Scranton Diocese posts deficit

By Mark Guydish mguydish@timesleader.comEducation Reporter

SCRANTON – As had been forewarned after a Feb. 11 meeting of Diocese of officials and the four boards that run diocesan schools, the diocese ran a nearly $15.5 million deficit from July 1, 2008, to June 30, 2009, according to the annual audited financial report released Wednesday.

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It is the deepest red ink in three consecutive years of shortfalls.

A statement by Apostolic Administrator Cardinal Justin Rigali accompanying the report – printed in the diocesan newspaper, The Catholic Light -- credits $7.1 million of that deficit to bad debts, most of which “are associated with parishes that borrowed heavily to fund parish-run schools.”

The financial market meltdown added nearly $1.5 million in unrealized losses on investments, though Rigali notes the recent recovery may mean some of that money can be recouped.

Another $3.6 million of the deficit is “for pension-related changes other than net periodic cost.”

In an effort to curb escalating pension expenses, at the end of the fiscal year on June 30, 2009, the diocese froze the defined-benefits plan it had been using, which guaranteed a set pension after a certain amount of years. It was replaced with a defined-contributions plan, which typically allows employees more say in how their contributions are invested but hinges pension payments on the investment performance.

Rigali’s note also says “the diocese experienced a loss from operations in the amount of $3,209,566 ... due to $3,826,530 net realized losses on the sale of investments.” The liquidation of the investments despite a down market was necessary “in order to meet operating losses related to the diocesan schools.”

A look at the financial reports for the last four years shows the $7.1 million “provision for bad debt” nearly doubled the previous high of about $3.7 million in 2007. The amount was a scant $70,403 in 2006 and $474,647 in 2008.

The data across years show the diocese made modest but steady increases in total revenue from 2006 to 2008, from $26.3 million to $28.5 million and $31 million, but dropped to $27.5 million in 2009. The total change from 2006 to the current report is a 4.5 percent increase.

By comparison, total expenses rose 21 percent, from $25.3 million in 2006 to $30.6 million in 2009. Even so, the expenses dropped by nearly $1 million from last year.

There were some bright spots on the revenue side of the 2009 report. Interest income on the deposit and loan funds rose steadily in the last four years, from $786,984 in 2006 to $1.2 million in 2009. Donations and bequests – traditionally an unpredictable source of income -- hit a four-year low in 2008 with only $28,284, but rebounded to $1.4 million in 2009, six times the second highest amount in the time frame, $237,386 in 2006.

Income for the diocesan self-insured medical coverage program has also increased dramatically, from $2.8 million in 2006 to $7.6 million in 2009, presumably because the diocesan-wide restructuring of schools included expanding coverage to all employees.

When diocesan officials met with the regional school boards, the board members were advised that they will have to make necessary adjustments to tuition, fundraising and budgets in light of the financial shortfalls, according to a press release following the meeting.

Monsignor Joseph Bambera, Cardinal Rigali’s delegate handling day-to-day matters in the diocese until a new bishop is appointed, told the board members the diocese remains committed to supporting Catholic education but does not have unlimited resources.

In his statement accompanying the financial report Thursday, Rigali – head of the Archdiocese of Philadelphia and top-ranking bishop in Pennsylvania – wrote that, “While the diocesan finances are deeply troubling and present formidable challenges, with God’s help we will find creative ways to meet the challenges and reverse the significant losses that are evident in the published financial statement. I ask for your prayers for our Diocese.”