Boston Herald: Up in alms over salaries

The Boston Herald has an article today reporting on the high executive salaries in the Pastoral Center that is worth reading.  We excerpt from it below, and offer brief BCI commentary after the article.

Up in alms over salaries
Church asks for more as top Catholic administrators see pay spike

By Erin Smith
Wednesday, March 21, 2012

With the Archdiocese of Boston in the middle of its 2012 Catholic Appeal fundraiser, the number of church employees earning upward of $150,000 has skyrocketed by more than threefold even as the church has been shuttering parishes, a Herald review found.

In 2006, the archdiocese listed only five employees earning more than $150,000, but its latest annual report shows 17 “senior lay executives” topped $150,000 last year. Among the latest eye-popping salaries and fiscal details the review found:

•     Total compensation for Mary Grassa O’Neill, superintendent of the archdiocese’s Catholic schools, last year topped $351,000, surpassing the $323,222 earnings of Boston Superintendent of Schools Carol R. Johnson. 

•    The top archdiocesan lawyer totaled $326,169.

•    The recently departed chancellor, the archdiocese’s top financial officer, grossed $276,486.

•    Since 2006, the archdiocese has cut 50 staff members but payroll costs increased by nearly $1 million.

“To focus on salaries and not look at the broader picture is vastly unfair,” archdiocesan spokesman Terrence Donilon said about the high-priced laymen. “These folks are immensely talented people who are helping one of the largest archdioceses in the country repair itself. The church is in a much better position than it was 10 years ago and that’s in no small part due to the talented people the cardinal has brought around him.”

Donilon, whose compensation topped $193,000 last year, said that even though the payroll went from $8.3 million in 2006 to $9.2 million this year despite dramatic job cuts, the church has actually saved $250,000 in payroll costs over the past five years when taking into account inflation.

Council of Parishes chairman Peter Borre, whose group fights church closures, said the hefty payroll runs counter to “the basic spiritual mission of the Catholic Church.”

“The crushing overhead weight at headquarters is becoming an intolerable burden for many parishes, and if the archdiocese wants to cut costs, it should start with Braintree, not in the churches,” Borre said.

…

Donilon credited school superintendent O’Neill with increasing Catholic school enrollment in Boston and Lowell while slowing an overall decline.

“Mary had a great job at Harvard,” he said. “She didn’t need to take on this assignment, which is one of the toughest Catholic school assignments in the country.”

Just weeks ago, the archdiocese launched its annual Catholic Appeal — which raised about $13.7 million last year — only months after proposing a parish reorganization plan. Donilon said it’s too soon to say whether it will result in more church closures.

“The Catholics throughout Boston are expecting a major round of church closings regardless of what the archdiocese says and that’s going to make people hang onto their wallets,” Borre said. “What’s the point of throwing good money after bad if the overhead of the archdiocese is eating up the cash of the diocese?”

The Herald got most of the story correct, but there are a few details they missed.

• The Herald’s look at the number of $150K+ employees in the 2006 fiscal year incorrectly assumed there were 5 employees making $150K+, when in fact, two of those employees left that year (David Smith and Ken Hokensen) and were replaced (by Jim McDonough and Scot Landry), so the positions were double-counted by the Herald .(See 2006 Annual Report).  In reality, the number of people making $150K or more per year increased from 3 in 2006 to 17 in 2011, for an increase of almost six-fold.
• If you add up the salaries for the 3 people (Smith, Hokensen, and Donilon) making more than $150K in 2005, the year before the former Chancellor arrived, they total $553K. Add up the $150K+ salaries from 17 people for the 2011 fiscal year and you get nearly $3.5M, also a more than six-fold increase.
• The compensation for Barbara Johnson, Boston Schools Superintendent may have been misreported in the Herald article.   See this April 2011 press release announcing the renewal of the contract for Barbara Johnson, which puts her salary at $266,750.: “At Superintendent Johnson’s request, her annual salary will hold steady at $266,750 – a voluntary decrease from the original salary of $275,000 when she first arrived in 2007. Dr. Johnson has also requested the removal of a provision in the contract that entitles her to a $600 per month car allowance.  Superintendent Johnson has never accepted the stipend since beginning her tenure with BPS. She uses her own private vehicle for all work purposes. Superintendent Johnson has also never elected to accept a performance-based compensation of up to $20,000 annually that the contract entitles her to receive.”  [Update: in a private email exchange with the Herald, they maintain from this source, that her compensation is $323,222)

  By the way, Johnson has direct operational responsibility and authority over hiring, budgets, teacher contract negotiation, busing, curriculum, etc for all Boston Public Schools, while Mary Grassa O’Neill, does not have similar operational responsibility and authority over Boston Catholic schools–they are managed locally. New York and Los Angeles pay their school superintendents $250K/year to directly manage school systems that are 15-20X bigger.

• Not mentioned in the Herald Report about compensation for Terry Donilon is the fact that he is paid about $50K more per year than the previous lay Communications Secretary–an increase of nearly 45%, for no apparent reason. The former Chancellor, Jim McDonough was paid 30% more than his precedessor. Mary Grassa O’Neill is paid 12X more than her predecessor, a religious sister.  Three fund-raising VPs today are paid in aggregate about 3X what one fund-raising secretary was paid in 2005.

• The comment by Terry Donilon that the church has saved $250,000 in payroll costs over the past five years when taking inflation into account merits more scrutiny.  First, we know that some salary expenses have been shifted off Central Operations to other related entities (e.g. sexual abuse victim counseling, clergy funds).  It is impossible from publicly disclosed reports to determine how much of the claimed “savings” is real, or how much has simply been shifted to other entities. Second, to whatever extent the total payroll-related expenses might have remained flat, it is largely due to the headcount reductions of lower-level people and freezing of lower-level salaries, while the $150K+ salaries grew.  Long-time BCI readers will recall how former Chancellor McDonough said in December 2010, “employees have not had a raise in four years,” which really meant that lower-level employees were not getting raises, while certain higher-paid employees did get raises.
• If everything is just fine with the $150K+ salaries, then why did the Finance Council form a “Compensation Committee” to review executive compensation, and why did the Compensation Committee hire an expensive consultant to work on the problem? (see “Boston Archdiocese Bloated Payroll Inaction).
• Administrative expenses have apparently grown from 26% of the total budget in 2005 to 36% in 2011. Many of these expenses are indeed loaded onto the backs of parishes who are struggling to pay their bills.  As we reported in “How Your Money is Spent, ” in the 2012 fiscal year, 36% of the budget ($9.95M out of $27.8M) is consumed by Administrative Services. By means of comparison, in 2010, Administrative Services expenses were 30% of the total budget (see “Easy Come, Easy Go“).  As a further comparison, if you look at the 2005 operating results in the annual report here, you will see that Management and General expenses (equivalent to Administrative Services, as best as we can tell) in 2005 were $10.1M out of total expenses of $37.9M, or 26% of the total.

BCI is also aware of the spin in the Terry Donilon email sent around last night. It will require a separate post to go into that.

For the ability of the archdiocese to continue her saving mission in the future and not be encumbered by high executive salaries and administrative expenses, we hope and pray that Vicar General Msgr. Deeley makes it a high priority to address the $150K+ salary and administrative expense problems in the very near future.