When Covid-19 hit the country, Highland applied for and received funds from the Paycheck Protection Program. The Paycheck Protection Program (PPP) is a loan program developed as a response to Covid-19 designed to provide direct support for small businesses (including non-profits and churches) to keep their workers on the payroll. The Small Business Administration will forgive loans if all employee retention criteria are met and the funds are used for eligible expenses.
Our hope in writing here is to give you a more thorough understanding of the process Highland followed to apply for these funds, the concerns we have received, and how they have been addressed thus far.
On Saturday, March 28, 3 members of Finance Ministry Group participated in a Zoom call hosted by CBF North Carolina with experts in church finance, Cheney and Associates, to learn more about the CARES Act (Coronavirus Aid, Relief, and Economic Security Act) and what it meant for churches. That Zoom call named that time was of the essence and applications for aid money would likely open by the end of the week, just 5-6 days later. That evening, Finance gathered via Zoom to talk through this possibility for Highland.
In the days that followed, Finance initiated conversations with staff, Personnel, and Ministry Council and gave them an opportunity to respond with questions and concerns. Ministry staff specifically considered the question of separation of church and state at the request of Finance. Wisely, one of our ministers asked if the aid was available for all faith groups (churches, synagogues, mosques and other religious bodies). If the answer was yes, given the global pandemic and the uncertainty and intensity of the season, the ministry staff was supportive of proceeding. Members of Finance researched this question, and the report was that all religious groups were eligible for aid. Ultimately, the decision was made to move forward, understanding that application did not necessarily ensure receipt of the funds.
The Ministry Council continued to receive monthly updates on this process from the Finance Ministry Group and reported updates to the church. (See minutes from the newsletter April and July). At first, we received notification that we did not receive the PPP funds we had applied for. However, in mid-April, Congress considered more funding. On May 6, we received communication that Highland would receive the requested PPP funds, and the next day, the money was deposited into the Highland account.
Normally, QCC would have met in April. However, given that we were not far into pandemic life and trying to discern how to move forward with a call weekend for a new pastor, we decided to postpone QCC until the fall. In our August QCC, Jeff Grey raised a concern about the PPP funds with two main questions: 1) Was the process of applying for the PPP funds a violation of Highland’s bylaws? 2) Was the process of receiving the PPP funds a violation of our Baptist principle of separation of Church and State? After some discussion, it was recommended that these concerns be addressed further with the Trustees and Ministry Council.
Shortly thereafter, Mary Alice called a meeting of the church Trustees to review the process of applying for the PPP funds. The Trustees, several of whom are attorneys, carefully reviewed all of the Finance Ministry Group’s work and did not see any violation of Highland’s bylaws, processes, or procedures. However, they did recommend that the financial policies and procedures be updated in the future to include more thorough guidance regarding the process of applying for a grant or loan.
In September, the Ministry Council met with Jeff Grey to hear his concerns first-hand. After that conversation, Ministry Council reviewed the Trustee’s report and discussed the concern about the separation of Church and State. These were their conclusions, also shared with him following the meeting:
- The Finance Ministry Group made the decision to pursue the PPP funds based on what was known at a specific point in time and without knowing what impacts the pandemic would have on Highland Baptist Church’s finances long term.
- The Ministry Council acknowledged that interpretation of historic Baptist values for separation of Church and State vary from place to place and time to time. There is a continuum of historic Baptist responses to the issue.
- On one end of the continuum is a hard and fast rule—we will stand clearly over and against any regulation by the state at all. Accepting funds requires that the church must abide by federal regulations. Collaboration with the state is not accepted in any form and the church does not participate in the electoral process or take political stands. This principle is something that Baptists have fought for and been persecuted over in the past.
- On the other end of the continuum churches have used federal grants (Faith Based Initiatives) to feed the hungry, provide low-cost housing, establish addiction services, etc. and see no problem with accepting funds available to all to accomplish mission.
- The middle ground includes, for example, (1) churches that take or encourage an active voice in important social issues that intersect with government and speaking truth to power; (2) Baptist churches’ long-standing role in ordaining and endorsing ministers to military chaplaincy, and chaplaincies in the Veterans Administration hospitals and a variety of other federal, state and local chaplaincies. The Ministry Council concluded that applying for and accepting PPP funds falls somewhere near the middle of this continuum.
- Ministry Council deliberations concluded that the core value of separation of church and state was not violated for two reasons:
- First, the loan was available to all faith traditions and so did not privilege one over the other which might imply establishment of religion. Funds were received by thousands of churches, synagogues, mosques, and other faith-based organizations.
- Second, there were no conditions attached to the loan that would impact or control the church’s actions, mission, or faith and practice commitments.
- The Ministry Council acknowledged that this experience raises a concern for congregational conversation that can clarify and expand how Highland Baptist Church’s core value of separation of church and state is to be interpreted and practiced in our very complex and politicized world. The Ministry Council encouraged the Staff over the next few months to consider ways the congregation can be more informed about the historic and always complex theological value of separation of church and state.
In the October Quarterly Church Conference, Jeff Grey made a motion for Highland to return the funds we received from the Payroll Protection Plan. The motion was seconded by Earl Shelp. There was considerable conversation and different opinions were expressed. However, the motion was ultimately tabled so that we could gather more information regarding questions that were raised:
Question: Do we need the PPP funds?
Answer: The Finance Ministry Group’s answer to this question is a resounding yes, we do need these funds. They have enabled us to fully pay all of our staff for 9 months of Covid-19. As you will see later this week in the budget proposal for 2021, the Finance Ministry Group is recommending a significant reduction from the 2020 budget, which will impact all areas of our ministry and mission at Highland, including personnel. Even with these cuts, depending on the timeline and continued effects of Covid-19, it is likely that we will need to pull from our cash reserves in the coming year.
Question: Has Highland met the conditions of the loan so that the funds are now forgivable?
Answer: Yes. Highland retained the required number of Full Time Equivalency Employees during the covered period.
Question: How much did we receive and how was this amount determined?
Answer: We received $139,000. The payroll expenses included in the calculation are cash compensation to employees and employer contributions for health insurance and retirement plans. We meet the criteria based on payroll expenses which was used as the basis for the loan amount. The loan amount was calculated as 2.5 times average monthly payroll costs over the prior 12 months. However, utility payments beginning February 2020 and during the Covered Period also qualify to be included as supporting documentation.
Question: Has Highland requested forgiveness of the loan? If not, by when would we need to do this?
Answer: We have not requested forgiveness since the concern was raised about the PPP funds in the August QCC. We wanted to wait until after these concerns were addressed in the October QCC. However, we have until August 2021 to request forgiveness.
Question: What happens if we vote to return the funds? Is there a penalty?
Answer: There is no prepayment penalty if the church votes to return the funds.
On Sunday, November 8, at 5:00 p.m., we will have a called business meeting. The original purpose of this meeting was to present and discuss the 2021 budget, and this will be the first item on the agenda. Following that discussion, there will be a set time for pro and con statements followed by a vote on the motion that has been made to return the funds. After the vote, Mary Alice will offer a word of prayer.
If you have further questions regarding the PPP funds, please send them to Mary Alice so that we can work to have answers to you in the business meeting on November 8.
Approved and Submitted by Highland’s Ministry Council