From the desk of…
Salvation Army Economics 101
by Kurt Burger, Lt. Colonel –
Economics is primarily concerned with the description and analysis of the production, distribution and consumption of goods and services. For The Salvation Army, economics is concerned with the description and analysis of generating income (fundraising, store sales etc.), income allocation (to programs, administration, properties etc.), and cost effective delivery of services (ministry).
Wait! I know that economics is the painful elaboration of the obvious, but, before you start yawning and turn to ESPN: however small your part may be, you are important to “Salvation Army economics.” Why? Because what is obvious is the significance of your financial contribution. What is not so obvious is the planning and application of these contributions, using sound economic principles.
Considering that the Western Territory’s total annual budget amounts to $650 million, you’ll understand the necessity to be good stewards (economists). Each division’s budget (the smallest about $18 million and the largest $57 million) is larger than the budgets of the vast majority of non-profits (religious and secular). There are 1.32 million non-profit organizations in the United States. In total, U.S. non-profit groups have combined annual incomes of more than $2 trillion.
To maintain a healthy economic balance in our territory (generating enough income, allocating properly, etc.) is a never-ending struggle. We depend on our donors, our customers in our thrift stores and state and local governments to finance our programs. Their economic health is our concern, too. Therefore, you may wonder about the economic health of our donors and customers. Just like always in economics, there is some good news and there is some bad news. The bad news first:
Most households are overextended. A growing burden of household debt, mainly credit cards, mortgage and car payments, is making it harder and harder for people to donate to charities. Salaries have nowhere near increased at the same rate as consumer spending. Few people are saving money to a significant degree. Most economists predict that consumer spending—and with it donations to charities—will decline in 2006.
Many families have maximized their credit and can go no further. They are learning the lesson an early 20th century economist articulated: “It may sometimes be expedient for a man to heat the stove with his furniture. But he should not delude himself by believing that he has discovered a wonderful new method of heating his premises.” (Quoted in The Economist, January 14th – 20th, 2006, p. 15) Too many people have already burned their furniture and have nothing else to burn.
Obviously, the picture is a lot more complex than household spending alone. Issues such as the price of housing, interest rates, globalization and politics all play a role in The Salvation Army’s economic well being. However, for us, the health or lack thereof of household income and spending is the most important predictor of our income potential through direct donations.
The good news: our territory had a better fiscal year (October 1, 2004—September 30, 2005) than the previous few years. Our divisions have engaged in rigorous cost controls as well as closing some corps. In addition, we have been blessed with a number of large donations throughout the territory. The Katrina disaster has resulted in the biggest outpouring of donor generosity—The Salvation Army alone having received over $300 million in the United States. Contrary to some predictions, Katrina did not reduce the level of Christmas giving in most locations. Final numbers are not yet available, but initial reports have indicated an increase throughout most of the territory.
This year—2006—will demand further vigilance in our fiscal stewardship. While much progress has been made, much more remains to be done. Many corps struggle to make ends meet. We have a lot of properties in the territory that need upgrading. Many vehicles need to be replaced but no reserves are available. While being both a tremendous ministry opportunity and a burden, the planning and building of our Kroc centers must be done with great care, clear heads and much prayer.
Economics, however, is not just about numbers and estimates. It is also about what economists call “human capital.” It is about people. As I travel the territory, the dedication of our officers and employees never ceases to impress and inspire me. The “human capital” of this territory is awesome. Our people work long hours, believe in the Army’s mission and want to be successful in ministering to people. Consider the tremendous work done by our people, every day of the year, often with limited resources. Thank God for them!
The nature of our “human capital” was well defined by General William Booth, the Founder. In a letter to his son Bramwell in 1895, he identified the qualities officers—and in today’s environment our employees—should possess: Heart religion, man (and woman) with a message, aggressiveness and soul-loving fervor, power to inspire, vision and leadership, influence and widespread confidence, teacher, writer, man of affairs (economist?), world outlook.
With this kind of “human capital” coupled with sound Salvation Army economic principles, how could we ever go wrong?