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US Catholic Church Heading for Bankruptcy? - 2002-12-20

It's been nearly a year since the first allegations of sexual abuse by priests in the Archdiocese of Boston surfaced. Since then, more than 400 lawsuits have been filed against that archdiocese alone, and priests in dozens of parishes across the country have also been accused of sexual abuse.

Over the course of the last two decades, the Catholic Church in America secretly paid what many now believe could be as much as one billion dollars to victims of clerical abuse. The claims filed against the Archdiocese of Boston this year could amount to another $100 million, and officials there have said the archdiocese may have to file for bankruptcy.

It's unlikely that that will happen, but nevertheless, the Church is in financial trouble.

The American Catholic Church brings in about $253 million in donations and investments each week. That amounts to more than $13 billion annually, which seems like a staggering sum.

But it's not nearly as much money as it needs to be, or could be, according Charles Zech, an economist at Villanova University. Professor Zech says the problem is that donations to the Church are managed by priests in each individual diocese. These men often have no formal financial training, and many have made very poor investment decisions. And Charles Zech says that's not the only reason the Church's income isn't as large as it could be.

"Catholics are notoriously low givers compared to their Protestant friends," he said. "The usual rule of thumb is that the average Catholic household gives about half as much to their church as does the average Protestant household."

Charles Zech says there are a couple of reasons for this. First, Catholic congregations tend to be much larger than Protestant ones, which makes it easier for individuals to assume their donations don't matter that much, or that "someone else" will provide for the Church. But Professor Zech say the other and probably greater reason is that the Catholic Church's financial structure is very different from that of most Protestant churches.

"In many Protestant congregations, the congregation's members have some say as to how the money in spent, and if not that, then at least they have good information on how the money was gathered and where it was spent," he said. "Catholic parishes are notoriously lacking in accountability and transparency. A typical Catholic parishioner doesn't know where his or her contributions are going, and of course that dictates against anyone being a high giver."

It's this lack of transparency that enabled individual Catholic dioceses to secretly pay millions of dollars over many years to victims of clerical abuse. The practice didn't become public until last January, when the world learned about a priest in Boston named John Geoghan who was convicted and sent to prison for fondling a ten-year-old boy.

But the sex abuse scandal isn't the only thing costing the Catholic Church money. Charles Zech says many buildings owned by individual dioceses are in desperate need of repair and maintenance. The U.S. Catholic Church is by far the largest operator of private schools in the country, and Catholic hospitals account for 17 percent of all patient admissions. Professor Zech says the shortage of priests and nuns has meant the Church has had to hire more lay people to work in its hospitals and schools.

"These lay folks that are professionally trained are expecting to be compensated at that level," he said. "And so the salary increase that the Church is facing as they hire more and more qualified lay folks is also going to put some financial pressure on them."

Each of the 188 dioceses in the United States is a distinct entity, receiving no financial assistance from each other, or from the Vatican. No churches in America receive government funding. That means the Archdiocese of Boston has had to shoulder its recent legal expenses entirely on its own, and because lay donations have dropped dramatically in recent months, church officials have said the Archdiocese may have to declare bankruptcy. The move would be unprecedented, and Charles Zeck calls the threat a "ploy" to scare Catholics into giving more and suing for less.

In order to declare bankruptcy, the Archdiocese would have to get permission from Vatican officials - who've made it clear they are very reluctant to give it. Dean Hoge, a sociologist at the Catholic University of America, says the Vatican will never approve a declaration of bankruptcy.

"It's a very serious step, and it has quite a cost in credibility, and the Church's mission depends on its credibility," he said. "Religion is not only a matter of relationship to Jesus Christ, but also a matter of the institutional church. We cannot be spiritual leaders if people have doubts, or if there's some reservation that maybe the institution isn't really doing its job."

Professor Hoge says the Archdiocese still has millions of dollars in assets it can sell off to pay for the lawsuits. But because many of these assets are schools and hospitals that Catholics rely on, Professor Hoge says he believes wealthy parishioners will come forward with more money for their church, before they'll allow the schools and hospitals to be sold.

Still, lay Catholics across the country are demanding more transparency and financial accountability, and experts like Charles Zech say it would be in the Catholic Church's best interests to bring lay people on as financial advisors. But Professor Zech also points to the Vatican's reluctance to approve a declaration of bankruptcy as a sign that church officials haven't yet recognized the need to open up their account books to the laity.

Like Dean Hoge, Charles Zech doesn't think the Archdiocese of Boston will be allowed to declare bankruptcy. But he says it's because bankruptcy would subject the archdiocese's financial records to a secular authority.