All of the following financial information comes from documents and statements available online at the website of the Church's Finance Office. I have simply integrated the budgetary information with the timeline of the Church's involvement in property litigation.
In July 2000, the General Convention of the Episcopal Church (USA) adopted a budget for the Church covering the years 2001-2003. Interestingly enough, the chair of the Joint Standing Committee on Program Budget and Finance at the time was a certain Ms. Bonnie Anderson -- later to become (in 2006) President of the House of Deputies. The budget for the Presiding Bishop's Chancellor (David Booth Beers, who had been serving in that position for more than eight years) was a straight $40,000 per year, or $120,000 for the three-year period. There was also a line item in the Budget for "Title IV Contingencies," which included the cost of any disciplinary investigations and trials at the national level involving the clergy (chiefly, at that level, the Church's bishops). The Budget allocated $100,000 per year to that item, for a total of $300,000. Thus we have:
Budget allocated to Church legal expenses, 2001-2003 (under +Griswold): $420,000.00
During that first triennium of the new century, the only property litigation in which the Church was involved, as far as I am aware, was the lawsuit brought by All Saints Parish, Waccamaw, in South Carolina. The suit began in October of 2000, and ECUSA was named as a defendant.
The next triennial budget was adopted at General Convention 2003, which saw the confirmation of the election of V. Gene Robinson to be the diocesan of New Hampshire. All of the consequences of that election were still off in the future, but Ms. Anderson's Standing Committee saw fit to nearly double the budget for legal expenses. They did double the amount for "Title IV Contingencies", from $100,000 to $200,000 per year, and they boosted the stipend to the Chancellor from $40,000 to $55,000 per year. This meant a
Budget allocated to Church legal expenses, 2004-2006 (under +Griswold): $765,000.00
The Presiding Bishop of the Episcopal Church (USA), the Most Rev. Frank T. Griswold III, had famously given out his opinion that church property disputes were matters for the dioceses to handle, and did not involve the national church. After the appellate court sent the South Carolina case back to the trial court in March 2004, Bishop Griswold might have thought his litigation expenses would lighten a bit, but events proved differently. Out in the Diocese of Los Angeles, a dispute was brewing between its bishop, the Rt. Rev. J. Jon Bruno, and three parishes whose congregations and rectors became disaffected following Bishop Bruno's participation in the consecration of Bishop Robinson of New Hampshire, and performance of a same-sex blessing in his own diocese. In August 2004, the vestry of St. James parish in Newport Beach voted to realign with the Anglican Province of Uganda. It was followed in short order by All Saints parish, Long Beach, and St. David's parish, in North Hollywood.
In a knee-jerk response that has now become typical of ECUSA's leadership, Bishop Bruno responded by having his standing committee rubber-stamp charges of "abandonment" against the realigning clergy (even though, as explained at length in this prior post, the abandonment canon for clergy spells out precisely that leaving ECUSA for another church within the Anglican Communion is not "abandonment"). Next, he filed suit against them, their parishes and their vestries (seeking punitive damages against the latter), and asked the national church for help. It is not clear why Bishop Griswold responded with the filing of a lawsuit against the three parishes in the name of ECUSA; it may be that he felt weak in light of the recently issued Windsor Report, and (probably at the urging of his Chancellor) wanted to back up a diocese which was facing well-funded opponents. At any rate. Chancellor Beers soon had a major legal fight on his hands, and costs began to escalate.
The year 2005 was a new low point for the Episcopal Church (USA). In February, the primates meeting at Dromantine asked ECUSA to withdraw from participating in the upcoming session of the Anglican Consultative Council at Nottingham in England. The House of Bishops met in March, and in response to the Windsor Report, declared a moratorium on all episcopal ordinations until General Convention 2006. The controversy over the leaked Chapman Memo continued to boil, and nineteen more parishes declared they were realigning with other provinces, in addition to the twenty-six who had done so the year before. The Connecticut Six filed suit in federal district court. And more troubles broke out in California: the Diocese of San Diego, under Bishop Mathes, met with resistance from three parishes, each of which voted to realign in 2006.
In March 2006, the Presiding Bishop's Canon, the Rev. Carl Gerdau, reported to the Executive Council that "the Church had spent $500,000 in 2005 to defend congregations and dioceses in [church property] disputes." (The Council's response? It voted to declare that the "expenses associated with Title IV investigations and trials and legal support for dioceses in excess of the previously budgeted amounts in 2004 and 2005 be considered as extra-budgetary items funded with surpluses accumulated from prior trienniums." [sic]) The problem of how properly to account for legal cost overruns would continue to dog the Executive Council for each of the ensuing years.
By the time General Convention met at Columbus in June 2006, ECUSA's leadership was virtually in panic mode. It needed an affirmative response to the Windsor Report, or it feared that ECUSA would lose its place in the Anglican Communion. But it almost failed to get one -- until an extraordinary, last-minute appeal to the House of Deputies from both Presiding Bishop Frank Griswold and the new Presiding Bishop-elect, Katharine Jefferts Schori, saved the day. (See the full chronology here.)
Meanwhile, the Diocese of San Joaquin, led by Bishop John-David Schofield, had amended both its own constitution and the articles of its diocesan corporation sole so as to minimize the role that ECUSA or General Convention would have in its affairs -- including the selection of any successor bishop. The day after General Convention finished its business, the Rt. Rev. William E. Swing, Bishop of California, addressed a strong letter to Bishop Schofield (scroll down to the sixth and seventh pages), in which he demanded that the latter sign and return by the next day an agreement to take all appropriate steps needed to reverse the steps taken by his diocesan convention. The letter explained the reason for its unusual demands (emphasis added):
My point is this: you have led your diocese to take actions that put all Episcopal dioceses in the State of California in jeopardy. I am not talking about interpretation of Scripture or theological points of view. I am specifically talking about your legal language. All Episcopal dioceses in California are questioned by the court system as to whether or not we are a hierarchical church. You have taken unilateral actions that destroy any chance that the rest of the Episcopal dioceses in California could ever argue that we are a hierarchical church. That will create chaos for all of us for all time.
I beg you to take the lead in reversing the actions of your diocese. No need to apologize; great need to begin now in reversing the situations. This issue of internal governance is crucial, and the moment is volatile."
When he received no response, Bishop Swing, joined by Bishops Lamb, Bruno and Mathes, who each also feared that the moves by San Joaquin could weaken their positions in ongoing or future litigation against realigning parishes, brought an accusation against Bishop Schofield for -- you guessed it -- "abandonment of communion."
In retrospect, it is obvious that the four complaining bishops coordinated their legal moves with Chancellor David Booth Beers, who had been stage-managing the Church's legal strategies since at least October 2004, when he called together all the diocesan chancellors for an extraordinary conference in the wake of the Windsor Report. According to sources who participated in the conference, Mr. Beers made it clear that the Church would not tolerate a diocese which did not aggressively pursue departing parishes for their buildings and assets. And when the correspondence to Bishop Schofield leaked in July 2006, Mr. Beers at a later conference "expressed annoyance that details of private correspondence had been published."
From this point forward, with Presiding Bishop Griswold on the way out, and "a new sheriff coming to town" in the person of Presiding Bishop Katharine Jefferts Schori, David Booth Beers assumed complete responsibility for the litigation policy of the Episcopal Church (USA). And under his direction and management of that policy, ECUSA's legal bills multiplied enormously.
The lack of advance warning for what was about to occur may be seen in the final triennial budget (2007-2009) proposed to General Convention by its outgoing Presiding Bishop. In that document, downloaded from the Finance Office's website, the amounts budgeted for the Chancellor dropped from $55,000 per year to $35,000 per year, and the amounts budgeted for "Title IV Expenses" were slashed to their 2001 level, from $200,000 per year to $100,000 for each of the next three years. This was an overall reduction in the budget for legal matters of nearly 43%, or $360,000 -- an amazingly short-sighted step to take for an organization that was becoming enmeshed in more and more lawsuits:
Initial allocation for Church legal expenses, 2007-2009 (last +Griswold budget): $405,000.00
The shortsightedness of these cuts in the triennial budget, however, reflected the views of the Presiding Bishop's Chancellor. Leading a workshop at the initial meeting of a group calling itself "The Episcopal Majority", at St. Columba's in Washington, D.C. in November 2006, Mr. Beers expressed those views as follows:
Beers briefly discussed instances of litigation that have arisen in the last few years after congregations have sought to leave TEC with their church building. He noted that TEC had prevailed in all situations that have already been decided except for one in Los Angeles (involving three parishes), although there have been some unfavorable developments in cases in San Diego, South Carolina and Central New York. Beers said he expects the Los Angeles decision to be overturned on appeal and a favorable final verdict in the other cases. He added that church officials were watching four other potential church property conflicts, which he did not identify.
"That's not an epidemic; it's not a flow of victories" for conservatives, Beers said.
"Not an epidemic" -- perhaps not at that point, but litigation certainly was not in a downtrend, either. And once again, the increase in litigation was spurred in part by the actions of the Presiding Bishop's Chancellor.
As the Diocese of San Joaquin moved closer to the adoption of amendments which would take it out of the Church altogether, Mr. Beers in the fall of 2006 took it upon himself to write letters to the Dioceses of Fort Worth and Quincy, where similar constitutional amendments had either been made, or were under active consideration. The full article describing the letters is no longer online, but here is a link to a copy of it. According to Steve Waring, reporting for The Living Church, the letters demanded that the dioceses bring their constitutions and canons into a state of "unqualified accession" to the Episcopal Church's Constitution and Canons, and ended by saying that "should your diocese decline to take that step, the Presiding Bishop will have to consider what sort of action she must take in order to bring your diocese into compliance."
The "she" referred to in Mr. Beers's letters was, of course, the Presiding Bishop-elect, who was still to assume the duties of office when Mr. Beers wrote. And remarkably, at the Episcopal Majority workshop mentioned earlier, Mr. Beers admitted that he had not consulted with either Bishop Jefferts Schori or with Bishop Griswold until after sending out the letters (emphasis added):
Beers said he wrote the letters on his own initiative but with the knowledge of Jefferts Schori and now-former Presiding Bishop Frank Griswold. He told the Episcopal Majority workshop that he had written a similar letter to the chancellor of the Diocese of San Joaquin, another Network diocese, last summer . . .
From his other remarks at the workshop, it is easy to see how the future litigation strategy of the Episcopal Church against departing dioceses was already in the Chancellor's mind:
Beers noted that he could not say how Jefferts Schori would respond if a diocese did pull out without convention permission. However, he said at a different point that, in the case of a vacancy in a see, he assumed that TEC's leader would "obey the canon calling for her to consult," provide the diocese in question with "episcopal care," facilitate the selection of a new diocesan standing committee and council, and help the diocesan leadership bring a lawsuit to recover the property, signs and symbols of the diocese.
(As documented in this post, the Presiding Bishop's special counsel for litigation and discipline, Ms. Mary E. Kostel, absorbed all of these strategies from her mentor at Goodwin Procter, David Booth Beers.)
Three short months after the Episcopal Majority workshop, the realities of the situation began to hit the Episcopal Church (USA). At their regular meeting in March 2007, the members of the Executive Council learned some unpleasant budgetary facts: (a) the canonical expenses for calendar 2006 had overrun their budget by some $425,000, thanks in part to an unscheduled grant of $443,519 for unspecified "legal assistance to dioceses" again; and (b) the Church's own Title IV expenditures had mushroomed to $430,648 -- more than four times the $100,000 that had been budgeted for that category. As a consequence, it was recommended to increase the 2007 budget for these items two items to $300,000 (Title IV) and $500,000 (legal assistance), respectively. The rationale given? "Reflects reality of 2006." (Remember that this was just nine months after General Convention had been told that $300,000 would be adequate funding for Title IV expenses for the entire triennium.)
So to recap: after increasing its budget for legal expenses in the 2004-2006 triennium from $405,000 to $765,000.00, the Church actually ended up spending $1,179,167.00 -- and so passed its first million-dollar milestone in ongoing legal expenses. And it did so after the fact, without ever bringing the matter before General Convention, and after having slashed the official budget presented to that body in the first instance. In a pattern that we will see recur, the Executive Council was required to make the painful adjustments in the interim, by tinkering with the Church's endowment funds to make up the shortfall:
So as not to have to reduce programs for the Church's mission and ministry, the council agreed in Resolution AF-21 to raise the investment income payout rate for 2007 from 5 percent to 5.5 percent, creating a one-year exception to the rate established in June 2005, and to take up to $2.3 million from short-term reserves to add to the 2007 budget's income.
Treasurer and Chief Financial Officer N. Kurt Barnes told the council March 3 that, while he generally supports leaving the payout rate at 5 percent in order to protect the endowment funds against "de-capitalization," the funds can withstand a one-year increase. . . .
We will leave the Executive Council on that note, as it had to adjust the official 2007 budget radically to deal with unbudgeted legal expenses, on which it received no independent advice. In the next installment, we will see how the Council had to adjust the official budgets upward again in 2008 and in 2009; then we bring the whole legal and financial story forward, to the current day. And then, in a concluding installment, we will ask the hard questions which no one in ECUSA appears to be asking -- such as: Cui bono?