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The financial collapse to the Methodist Church affects local churches

The cost of remaining a part of the United Methodist Church is another factor a local church must consider when evaluating its options after the General Conference in May 2020.  The proposed Separation Protocol provides that a local church leaving the denomination for another new denomination – whether conservative or progressive – must pay for an outstanding pension obligation, even if the pension is fully funded, and the cost of preparing new governing documents and real estate deeds that remove the Trust Clause. The Separation Protocol also provides that local churches who wish to become independent must pay a pension obligation, twenty four months of apportionments and anything else that the conference wishes to impose on the local church to leave and keep their property.

However, the Separation Protocol does not address the cost of remaining in the denomination.  While the proponents of the United Methodist Church wish to have the appearance that there will not be cost to remain in the denomination – with the exception of keeping the Trust Clause – the proposed budget shows that there will be a substantial cost imposed on a  local church to remain in the denomination.

The Proposed Budget and the reason for the substantial budget adjustment. 

The proposed budget to be voted on at the May 2020 General Conference calls for a 23% reduction in spending based on 2017 giving levels. You can read about it here.

The reason for the substantial budget adjustment is that in this past decade there has been a staggering  number of people fleeing local Methodist churches due to the internal denominational schism. The loss of local members has resulted in less donations to the local church, which in turn, has resulted in lower apportionments to the annual conferences. Rather than eliminate or restructure programs and agencies, the annual conferences have pressured local churches to pay more in apportionments.

The only proposal in the budget is to raise cash outside of apportionments is to “evaluate” the $70 million dollars of real property assets owned by the denomination in the red hot real estate market of Davidson County (Nashville) Tennessee, and make a determination whether it should sell the property and secure more funding for the denomination or retain it. Selling the Nashville property makes sense in the short term – as there are loads of vacant Methodist Church property throughout the United States that can be used – but convincing a Bishop give up a beautiful building in a vibrant downtown and moving to someplace else that is not as nice will be difficult, at best.

The flaw in the proposed budget. 

Even if one assumes that there will not be much of an impact on the local church, the members must contemplate that the proposed budget is fatally flawed because the income is set at 2017 giving levels.

The budget does not factor in the exodus of many local churches in the past three years and the anticipated loss of thousands of more members and donors after the May 2020 General Conference. There will be a substantial loss of churches if either one of two likely scenarios occur. Under the first scenario, if the Separation Protocol passes, thousands of progressive and conservative churches will leave the denomination and create their  own space.  Under the second scenario, if no separation plan passes, it is anticipated that a large number of local churches leaving the denomination.  Under either scenario, local churches will leave and the local churches who remain will end up paying substantially more apportionments.

History has shown that annual conferences and agencies refuse to engage in a wholesale restructuring or eliminating agencies that no longer serve the local church. A local church may wonder why is should remain in the denomination when apportionments will increase, services will decrease and the agencies they fund provide little or nothing to the local church. Further, the local churches who are already losing members, do not have the ability to pay more apportionments as will be demanded by their annual conferences post May 2020.

Therefore, the local church who does nothing or waits for a later time to make a decision and finds itself remaining in the United Methodist Church needs to plan now for the financial hit it will take when the annual conference turns to it for funding. This is no secret: it has happened in the past and will happen again.

Weighing the cost of staying, leaving for a new denomination or becoming independent. 

In addition to making a determination of what the future holds for the local United Methodist Church, the local church needs to evaluate and understand the financial consequences of their decision.

In the short term, staying within the denomination may make sense as the initial cost is low and if the local church does not care about its property, the impact on the enforceability of the Trust Clause may not matter to them.  The local church leaving to another denomination is the second best financial option as the cost may be limited to the pension obligation and some miscellanious cost related to new governance materials and real estate related matters that need to be attended to. Local churches leaving to become independent may pay the most in the short term under the separation protocol.

However, in the long term, the opposite is true. Local churches who wish to become independent will pay little after that as it has no remaining liabilities. The local church that wishes to join a new Methodist denomination will pay the initial pension cost and set up fees, but will likely pay apportionments and other fees to the denomination over time that will only increase as history will demonstrate. And the local church that does nothing, or decides to stay in the denomination will pay the most over time through the apportionments, increased pension cost, health care cost, and additional cost when the denomination fails. Further, if it wishes to leave, it will have a challenging time as the enforceability of the Trust Clause in the state in which they are located will be at issue.

We are here to help.

The law firm of Dalton & Tomich has helped hundreds of local churches think through these options and the impact on the l0cal church to make a decision as to how to move forward. If you wish to learn more, please contact Daniel Dalton or download one of our white papers concerning these topics.


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