Title: Polich v. Chicago School Finance Authority

State: illinois

Issuer: Illinois Supreme Court

Document:

79 Ill. 2d 188 (1980)
402 N.E.2d 247
PATRICIA POLICH et al., Petitioners,
v.
CHICAGO SCHOOL FINANCE AUTHORITY et al., Respondents.
No. 52957.

Supreme Court of Illinois.
Opinion filed March 11, 1980.
*189 *190 *191 Wilson & Strawn, of Chicago (Edward J. Wendrow, Calvin Sawyier, Edward L. Foote and Thomas J. Campbell, of counsel), for petitioners.
Albert E. Jenner, Jr., Anton R. Valukas, Michael J. Rovell, John H. Mathias, Jr., Linda L. Listrom, and Robert T. Markowski, of Chicago (Jenner & Block, of counsel), for respondent Chicago School Finance Authority.
William R. Quinlan, corporation counsel, of Chicago (Martin Healy and Lee J. Schwartz, assistant corporation counsel, of counsel), for respondent City of Chicago.
DeJong, Poltrock & Giampietro (Lawrence A. Poltrock, Wayne B. Giampietro, Kathrin A. Koenig, Gregory N. Freerksen, and Stephen G. Daday, law student, for amicus curiae Chicago Teachers Union, Local No. 1, AFL-CIO.
Judgment for defendants.
MR. CHIEF JUSTICE GOLDENHERSH delivered the opinion of the court:
Pursuant to leave granted (73 Ill.2d R. 381), petitioners, Patricia Polich, Norm Gierke, William Gierke, Gunthorp-Warren Printing Co., B.S. Miller and Herbert *192 Loeb, filed this original action (Ill. Const. 1970, art. VI, sec. 4(a)) relating to revenue seeking a declaratory judgment that the School Finance Authority Act and other provisions of Public Act 81-1221, approved January 16, 1980, are invalid.
Petitioner Polich is a citizen and resident of the city of Chicago, petitioners Gierke are teachers employed by the board of education of the city of Chicago (the Board), and Gunthorp-Warren Printing Co. is an unsecured creditor of the Board. Petitioners Miller and Loeb are holders of board of education bonds maturing respectively on October 15, 1987, and December 1, 1981.
The relevant portions of Public Act 81-1221 will be set forth to the extent necessary to the discussion of the issues. The respondent, Chicago School Finance Authority (the Authority), is governed by a five-member board of directors, two of whom were appointed by the Governor with the approval of the mayor of Chicago; two directors were appointed by the mayor of Chicago with the approval of the Governor, and one director, appointed jointly by the Governor and mayor, serves as chairman of the Authority. Sec. 34A-301.
Prior to consideration of the substantive issues presented, we deem it advisable to comment briefly on our exercise of jurisdiction over an original action which presents no actual controversy concerning the collection of revenue. Historically (Ill. Const. 1818, art. IV, sec. 2; Ill. Const. 1848, art. V, sec. 5; Ill. Const. 1870, art. VI, sec. 5) this court has been vested with original jurisdiction in matters relating to the revenue, and neither the framers of the constitutions nor this court have deemed it necessary to precisely define the term "revenue" as used in those constitutions. The jurisdiction has been sparingly exercised in causes involving issues relating to the revenue and of great public importance (see People v. Deep Rock Oil Corp. (1931), 343 Ill. 388; Thorpe v. Mahin (1969), 43 Ill. 2d 36; Dee-El Garage, Inc. v. Korzen (1972), 53 Ill. 2d 1; *193 Continental Illinois National Bank & Trust Co. v. Zagel (1979), 78 Ill. 2d 387), and is appropriately asserted here.
In addition to the creation of the School Finance Authority, Public Act 81-1221 provided for the termination of the terms of all members of the school board effective April 30, 1980, and the appointment of a new board (sec. 34-3); reduced the maximum tax rate for educational purposes from 2.11% to 1.61% (sec. 34-53); provided for the reduction of the State aid funds payable to the school district under section 18-8 by an amount equal to the budget for the operations of the Authority, and payment of that sum to the Authority (sec. 18-8(k)); and enumerated the powers of the Authority in the control of the finances and expenditures of the Board.
Section 34A-401 of the Act provided that the Authority "shall have the power to approve or to reject the Financial Plans, Budgets and Contracts of the Board," and other provisions detail the manner in which the Authority is empowered to supervise the fiscal affairs of the Board. (Secs. 34A-401 to 411.) In order that it may carry out its fiscal duties and provide the Board with moneys with which to operate, the Authority was empowered by section 34A-501 to issue general obligation bonds in an amount not to exceed $500 million. Section 34A-503 provides in part:
Petitioners contend that "the amendatory Act, in setting up the Authority with supervisory fiscal powers over the Board of Education and the power to incur debt and compel the Chicago City Council to levy taxes in order to pay the same, clearly violates the constitutional home rule powers of the City." They argue that the Act confers upon the Authority complete control over the financial affairs of the board of education and compels the city council to levy and collect such taxes as may be directed by the Authority. Simply stated their contention is that, in violation of the constitutional home rule powers of the city, the statute grants the power to control the amount of money to be raised by taxes for the operation of the schools to persons other than the corporate authorities of the city of Chicago or persons selected and approved by them. Cited in support of this position are People ex rel. Vermilion County Conservation District v. Lenover (1969), 43 Ill. 2d 209, People ex rel. Bergan v. New York Central R.R. Co. (1945), 390 Ill. 30, People ex rel. Burow v. Block (1916), 276 Ill. 286, Morgan v. Schusselle (1907), 228 Ill. 106, and Lovingston v. Wider (1870), 53 Ill. 302. In Lovingston, decided under the 1848 Constitution, the General Assembly passed an act intended to establish a police force for East St. Louis. The act provided for the appointment by the Governor of three commissioners who would control the police department. The city was required to appropriate funds for the operation of the department, but failing that, the commissioners were empowered to issue certificates of indebtedness in the name of the city which were to be paid out of taxes. In *195 holding that the legislature had exceeded its powers under article IX, section 5, of the Constitution of 1848, the court said:
Article IX, section 9, of the Constitution of 1870, in force when the other cases cited were decided, provided in *196 part:
The Constitution of 1970 contains no comparable provision. Arguing that "an examination of the debates shows no intent to change the basic concept of the power to tax as enunciated in the cases cited above," petitioners seek to have us hold that under the present constitution the power of the General Assembly is similarly restricted. They argue that to qualify "the right of a home rule unit, having the taxing power, to decide when it will levy a tax" violates article VII, section 6, of the 1970 Constitution, which provides in part:
As shown by the quotation from Lovingston v. Wider (1870), 53 Ill. 302, the constitutional provision pertaining to municipal taxing authority was construed as a limitation on the power of the General Assembly to grant the right of local taxation to anyone but the "corporate authorities."
Article IX, section 1, of the 1970 Constitution provides in part:
This court, considering the scope and meaning of article IX, section 1, said in Hoffmann v. Clark (1977), 69 Ill. 2d 402, 422-23:
In view of the foregoing, we conclude that, contrary to petitioners' contention, the convention proceedings demonstrate the clear intent to change the extent to which the General Assembly may delegate the power to tax. The restrictions imposed by the cases cited by petitioners are no longer applicable. Because we consider that the issue of the validity of section 34A-503 presents only the question of the General Assembly's power to tax, we find it unnecessary to address the suggestion raised in respondent city of Chicago's brief that because the Act is a limitation on the taxing power of a home rule municipality, a three-fifths majority was needed to pass the bill (Ill. Const. 1970, art. VII, sec. 6(g)). We note, parenthetically, that article IX, section 10, of the Constitution provides:
We note further that article VII, section 8, of the 1970 Constitution empowers the General Assembly to provide for the "selection" of the officers of school districts, special districts and other units of local government. This negates petitioners' contention, made in reliance on cases decided under prior constitutions, that members of the Authority must be elected or appointed in a manner approved by the voters of the city of Chicago.
Concerning the provision of section 34A-503 that "the Authority shall demand and direct the City Council * * * to provide by ordinance for the levy and collection of a direct annual tax * * *," we note that sections 34-22.2, 34-22.4, 34-22.7 and 34-3 of the School Code (Ill. Rev. Stat. 1977, ch. 122, pars. 34-22.2, 34-22.4, 34-22.7, 34-3) contain provisions which are substantially similar. In Latham v. Board of Education (1964), 31 Ill. 2d 178, 181-82, in rejecting the contention that the board of education rather than the city council made the tax levy for the Chicago school system, the court said:
The rationale of Latham is applicable here.
Petitioners contend that, in effect, the foregoing provision "purports to prevent future legislatures from ever amending the School Code to abolish the Authority." They argue too "that the Act in question in effect prevents future legislatures from abolishing the Authority which lasts as long as it has any 30-year bonds outstanding." Citing People ex rel. City of Chicago v. Barrett (1940), 373 Ill. 393, they argue: "The General Assembly has the undoubted right to repeal all legislative acts which are not in the nature of a private grant * * *." "A General Assembly cannot bind its successors unless authorized by the Constitution * * *." In Hoogasian v. Regional Transportation Authority (1974), 58 Ill. 2d 117, section 4.04(e) of the Regional Transportation Authority Act (Ill. Rev. Stat., 1973 Supp., ch. 111 2/3, par. 704.04), which contained language substantially similar to that involved here, was attacked on the ground that it created "State debt." The court held that the provisions did "nothing more than recognize an already existing obligation on the part of the State to the Authority's note and bond holders not to impair their contractual relationship with the Authority * * *." (58 Ill. 2d 117, 128.) In Day v. Regional Transportation Authority (1977), 66 Ill. 2d 533, it was again contended that the provision under attack in Hoogasian, coupled with the provision providing for allocation of certain taxes, served to create State debt. Under the rationale of Hoogasian that contention was rejected. We fail to perceive in what manner the section binds future *201 General Assemblies and hold that as in the legislation considered in Hoogasian and Day the clause expresses the intent to provide protection to the bondholders consistent with the constitutional provisions prohibiting impairment of contractual rights. U.S. Const., art. I, sec. 10; Ill. Const. 1970, art. I, sec. 16.
Petitioners contend next that Public Act 81-1221 is invalid for the reason that in reducing the board of education's authorized tax rate and eliminating its control over the allocation of revenues to and among its various creditors, it impairs the obligation of contracts. The Act amends section 34-53 of the School Code to reduce the maximum tax rate for educational purposes from 2.11% to 1.61%. Section 34A-404 requires the Board to submit budgets for the Authority's approval or rejection. Section 34A-405 empowers the Authority to adopt regulations identifying categories and types of contracts which must be submitted by the Board to the Authority for its approval or rejection. Section 34A-409 empowers the Authority to direct the Board's treasurer to establish and maintain the Board's cash accounts in the manner prescribed by the Authority and further empowers the Authority to assume exclusive administration of the Board's cash and bank accounts and to withdraw funds from these accounts for the Board's lawful expenditures.
Faitoute Iron & Steel Co. v. City of Asbury Park (1942), 316 U.S. 502, 86 L. Ed. 1629, 62 S. Ct. 1129, involved a New Jersey statute under which a plan for adjustment of the claims of creditors of insolvent municipalities could be made binding upon all creditors. The statute was attacked as an impairment of the right of contract in violation of article I, section 10, of the Constitution of the United States. The Supreme Court held that the enactment of the legislation was within the police power of the State and that the legislation was valid. Similarly, in Community Renewal Foundation, Inc. v. Chicago Title & Trust Co. (1970), 44 Ill. 2d 284, 290, *202 this court observed:
In section 34A-102 the General Assembly found:
We are unable to say that the General Assembly erred in finding that the enactment of the legislation was within *203 the necessary and appropriate exercise of its police power. We hold, therefore, that the enactment of the legislation was not an impairment of contract proscribed by either the United States Constitution or the Constitution of Illinois.
Petitioners contend next that the Act is invalid because it "constitutes a direct disavowal by the State of Illinois of its constitutional obligation to provide and finance an efficient system of high quality public education." Petitioners assert that under the Act, the State "assumes absolutely no added obligations" in dealing with the financial crisis facing the Chicago school system.
Article X, section 1, of the 1970 Constitution provides:
Petitioner does not assert that the State contributes nothing toward the public educational institutions and services for Chicago. Indeed the contrary is true. Under section 18.8 of the School Code (as amended by Pub. Act 81-1221), the State is still obligated to make aid payments, based on attendance, to the school district and the Authority. Also we note that in December of 1979 the State provided emergency funds to the school district both in the form of an advance of State payments and loans in the form of State aid payment anticipation certificates. The Board guaranteed that payment of the principal and interest on the loans would be made out of State aid payments for future months. This, we note, was accomplished *204 without new legislation.
Apparently petitioners' position is that the State, under the Constitution, is required to provide direct cash payments in order to alleviate this crisis rather than make provision, as it has done, for bond financing and repayment out of city taxes. We cannot agree.
In Blase v. State (1973), 55 Ill. 2d 94, the court construed the last sentence of section 1, article X, of the Constitution of 1970, which reads "The State has the primary responsibility for financing the system of public education." The plaintiffs in that case contended that the Constitution required that the State provide at least 50% of the cost of public education. Rejecting that assertion, the court said:
In view of the holding of Blase that article X, section 1, imposed no specific duty on the General Assembly and the strong presumption of constitutionality which must be overcome to invalidate the statute before us, we hold that the Act is not violative of article X, section 1, of the 1970 Constitution. The measures taken to alleviate the crisis facing Chicago schools are properly left to the wisdom of the General Assembly. Cronin v. Lindberg (1976), 66 Ill. 2d 47.
Petitioners contend next that Public Act 81-1221 (sec. 18-8.9(k)) provides on its face for a discriminatory deduction of State aid paid to the Chicago school district. This discrimination, they argue, is compounded by its marked racially discriminatory effect. They argue further that the equal protection clause of the Illinois Constitution of 1970 (Ill. Const. 1970, art. I, sec. 2), read in conjunction *205 with express constitutional provisions establishing education as a fundamental goal of the State (Ill. Const. 1970, art. X, sec. 1), mandate strict judicial scrutiny of statutes involving disparity in provision of educational services.
Section 18-8.9(k) provides in pertinent part:
We need not and do not further address this contention. Obviously none of the petitioners are members of the class of school pupils against whom it is contended the statute is unreasonably discriminatory, and therefore no parties to the action have standing to question its validity. Cronin v. Lindberg (1976), 66 Ill. 2d 47, 56; Board of Education v. Bakalis (1973), 54 Ill. 2d 448, 467.
Petitioners contend next that if the Authority is treated as a unit of local government separate from the Chicago School District then "Section 18-8.9(k), as amended by the Act invalidly delegates to the Authority the determination, without standard, of the amount [by] which the appropriation of funds by the Legislature to the Common School Fund * * * is to be reduced in connection with the Chicago school district." Petitioners argue that section 18-8.9(k) sets no standards and that the amount payable to the school district is dependent upon "what the Authority happens to budget for its operations and certify to the State Board of Education as its operating expenses." *206 Consequently, it is argued, the section contravenes article II, section 1, of the 1970 Constitution, pertaining to separation of powers.
In Hill v. Relyea (1966), 34 Ill. 2d 552, 555, the court said:
*207 As demonstrated by the debates on House Bill 1264, the drafters of the provision in question were unable to determine how much to budget for operating the Authority. In its first year of operation, for instance, the Authority would be required to incur large expenses related to the sale of bonds. Such expenses, however, would be expected to decline. In view of this and the unique nature of the undertaking, the inability of the General Assembly to set a precise budget for the Authority is understandable.
Moreover, when the Act is viewed in its entirety, it becomes clear that the Authority's power to incur expenses is not unlimited. Section 34A-201 of the Act provides in part:
Thus, the Authority's discretion is limited to incurring expenses "necessary" to discharge its responsibilities under the Act. In view of the difficulty or impossibility of defining more precise standards by which the Authority is to determine its budget and hence the amount ultimately allocable to the school district, we cannot say Public Act 81-1221 constitutes an unlawful delegation of legislative power. See also Paepcke v. Public Building Com. (1970), 46 Ill. 2d 330, 345-47; People ex rel. Stamos v. Public Building Com. (1968), 40 Ill. 2d 164, 174-76.
Petitioners contend that the Act is invalid because two essential provisions (sections 34-3 and 34A-502(a)) were not passed by a three-fifths vote of the members elected to *208 each house of the General Assembly. They argue that sections 5(a) and 10 of article IV of the Constitution of 1970 must be read together and that "It is contemplated that a bill `passed prior to July 1' is one introduced after the convening of the Legislature on the second Wednesday of January of that calendar year." They argue that because the Act had its origin in House Bill 1264 (which was introduced in March of 1979, and was not passed prior to July 1, 1979) when it was passed on January 11, 1980, it passed "after June 30th." They argue that in accordance with the provisions of section 10 of article IV the bill cannot become effective until July 1, 1980, unless it was passed by the vote of three-fifths of the members elected to each house.
Article IV, section 10, of the Constitution of 1970 provides as follows:
Both the constitutional provision and the legislation enacted in implementation thereof (Ill. Rev. Stat. 1977, ch. 131, pars. 21 through 26) referred to a bill "passed prior to July 1 of a calendar year" without regard to when the bill may have been filed or its prior course through the legislative process. (Ill. Const. 1970, art. IV, sec. 10; Ill. Rev. Stat. 1977, ch. 131, par. 21.) In our opinion this clear and explicit constitutional provision requires no construction, and in accordance with the provision contained in the bill, it became effective upon becoming a law.
Finally petitioners contend that Public Act 81-1221 could not, as required by article IV, section 8, of the Constitution, have been read "on three different days" in *209 either house for the reason that it is obvious that it came into existence and "traversed the whole legislative process in one day, January 11, 1980." Petitioners argue that House Bill 1264 filed in March 1979 dealt solely with the retirement age of certain school personnel. It was at that time entitled "An Act to amend the School Code." It was read on three different days in the House, passed the House, and was sent to the Senate. In the Senate it received a first reading and was assigned to committee. On January 9, 1980, the bill was discharged from committee and given its second reading in the Senate. On January 11, 1980, everything but the title and the enacting clause was deleted from House Bill 1264 and the contents of what became Public Act 81-1221 were substituted. On that same date House Bill 1264 was given two readings in the Senate, passed the Senate, and was sent to the House, which passed it as received. Subsequently it was approved by the Governor. Petitioners argue that the foregoing procedure "is such a wilful and gross violation of article IV, section 8(d) that no categorization of these actions as being merely `procedural' and as somehow absolved by the `enrolled bill' rule seems adequate under the circumstances."
Respondents contend that it was the clear intent of the framers of the Constitution, and our holding in Fuehrmeyer v. City of Chicago (1974), 57 Ill. 2d 193, that the argument made now by petitioners be foreclosed. In Fuehrmeyer the city of Chicago argued that a house bill was not validly enacted for the reason that it was not read by title in the Senate three times. In addressing that contention the court said:
In Benjamin v. Devon Bank (1977), 68 Ill. 2d 142, the court recognized the validity of the enrolled-bill rule insofar as it related to procedural requirements for passage of legislation. The court said:
This case is distinguishable from Benjamin in that the alleged defect argued by petitioners would require examination of the Journal, whereas in Benjamin, failure to comply with the constitutional provision was apparent from *212 the face of the bill. The enrolled bill rule is clearly applicable here, and we hold the legislation was properly enacted.
For the reasons stated we hold that Public Act 81-1221 is constitutional and became effective upon approval on January 16, 1980.
Judgment for defendants.
MR. JUSTICE MORAN, dissenting:
This court may issue a declaratory judgment only if an actual controversy exists. (Underground Contractors Association v. City of Chicago (1977), 66 Ill. 2d 371, 375; Dean Milk Co. v. City of Aurora (1949), 404 Ill. 331, 334.) It cannot issue an advisory opinion based on the possibility of future harm or injury. (Exchange National Bank v. County of Cook (1955), 6 Ill. 2d 419, 422; Dee-El Garage, Inc. v. Korzen (1972), 53 Ill. 2d 1, 11.) In the case before us, the majority admits that there is no actual controversy but fails to explain why such deficiency does not act to prevent the court from taking original jurisdiction. The plaintiffs only "fear" that the obligations due them may be impaired by the School Finance Authority Act (Pub. Act 81-1221). To address those "fears" would be to merely render an advisory opinion. It is only when those fears become a reality that a declaratory judgment may properly be brought.