the family of Bliss Knapp, a Christian Science teacher, that may result from the recent publication by the Publishing Society of Mr. Knapp's controversial biography of church founder Mary Baker Eddy.
When a decision to publish the biography last year became known, critics of the board charged that it contained a view of Mrs. Eddy at variance with official church teaching, and that the board had published the book only to get the money for its costly television operations.
Stanford University and the Los Angeles County Museum are currently challenging the will in a California probate court.
Meanwhile, Hallock Davis, a Newport Beach, Calif., businessman, has been appointed a Publishing Society trustee, replacing John Hoagland Jr., who has resigned.