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Decision No. 330

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April 23 1970
In Re: Meaning and Application of Paragraph 20 of the Constitution.

Digest of Case

The Constitution of The United Methodist Church (Paragraph 20) prohibits the General Conference from appropriating the net income of The Methodist Publishing House for any purpose other than the ministerial pension systems. Net income is the accrued balance of all income after expenditures for production, operation and administration, including reserves for growth and expansion. The Board of Publication has power and authority to determine the necessary and appropriate expenditures for operation, and is accountable to and subject to the control and direction of the General Conference as set forth from time to time in the Discipline.

Statement of Facts

The standing Legislative Committee on Publishing Interests of the 1970 General Conference petitioned the Judicial Council for a Declaratory Decision "to clarify the meaning and application of Article VI, Par. 20, of Section III (Restrictive Rules) of the Constitution as it pertains to the expenditure by the General Board of Publication of funds of The Methodist Publishing House for items unrelated to the production of income and specifically whether the Board of Publication under the aforesaid Restrictive Rule is authorized to expend from the funds of the Publishing House funds for the support of organizations or activities such as Project Equality or any other organization of like nature." In addition to the petition the Judicial Council received oral presentations from six members of the standing Legislative Committee, three speaking for the majority report and three for the minority report. JURISDICTION The Judicial Council has jurisdiction to make a ruling in the nature of a declaratory decision under Paragraph 1715.2(c) of the 1968 Discipline. ANALYSIS Paragraph 20 provides: "The General Conference shall not appropriate the net income of the publishing houses, the book concerns, or the Chartered Fund to any purpose other than for the benefit of retired or disabled preachers, their wives, widows, and children or other beneficiaries of the ministerial pension systems." The General Conference has enacted legislation establishing the General Board of Publication and granting powers and authority thereto, including conduct of general operations by The Methodist Publishing House under the direction and control of the General Board. (Discipline, Paragraphs 929 to 944 and 948) The General Conference implemented the restrictive rule of the Constitution above stated, as follows: "The net income from the operations of The Methodist Publishing House, after providing adequate reserves for the efficient operation of the business and allowing for reasonable growth and expansion, shall be appropriated by the board and distributed annually on the basis of an equitable plan provided by the General Board of Pensions to the several Annual Conferences for the persons who are and shall be conference claimants." (Par. 945) "The net income from the operations of The Methodist Publishing House shall be appropriated to no other purpose than its own operating requirements and for persons who are or shall be conference claimants as provided in Paragraphs 20 and 945." (Par. 946) Thus the meaning of Paragraph 20 and implementing legislation is clear. A simple answer to the petition is that the General Board of Publication shall not appropriate the net income from operations of The Methodist Publishing House to any purpose other than for the benefit of beneficiaries of the ministerial pension systems. We note that the General Conference in Paragraphs 945 and 946 interpreted the Constitutional restriction by authorizing appropriation of income for the purpose of "operating requirements" of The Methodist Publishing House. The term "net income" as used in these two paragraphs is an inaccurate term. Thus we do not regard this use as violative of the Constitution, but rather it recognizes and provides for normal corporate growth, development and expansion capital needs from gross income. Therefore, we conclude the meaning of "net income" as used in the Discipline to be that portion of the gross operating and investment income remaining after meeting all costs of production, operating and administrative expenses, including a reasonable reserve for growth and expansion, as determined by the prudent discretion and judgment of the General Board and management of the Publishing House. In responding to the request that the Judicial Council clarify the meaning and application of Paragraph 20 as to the expenditure of funds for items "unrelated to the production of income," we do not presume to act or serve as a review or oversight authority of a corporate board, composed of elected representatives of The United Methodist Church, created by and responsible to the General Conference in the exercise of the powers and discretion of corporate management. We take judicial notice of the action of the 1968 General Conference in recommending participation in and support of "Project Equality" on the part of all United Methodist churches, institutions, agencies and organizations. The hearing on this petition produced evidence that the management with the approval of the Board of Publication expends as normal administrative costs, contributions, donations, and membership fees. The Board of Publication has operated on the basis that it has reasonable and prudent discretion to make such expenditures and contributions which may be only indirectly connected with the business operation. In the exercise of these discretionary powers the board is dealing with trust funds which are to be held for the specific benefit of the ministerial pension systems of The United Methodist Church and must use all the prudence and judgment required to be exercised in connection with such funds. We conclude that it is within the management discretion of the General Board of Publication to determine whether a "sponsor" relationship to Project Equality has an appropriate relation to the Publishing House objectives and operations and whether the cost or expense is reasonable and has a commensurate relation thereto. Under Paragraph 948 the Board of Publication has broad discretionary power and authority to carry on the operations of The Methodist Publishing House, subject to the continuing control and direction of the General Conference as set forth from time to time in the Discipline. We conclude and hold that the Board of Publication is accountable to the General Conference for its operations, for its exercise of authority in expenditures and for preserving the trust fund for conference claimants. The General Conference, having delegated to the Board the broad powers necessary for the effective management and operation of its business, may not substitute its wishes for the judgment of its corporate managers, except as it enacts directive legislation as a part of the Discipline.

Decision

The Constitution of The United Methodist Church (Paragraph 20) prohibits the General Conference from appropriating the net income of The Methodist Publishing House for any purpose other than the ministerial pension systems. Net income is the accrued balance of all income after expenditures for production, operation and administration, including reserves for growth and expansion. The Board of Publication has power and authority to determine the necessary and appropriate expenditures for operation, and is accountable to and subject to the control and direction of the General Conference as set forth from time to time in the Discipline.

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