Monday, December 15, 2014

Pharoah's Dream

I've decided to name my next blog Pharoah's Dream.  (I'm just posting here for the time being.)
The purpose of this blog is to talk primarily and specifically about church finance, but also about non-profit finance in general.

My primary intended audience is the lay leadership of churches like the  Episcopalian congregation of which I'm a member; although much of this will also pertain to all non-profits. 
The central theme of this blog is reconsidering how to use one of our main pillars of financial support -- those larger sums of capital which usually come from people's estates, and which typically have been used to create perpetual endowments.   I'm going to argue that, unless such an endowment is the only thing the donor wants to do, a better way to use legacy gifts is to liquidate them and invest them in fulfilling your mission.  
The Bible, whether read as the sacred word of God or simply as one of the foundational historical documents of Western civilization, talks a lot about money and wealth -- depending on who's counting, perhaps more than any other subject.  
One of the earliest instructional episodes for institutions considering how to handle assets occurs way back in Genesis 47, in the story of Pharoah's Dream.
Joseph, the great-grandson of Abraham, had been sold into slavery in Egypt by his jealous brothers, but emerges as an advisor to Pharoah when he is able to interpret a troubling dream.  In Pharoah's dream seven fat, sleek cows are eaten by seven scrawny cows; and then seven full and heavy heads of grain are devoured by seven withered plants.   Joseph  indicates that the dream is a weather forecast of seven years of plenty, which is to be followed by seven years of famine.
Joseph offers a plan from God, which Pharoah empowers him to implement, to prepare Egypt for the coming disaster by setting aside 20% of the harvest from each of the seven years of plenty in great warehouses.   When the famine years begin, enough grain has been stored to feed the people of Egypt and their neighbors through the times of trouble.
For 3400 years, this story has been used to demonstrate the wisdom of prudence and thrift, of setting aside money for a rainy day.  It is, in fact, frequently cited in books and essays about the need to create endowments. 
I'm no Pharoah, but I am often troubled, sometimes in the middle of the night, by concerns that lean years may already be upon us.  I serve on the vestry of a church that is blessed (and challenged) with an endowment that can support more than half of our current operating budget -- if that's how we continue to choose to use it.  I've spent nearly 30 years working with dozens of non-profits that only aspire to having more assets than annual expenses.   (I'll probably break this into two posts at this point).
I decided to name this blog after the story in Genesis 47 because it is instructive in a way that we don't often consider, in our efforts to turn years of plenty into futures of plenty.    Pharoah was told to set aside 20% of the income from seven abundant years to use it, to spend it, over the next seven years -- to meet human need, not to produce interest income as an additional revenue stream for the palace. 
Most churches and most non-profits do a pretty good job (although we all can do better) at talking to their members and supporters about the importance of regularly supporting their annual operating budget with a recurring gift or pledge out of the member’s income. Churches have the extra advantage of a common language about giving back to God.
Very few churches or non-profits are anywhere near as systematic about talking to their supporters about ALSO supporting their mission with a significant one-time gift out of their estate.  Many endowments that do exist came as unexpected surprises, or as the result of extensive targeted cultivation of a few significant prospects.
And yet if churches – or non-profits in general – succeeded in making their case for the second kind of gift at the same conversation rate that they do in making their case for the annual kind, they could transform themselves within a generation.  
If every parishioner in your church would endow their pledge – would commit to a gift out of their estate of $20,000 or so for every $1000 they pledge on an annual basis – then within 60 years, your endowment would be producing as much as your current annual appeal does; you could double the resources available to pursue your mission.  And, probably two-thirds or more of your pledge revenue comes from people over age 50; so there is a chance that you could increase your budget by 70% in just a generation, even without increasing pledging.
Excited yet?  No, me either.  This is going to take too long, and the benefits are too far down the road.
But Pharoah’s Dream offers one other bit of advice for making a case for that legacy gift. Joseph didn’t tell Pharoah to store up seven years’ worth of surpluses to invest it at 8% so he could spin off 5% per year while reinvesting the other 3% as a hedge against inflation forever.  The plan was to use it over the course of a seven-year famine.
Maybe we need to change, or at least add a new dimension to, the paradigm of how to use estate gifts.  Maybe putting a million dollars into an “investment vehicle” that spins out $50,000 a year until the end of time isn’t the only or the best way to inspire giving or plan your organization’s long-term future.  Perhaps other donors – particularly those whose estate gifts will be four or five figures instead of six or seven – can better visualize the meals served, the people clothed, the lives changed if their gifts, pooled with others like them, were spent down over a given number of years – perhaps a generation, during which time the next generation of donors are cultivated to replace the gifts that preceded them.
There are and have been charitable foundations, such as the Herman Krannert Trust and the Nina Mason Pulliam Charitable Trust, designed to self-liquidate in this manner.  How many individual institutions are beginning to plan at least a part of their legacy giving and asset management programs in this way?  Trinity Episcopal Church in Indianapolis is at least exploring it.  In posts to come, I’ll share what we’ve experienced, and what I’ve found in talking to others across the country. 
We may survive this famine yet.  We may even come through stronger.

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