Thursday, February 28, 2008

Pew Forum Surveys Religion

A rather extensive survey by the Pew Forum on Religion & Public Life explores some of the shifts that have been taking place in our churches in the US. Based on interviews with over 35,000 adults, the Pew Forum study is interesting reading for those of us that may be wondering what is happening to our religious values, observing the growing diversity of our religious traditions and the growth and/or decline of our established religious institutions.

While there have been some reporting on the survey results, I don't think that many have focused on the "rest of the story", as Paul Harvey says.

The rest-of-the-story is not that 51% of the population is Protestant or that one-in-four (25%) presently describe themselves as Catholic, but that more than one-in-six American adults (16.1%) are presently not affiliated with any particular religious faith.

The Pew report went on to describe that this group of unaffiliated people are not primarily "secular" but rather, "nothing-in-particular". About half of this growing group of restless and unconnected adults often described themselves as "religious" but not connected.

If you realize that another 5-10% of those surveyed identified themselves with a particular religious group or denomination but readily admit that they frequent their house of worship rarely (maybe Easter or Christmas), we can gain a better understanding of what we normally call the "unchurched" in America. Based on the estimate of about 245 million adults in the United States, about 25% would be "unchurched" or about 61 million adults. This is more than the Pew Forum estimate of the total number of Evangelicals in the United States.

Americans remain some of the most religious and most diverse people in the world. Biblical Christianity continues to play a very prominent role in American public life and the Pew report found that Americans are very willing to experiment and to embrace a religious point of view other than the experience of their youth.

Reminds me of what Jesus says in John 4:35, "Do you not say, 'There are yet four months, and then comes the harvest '? Behold, I say to you, lift up your eyes and look on the fields, that they are white for harvest."

Saturday, February 16, 2008

Clergy Health

Recently there has been a lot of press on Pastors' salaries. I think much of the interest can be attributed to both the growth and popularity of the mega churches and their pastors. Some of the interest however, is just plain "nosiness". Pastors’ salaries have traditionally been kept relatively confidential and for the vast majority of the Pastors of our local churches, their salaries are also relatively modest.

Here are a few things that Pastors should think about at least annually as well as when they take a new assignment or accept a new pastorate.

1) Make yourself accountable: While some churches are small and some are large and every church has its own particular practices, every pastor can insist that they are at least held to the same standard as everyone else. Don’t get into the habit of turning in expenses or the church credit card without receipts; don’t write checks to yourself or handle the church’s cash. Keeping yourself somewhat separate from the business and finances of the church is healthy and Biblical. Find someone with the gift of administration to handle these things for you.

2) Review your life, medical and other insurance needs: most churches are small and studies have shown that “solo” pastors are less likely to have church paid insurance plans than senior and staff pastors. Pastors that don’t have insurance provided by their church should evaluate some very attractive self employed health insurance plans. “Catastrophic Loss” or “Major Medical” plans are widely available and with this type of health insurance you typically pay out-of-pocket for doctor's visits and prescription drugs, but major hospital and medical expenses above a certain deductible are covered. Most catastrophic health insurance plans cover necessary hospital stays, non-elective surgery, intensive care, diagnostic, X-ray and lab tests.

3) Remember that you are “minister for tax purposes” that requires specific W2 filing requirements and tax considerations. Make sure that your church accountant understands the issues. Dan Busby’s Minister’s Tax & Financial Guide is a “must-have” for every Pastor and is updated annually. Ministers have “dual tax status" and hopefully they have not opted OUT of social security. In the majority of cases, this election is done without full consideration of the consequences and without proper consideration to the legal basis of being “conscientiously opposed to the acceptance of any public insurance.”

4) Take full advantage of the minister’s housing allowance: Notice I didn’t say “abuse” the minister’s housing allowance. It is the responsibility of the church to determine if an individual qualifies as a minister in the eyes of the IRS but the responsibility of the minister to estimate how much should be designated to cover the full costs of housing up to the fair rental value of his/her residence. While the church is still ultimately responsible to “designate” the amount and exclude it from the minister's federal income tax, all too often churches assign arbitrary and inadequate amounts to junior employees (i.e. Associate Pastors get $8,000 housing allowances and Youth Pastors get $4,000).

Finally, while you may consider that your retirement benefits are “heavenly” and that you’ve stored up all your treasure in heaven, careful retirement planning is still advisable. Contributing to a 403(b), IRA or Rabbi Trust is a great way to save in a tax-efficient manner. Again, hopefully you haven’t opted out of Social Security but you’ll still need to find other ways to supplement your income during retirement.

Tuesday, February 12, 2008

Moral Hazard

I have some background in economics. When I was taking classes in International Economics and spent any time on third-world economic issues, one of the frequent topics was "Moral Hazard".

Moral Hazard is defined as the situation that arises when a party or a group of people are insulated from risk and therefore end up behaving differently than if they were fully confronted with the risk.
Third-world economies were often the example because state-supported banking, or telephone companies, or oil companies, don't really need to compete or be efficient and productive because of their government-supported status. Therefore, they were somewhat immune from financial difficulties as the government was always willing to give them more money.

The term "Moral Hazard" has come up a few times in the United States. One of the times was when the government bailed out Chrysler Corp (circa Lee Iacocca). This issue was that the auto companies would behave differently if they knew that someone would bail them out.

Well, a different form of Moral Hazard is now upon us but few understand the consequences and we are just starting to see the results. I'm referring to the subprime crises and resulting "freeze on foreclosures" and renegotiation of the interest rates. In essence, a bail-out of both the homeowners as well as the lenders.

Now before you jump on me for being insensitive, hear me out.

The real Moral Hazard started years ago when many States required that homeowners would no longer be responsible for mortgages if they defaulted --personal bankruptcy was not required. Today, most mortgage loans in the United States are non-recourse. Meaning that the lender’s only remedy in case of default is to repossess the house. That is, the lender cannot pursue you personally in case of default.

While that may be kind and humane in some cases, it shouldn't be applied to everyone. It isn't like we have debtors' prisons in the country and many can certainly find a way to repay the principle. To show you the extent of this "forgiveness" issue, President Bush signed the Mortgage Forgiveness Debt Relief Act of 2007 which also provides forgiveness to the defaulting homeowners' income tax owing since loan forgiveness is considered a taxable event (think about it...not as strange as it sounds).

The Moral Hazard arises because people now BEHAVE differently. If someone can go and speculate that a house may appreciate quickly in value, they will borrow as much as a lender will possibly allow and if the house goes up, they gain greatly. A ten percent down payment on a house that goes up in value just 10% is a 100% return on the investment.
Conversely, if someone can't lose anything other than the house, why not be reckless? If the home value goes down 10%, they walk away and lose only the 10% Therefore, why not just get into the most house (or houses) one can possibly afford, especially if there is a little down payment (or a second mortgage which can also be forgiven).

When people are no longer obligated to pay off a debt, behavior changes. When lenders take a huge risk on lower credit quality applicants but the government comes in and provides tax incentives and direct subsidies to the lenders, we have a Moral Hazard.

And a continuing Moral Crises.




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