How Many Income Streams?
By Lyle E. Schaller

On April 30, 1789, the 57-year-old George Washington was inaugurated as the first President of the United States of America . In July 1789, the new President signed the first important bill passed by the new Congress. It provided the first income stream to finance the new government by levying tariffs of 10 to 15 percent on imported goods. During the next two months, Congress created the first three departments for the new government: Foreign Affairs, War, and Treasury. During the 1790s, tariffs or customs duties, as they also were labeled, were yielding an average of $5 million a year. Tariffs not only accounted for most of the receipts of the national government, they also protected American agriculture and other producers of goods. For the next century, that one income stream produced one-half of the dollars required to finance the operations of the federal government.

Today, of course, the United States Department of the Treasury depends on scores of income streams, including billions in borrowed dollars, to fund the national government.

In 1692 and 1693, the General Court of the Massachusetts Bay Colony adopted statutes that required the property owners of the Colony to pay an annual tax to fund the salaries of all of the Congregational Church ministers in that Colony, except for those in Boston . That income stream continued for another 138 years. Today, the congregations in what has become the United Church of Christ rely on several other income streams to pay their ministers.

In thousands of Christian congregations in America today, every Sunday morning, the worship service includes a brief period allocated to the "Presentation of Tithes, Offerings, and Gifts." The origin of those words refers to three income streams. The first called for returning - not giving, but returning - to the Lord what is His. This refers to 10 percent of the income of that person or family. Good stewardship requires returning what belongs to God.

The second stream is the offering over and above the tithe. (In a couple of American religious traditions, the tithe is forwarded to the denomination - which pays all of the compensation received by the clergy - and the offerings and gifts are used to finance the balance of the congregation's expenditures.)

The third stream consists of special gifts given in a spirit of thanksgiving. One may be thanksgiving for the birth of a healthy baby, a second in thanksgiving for completion of a long trip, a third in thanksgiving for a happy wedding anniversary, and a fourth as thanksgiving for the life and love of a recently deceased relative.

The Unified Budget
By the end of World War I, many Protestant congregations were confronted by dozens of pleas for money. One was to contribute to that congregation's building fund or to retire the mortgage. Several more were to help fund a church-related college or a camp for summer ministries with children, a hospital or foreign missionary venture or orphanage or denominational agency or pensions for retired ministers or an evangelistic crusade or a home for widows or a theological school or to plant new missions in urban America or to relieve the suffering caused by the war in Europe.

One consequence was the most persuasive fund raisers collected the most money, while many worthy causes often were underfunded. Another consequence was an increase in the number of frustrated congregational leaders who preferred order to chaos. A third was the arrival of the unified budget that affirmed that "we are besieged by too many pleas for money, so let's ask those who have an overall view of all the needs to define the priorities in the allocation of scarce resources." In essence, this represented a switch from a participatory democracy to a system of representative government. One example of this was the adoption of the World Service Fund by the Methodist Episcopal Church in 1924, and, two years later, the Southern Baptist Convention created the Cooperative Program. Both systems were organized around the central concept of a unified budget.

The popularity of the unified budget in religious organizations began to wither after World War II. Two demographic changes undermined it. One was the deaths of the generations born in the 1860-1920 era who created and supported the concept. The second was the arrival on the religious scene of the churchgoers born after 1920. A growing proportion of each of these younger generations grew into adulthood in a culture that persuaded them their values and priorities were at least as good, if not better, than anyone else's. One popular name for this movement is "consumerism." One expression of it is each generation is less willing to inherit their religious identity than were their grandparents and great grandparents. One consequence is that growing number of adult Christians in America who have switched their loyalty from one tradition to a different religious tradition two or three or more times.

Another consequence is many of them want to identify the ultimate destination of every dollar they contribute to a charitable cause. This has eroded the central purpose of the United Appeal model of the 1950s and other expressions of the unified budget. It has expanded the alternatives as congregations - and denominational agencies - plan the receipts side of their annual budgets.

During the 20th century, the United States Congress sharply increased the number and variety of income streams into the United States Treasury. The personal income tax and the Minimum Alternative Tax are but two of scores of examples. In addition, Congress has adopted legislation encouraging greater generosity by taxpayers in making charitable contributions from accumulated wealth.

Another influential change has been the rise in the level of competition for that rapidly increasing pool of dollars being allocated to charitable causes.

A persuasive argument can be made that the five most effective competitors for charitable contributions today are: (1) institutions of higher education, (2) hospitals, (3) museums, (4) major civic ventures, and (5) appeals for aid to the victims of national disasters that are reinforced by news stories on television. Religious congregations probably rank about eighth on that list and denominations about 12th to 20th.

Why?
Why do religious organizations no longer dominate the allocation of charitable contributions in America ?

From this observer's perspective, the No. 1 explanation is most tend to operate on a level of sophistication that was effective as recently as the 1950s. Most, however, have failed to improve the quality and effectiveness of their system.

Perhaps another reason is they are the victims of their success in advocating the concept of tithing. Clearly, a growing proportion of the adult population in America feels a need to contribute a substantial proportion of their annual income and/or their accumulated wealth to charitable causes. The subtle difference is between contributing money to an attractive cause or returning to God His tithe. Many tithers divide those dollars among their congregation and several other attractive causes. The real issue is effectively competing with other attractive charitable causes by motivating contributors to "give to our church, not to some other cause."

That introduces another major change over the past half century. The contributors born before 1920 were reared in a culture that taught them to contribute to institutions. The decision-makers in those institutions could be trusted to decide on the final recipient of those gifts to that unified budget. The children and adult grandchildren of those contributors have been reared in a culture that affirms they have both the competence and the right to identify the final recipient of those charitable dollars.

A fourth explanation is that up through 1945 our culture taught most Americans the world offers you two choices: "Take it or leave it!" The babies born after 1940 have been taught, "You are entitled to choose from among several attractive choices." That includes choices in deciding how to earn a living, where to live, in choosing a spouse, in selecting your favorite form of entertainment, in choosing to serve or not to serve in the United States military system, in purchasing a motor vehicle, in where to eat the evening meal, in whether or when to become a parent, in funding your retirement, and where to sleep tonight. It also includes attractive choices on where to send your charitable dollars and also, for many, whether to make those choices out of current income or out of accumulated wealth or both.

One Operational Translation
If the majority of the newcomers in your congregation were born before 1940 and if their financial contributions are sufficient to pay all the bills, you may decide the best advice is, "Don't fix what isn't broke." If, however, you conclude your congregation is underfunded, you may conclude the time has come to increase the number and variety of income streams.

One creative example is Hope Church. This denominationally affiliated congregation was organized as a new suburban mission in 1958. Twenty-six years later, the founding pastor retired. An unhappy two years with an unintentional interim saw the average worship attendance drop from 292 to 218. The third pastor arrived in 1987 and soon began the process of persuading this congregation to relocate to a nine-acre vacant parcel of land at a better location and to construct new facilities. The third unit of the building program was completed in 2003. That increased the size of the mortgage to $3.2 million. That coincided with the selection of a new volunteer financial secretary who had just retired as the Chief Fiscal Officer of a medium-sized corporation, but had joined Hope Church back in 1989.

From 1960 through 2003, Hope Church had used the three-pocket envelope system. Every October, the members were asked to make a three-part financial pledge for the coming year: one pledge for contributions to the operating budget, a second for debt retirement, and the third for missions. Every household plus every teenager received a box of long white envelopes divided into three pockets. The contributor could place cash into each pocket or simply enclose a check and indicate on the envelope the distribution of that contribution.

In the fall of 2004, that system was replaced by a new one beginning on January 1, 2005. For 2005, this new system, consisting of 23 income streams, produced $1,122,617, or an average of $3,041 times the average worship attendance of 371, which was up from 358 in 2004. The total receipts for 2004 had been $787,607 or $2,200 times the average worship attendance.

For 2005, the single largest designated income stream was $365,219 for the operating budget, followed by $344,800 for debt service, $176,941 for donor-directed gifts to eleven specific missional causes, $36,300 to help fund denominational budgets, $24,000 for advance payments made in 2005 for 2006 pledges, $22,200 undesignated contributions from non-members, $19,800 fees for special programs, $7,300 for required additional furnishings for that new building via a special appeal, $14,300 for a new part-time staff position, $2,806 for late contributions on 2004 pledges, and $3,748 for equipment for the expanded playground. The endowment fund received three bequests for a total of $58,000 plus $47,203 undesignated income from that endowment fund.

Has the day arrived for your congregation to enlarge the number of income streams?

Lyle Schaller's The New Context for Ministry (Abingdon Press, 2002) describes the current competition for the charitable dollar.

Copyright 2008 by Lyle E. Schaller