Managing the Donor Base

February 20, 2004 | 8 comments
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I have been meaning to write about this for a while, and Brayden’s comments on the centralization of budgeting have spurred me on. So here is Nathan Oman’s based-entirely-on-meager-evidence-and-speculation theory of Church financing. Or at least a part of it.

The Church has very large financial commitments and runs more or less entirely on donations. It has a large pool of assets, but most of this wealth is tied up in real estate that consumes rather than produces income. A portion of donations are invested as a kind of savings, but if we are to trust President Hinckley the income from these investments would not keep the Church going for very long. Since donations are the major source of Church income, I think that the Church leaders very carefully manage the donor base. Here is how I think that this works in practice:

1. The financing of local programs has been entirely centralized in Salt Lake City. I think that the basic reason for this policy is to keep wealthy units from spending money on themselves. To the extent that the Church taps wealthy members for donations, I think that the leadership would prefer that the tapping come from fairly high up the org-chart. The reason is that the higher you go the more likely it is that the money will be redistributed far away from the wealthy member. Since the wealthy tend to live among the wealthy this means that the money, by going through Salt Lake, is more likely to reach the poorest members of the Church. Hence, the Church encourages generous donations to the Missionary Fund, the Perpetual Education Fund, etc. all of which are run through Salt Lake. In addition, mechanisms are in place to move fast offering money from wealthy units to poor units. To be sure, money continues to be donated for local level projects ? e.g. a ward helping to fund a missionary ? but I think that this is less common than it was a generation or two ago.

2. The Church leadership is fairly jealous of the fund raising activity of other “Mormon” organizations. I think that one (very low down on the list to be sure) reason that the Church maintains fairly tight financial control over BYU is that the BYU alumni base is probably one of the most fertile grounds for donations in the Mormonism. If BYU were fully independent, then it would become a direct competitor to the Church for fund rasing purposes. As it is, the Church can keep BYU from excessive poaching on its fund raising base. A related issue ? I think ? has to do with the absorption of the Foundation for Ancient Research and Mormon Studies (FARMS) into BYU. FARMS started out as a private, non-profit organization that was given some office space by BYU, but not much else. A couple of years ago, it was formally made part of the University. Overwhelmingly, this move was seen as a BYU and indirect Church endorsement of FARMS and its work. (There has been a lot of hand ringing and doom predicting along these lines by both conservatives and liberals.) There is no doubt a lot of truth to this story. (I am more skeptical about the doom.) However, I have also heard that one of the reasons it was absorbed is because it was tremendously successful at fund raising. BYU and the LDS Foundation were going to potential donors and were regularly being told, “I’d love to help you, but I just wrote out a big check for Noel Reynolds over at FARMS.” In other words, FARMS was a threat to the larger donor management strategy and therefore got integrated into the system.

On the whole, I think that the Church strategy works and works well. As an institution, the Church faces enormous financial commitments in the form of buildings, temples, and missionary work. These are the core elements of the Gospel, and the Church’s centralization, redistribution, and donor management allows it to carry the Gospel to the poor. On the other hand, this limits the autonomy of local units. The biggest loss here ? in my opinion ? has been to meeting house architecture. It also seems to mean that “faithful” or “orthodox” but non-sponsored institutions, ie Mormon institutions that have a chance of making real inroads into the Church donor base, are likely to face a limiting principle. Once they reach a certain size they are likely to meet resistance from the Church or be co-opted into an integrated donor management system. In my mind, these are clearly trade offs that are worth making in order to provide temples close to members, missionaries to (and from) the poorest areas of the globe, and worship facilities for those who cannot afford them. Still it will be interesting to see what happens, for example, with Southern Virginia University (the private Mormon college in the Shenendoah Valley). From what I hear, the whole project has been encourages (unofficially) by the Church. On the other hand, I have also heard that SVU has not been successful at breaking into the Mormon fund raising pool in a big way

To end, if you want to make a donation to the Church, visit the LDS Foundation.

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8 Responses to Managing the Donor Base

  1. Evan on February 20, 2004 at 12:27 pm

    About SVU, I think the reason that it has not tapped into the donor base has nothing to do with competition with the Church in general. Rather, it has to do with less-than-stellar marketing of the school and the personal fund-raising abilities of the leadership at the school.

    Other former SVC students who read this (KC, JJEQP) might have other perspectives. But in general it is not b/c the donor base among LDS is too small or tapped out. The niche for academic interest and donation is there–I’m sure there is a large pool of folks with the $$ and the inclination to donate to a good academic program not affiliated with the BYU.

  2. Nate Oman on February 20, 2004 at 12:43 pm

    What do you think of Rodney Smith, the newly announced president of SVU?

  3. Evan on February 20, 2004 at 2:04 pm

    Law professor, interim dean at Memphis. Good record. Some of his articles are bit interesting–addressing Title IX imbalances by starting women’s collegiate football and the up-side of multi-level marketing.

    I think the school’s biggest weakness in picking presidents so far is a true understanding of what that person’s role should be. And, especially right now, the president (at SVU and most other places) needs to be first and foremost the public face of the school and a fundraising machine. If the walking, talking billboard isn’t all that impressive, a nice academic record isn’t going to change that. Not knowing Prof. Smith, I have no idea about his capabilities in the fundraising arena. So I hope he does extremely well. I think it is going to be hard for anyone to compete for the most wellknown and capable LDS college president out there in terms of amazing record, abilities, etc (Gordon Gee at Vanderbilt).

    Another part of it is what is Smith’s vision for the school–b/c the board sure hasn’t delineated a clear course for the future. It started off as a liberal arts school and is now becoming, academically at least, a smaller version of UVSC. Which is fine–if that is what the board, faculty, et al really want. The problem is that no one has articulated a clear idea of what the school IS now and WHERE it is headed in the future–except for the fact that it has BYU-like standards. And that, as a selling point, can only go so far. It doesn’t matter if you have LDS standards if your retention is horrible, few people get decent jobs after graduating, etc.

    Sorry–you opened Pandora’s box by mentioning SVU and now I’ll close it. I hope Smith can address these issues and lead them into smoother waters.

  4. Evan on February 20, 2004 at 2:04 pm

    Law professor, interim dean at Memphis. Good record. Some of his articles are bit interesting–addressing Title IX imbalances by starting women’s collegiate football and the up-side of multi-level marketing.

    I think the school’s biggest weakness in picking presidents so far is a true understanding of what that person’s role should be. And, especially right now, the president (at SVU and most other places) needs to be first and foremost the public face of the school and a fundraising machine. If the walking, talking billboard isn’t all that impressive, a nice academic record isn’t going to change that. Not knowing Prof. Smith, I have no idea about his capabilities in the fundraising arena. So I hope he does extremely well. I think it is going to be hard for anyone to compete for the most wellknown and capable LDS college president out there in terms of amazing record, abilities, etc (Gordon Gee at Vanderbilt).

    Another part of it is what is Smith’s vision for the school–b/c the board sure hasn’t delineated a clear course for the future. It started off as a liberal arts school and is now becoming, academically at least, a smaller version of UVSC. Which is fine–if that is what the board, faculty, et al really want. The problem is that no one has articulated a clear idea of what the school IS now and WHERE it is headed in the future–except for the fact that it has BYU-like standards. And that, as a selling point, can only go so far. It doesn’t matter if you have LDS standards if your retention is horrible, accreditation took forever, costs are way up, etc.

    Sorry–you opened Pandora’s box by mentioning SVU and now I’ll close it. I hope Smith can address these issues and lead them into smoother waters.

  5. Dave on February 20, 2004 at 8:01 pm

    Nate,

    Your comments made me think of the Serrano decision in California from the 1970s that mandated equalization in school district funding across the state. Many feel that Proposition 13, passed in 1978 capping property taxes at a fairly modest level, was a direct result, as taxpayers in wealthier districts figured out that much of their marginal tax revenue would go to other school districts rather than building the quality of their own local schools.

    Now I don’t really expect most LDS to react that way to “tithing benefit equalization” across stakes or across the global church. But human nature being what it is, at some point radical equalization might generate some type of reaction.

  6. Frank on February 20, 2004 at 9:24 pm

    Interesting theories, but in the end, I hope that no one will take your “meager-evidence-and-speculation” to be any thing but that. In my experience, most speculation as it relates to how the church is governed and operated is usually wrong. This is likely no exception.

  7. Jason on February 21, 2004 at 12:53 am

    How long until Dialog gets ‘co-opted’? Maybe one can measure the arc of the curve in donations before a merging with the Church is possible. ;)

  8. Grasshopper on February 25, 2004 at 10:47 am

    Nate, one thing working against your theory regarding centralization of budget is that the budget isn’t really completely centralized, at least in some areas. I understand that fast offerings, for example, are used locally first, and only the surplus makes its way up to Salt Lake and then around the Church. There was an interesting series of articles Dialogue recently that addressed this issue in connection with extreme poverty among Church members in developing countries.