Scandals will dent, not bankrupt, dioceses

Dozens of priests are sacked over child-abuse accusations. New lawsuits worth millions are filed as previously unknown victims phone lawyers. Irate parishioners from Boston to Palm Beach chop donations to avoid paying for huge settlements.

"Now that the silence has been broken, dioceses across the country face mountains of debt, even bankruptcy," one news magazine reported recently.

The financial toll is real enough – and will vary sharply from one diocese to another – but the image of looming financial collapse ignores the vast wealth of the Roman Catholic church in America, which extends from real estate holdings to parochial schools.

Even with the prospect of fresh child-abuse lawsuits that could double the billion-dollar tally of settlements already reached, the bankruptcy of even a single diocese is unlikely, church financial analysts say.

Several overlooked factors will limit long-term financial damage to the church to manageable levels, these analysts say.

First, while on one level the ancient church appears monolithic in its priest-to-pope hierarchy, its highly decentralized legal structure in the US is as resilient in its own way as the Internet, which was designed to survive nuclear war. The 188 dioceses in the United States are distinct entities that cannot readily be sued as a group and will effectively compartmentalize the financial fallout from any new lawsuits, observers say.

"It's like McDonald's," says Anson Shupe, a sociologist at Indiana-Purdue University in Fort Wayne who studies finances and abuse within churches. "There is no one Catholic church in the United States. They are all separate corporate entities – a bunch of franchises."

Second, the Catholic church in America is easily the richest in the world with untold billions in assets. This point is often missed in news reports, because so little is known about its resources. Few realize that a month or two of contributions would pay the expected legal bills.

According to one of the few existing financial analyses of overall church finances, the Catholic church in America receives more than $13 billion in contributions and other income annually – in excess of $253 million a week. Such income means the church can absorb even a major financial blow without lasting damage, several observers say.

"The concept of bankruptcy doesn't apply here," says Dean Hoge, director of the Life Cycle Institute at the Catholic University of America in Washington.

Dr. Hoge should know. He and a handful of church colleagues have analyzed the church's finances over the past decade, particularly its income from contributions. What's clear is that the church's income and assets – plus wealthy contributors who might be called upon in a pinch – can cover almost any conceivable emerging liability.

A 1997 article in the Catholic weekly "America" entitled "The church is not broke," rebutted popular perceptions that giving had slowed. Author Joseph Claude Harris, a church financial analyst from Seattle, put revenue for 19,000 parishes and 8,300 schools nationwide at $13.2 billion. Those estimates, from an analysis by Harris, are the best available today, Hoge says.

That total has also undoubtedly grown in the intervening years. Church membership has risen from about 55.5 million members in 1994, the year used in the 1997 analysis, to about 62 million today, Hoge says.

The Archdiocese of Boston is one of the richest dioceses in the country. The Boston Globe reported the cost of settlements in the case of pedophile priest John Geoghan at about $100 million. And other suits are being filed. Eventually, it could cost the diocese dearly.

Yet the diocese has hundreds of millions of dollars of real estate, some of which could be sold – Cardinal Bernard Law's residence, for instance, Hoge says. It also ask other dioceses for help.

Lessons from the past show dioceses are resilient. In Dallas, a $119 million court judgment was negotiated down to a $23 million payment in 1998, and finances are doing well today, a diocese spokesman recently reported. The Santa Fe diocese has paid out more than $40 million, but is on a sound footing, its officials report. And there are similar echoes in dioceses in Stockton, Calif., ($30 million) and others.

"I don't see any one diocese going bankrupt because I think the others will help bail them out if it gets to that," says Charles Zech, a professor of economics at Villanova University and an expert on church finances.

The Vatican, by contrast, is not seen by many as willing to bail out what it considers the rich dioceses of America. More likely, dioceses might band together to help struggling peers.

Even critics like A.W. Richard Sipe, a former priest who has studied sexual abuse within the church, agrees with that assessment. He and others say the Catholic church in the United States faces a crisis of a magnitude and severity that will test both finances and resolve – and the resilience of parishioners, priests, and bishops. The financial threat will likely prod changes of how priests are selected, and other shifts – but will stop far short of being a full-blown disaster, they say.

But there are legal uncertainties. On Friday, a Missouri man speaking anonymously, announced an unusual lawsuit seeking restitution and triple damages, for abuse by a priest, from three Catholic dioceses under the federal racketeering law designed to target organized crime. Victory in the suit could mean huge liabilities, but legal experts whether the strategy will succeed.

There are also questions on the income side. Zech and others see only localized impact on contributions in dioceses where scandals emerge. And even that may not prevent giving, but simply divert it. In the Archdiocese of Santa Rosa, for instance, where a sex-and-finance scandal emerged in 1999, churchgoers switched gears to give directly to their local parish church, not the diocese.