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.