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Did 'the Roman Catholic Church' unjustly collect federal aid? AP story misrepresents Church finances, expert says

Church pews Credit Goran Bogicevic Shutterstock CNA 1 Goran Bogicevic/Shutterstock.

A Feb. 4 investigative story from the Associated Press inaccurately portrays “the Roman Catholic Church” as a "giant corporate monolith” that raked in federal aid while sitting on billions of dollars that they could have used to pay employees, a canon and civil law expert told CNA.

In reality, “the Roman Catholic Church” in the US is made up of tens of thousands of separate nonprofits, most of which did not have legal access to liquid cash necessary to pay their employees when the pandemic took hold last year.

The CARES Act, passed in March 2020, initially authorized some $350 billion in loans to small businesses, known as the Paycheck Protection Program, which was intended to allow them to continue to pay their employees.

The loans, given by the Small Business Administration, were approved on a first come, first served basis. According to reports, an estimated 12,000-13,000 of the 17,000 Catholic parishes in the U.S. applied, and most were encouraged to do so by their dioceses.

According to the AP’s analysis, “dioceses” and “other Catholic institutions” collectively received about $3 billion from the PPP program, leading the authors to conclude that “the Roman Catholic Church” was perhaps “the biggest beneficiary of the paycheck program.”

Father Pius Pietrzyk, OP, a canon and civil lawyer and a professor at St. Patrick Seminary in Menlo Park, California, told CNA that in conflating the finances of dioceses with those of individual parishes and other Catholic entities, the article gives the impression that "this is all one budget with fungible dollars"— a “gross misrepresentation" that belies a "fundamental ignorance" of Church finances in the US.

The article goes on to claim that the total assets for all Catholic entities in the US, including dioceses, parishes, and charities, totals more than $10 billion and in some cases increased slightly over the course of the pandemic.

Importantly, to reach the $10 billion figure, the AP “also included funding that dioceses had opted to designate for special projects instead of general expenses; excess cash that parishes and their affiliates deposit with their diocese’s savings and loan; and lines of credit dioceses typically have with outside banks.”

The AP story does not assert that dioceses or other Catholic entities committed fraud or broke the law by applying for and receiving PPP loans, but a strong theme in the article is that "the Roman Catholic Church" did not need the loans, and could have afforded to continue to pay its employees with the assets "the Church" had on hand.

The January AP story is similar to a story the AP published during July 2020, which criticized the “US Roman Catholic Church” for accepting what appeared at the time to be $1.4-3.5 billion worth of PPP loans.

But there is, both legally and financially, no single entity that is the “US Roman Catholic Church.” Nearly each of the nation’s 17,000 parishes operates as its own nonprofit, and weekly donations help to employ the priest, along with the employees who maintain the parish and its ministries.

The distinction in civil law is important, but the distinction in canon law— the law governing the Church— is also crucial to understand, and applies to every diocese in the world.

“Juridic persons” are defined in canon law as either aggregates of persons, or aggregates of things, i.e. goods. Canon law protects the financial independence of each juridic person, such as a parish. A “parish” is defined in canon law as “a portion of the people of God.”

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Under canon law, the assets of a parish are managed by the pastor and are not "owned" by the bishop, although he does exercise a certain degree of governance over them, Pietrzyk explained.

Some— but only a minority— of US dioceses are incorporated in civil law as a “corporation sole”, whereby all Church assets within the diocese are owned by the bishop. The Vatican has discouraged this form of corporate organization because of its incongruency with canon law.

The canonical structure of the Church is, in some ways, similar to the federal system in the US, Pietrzyk said. The federal government exercises governance in individual states, but it does not "own" individual states, and thus cannot take funds away from one state budget and give them to another state.

Catholic schools are, like parishes, separate legal entities and their employees work for the school, not for the diocese.

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This does not mean that there is no free flow of money between dioceses and parishes. All parishes are taxed by their dioceses.

In addition, many dioceses operate “savings and loans,” whereby parishes send excess money to a reserve fund managed by the diocese which functions like a bank; deposits can then be withdrawn at any time for any reason.

Importantly, dioceses do not— as the AP asserts— have the power to use the deposited money, which belongs to the parishes, as they see fit.

"The bishop has no authority in canon law to simply swoop in and clean out the bank account of a parish, nor does he have that ability in civil law if they are separately established," Pietrzyk pointed out.

The AP story also does not adequately portray Catholic endowments or foundations, many of which are required by law to respect the intentions of donors and be used for specific purposes, Pietrzyk said.

The foundations, too, are also separate civil and canonical entities from the dioceses, and are not subject to the bishop’s whims, he noted.

For example, the AP reports that the Archdiocese of Chicago “had more than $1 billion in cash and investments in its headquarters and cemetery division as of May [2020],” while at the same time “Chicago’s parishes, schools and ministries accumulated at least $77 million in paycheck protection funds.”

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The story implies that a fund specifically earmarked for cemeteries could somehow be repurposed to pay for salaries— a legal and practical impossibility, Pietrzyk said.

"You can't, either in civil or canon law, simply move those funds around contrary to the wishes of the donor," he said.

"The diocese can't simply scoop out the cemetery fund to start paying salaries for schoolteachers. That would be fraud...they could be liable for prosecution for something like that."

The AP story includes quotes from an anonymous pastor in “a Western state” as well as Fr. James Connell, former vice chancellor of the Milwaukee archdiocese, who asserted that “Catholic entities did not need government aid” and should have instead, out of love of neighbor, left the funds for small businesses to use.

Part of the reason for their assertions was the fact that many dioceses did not experience the catastrophic downturn in assets that many expected in 2020, thanks in part to a healthy rebounding of the stock market.

The investments made by many Catholic entities turned out to be safer than they could have been, Pietrzyk said, with the stock market largely recovering since the start of the pandemic. But "nobody knew that in June."

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"To say that the Church should not have taken that money in June because things are really rosy [next] January is absurd," he asserted.

Catholic financial experts have recommended to CNA in the past that parishes and dioceses especially well-prepared for a crisis ought to consider calling up struggling parishes or dioceses voluntarily to offer to share resources.

That being said, the AP story displays "incredible 20/20 hindsight," Pietrzyk noted, and seems to gloss over the uncertainty of the period in which the PPP program first launched.

"There was a nationwide sense of panic within the Church at the time these funds were available. No vaccine in sight, didn't know how long the pandemic would go on, everything was being shut down. Initial numbers from dioceses were that donations were way down, as people themselves were uncertain about their future."

At that time, a massive reorganization of Church assets was not possible, legally and practically. Without another immediate source of income, especially for small parishes without much reserves, large-scale firings of church employees could have taken place, Pietrzyk said.

By the AP’s own admission, dioceses reported that their hardest-hit churches saw income drop by 40% or more before donations began to rebound months later, and schools took hits when fundraisers were canceled and families had trouble paying tuition.

The purpose of the PPP, in part, was to relieve the nation's unemployment system and keep people employed, and evidence shows that it likely succeeded. Economists working with the Treasury Department’s Office of Economic Policy said in December that the PPP may have saved about 18.6 million US jobs.

Even with PPP money, some dioceses, such as San Francisco’s, still had to cut salaries— but, as the PPP intended, did not have to resort to mass firings.

The AP does not cite any evidence that “Catholic entities” unjustly took money away from more deserving candidates. Catholic entities, taken as a whole, appear to have received, at most, about 0.6% of the funds so far disbursed from the PPP program.

Guidance from the SBA on eligibility for the loans stated that “no otherwise eligible organization will be disqualified from receiving a loan because of the religious nature, religious identity, or religious speech of the organization.”

PPP funds are still available for businesses that need them, albeit with more restrictions than in previous rounds. All told, with Congress adding $284 billion to the program in December, the PPP program is expected to eventually disburse nearly $1 trillion in loans.

Another implication from the AP story worth refuting, Pietrzyk said, is that nonprofit, tax-exempt entities are somehow less deserving of government largess.

It makes sense to allow nonprofits access to PPP funds, he said, because PPP was intended to cover worker's salaries— workers who pay income tax.

The PPP loans did not directly enrich the nonprofit entities that received them, but rather went straight to the employees. Cardinal Timothy Dolan of New York noted this fact in a letter he released following the AP's July 2020 story. The archdiocese, as well as many of the archdioceses' parishes, had received PPP loans.

"Make no mistake, the money that the Archdiocese of New York received was used solely for the purposes outlined in the law, that is to continue to pay employees their salaries and benefits. Not one penny of that money was used in any way to settle lawsuits or pay victim-survivors of abuse.

"We have none of this money left. It has all be [sic] distributed to our workers, and the government is carefully auditing it."

Archbishop Paul Coakley of Oklahoma City, chair of the US bishops’ committee on domestic justice, also wrote a response to the July AP story, defending the use of the PPP by Catholic parishes, hospitals, schools, dioceses, and social service agencies.

“The Paycheck Protection Program was designed to protect the jobs of Americans from all walks of life, regardless of whether they work for for-profit or non-profit employers, faith-based or secular,” Archbishop Coakley wrote.

“The Catholic Church is the largest non-governmental supplier of social services in the United States. Each year, our parishes, schools and ministries serve millions of people in need, regardless of race, ethnicity or religion. The novel coronavirus only intensified the needs of the people we serve and the demand for our ministries. The loans we applied for enabled our essential ministries to continue to function in a time of national emergency.”

“In addition, shutdown orders and economic fallout associated with the virus have affected everyone, including the thousands of Catholic ministries -- churches, schools, healthcare and social services -- that employ about 1 million people in the United States,” Coakley added.

“These loans have been an essential lifeline to keep hundreds of thousands of employees on payroll, ensure families maintain their health insurance, and enable lay workers to continue serving their brothers and sisters during this crisis.”