Court Opinion

ID: 9925369
Source: CourtListenerOpinion
Date Created: 2024-01-19 16:03:57.349126+00
Date Added: 2024-06-11T09:20:05.605872
License: Public Domain

2024 IL 129471

                                          IN THE
                                 SUPREME COURT

                                              OF
                           THE STATE OF ILLINOIS

                                     (Docket No. 129471)

      THE ARLINGTON HEIGHTS POLICE PENSION FUND et al., Appellants,
           v. JAY ROBERT “J.B.” PRITZKER, Governor, et al., Appellees.

                               Opinion filed January 19, 2024.

        CHIEF JUSTICE THEIS delivered the judgment of the court, with opinion.

        Justices Neville, Overstreet, Holder White, Cunningham, Rochford, and
     O’Brien concurred in the judgment and opinion.

                                          OPINION

¶1       Plaintiffs filed a complaint against defendants in the circuit court of Kane
     County seeking, inter alia, a finding that Public Act 101-610 (eff. Jan. 1, 2020)
     (Act), which amended portions of the Illinois Pension Code (40 ILCS 5/1-101 et.
     seq. (West 2020)), violated article XIII, section 5, of the Illinois Constitution (Ill.
     Const. 1970, art. XIII, § 5), commonly known as the pension protection clause,
     and/or article I, section 15, of the Illinois Constitution (Ill. Const. 1970, art. I, § 15),
     commonly known as the takings clause. The circuit court granted summary
     judgment in favor of defendants. The appellate court affirmed. 2023 IL App (2d)
     220198, ¶ 20. For the following reasons, we also affirm.

¶2                                      BACKGROUND

¶3       On January 1, 2020, Public Act 101-610 became effective and amended, in
     pertinent part, portions of the pension code to consolidate all applicable local police
     and firefighter pension fund assets into two statewide pension investment funds,
     one for police and the other for firefighters. Pursuant to the Act, the local pension
     funds were required to transfer custody and investment responsibility for their fund
     assets to the respective statewide funds, which are now tasked with collectively
     investing and administering the pooled assets. The Act provided a transition period
     that ended on June 30, 2022, for the transfer of securities, assets, and the investment
     function from the local funds to the statewide investment funds. See 40 ILCS
     5/22B-120, 22C-120 (West 2020).

¶4       Under the Act, each local fund retains a separate account in the respective
     statewide fund. Those assets are dedicated solely to paying benefits to the local
     fund’s members and to covering operating expenses. Id. §§ 1-109; 22B-118(c), (e);
     22C-118(c), (e). The Act specifies that the “operations and financial condition of
     each participating pension fund account shall not affect the account balance of any
     other participating pension fund.” Id. §§ 22B-118(c), 22C-118(c). The returns on
     the investments in the statewide funds are then “allocated and distributed pro rata
     among each participating pension fund account in accordance with the value of the
     pension fund assets attributable to each fund.” Id.

¶5       The purpose of the Act is “to streamline investments and eliminate unnecessary
     and redundant administrative costs, thereby ensuring more money is available to
     fund pension benefits for the beneficiaries of the transferor pension funds.” Id.
     §§ 22B-114, 22C-114. The two investment fund boards created by the Act are
     composed of nine members: three officers or executives from participating
     municipalities, three active participants of the local funds who are elected by active

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     participants, two beneficiaries 1 from the local funds who are elected by
     beneficiaries of the funds, and one member recommended by the Illinois Municipal
     League who is appointed by the governor and confirmed by the Senate. Id. §§ 22B-
     115(b), 22C-115(b). In addition, the Act authorizes the Illinois Finance Authority
     (IFA) to lend money, if requested by the local funds, to pay the necessary transition
     costs to the new statewide funds. Id. §§ 22B-120(h), 23C-120(h). Any such loans
     are to be repaid with interest. Id.

¶6       There are approximately 650 local police and firefighter pension funds for
     municipalities in Illinois with populations between 5000 and 500,000, and the Act
     does not eliminate any of them. See id. §§ 3-103, 4-103. These local funds continue
     to be governed by five-member boards composed of two appointed members, two
     members elected by active members, and one member elected by and from the
     beneficiaries. Id. §§ 3-128, 4-121. The Act specifically provides that these local
     boards retain exclusive authority to adjudicate and award retirement and other
     benefits. The new statewide investment funds “shall not have the authority to
     control, alter, or modify, or the ability to review or intervene in, the proceedings or
     decisions” of the local pension boards. Id. §§ 3-124.3, 4-117.2. Therefore, the
     enactment of the Act had no impact on the local pension boards’ responsibility to
     determine the retirement, disability, and death benefits payable to fund members
     and other beneficiaries.

¶7       In February 2021, plaintiffs, 36 individual active and retired beneficiary
     members from a small number of suburban and downstate police and firefighter
     pension funds, filed a three-count complaint against Governor Jay Robert “J.B.”
     Pritzker; Christopher Meister, executive director of the IFA; Dana Severinghaus,
     acting director of the Illinois Department of Insurance; the Board of Trustees for
     the Police Officers’ Pension Investment Fund; and the Board of Trustees for the
     Firefighters’ Pension Investment Fund. Plaintiffs sought declaratory, injunctive,
     and other relief, including a finding that the Act violated the pension protection
     clause of the Illinois Constitution (Ill. Const. 1970, art. XIII, § 5) (count I) and/or

          1 The fund board for local police has two members directly from the population of beneficiaries;

     the fund board for firefighters has one beneficiary member and one member recommended by the
     statewide labor organization representing firefighters from at least 85 municipalities, who is then
     appointed by the governor and confirmed by the Senate. See id. § 22C-115(b)(3), (5).

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       the Illinois Constitution’s contracts clause (id. art. I, § 16) (count II) and/or the
       Illinois Constitution’s takings clause (id. § 15) (count III). 2

¶8         Plaintiffs’ complaint alleged that the Act diminishes and impairs their pension
       benefits because, (1) prior to the Act, the local funds could “exclusively manage
       and control their investment expenditures and income”; (2) their “voting power and
       thereby an effective say in the selection of investment managers, investments, risks,
       rates of return, costs and expenses” was diluted by the participation of members of
       other local funds; and (3) the local funds must bear the costs associated with the
       Act’s transition process, including repayment of any IFA transition loans.

¶9          On cross-motions for summary judgment, the circuit court entered judgment in
       favor of defendants and against plaintiffs. 3 As to count I, the circuit court found
       that precedent from this court instructs that the “benefits” protected by the pension
       protection clause are limited to those that affect the value of a member’s pension
       benefit. The circuit court found the Act did not violate the clause because plaintiffs
       were not denied a “benefit” that could be tied to a change in the value of their
       retirement payments. As to count III, plaintiffs’ takings clause claim, the circuit
       court found that, because the clause applies only to government action against real
       property, which is not at issue here, the Act did not implicate that constitutional
       provision.

¶ 10       On appeal, plaintiffs only challenged the circuit court’s ruling as to counts I and
       III of the complaint. 2023 IL App (2d) 220198, ¶ 5. Concerning count I, the
       appellate court rejected plaintiffs’ contention that voting rights are protected
       benefits under the pension protection clause. Id. ¶ 14. The court found that benefits
       outside of pension payments that have been held to constitute benefits for purposes
       of the clause are generally only those that affect a participant’s continued
       participation in a pension system or their ability to increase their service credits,
       thereby affecting the calculation of eventual benefit payments. Id. ¶ 12. The

           2
              The complaint also named as plaintiffs 18 local police or firefighter pension funds. The circuit
       court dismissed these plaintiffs for lack of standing. This ruling was not challenged in the appellate
       court, nor is it raised in this court.
            3
              Prior to the filing of plaintiffs’ countermotion for summary judgment, the circuit court
       dismissed count II of the complaint after finding that plaintiffs failed to state a cause of action under
       the contracts clause.

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       appellate court concluded that the ability to vote in elections for local pension board
       members is not such a benefit, nor is the ability to have local board members control
       and invest pension funds. Id. ¶ 14.

¶ 11       The appellate court also rejected plaintiffs’ argument that the Act impairs and
       diminishes their benefits by requiring local funds to pay startup and administrative
       costs, as well as transition costs, for the new statewide pension investment funds.
       Id. ¶ 15. The court found that plaintiffs failed to explain how such costs impair or
       diminish payment of their benefits. Id. Additionally, the court noted that the Act
       does not require the local funds to borrow money to pay for the costs or for them to
       spend any specific amount. Id.

¶ 12       As to count III, the appellate court held that, because plaintiffs have no property
       right in any particular assets or level of funding and are entitled only to present or
       future payments from the funds, they could not establish the private property
       requirement for their takings clause claim. Id. ¶ 18. The court concluded that
       plaintiffs do not own the funds that are to be transferred to the new statewide funds.
       Id.

¶ 13       For these reasons, the appellate court held that the circuit court correctly ruled
       that summary judgment in defendants’ favor was appropriate on counts I and III of
       the complaint. Id. ¶ 20.

¶ 14       This court granted plaintiffs’ petition for leave to appeal. Ill. S. Ct. R. 315(a)
       (eff. Oct. 1, 2021). This court also allowed the Illinois Municipal League and the
       Associated Firefighters of Illinois leave to file amicus curiae briefs in support of
       defendants’ position. Ill. S. Ct. R. 345(a) (eff. Sept. 20, 2010).

¶ 15                                       ANALYSIS

¶ 16       We first address plaintiffs’ contention that the circuit court erred in granting
       defendants’ motion for summary judgment because the Act violates the pension
       protection clause of the Illinois Constitution (Ill. Const. 1970, art. XIII, § 5).
       Plaintiffs assert that the Act does not conform to the requirements of this clause
       because it impairs the rights of members to vote in the election of local police and

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       firefighter pension boards and to have those boards control and invest the local
       pension funds.

¶ 17       Summary judgment is warranted where there is no genuine issue of material
       fact and the moving party is entitled to judgment as a matter of law. 735 ILCS 5/2-
       1005(c) (West 2020). By filing cross-motions for summary judgment, the parties
       invite the court to decide the questions presented as a matter of law. Carmichael v.
       Laborers’ & Retirement Board Employees’ Annuity & Benefit Fund of Chicago,
       2018 IL 122793, ¶ 21. We apply a de novo standard of review to summary judgment
       rulings. Id.

¶ 18                               I. Pension Protection Clause

¶ 19        Article XIII, section 5, of the Illinois Constitution provides that “[m]embership
       in any pension or retirement system of the State, any unit of local government or
       school district, or any agency or instrumentality thereof, shall be an enforceable
       contractual relationship, the benefit of which shall not be diminished or impaired.”
       Ill. Const. 1970, art. XIII, § 5.

¶ 20        This clause of our constitution has been construed by this court on numerous
       occasions. We have repeatedly held that the pension protection clause means
       precisely what it says: “if something qualifies as a benefit of the enforceable
       contractual relationship resulting from membership in one of the State’s pension or
       retirement systems, it cannot be diminished or impaired.” Kanerva v. Weems, 2014
       IL 115811, ¶ 38; id. ¶ 40 (holding that subsidized health care provided to state
       employees was a benefit of membership in a state retirement system protected by
       the pension protection clause). The protections afforded to pension benefits by
       article XIII, section 5, attach once an individual first embarks upon employment in
       a position covered by a public retirement system, not when the employee ultimately
       retires. In re Pension Reform Litigation, 2015 IL 118585, ¶ 46. Those benefits
       therefore cannot be later unilaterally diminished or eliminated by the legislature.
       Id. ¶ 46 n.12.

¶ 21        Accordingly, once an individual begins work and becomes a member of a public
       retirement system, any subsequent changes to the Pension Code that would
       diminish the benefits conferred by membership in the retirement system cannot be

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       applied to that individual. Id. ¶ 46. “The primary purpose of article XIII, section 5,
       was to eliminate any uncertainty surrounding the payment of public pension
       benefits and to clarify that state and local governments were obligated to provide
       pension benefits to their employees.” Matthews v. Chicago Transit Authority, 2016
       IL 117638, ¶ 57.

¶ 22       This court has further explained that the pension protection clause “ ‘protects
       all of the benefits that flow from the contractual relationship arising from
       membership in a public retirement system.’ ” Williamson County Board of
       Commissioners v. Board of Trustees of the Illinois Municipal Retirement Fund,
       2020 IL 125330, ¶ 32 (quoting Matthews, 2016 IL 117638, ¶ 54). The benefits
       protected include “those benefits attendant to membership in the State’s retirement
       system, such as subsidized health care, disability and life insurance coverage, and
       eligibility to receive a retirement annuity and survivor benefit [citations], along
       with the right to purchase optional service credit in the state pension system for past
       military service.” Carmichael, 2018 IL 122793, ¶ 25.

¶ 23       Plaintiffs claim that the lower courts failed to appreciate this precedent and the
       breadth of the phrase “any benefit” contained in our pension protection clause.
       Plaintiffs argue that their voting rights are impacted by the Act and that voting
       rights are a benefit that cannot be altered. They assert that prior to the adoption of
       the Act they had the right to vote and exercise greater control over locally managed
       boards and pension funds. The Act, according to plaintiffs, “substantially impacted
       and diluted” their voting rights and their rights to control the management of the
       funds. Consequently, plaintiffs claim it was erroneous for the lower courts to find
       that these rights were not the kind of benefits protected by our constitution.

¶ 24       In support of this argument, plaintiffs rely heavily upon Williamson County.
       There, the plaintiffs were elected members of the Williamson County Board of
       Commissioners and had satisfied the requirements of the Pension Code to
       participate in the Illinois Municipal Retirement Fund (IMRF). Williamson County,
       2020 IL 125330, ¶ 5. The Pension Code was subsequently amended to add a
       requirement for a county board to adopt an IMRF participation resolution within 90
       days of each election when a member of the county board is elected or reelected.
       Id. ¶ 8. The Williamson County Board failed to adopt such a resolution within the

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       required time frame, and the plaintiffs’ participation in IMRF was terminated. Id.
       ¶ 12.

¶ 25       This court found that the amendment to the Pension Code was unconstitutional
       because the legislature’s unilateral decision to create the provision contained in
       section 7-137.2(a) (40 ILCS 5/7-137.2(a) (West 2016)) imposed a new requirement
       for continued IMRF participation that did not exist when the plaintiffs began their
       public employment. Williamson County, 2020 IL 125330, ¶ 47. The defendants did
       not contest the plaintiffs’ assertion that they would qualify for continued
       participation in the fund but for the new requirement that all county boards certify
       within 90 days of each general election that their county board members are
       required to work sufficient hours to meet the applicable hourly standard. Id.

¶ 26       Plaintiffs’ reliance on Williamson County is misplaced. There, the newly
       created requirement in the Pension Code could eliminate the monetary benefits of
       members and did not exist when the plaintiffs began their public employment and
       participation in IMRF. Therefore, in marked contrast to the instant case, the
       constitutional violation in the new legislation in Williamson County was
       specifically tied to its effect of eliminating monetary benefits for existing members.

¶ 27       Generally, as the appellate court below recognized, the benefits outside of
       pension payments that have been found to constitute benefits for purposes of the
       pension protection clause are those that affect a participant’s ability to continue
       participation or increase service credits, thereby negatively affecting calculation of
       eventual benefit payments. See, e.g., Carmichael, 2018 IL 122793, ¶ 65 (holding
       that amendment to the Pension Code that eliminated the ability of the plaintiffs to
       purchase service credit during a leave of absence to work for a local union was an
       improper new requirement placed on pension benefits); Buddell v. Board of
       Trustees, State University Retirement System, 118 Ill. 2d 99, 106-07 (1987)
       (holding that change to employees’ right to purchase optional service credit for time
       spent in military service was an improper new requirement placed on pension
       benefits). In Carmichael, we also listed, as examples of the benefits protected by
       the pension protection clause, “subsidized health care, disability and life insurance
       coverage, and eligibility to receive a retirement annuity and survivor benefits.”
       Carmichael, 2018 IL 122793, ¶ 25.

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¶ 28       In contrast, the ability to vote in elections for local pension board members is
       not such a constitutionally protected benefit, nor is the ability to have local board
       members control and invest pension funds. See Kanerva, 2014 IL 115811, ¶ 48
       (holding that the pension protection clause was aimed at protecting the right to
       receive the promised retirement benefits, not the adequacy of the funding to pay for
       them); McNamee v. State, 173 Ill. 2d 433, 444 (1996) (holding that the pension
       protection clause does not create a contractual basis for participants to expect a
       particular level of funding but only a contractual right that they would receive the
       money due them at the time of their retirement).

¶ 29       It is axiomatic that, if plaintiffs have no constitutional right in how their local
       pension funds are funded or the adequacy of that funding, they similarly have no
       constitutional right regarding who invests local fund assets. The Act does not
       change plaintiffs’ right to elect members of their local funds’ boards or the local
       boards’ authority to determine the amount of benefits plaintiffs are entitled to
       receive. It only changes the local boards’ power to invest the assets of the local
       funds. Simply put, the 2020 amendment to the Pension Code has no impact on
       plaintiffs receiving their promised monetary benefits.

¶ 30       Plaintiffs further argue that the Act impairs and diminishes their benefits in
       violation of the pension protection clause by requiring local funds to pay start-up,
       administration, and operation costs for the new funds, plus interest if any amount
       is borrowed from the IFA. Plaintiffs argue that the appellate court ignored this
       concern by stating that the funds must already pay administration costs and that
       there is no evidence that the costs of the new funds would be any greater. Plaintiffs
       assert that these liabilities and encumbrances did not exist before the Act and
       constitute a further violation of the pension protection clause.

¶ 31       This contention also lacks merit. Plaintiffs do not explain how the payment of
       the startup costs impairs or diminishes payment of their pension benefits. The Act
       does not require the borrowing or the spending of any specific amount for the
       startup or administrative costs of the funds. Additionally, as previously noted, the
       two new statewide funds are intended to streamline investments and eliminate
       unnecessary and redundant costs, thereby ensuring that more money is available to
       fund local police and firefighter pension benefits. See 40 ILCS 5/22B-114, 22C-
       114 (West 2020).

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¶ 32       For these reasons, we find the circuit court properly granted summary judgment
       in defendants’ favor on count I of the complaint.

¶ 33                                     II. Takings Clause

¶ 34       We next turn to plaintiffs’ claim that the circuit court erred in granting
       defendants’ motion for summary judgment because the Act violates the takings
       clause of the Illinois Constitution (Ill. Const. 1970, art. I, § 15). Plaintiffs contend
       that, because the Act requires them “to fully transfer all of their private property,
       comprised of their securities, funds, assets, monies, and cash reserves” to the
       statewide pension investment funds, and because the Act requires them to bear the
       financial costs of transition, as well as to pay the costs and expenses incurred in the
       operation and administration of the funds, their private property has been taken
       and/or damaged in violation of the takings clause.

¶ 35       Article I, section 15, of the Illinois Constitution provides that “[p]rivate
       property shall not be taken or damaged for public use without just compensation as
       provided by law. Such compensation shall be determined by a jury as provided by
       law.” Id. We have defined a taking as “a physical invasion of private property or
       the radical interference with a private property owner’s use and enjoyment of the
       property.” Tzakis v. Maine Township, 2020 IL 125017, ¶ 45. “One of the principal
       purposes of the Takings Clause is ‘to bar Government from forcing some people
       alone to bear public burdens which, in all fairness and justice, should be borne by
       the public as a whole.’ ” Northern Illinois Home Builders Ass’n v. County of
       Du Page, 165 Ill. 2d 25, 31-32 (1995) (quoting Dolan v. City of Tigard, 512 U.S.
       374, 384 (1994)).

¶ 36       As the appellate court correctly concluded, the Act does not take any of
       plaintiffs’ private property. As participants in a defined benefit plan, they have a
       right to receive their promised benefits but do not somehow have a private property
       right in the source of funding for those payments. Plaintiffs claim that the Act
       requires them to fully transfer ownership of their private property, comprising the
       securities and other fund assets. The Act does not operate in that manner. It simply
       changes the control and management of the local funds’ assets from one
       government-created pension fund to another type of government-created pension
       fund. As defendants assert, although plaintiffs have a constitutional right to receive

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       the benefit payments promised to them, which the Act does not change, they do not
       have a property right to any particular level of assets used to pay those benefits or
       in the way those assets are held or invested.

¶ 37       Plaintiffs have failed to identify any property right under Illinois law that is
       affected by the 2020 amendment to the Pension Code. It is undisputed that the Act
       does not impact the pension payments that plaintiffs are entitled to receive.
       Additionally, as defendants recognize, plaintiffs’ takings claim must also fail
       because even if they had a property right in the local funds’ assets, which they do
       not, the Act would not constitute a taking of that property for the government’s use.
       The Act simply changes how local fund assets are managed and invested without
       affecting the ultimate use of those assets to pay the benefits of local fund members.

¶ 38      Consequently, the circuit court properly granted summary judgment in
       defendants’ favor on count III of the complaint.

¶ 39                                    CONCLUSION

¶ 40       For the foregoing reasons, we affirm the judgment of the appellate court
       affirming the circuit court’s order granting summary judgment in defendants’ favor
       and against plaintiffs.

¶ 41      Judgments affirmed.

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