Now that may not sound like the most interesting question in the universe, except perhaps for trust lawyers and serious polity wonks. But the disagreements between the foundation and the General Assembly Council are bubbling to the surface and will likely become an issue before the General Assembly in June.
And, according to those involved, these discussions raise important questions about checks-and-balances within the Presbyterian system and about who should make decisions about mission priorities for the Presbyterian Church (U.S.A.)
When there is a difference of opinion, “Who has the final say?” asked Allison Seed, a minister from Missouri and chair of the council. “Is it the foundation and is it civil law, or is it the guidance of the General Assembly as interpreted by the General Assembly Council? That’s a pretty major issue.”
What’s at stake for the broader church is complicated. According to Robert Leech, chief executive officer of the foundation, the council has about $440 million in restricted funds invested with the foundation. Of that, about $200 million are in what are often called church building funds or church extension funds. Those funds are involved in this discussion.
That includes money given through the years to what was once known as the Board of Church Erections, which was “sort of a vehicle for homesteading churches,” said Laura C. Plumley, senior vice president and general counsel for the foundation. That money was used over the decades to buy land, build churches and manses, and to renovate church buildings.
But now, the Board of Church Erections no longer exists; the PC(USA) has a different organizational structure; and complex legal questions have arisen over what restrictions exist on a whole matrix of funds, which generally are used for “the spreading of the church to more places,” said Jay Hudson, chief executive officer of the Presbyterian Investment and Loan Program.
Today, for example, when a presbytery approves a new church development, often that doesn’t involve buying property or constructing a building – at least not at first. New immigrant fellowships often meet in schools or nest in Anglo congregations – so they may need money to pay the rent for a storefront church or for programming or to pay the pastor’s salary while the faith community is getting on its feet.
So the conversations between the foundation and the council can involve whether particular uses proposed for certain funds meet the intentions of the original donors – or of the denomination’s previous governing boards, which may have imposed restrictions of their own.
While all that’s being sorted out, some funds at times have been frozen – that in an environment in which the PC(USA), perpetually short on money, has at times needed to lay off staff or cut programs because there’s not enough money to go around.
And there are discussions about whether some funds can be used for loans to congregations – often through the Presbyterian Investment and Loan program, an approach which the council tends to prefer – or should be given as grants, which the foundation favors.
“Of course, the guidance of the General Assembly is that loans are preferable to grants,” Seed said.
With a grant, a congregation arguably benefits more – it receives the money and doesn’t have to pay it back. But with a loan, “it demands a certain accountability on the part of the congregation, that they’re serious about it and they also have a good, dare I say, business plan, for being financially in the black and on their feet, that they have a plan for growth,” Seed said.
And as the money is repaid, that makes funds available for other congregations, “it’s an abundance creating greater abundance.”
At least two issues involving the relationship between the foundation and the council are coming up before the assembly in June.
The Synod of the Southwest, in Overture 85, has publicly raised the question of whether the foundation is paying a strong enough return on investment, and is asking that the council be given the freedom to invest mid-term and long-range funds outside the foundation, as other General Assembly entities already are allowed to do.
Also, the Advisory Committee on the Constitution (ACC) is suggesting a change in who would make the decision in cases of disputes involving restricted funds.
The ACC is recommending that the assembly approve an advisory opinion that PC(USA) Stated Clerk Clifton Kirkpatrick issued in July 2007. That opinion initially addressed the question of whether the council could, between meetings of the General Assembly, modify the restrictions on the Church Extension Fund — in other words, make adjustments to restrictions imposed by an earlier General Assembly entity. Kirkpatrick concluded that the council could.
The ACC is advising the assembly to adopt that stated clerk’s advisory opinion – but also to shift the final decision-making power from the foundation to the council should those entities be unable to reach agreement on whether it’s proper to spend money from funds restricted for particular purposes.
Linda Valentine, the executive director of the General Assembly Council, presented the issue to the ACC and asked for the committee’s advice. Foundation officials have been so concerned about what the ACC has recommended that they asked for reconsideration, but the ACC did not substantially change its conclusion.
The foundation’s leaders contend they don’t want to end up in an untenable position, and think the church should keep the arrangement from the 1986 deliverance, written at the time of the reunion of the northern and southern branches of the denomination, in which the General Assembly allowed the foundation to prevail in cases of disagreement.
“The church is permitted to spend money out of restricted funds,” Leech said in an interview. “It is the foundation’s job to review those expenditures and ascertain that they are in accordance with the documents. We have areas where we have expressed concern about some of those expenditures.”
Leech and Plumley say the foundation is required to honor the intentions of donors and to follow civil law. If the terms of an old bequest can no longer be legitimately met — if meeting the original restriction is “illegal, impossible or impracticable,” Plumley said — then the foundation can take the matter to civil court and ask a judge for a “cy pres” order, which permits the funding to be shifted to the “next best use.”
One example, Plumley said, was a bequest given to support a presbytery’s church camp. When, in time, the presbytery found it was no longer economically feasible to operate the camp, it closed the camp – and a court issued a cy pres order that allowed the bequest to be spent for the presbytery’s outdoor ministry program, which includes camping.
These questions apparently are emerging now in part because the foundation has been revisiting the question of whether the restrictions are all properly being met.
“Over time, these church loan funds were thought more of as an amorphous blob of money by the General Assembly, than as individual discreet restricted funds,” Plumley said. “This is sort of a truing up period on the restrictions — and that causes some angst.”
Leech said the foundation is inclined to “view these as strictly as possible. … They (the council’s leaders) think perhaps we are being awfully picky on this. We view this as our responsibility to make sure there’s never a question” that things were properly handled.
And “our response is if you disagree, take it to court, we’re not going to oppose you. Give us the pass we need,” of court approval, Leech said.
Leech said he also has a concern that if donors suspect their wishes aren’t being followed, they may choose to invest elsewhere.
And Plumley speaks of the wisdom of a checks-and-balances system –— with the council determining the mission priorities for the denomination, and the foundation making sure restrictions are properly followed.
“The Presbyterian church has been very astute and really led a lot of churches in social witness through investing,” Plumley said. “The more dollars you have to invest, the more corporations listen to you, and the more impact you have. So if we end up eroding donor confidence because they think the GAC might be able to interpret restrictions, we get less money into the foundation and we have less to invest and we have less to speak about” — less impact in the realm of socially-responsible investing.
“The checks and balances that were set up between the foundation as the fiduciary and the GAC as mission spenders were very wise and should be preserved,” Plumley said.
The ACC, however, said in its advice that the foundation has the responsibility for managing funds for the denomination, but that responsibility “does not by itself grant authority to determine how or for what purposes those funds are dispersed.” The ACC made an analogy to a congregation with the foundation being like the board of trustees, managing the congregation’s money, and the council being like the session, “with the authority to determine the mission of the congregation” and to decide how to spend the congregation’s money in support of that mission.
The ACC also states that “when funds are restricted, they may be spent only for the purposes stated in the restriction.” In interviews, both Valentine, herself a lawyer, and Seed said the council is as legally bound by those restrictions as is the foundation.
“Often times it’s not wildly clear, because many of these funds are decades and centuries old,” Valentine said. “Conditions have changed. That’s where the differences of interpretation come up.”
Valentine also said that if the assembly accepts the ACC’s advice, “there are still checks and balances” in the system, and “we operate on the assumption that we have as much fiduciary responsibility to the donors and the restrictions they place on funds as the foundation does. So we take that very seriously, as do they. … In no case are we seeking to go around donor restrictions in any way.”
During a conference call May 6, the council passed a resolution stating that it would engage with the foundation “in a collegial process involving a mutually agreed upon independent third party to advise both agencies on issues involving the use of restricted funds.”
Seed said that resolution has received support from the foundation’s Board of Trustees as well. Valentine told the council that the “third party” likely would be a lawyer or law firm familiar with the church and with trust law.