New Pope Will Need a Bigger Collection Plate

Pope John Paul II’s successor won’t just face falling church attendance and an aging priesthood: He will also have to find new revenue to balance the Vatican’s budget.

After making a profit for eight years, the Holy See, the central administration for the church, ran deficits in the three years through 2003, the Vatican’s financial statements show. The separately run budget for Vatican City, the independent papal state in Rome, was also in the red in 2003, the latest year for which figures are available.

The papacy relies on earnings from about $1 billion in stocks, bonds and real estate in addition to donations from Catholics around the world. Although the Holy See benefited in the 1990s from booming stock markets and a strong dollar, foreign-exchange losses plunged it to a 9.6 million-euro ($12.1 million) loss in 2003 on revenue of 204 million euros ($256 million).

“Vatican administrators, like many people, got accustomed to balancing the budget with great market gains,” said Joseph Harris, a Seattle-based accountant who has done financial studies for several U.S. dioceses and writes a yearly analysis of the Vatican’s finances. “Well, the market giveth, and the market taketh away.”

The new leader of the world’s 1 billion Catholics will be chosen by a conclave of cardinals that begins this month, following John Paul II’s death April 2.

The papacy will be increasingly strapped for cash unless it finds new sources of revenue, says Francis Butler, president of Foundations and Donors Interested in Catholic Activities Inc., a Washington-based association of Catholic lay charities. The Holy See forecasts it will break even in 2005.

Catholic churches around the world donate about 80 million euros a year to the Vatican. Individual Catholics gave an additional 49 million euros in 2003 to be used by the Vatican for charities, according to the annual report.

“They just don’t get a lot of contributions,” says Butler. “It’s a question of how generous the world’s Catholics will be.”

The new pope won’t able to use the church’s priceless art treasures and four Roman basilicas to boost the bottom line. The Vatican has a policy of never selling its art.

The Italian government would block the export of any of the Vatican Museums’ collection, which includes 460 paintings by masters such as Giotto, Caravaggio and Raphael, said Msgr. Claudio Celli, 63, who is in charge of managing the Holy See’s assets as secretary of the Administration of the Patrimony of the Apostolic See.

“That’s our situation: so little liquidity and so many great art treasures,” Celli said in an October 2003 interview in his office facing a portrait of Christ by Guercino, a 17th-century Bolognese painter. Two mobile phones and an Internet-linked Compaq personal computer provided reminders of the modern world.

“But how do you value Michelangelo’s Pieta?” he asked, referring to the statue of a dead Christ draped over Mary’s lap that sits in a side entrance to St. Peter’s Basilica, Europe’s largest church.

The Holy See and Vatican City are scheduled to announce their 2004 results in July.

Celli said in 2003 that he had shifted most of the Holy See’s portfolio away from stocks and into short-term bonds. He didn’t respond to a faxed letter asking for information about his current investment strategy.

The Holy See includes the Curia, or Vatican bureaucracy, whose 20 councils and congregations set church doctrine and policy; the pope’s 118-embassy diplomatic corps; the Vatican’s radio station and Rome real estate used to house clergy.

Its 2003 results included a 22.4-million-euro profit from renting buildings near the Vatican, and an 11.6-million-euro loss on financial assets, according to the annual financial statement.

The loss on currencies alone was 32.8 million euros. During 2003, the Standard & Poor’s 500 index gained 26%, while the dollar lost 17% against the euro.

Vatican City -- the pope’s temporal domain -- had 2003 revenue of 145.9 million euros ($182.1 million), up 5%, mostly from entrance fees paid by 3 million visitors to the Vatican Museums and the tax-free stores it operates for employees and diplomats. The 8.8-million-euro deficit came after the city paid 10.5 million euros to help the Holy See cover losses at Vatican Radio.

The stores within the Vatican walls include a pharmacy that can import medicines not yet approved in Italy, a supermarket and a store housed in a restored old train station that offers Chanel perfumes and Cartier watches for as much as 50% less than elsewhere in Rome.

Combined, the cost of maintaining the Vatican’s offices and its four Roman basilicas, paying the 123-person Vatican police force and housing the pope’s 110 Swiss Guards rose 15%.

The world’s smallest state, Vatican City occupies a fifth of a square mile on the right bank of the Tiber River in central Rome. It mints its own euro coins and issues its own postage stamps, also denominated in euros.

Tourists can visit only St. Peter’s Square, the basilica and the museum. Behind the basilica are 19th-century palaces and office buildings spread around landscaped gardens.

One of those buildings houses the Institute for Religious Works. Known as the Vatican Bank, it is the third pillar of the Vatican’s finances. It doesn’t release financial data.

The 49 million euros donated by individual Catholics in 2003 was an increase of 6% from the previous year. U.S. Catholics gave about a third of the total. The contributions go into a fund called Peter’s Pence that has existed in some form since the 13th century. It’s handled directly by the pope for charitable purposes.

Although the pope maintains diplomatic relations with 172 countries and 48 international organizations, he controls less money directly than the University of Notre Dame. The 11,000-student Catholic university in Indiana had an annual budget of $695 million in 2004 and an endowment of $3 billion.

The 2,864 Catholic dioceses and 412,886 parishes worldwide -- including Rome’s -- are financially independent from the Vatican. That independence kept the Vatican financially untouched by sex-abuse scandals in the U.S. The archdiocese of Portland, Ore., filed for bankruptcy protection in July 2004 after paying $53 million to settle more than 100 allegations of sexual abuse by clergy.

The diocese of Tucson filed under Chapter 11 of the U.S. Bankruptcy Code in September, as did the Spokane, Wash., diocese in November.

Vatican finances were totally secret before Edmund Szoka, then the archbishop of Detroit, moved to Rome at John Paul II’s request to become head of the prefecture for the economic affairs of the Holy See in 1990.

“No one ever sat down and drew up an organizational chart and said it should be like this,” Szoka, 77, the governor of Vatican City, said in an October 2003 interview. “It grew up over 2,000 years.”