The following is the third of all five segments of a debate between presidential candidates Rev. Dr. Laurel Hallman and Rev. Peter Morales that took place at Eliot Chapel at the Boston headquarters of the UUA on January 15, 2009.
The full transcript is taken from their site http://www.uua.org/aboutus/governance/elections/president/128768.shtml which also hosts the linked audio versions; the full transcript is also available here.
UUA board secretary Paul Rickter introduced the event explaining that from 33 questions brought up by board members five subjects had been selected for this 90 minute event. (Read his full introduction in the original transcript).
Link to original audio at UUA.org: Finance
SEGMENT THREE: FINANCE
Rickter: And And we’re going to go on to our next segment, on finance, which will be moderated by Dan Brody.
Dan Brody: Thank you. Rather than give each of you 20 seconds each for each of the 13 questions on the list, I’m going to focus on two questions [laughter and side comments], perhaps with some follow-ups on the second question. So, Laurel, why don’t you start on the first question.
As you heard in finance committee yesterday, the administration is contemplating some budget cuts for the fiscal year that starts July 1st. It is highly likely that additional budget cuts will be needed in the subsequent fiscal year just because of the way our endowment spending policy works. Could you tell me how you would approach the task of, say, an additional 10% budget cut that might be needed in the first budget that you’re responsible for? And what would be your programmatic priorities?
Hallman: First of all, I think that we need to look at the question differently. And that means different delivery of services that are not necessarily programmatic. We did even, in fact in the finance committee, talk about some of that, the technological delivery of services that mean that we’re not sending people out to do workshops and gathering people for workshops. Just thinking creatively about how we deliver what we need to deliver.
The first priority, of course, is the help with the congregations, and so we need to figure out what the UUA will be doing to support congregations and how to deliver that in a cost-efficient way that cuts — the kinds of cuts that you are suggesting. So that includes religious education, that includes the preparation and support of ministry and religious education directors under religious education and musicians — and the support of the strengths of the institution as its embodied in our thousand congregations.
Beyond that then we start thinking of what do we, what can we, what other efficiencies can we do? And we listed some of them yesterday. Webinars would become very effective in this kind of environment. It gives us an opportunity to reexamine how we do things and what is our most important service, to whom do we serve, who are we serving and to whom do we serve and to what end? I think that question will help us sort that very effectively, but I just would say, again, I think our first pass would be the one that we begin to make which is how do we deliver what we’re delivering in a different way.
Brody: Thank you. Peter.
Morales: There are several parts to this, one of which is the fact that we are likely to have to make budget cuts puts a huge premium on very quickly developing a new culture of evaluation in our association where we are results-oriented and we’re measuring that. Again, not that we’re falling in love with false indicators. But being a religious organization and being one where people tend to come from congregations, and often smaller ones, compared to what exists in much of the world of organizations, both profit and nonprofit, we are, in fact, far behind. And too often when I was sitting in budget discussions, we didn’t have the information to be good stewards because we really had no sense of whether different program initiatives were working effectively or were not. We just simply didn’t know. I often use the example of a program that we had for some time around doing growth workshops, Decisions for Growth, and we had a couple of staff members for a long time devoted to it. I don’t know how effective that was. I don’t know whether at the time, and if we really valuing growth as a high thing to share our faith, we should have been doubling that or whether we should have cut it. And we had no basis on which to make that. So I want to talk about how you make the decisions, but you have to have the stuff as background to make responsible decisions.
Once you’re in that process, alas I’ve been through it in government and in the private sector too many times, I think if you’re looking at 10% cut you’ve got to ask different workgroups what they’re going to do, if they’re going to cut 25% or 30%. Because you cannot do stuff across the board, because then you don’t become more effective and more efficient. And then you go through an exhaustive and anxiety-producing process, but it’s very rigorous if you do it well.
There’s another piece to this. If we’re going to have to make cuts they need not only to reflect our ends but deeply our values. And that means around… this is an organization of people, for example, you know, if we’re going to make significant budget cuts, especially we’re dealing then with 20% and maybe effectively 25% over a couple year period, I don’t know any way to do that without effecting staff. You just cannot. And I think we need to do it in a way that is sensitive and compassionate. And one of the things that I would model is the biggest cuts would come at the top, including the President’s salary should be reduced significantly if we get to that point. And probably, and then do things like one day a month leave, things like that, to try to preserve the people who are essential and really good in our organization and to share the burden.
Brody: Thank you.
Hallman: Can I tag on that?
Brody: Sure.
Hallman: As President, I have a different response to that. And as President and having gone through three different downturns and then recoveries, it’s extremely important for the President to take a position of prudent leadership which is not doomsday, you know, we’re all going to hell in a hand basket and that we’ve got to make these terrible cuts and is not Pollyanna, but is responsible in terms of leadership and in terms of generosity. Because it’s the economy and, you know, we’ve talked about this in these meetings. The economy right now is, and certainly investments have taken a huge cut, but pockets here and there have not been affected yet. And so I would go to the places that have not been affected and ask them to be more generous, because, in fact, we even talked about this a little bit in Dallas, about how do we help other places that are being hard-hit keep solvent so that we have some, we talk about generosity, as well as oversight of the staff and the budget and preparations and plans for what we might have to do.
Morales: And this process, too, especially if it gets to another round of significant cuts, it’s essential that we not eat our seed corn. And by that I mean certain long-range programs, like around diversity and retention of youth, those don’t pay immediate returns, but those have got to be preserved because our long-term health absolutely relies on those. And so we have to both maintain our sense of those that are absolutely essential for long-term health and they have to be protected virtually at all cost.
Brody: Thank you. The second question involves how you would make financial tradeoffs. In many cases, and the questions on this list reflect a number of aspects of it, we have to make a decision where, on the one hand, we might be trying to maximize the amount of money that’s available to spend right now, but at the risk of a variety of undesirable consequences. So the risk in, not so much risk as the tradeoff is an undesirable consequence in some other form.
So a clear example is, when we get unrestricted request income, we can decide to spend it this year or we can put it in the endowment that then lets us spend it in some future year. We can have an investment policy that increases the amount of money that we spend each year out of the endowment at the risk — at the tradeoff — of having less to spend in the future. We can invest money in the endowment in riskier investments, but there’s going to be more volatility. So there are a whole range of these issues. Peter, if you would go first. Sort of … what’s your bias on that? Are you leaning one way or the other as terms of, you know, what we do now versus some of these other consequences?
Morales: I don’t want to duck the question, but before I made that decision I’d want a lot more analysis and I’d want different perspectives on it. So, for example, I would want information about what other like institutions are doing, not only religious but, say, educational ones, what their policy is, what their experiences have been and what the recommendations of their top people are. I would want, let’s say, a bequest income. I would want to look at the tradeoffs and have some very rigorous analysis of what those tradeoffs are and then make the decisions based on our objectives and our common values. And it will vary. I mean it’s the tyranny of circumstance. If things have just gotten awful and you’re real short and, you know, $2 million lands on your lap and the choice is to spend that $2 million this year, put it in the endowment when the market is volatile, I’d probably lean toward, you know, saving essential programs and key staff and maintaining operations. If things weren’t that dire, I might feel a different way at a different time. It’s always a moving target on those things.
Hallman: I would approach it, as a president, from the point of view of the donor. I think that one of the most important factors to be factored into all of these decisions is credibility, trust, that the money that these people are leaving with the intension of, in a bequest of a long-term investment in the future of our faith, needs to be perpetuated and underscored, even in hard times. So I would tend to take the more conservative side financially, specifically in terms of the 5% plus 2% that the Board has grappled with, or the finance committee has grappled with, I think the 5% is in keeping with pretty much what people are doing out there and that 2% in this market is very extravagant. And I know it’s the real-world versus the world that we would hope for, but I would take the conservative side on it. It’s the way to keep credibility in the institution while you ride out a dark time, a hard time.
Morales: Let me say even that one is a tough call because I tend to lean that way. I don’t want to draw down the endowment, but if can spend a bit of it, it really depends on what the probability is of that returning a whole lot more money than you’re spending, you know. In the newspaper business in hard times, you don’t fire the advertising staff. That’s your revenue stream. And sometimes you might even have to spend more on that. It really is a tradeoff, but you don’t let somebody go because their salary is $50,000 and they’re bringing in $200,000. I mean that’s nuts. So you really have to look at it, I think, case-by-case.
Hallman: That’s true, but just don’t forget that it’s not the selling of the newspapers or the advertisements. It’s the gifts of the donors and it’s a different kind of relationship.
Morales: But we were talking about unrestricted.
Brody: There’s a range of things we’re talking about where the issue comes up. Thank you very much. I think we’re ready to move on.
