A Modest Proposal for the LDS Church's Financial Management Strategy

There was a recent article in the Wall Street Journal on the Church of Jesus Christ of Latter-day Saints' finances (this one doesn’t have a paywall). Summary: a disgruntled former employee of the church’s investment arm Ensign Peak filed a complaint to the IRS claiming that the church should lose its nonprofit status and pay back taxes (of which he would get up to 30% according to IRS whistleblower laws) based on the way they handled a couple of investments. It gets into how these were treated for tax purposes, but I'm not focused on that here.

The interesting part to me is that the size of the church's general fund has grown to ~$100bn due to a great decade of market growth (this is excluding real estate holdings like temples, churches, etc). Total tithing is ~$7bn/year (according to one estimate... could be much more) and it costs ~$5bn/year to run the church (building maintenance, education programs, missionaries, headquarters, everything). So ~$2bn/year goes into the general fund and invested for a rainy day, which to me doesn't sound totally unreasonable if you want to save and invest for the future. It might be good for other organizations to be diligent and frugal in the way they ran their operation (looking at you federal government). But if you never hit a rainy day then it gets interesting and a bit controversial as to what you should do with all of that money. So some say that it’s already too big and they should be donating that to charity or doing more charitable work. I agree that eventually you need to do something with that money or it will just keep growing forever. Tithing was always meant for church operations with welfare and fast offering donations as added funds to help the poor, so they're not necessarily doing anything shady in legal terms or lying to church members. Still, most members of the church think that their tithing donation is going to help the poor and fund welfare initiatives. It doesn't. Today the church spends about $40 million on humanitarian aid, welfare, and charity per year. Sounds like a lot of money. Except $40 million is about 0.04% of the church’s investment portfolio, or about how much they earn in interest in two days. Tithing is used to further religious purposes, not humanitarian. There is a separate fund to which people can donate for that purpose. Tithing is used "to build and maintain temples and meetinghouses, to sustain missionary work, to educate Church members, and to carry on the work of the Lord throughout the world." But at some point very soon they will have the opportunity to not only be able to fund the church forever off of interest alone, but also fund charitable works at a scale never before seen.

My plan if I were in charge of the church’s money would be to grow the stockpile to $250bn (so a decade or two depending on how well they do) and spend that time beefing up LDS Charities to be able to handle spending $7bn/year on philanthropy, an unprecedented challenge that has never been done before. If you funneled 100% of tithe dollars to these causes you could spend 175x what they are now spending on philanthropy and still run the church forever. Here's how:

Step 1) Make church operations an endowment (perpetual)

The church’s $100bn will grow to $250bn in the next 10-20 years, depending on market returns. At that point no one could argue that they need any more money to fund the church forever since you'd only need to earn a 2% real return to generate $5bn/year in today’s dollars and fund the church into perpetuity. You could argue that they could start that today based on the risk profile endowments typically have, but I'll be generous and say $250bn. At that point the church will have to really grapple with what to do with that money. You could say “tell people to quit paying tithing” but church members see it as both a commandment and a privilege for which they are blessed. As one friend told me, "I'd light 10% of my income on fire every year if I had to." Obedience with exactness is a term thrown around a lot. Plus, let's be honest, the church isn't going to cancel tithing. Another option would be to tell people to make a "tithing" donation to the charity of your choice, but that won't happen either. So if the money is still coming in but the church doesn't need it, then...

Step 2) Turn LDS Charities into the largest philanthropic organization in the world

The Bill and Melinda Gates Foundation has spent an average of $2.7bn per year for the past twenty years. It’s the second largest philanthropic organization in the world, just barely behind the Novo Nordisk Foundation. It is behind some of the most world-changing charitable projects and is the gold standard in giving worldwide. If church operations were paid through its endowment forever, and if instead the $7bn in annual tithes went directly to LDS Charities, it would immediately become double the spending of the largest philanthropic organization in the world. Here are just a few benefits:

• The Gates Foundation employs 1,500 people in Seattle, and the church could add even more jobs in Utah and around the world. Health care workers, scientists, engineers, construction workers, researchers, and on and on.

• They could utilize the army of church members across the world to volunteer in a much more meaningful way, working on local projects taken on by the church.

• Missionaries could spend a portion of every day working for the charity, then also do their proselyting after, creating a much more positive and rich experience, especially for those in areas where proselyting is a challenge.

• Members could get a report every year of where the church has donated and what they've done, which would be bigger and more important than what literally any other organization in the world is doing. It would give people pride in what that church is doing instead of many wondering what they’re doing behind the scenes. Social media sharing of this stuff would explode.

• It more closely aligns with the actual teachings of Jesus (feed the hungry, clothe the naked, give to the poor, love your neighbor, etc.).

• It would be the greatest missionary tool knowing that you’re joining an organization that practices what they preach more than anyone else.

• Instead of looking to critics like a sketchy secretive religion stockpiling cash for the second coming of Jesus and avoiding taxes in the process, the church could then tell a brilliant story of how they amassed a fortune in wisdom and discipline then dedicated it all to change the world forever.

To give an idea of the kind of impact we're talking about, this is just a short list of accomplishments that the Gates Foundation has accomplished in only 20yrs:

- Global Health

o 7.3mm people have received HIV/AIDS treatment

o Effectively eliminated the guinea worm disease, which had 3.5mm cases in 1986

o Distributed 450mm mosquito nets to combat malaria

o 12mm people tested and treated for tuberculosis

- Global Development

o 500mm children vaccinated (estimated 7mm lives saved)

o 3mm households received access to drought tolerant corn in Africa

o Contraceptives supplied to 120mm women

o Major contributor to eradicating polio

- U.S. Program

o Kentucky college-ready high school graduates increased from 34% to 62%

o Washington family homelessness reduced by 35%

- Global Policy and Advocacy

o $210mm to combat tobacco use in the Philippines and enroll 43mm Filipinos in health insurance

The church could (and should) more than double what the Gates Foundation is doing, and still pay for church operations till the end of time. $40 million a year could (and should) be $7 billion a year. It would be much more closely aligned with what Jesus actually taught, would increase church membership and total donations, and make existing members feel proud of what their church is doing around the world. The inflection point is soon and they'll have to decide one way or another.