Budget Issues

In a recent coaching group, I asked the participants what topics they’d like to discuss.  While there was much interest in addressing major themes such as casting a compelling vision and leading cultural change, there were also requests for the more mundane yet essential subjects.  Things like hiring/firing, staff reviews, working with a board, and budgeting.

We decided to direct our attention to the issue of budgeting.  This post reflects some of what we discussed.

General Guidelines

A survey of various resources on church budgeting reveals that there is no single standard for how a church should break down its budget. The variables are simply too diverse: size of church, polity, church vision, philosophy of ministry, staff (paid and volunteer), widely diverse property/facility issues, member demographics, giving patterns, etc.

The following percentages, however, provide ranges that give some framework for a “typical” church budget:

• 10%-30% – Mission Giving
  (outside the church; includes regional and denominational support)

• 20%-40% –Church Ministry
  (programs/administration/benevolence)

• 40-60% – Staff Expense
  (payroll, pension, health insurance, etc.)

• 20-40% – Facility Expense
  (building costs, debt, etc.)

Budget for Vision

As you flesh out the specifics of that budget, keep this principle in mind: Budget for your church’s current vision, not its past history. 

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Budget for your church’s current vision, not its past history.

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What is it that deserves to be supported in light of where you are heading and what is it that needs to be dropped since its time has passed? For example, if making the move to a discipling/development culture is a key goal, budget in light of that, rather than maintaining or expanding other “delivery” areas.

Gather Data

I’ve heard it said that “facts are our friends.” As you get started on the budget process, a bit of research will help give some direction to your planning. Begin by gathering the following information:

1. Attendance and giving patterns for the previous 12 months. 

   • Is your church growing, plateaued, or declining? 

   • Were there any special circumstances that need to be taken into consideration?

   • Is there a trend over the past few years that needs to be noted?

2. Areas where you were over budget and ones where you were under budget. 

   • Do the overages reflect careless spending or do they point to a growing need? 

   • Does underspending demonstrate exceptional stewardship or does it indicate a declining need?

Staff Compensation

Another major area of consideration is staff compensation. Here are a few tips:

1. Research salary ranges in your area and denomination for basic guidelines. You might find that your denomination has suggestions here.  As well, you could contact other area churches of your size and ask the pastor what their ranges are.

2. Consider cost of living increases as well as scaled merit increases. Remuneration should be linked to reviews.

3. Allow the Senior Pastor (or Executive Pastor) to give input into staff compensation.

Other Guidelines

Here are a few more considerations that might serve you well.

1. Use a finance committee made up of experienced and skilled individuals to review, revise, and recommend the budget to the elders. 

2. Maintain operating reserves of 6 months.  You can’t anticipate things such as an economic downturn, the death or departure of the pastor, or the loss of key givers.

3. Consider “key man” insurance to cover the loss of a pastor and the resulting decrease in attendance and giving.

4. Include an ongoing building maintenance plan.  Boilers need to be replaced.  Roofs need to be repaired.  Deal with these as soon as possible rather than postponing them until they accumulate.

5. Hold spending on major capital items for 6 months. Evaluate the current financial state and then address these in priority order.  (If the budget is struggling, these areas can be backed out.)

To be sure, these suggestions aren’t exhaustive.  But in my 35 years of serving as Senior Pastor in a church that grew from 50 to 2300 and had a staff that ranged from 1 to 25, they are best practices I’ve learned that helped us end every year of my pastorate, except one, in the black.

I would be curious what thoughts you might have on these and would welcome your additional suggestions.

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