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More Layoffs, Cuts Possible in Archdiocese

Its administrative deficit has tripled to $13.4 million, officials say. A substantial portion is related to the sexual abuse scandal.

January 24, 2003|Larry B. Stammer | Times Staff Writer

The Roman Catholic Archdiocese of Los Angeles may need to make additional layoffs and reduce programs to handle a budget deficit three times larger than previously revealed, church officials said Thursday.

Four months ago, the archdiocese, which is the nation's largest, said it faced a $4.3-million deficit in its $43.4-million administrative budget. To respond, the archdiocese cut 60 jobs and reduced or eliminated numerous programs.

Now, the archdiocese says the operating deficit has grown to $5.7 million, in part because the layoffs were delayed. In addition, the church said, it faces $7.7 million in one-time costs, much of it related to the sexual abuse scandal, bringing the total shortfall to $13.4 million.

Church officials are considering dipping into reserve funds to close the gap. But that may not be enough if sexual abuse litigation costs are not fully covered by insurance, the financial report indicated Thursday.

Cardinal Roger M. Mahony, archbishop of Los Angeles, has previously said that such reserves were all but exhausted during the last several years. The archdiocese's attorney, Michael Hennigan, said earlier this month that the archdiocese had about $150 million in insurance coverage.

The administrative budget covers the church headquarters, which provides services to parishes in the three counties -- Los Angeles, Ventura and Santa Barbara -- that make up the archdiocese. It does not include the budgets of individual parishes, the Cathedral of Our Lady of the Angels, schools, hospitals and other Catholic institutions in the archdiocese.

The financial report showed that the archdiocese has grown poorer during the year. At the end of 2001, the archdiocese counted $643.7 million in assets of its central office, including $241.5 million in investments. Those figures do not include all the holdings of the church and its parishes.

By the end of 2002, the figure had dropped to $626.4 million. The reduction included a $9.7-million decrease in the value of investments, caused in part by the cashing in of investments to help cover operating expenses and in part by the decline in the stock market, church officials said. In addition, the church counted $7.6 million less in pledges, largely because of the winding down of fund-raising to build the Cathedral of Our Lady of the Angels.

Donations by Catholics to their parishes, however, were up in 2002, totaling $153.8 million, compared to $148.6 million in 2001, an indication that the sexual abuse scandal has not hurt the church at the local level.

In a response to questions about the financial statements, church officials said that "the current external environment dictates that the administrative office should begin contingency planning. At this time we are in the early stages of planning and we are taking a conservative and prudent approach. We are evaluating and measuring our administrative overhead against our operational objectives."

Asked if the archdiocese has ruled out further layoffs, archdiocesan spokesman Tod Tamberg said, "No decision has been made regarding a reduction in work force."

The cutbacks already made included reduction of prison ministries and elimination of specialized outreach ministries to college campuses, ethnic groups, people with disabilities, and gays and lesbians. Some reductions were later offset by private donations.

Although the stock market has been declining for a few years, the financial report said the archdiocese had budgeted based on the assumption that the return on its investments would be higher in 2002 than in 2000. The budget assumed $6.2 million in investment income in both 2001 and 2002, compared with $5.3 million in 2000.

In reality, investment returns were "significantly below budget," the financial statement said.

To cover the losses, the archdiocese central office tapped its portion of investment pool reserves that it shares with parishes.

As a result, its share of reserves declined by $15.8 million over the last three years.

No officials of the archdiocese, including Mahony and his financial advisors, were available for comment on the church's finances.

In a statement, Mahony said that "like other institutions, the archdiocese has been adversely affected by the general economic downturn over the past three years."

"Consequently, we have had to make some painful but necessary cuts in services in order to reduce expenses and live within our present fiscal reality," he said.

Not coincidentally, the archdiocese also announced Thursday that it has begun phasing out its four-year undergraduate college program for future priests at St. John's Seminary in Camarillo, which will help trim the deficit by $2 million this year.

Mahony has previously said that such a plan has been on track for "a long time."

The archdiocese said Thursday that it will no longer admit freshmen and sophomore level students to St. John's Seminary College, and will move its current students to the graduate seminary.

The decision was made by the seminary board Jan. 14.

One bright light in the otherwise grim picture was that giving was up slightly in the archdiocese's annual "Together in Mission" fund, which provides subsidies to underfunded parishes and schools in the most economically disadvantaged areas. Contributions to that fund totaled $13.4 million in 2002, compared to $13.1 million in 2001.

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