The Presbyterian Foundation is planning to file legal actions in secular court in Indiana and possibly Pennsylvania that could free up funding to support the 1001 New Worshipping Communities program.
The legal action is known as a cy pres filing: a formal request to a judge to reconsider the restrictions that donors placed on money they gave to the Presbyterian Church (U.S.A.) or its precursors decades ago – restrictions that may no longer apply given a changing denominational environment. Many of the donations were given to support the construction of new churches or ministries, for example, at a time when the denomination was expanding and planting new churches. But since the 1960s, the PC(USA) membership has declined – from 4.25 million active members in 1965 to 1.24 million active members in 2020.
The plan is to formally ask a court to reconsider those restrictions in a way that would give permission for the PC(USA) to use the money for what the church would argue was the next closest use to the donors’ intent: to fund the Presbyterian Mission Agency’s 1001 New Worshipping Communities program, which supports new endeavors that range from immigrant fellowships to programs focused on unchurched young adults, and other creative ministry approaches.
It’s unclear how much money the cy pres action might free up – or how long it might take until the legal actions are filed and a court actually rules. Most of the cy pres actions likely will be filed in state court in Indiana, because that’s where the Presbyterian Foundation has its offices. The Foundation has said the legal filings “could free up millions,” but was not more specific in an announcement issued via Presbyterian News Service.
The funds under consideration in the cy pre actions potentially could total nearly $118 million – with the possibility of providing the Presbyterian Mission Agency (PMA) 4.25% of that amount per year (using a 20-quarter market value average with an 18-month lag), or about $5 million annually, according to the current spending formula being used. There are a lot of unknowns in those estimates – including whether courts would grant changes in the restrictions on the full $118 million.
The Foundation’s announcement stated that on July 9, the Foundation, the Investment and Loan Program and the Presbyterian Mission Agency signed a Memorandum of Understanding on how the funds would be distributed. (See the Memorandum of Understanding and related documents here: 1001 NWC MOU_signed July 9 2021)
That memorandum of understanding states that PMA believes $140 million of principal funds would be needed to sustain the 1001 program, stating that about $22.4 million of the funds it has identified as potentially supporting “church extension work” in PMA would come from funds not needing cy pres action – and about $117.7 million would need approval through cy pres actions filed in court.
That memorandum states that what are known as “Board designated funds” that the Foundation holds – including the Church Extension Fund, The Special Church Extension Fund and the Fifty Million Fund – can be used without court approval to support the 1001 New Worshipping Communities Program, which is now being considered as part of PMA’s “church extension work.”
The memorandum also indicates that the funding might be used for purposes beyond new worshiping communities – stating that “PMA’s church extension work also includes grants to particular congregations and presbyteries for projects associated with transforming existing congregations, or developing congregational-based ministries and as support for ministry programs related to organizing new congregations or worshiping communities, transforming existing congregations, or developing congregational-based ministries.”
Previously, the Foundation had agreed to provide funding to support the 1001 program through 2022 from endowment funds the Foundation holds – funds whose use does not require court approval. Earlier this year, PMA submitted a proposal to the Foundation stating that the 1001 program does not generate enough income to sustain itself, that designated funds it has been using to support the program are nearly depleted, and that $6 million annually is needed to support the work it wants to do through 1001.
The PMA proposal identifies a number of funds that could be possibilities for cy pres actions – including $56 million from the Building Campaign Fund, $42 million from the Loan A Fund, and $18 million from the Church Erection Fund (those amounts are based on market value fund balances net of endowed principal as of March 31). Although those funds have not been fully utilized because of the donor restrictions, the Investment and Loan Program has been able to use some portion of those funds to make loans to churches, within the original donor restrictions.
The idea of filing cy pres actions or finding some ways to ease the restrictions has been a topic of conversation among Presbyterian leaders for more than a decade – with the former chief executive officer of the Foundation, Robert Leech, stating in 2008 that about $200 million was at stake, some of it funds given for homesteading churches, to buy land, build churches and manses, or renovate existing structures.
While most Presbyterian congregations aren’t building new churches now, that money could be used to pay the rent for a storefront church or for salaries or start-up costs for a new worshipping community, a church leader said at that time.
A 2008 Outlook story said that “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.”
There’s also been conversation at the Coordinating Table about appointing a cross-agency staff team to review whether there might be more flexibility in how some restricted funds are used and which funds might be likely candidates for cy pres actions. Kathy Lueckert, president of the PC(USA), A Corporation, said in May that there are more than 2,000 restricted funds, and that such a review would be time-consuming.
That cross agency team is expected to report back some of its findings and recommendations later this year.