Pastoral Compensation Report - August 2013 The Evangelical Covenant Church

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1 Pastoral Compensation Report - August 2013 The Evangelical Covenant Church Dean A. Lundgren Vice President of Finance & Director of Pensions This is the 22 nd year of providing the Pastoral Compensation Report to give information on current minimum salary guidelines for clergy. Specifically this report will serve to: encourage the local church to take action with regard to those pastors compensated below suggested minimum guidelines by referencing the information in this report and other suggested resource materials to ensure that all pastors receive adequate and fair compensation. make pastoral compensation a priority of local church management, with full support of regional and denominational leadership. This material is designed to be a useful framework. Specific application depends on unique local circumstances which implies that certain data may not be relevant to your local situation. In this publication: -The Church s Financial Responsibility for Pastoral Staff pg. 2 -External Data: Denominational comparisons in salary provisions pg. 3 Consumer Price Index: increases compared over the last ten years pg. 3 -Regional Data: Cost of living information for the U.S pg. 4 -Cost of Living Index: Data for 1 st quarter 2013 from The Council for Community and Economic Research (C2ER) pg. 5 -Recommended Minimum Salary Guidelines for Covenant Pastors pg. 6 -Additional Provisions for the Pastor pg Other Recommended Resources pg. 8

2 The Church s Financial Responsibility for Pastoral Staff Pastoral ministry is a unique calling within the priesthood of all believers. Serving in Christ's Church as a pastor is both a calling and a special privilege. Pastors are expected to hold the mission of the church in high priority, balanced with care for their families and themselves. Congregations seek to honor and support their pastors. Many would like to be able to reward their pastors with a more than adequate salary. Still, a congregation must reckon with the reality of church finances. In the end, it comes down to a question of balance and fairness. Providing an acceptable standard of living for the pastor and her/his family; enabling a sense of high self-esteem; encouraging healthy family life; creating a positive relationship between pastor and congregation; and, above all, encouraging effective ministry these are the goals of fair and balanced compensation. Ultimately, compensation is part of a covenant relationship between pastor and congregation in which each looks out for the good of the other. The pastor commits her/his life to the service of God and the Church. The congregation, as a part of their commitment, cares for, supports, and upholds the pastor. Uninhibited by financial worry, fair compensation frees the pastor to be creative and to use the gifts God has given for ministry. At the same time, it enables the congregation to tangibly love their pastor and to affirm her/him for work well done. Don t you know that those who serve in the temple get their food from the temple, and that those who serve at the altar share in what is offered on the altar? In the same way, the Lord has commanded that those who preach the gospel should receive their living from the gospel. I Corinthians 9:13-14 (NIV) The elders who direct the affairs of the church well are worthy of double honor, especially those whose work is preaching and teaching. For Scripture says, Do not muzzle an ox while it is treading out the grain, and The worker deserves his wages. 1 Timothy 5:17-18 (NIV) Pg 2

3 External Data The Church Benefits Association (CBA) annually collects and distributes salary information from many church denominations. Across this spectrum of denominations, the Covenant is at the 64 th percentile meaning the Covenant average is higher than two-thirds of the other reporting denominations. The average Covenant salary is approximately $1,800 above the median for all reporting denominations. The following table compares average Covenant compensation with a number of other well-known denominations, as reported to the CBA. Denominational Comparisons in Salary Provisions: Selected Denominations 2011 Average Ministerial Salary * American Baptist $52,580 Baptist General Conference $58,640 Christian Reformed Church $64,341 Episcopal Church $72,504 Evangelical Covenant Church $58,189 Evangelical Lutheran Church in America (ELCA) $58,717 Lutheran Church-Missouri Synod $51,230 Presbyterian Church U.S.A. $57,357 United Church of Christ $54,000 United Methodist Church $53,374 Median for all 14 reporting denominations: $56,334 * includes salary, housing, and church s payment of FICA (if any). Consumer Price Index The increases in the U.S. Consumer Price Index (CPI) from are listed below. The average for this period has been 2.5% and for the most recent five years it has been 2.1%. Year CPI * % % % % % % % % % % Pg 3 (* Source = Bureau of Labor Statistics)

4 Regional Data This report includes updated regional information through the first quarter of 2013 from The Council for Community and Economic Research (C2ER) formerly the American Chamber of Commerce Researchers Association (ACCRA) which is updated quarterly for over 300 cities and non-metropolitan areas in the U.S. Additional information about this organization may be found at Pg 4

5 Cost of Living Index Not surprisingly, the most important determination of regional living costs is the housing component. Results are summarized below (the average U.S. cost of living base = 100%). This chart contains regional cost of living information for a number of locations. We have included data for every area C2ER reported in close proximity to Covenant churches. If your area is not included, it is because that information was not provided to C2ER. Another suggested website which may help to determine the cost of living index for any city in the U.S. is First Quarter 2013 Cost of Living Index Data below includes every area reported which is in close proximity to Covenant churches. If your area is not included, it is because C2ER received no data for that area. Urban Area And State 100% Composite Index Birmingham, AL 89.0 Mobile, AL 92.9 Anchorage, AK Fairbanks, AK Phoenix, AZ 94.0 Tucson, AZ 95.1 Anaheim- Santa Ana Irvine, CA Los Angeles Long Beach, CA Oakland, CA Sacramento, CA San Diego, CA San Francisco-San Mateo-Redwood City, CA Colorado Springs, CO 95.5 Bridgeport-Stamford Norwalk, CT Hartford, CT Washington DC Arlington-Alexandria, VA Bradenton, FL 98.4 Miami-Dade County FL Sarasota, FL 99.8 Vero Beach, FL 98.8 Atlanta, GA 96.6 Honolulu, HI Boise, ID 92.3 Champaign-Urbana, IL 95.9 Chicago/Naperville, IL Galesburg, IL 92.5 Peoria, IL Rockford, IL 92.5 Lafayette, IN 92.6 South Bend, IN 91.2 Davenport, IA-Moline, IL 96.7 Des Moines, IA 91.3 Mason City, IA 91.9 Salina, KS 89.3 Topeka, KS 92.6 Wichita, KS 90.9 Paducah, KY 89.8 New Orleans, LA Portland, ME Baltimore, MD Boston, MA Fitchburg, MA Detroit, MI 95.1 Kalamazoo, MI 87.7 Mankato, MN 93.9 Minneapolis, MN St. Cloud, MN 95.0 St. Paul, MN Kansas City, MO St. Louis, MO 91.4 Springfield, MO 86.7 Bozeman, MT Lincoln, NE 90.7 Omaha, NE 87.7 Manchester, NH Newark-Elizabeth, NJ Buffalo, NY New York-Brooklyn, NY Rochester, NY Asheville, NC Charlotte, NC 94.7 Fargo-Moorhead, ND 93.5 Cincinnati, OH 90.8 Columbus, OH 88.0 Wooster, OH 93.3 Edmond, OK 94.3 Oklahoma City, OK 91.4 Tulsa, OK 88.5 Portland, OR Philadelphia, PA Pittsburgh, PA 95.6 York County, PA Providence, RI Columbia, SC 96.0 Morristown, TN 93.0 Smyrna, TN 92.2 Beaumont, TX 94.7 Dallas, TX 94.9 Houston, TX 99.8 Burlington, VT Bellingham, WA Everett, WA Olympia, WA Portland, OR-Vancouver Beaverton, WA Seattle, WA Spokane, WA 94.4 Yakima, WA 95.3 Eau Claire, WI 90.2 Green Bay, WI 95.7 Milwaukee, WI Pg 5

6 Recommended Minimum Base Salaries for Covenant Pastors Decisions regarding pastoral compensation are vested in the local congregation. It is important for local churches to raise the salary levels of pastors who are currently compensated below recommended minimum guidelines. Guidelines were increased 2.5% over those for the previous year. It is not our objective to identify ranges or potential maximums; this is outside the scope of this report. However, we hope that this information will enable all parties to make more informed decisions regarding pastoral compensation. To provide fair and equitable compensation for Covenant pastors, the following minimum base salary scale is recommended: 1. MINIMUM overall compensation based upon average Sunday morning attendance. PLEASE NOTE: The table below showing minimum compensation does NOT include the church s portion of FICA, contributions to the Covenant Pension Plan, health insurance, auto expenses, and other benefits and ministry expenses. Average Attendance* Minimum Compensation less than 75 $30, $35, $40, $48, $56, $63, $71, and up $76,400 * Average attendance is the definition used in the Covenant s November attendance Survey which includes adults, children, and nursery. Pg 6

7 Additional Provisions for the Pastor: 1. The local church is asked to provide for their senior pastor: a. a well-maintained parsonage, with all utilities paid. An alternative is to provide cash allowance sufficient to cover reasonable and adequate housing and utility costs. b. paid full premium for the Covenant Group Insurance Program (Bethany Benefit Services). c. paid full premium for pastor's membership in the Covenant Pension Plan. d. payment of all pastor's church-related expenses, including auto expenses, to the limits established by the Internal Revenue Service. e. payment of pastor's expenses for conference and Covenant meetings; specifically Covenant Midwinter Conference; Annual Meetings of the Conference, and The Covenant Ministerial Association Retreat (where the Conference Ministerial Association Retreat is for the pastor and their spouse, expenses for both the pastor and spouse should be covered). f. payment of expenses and granted time off to assure pastor's compliance with the Covenant Ministerium's annual continuing education requirements. g. payment of at least one half of the pastor's self-employment tax (Social Security). 2. Please note: a. Minimum base salaries of ministerial staff shall be at least 60% of the senior pastor's base salary. In any case, it should never be lower than the lowest figure on the chart on page 6. b. Where compensation is less than recommended minimum scale, the church is expected to examine its entire budget and level of stewardship in order to give pastoral compensation a higher priority. Compensation less than scale may well suggest that the pastor be given permission to supplement income through part-time employment. c. Both pastor and church should be aware of the allowances granted in the Tax Code of the Internal Revenue Service so that full advantage can be taken of the housing allowance within compliance of the law. d. Pastoral Housing Allowance By IRS regulations, credentialed Covenant pastors are permitted to declare a portion of their salary as a housing allowance. This housing allowance is not subject to Federal and (most) State income taxes. The pastor determines the level of the housing allowance requested for the coming year. The church has no role in setting the level of the housing allowance, but does record its approval in the official minutes. Pg 7

8 The level of housing allowance requested by the pastor is limited to the lesser of: The amount prospectively designated The amount of actual expenses in the calendar year or The fair rental value of the residence, plus utilities & furnishings Any excess of housing allowance over the limit must be reported as income on IRS form Other Recommended Resources: An excellent resource is The Compensation Handbook for Church Staff by Richard R. Hammar which contains current survey data from over 5,000 churches representing more than 10,000 staff members. We highly recommend that all pastors and church pastoral relations committees obtain a copy of this handbook. It provides a very useful framework for church leaders when addressing compensation planning for pastors and other staff including Christian education directors, youth ministers, choir and music directors, church administrators, church bookkeepers, church secretaries, and church custodians. This handbook provides more specific guidelines when planning compensation for pastors including: salary, housing allowance, business expense reimbursement policy, automobile expenses, self-employment tax, insurance, and pension. The data is organized by church attendance, church income, setting (urban, suburban, medium size city, small town, and rural), gender, education, and years employed. It suggests that for senior pastors, the most critical variables influencing compensation (in descending order of importance) are: church income, church attendance, geographical setting, and years of service. To order a copy of this book from Your Church Resources phone or order online at Some regional conferences provide information and guidelines regarding compensation within their conference. If there is conflicting information from statistics shown in this report, we recommend utilizing the conference material since it is more specific to that geographical area. More detailed Covenant data is available to the local church pastoral relations committee through your conference superintendent. Pg 8