People ex rel. Sklodowski v. State of Illinois
Annotate this Case
Nos. 1--93--2951)
1--93--3171)
1--93--3172)
1--93--3173)(Cons.)
PEOPLE ex rel. ROBERT SKLODOWSKI, ) Appeal from the
THOMAS HANAHAN, SANDEE HANAHAN, ) Circuit Court
of
SUSAN LILLIS, ROBERT NEGRONIDA, ) Cook
County.
and MARK D. WARDEN, )
)
Plaintiffs-Appellants, )
)
v. )
)
THE STATE OF ILLINOIS, JIM EDGAR, )
Governor, PHILIP P. ROCK, President of )
the Senate, MICHAEL J. MADIGAN, Speaker )
of the House of Representatives, DAWN )
CLARK NETSCH, Comptroller of the State )
of Illinois, and PATRICK QUINN, )
Treasurer of the State of Illinois, )
)
Defendants and Counterdefendants- )
Appellees, )
)
and )
)
THE JUDGES' RETIREMENT SYSTEM OF )
ILLINOIS, THE STATE EMPLOYEES' )
RETIREMENT SYSTEM OF ILLINOIS, THE )
STATE UNIVERSITIES RETIREMENT SYSTEM, )
THE TEACHERS' RETIREMENT SYSTEM OF THE )
STATE OF ILLINOIS, THE GENERAL ASSEMBLY )
RETIREMENT SYSTEM, and the TRUSTEES OF )
EACH FUND, )
)
Nominal Defendants and )
Counterplaintiffs-Appellants. )
__________________________________________)
)
THE ILLINOIS RETIRED TEACHERS )
ASSOCIATION, )
)
Intervenor-Appellant, )
)
v. )
)
THE STATE OF ILLINOIS, JIM EDGAR, )
Governor, PHILIP P. ROCK, President of )
the Senate, MICHAEL J. MADIGAN, Speaker )
of the House of Representatives, DAWN )
CLARK NETSCH, Comptroller of the State )
of Illinois, and PATRICK QUINN, )
Treasurer of the State of Illinois, ) The
Honorable
) Lester D. Foreman,
Defendants-Appellees. ) Judge
Presiding.
JUSTICE BURKE delivered the modified opinion of the court upon
denial of partial rehearing:
This case involves an action based on an alleged failure to
contribute to, and on the alleged impairment of, retirement pension
benefits and contractual rights by the State of Illinois and
certain State officials.
Plaintiffs Robert Sklodowski, Thomas Hanahan, Sandee Hanahan,
Susan Lillis, Robert Negronida and Mark D. Warden,
counterplaintiffs, the State Employees' Retirement System (SERS),
the State Universities' Retirement System (SURS), the Teachers'
Retirement System of the State of Illinois (TRS) (retirement
systems), and intervenor, the Illinois Retired Teachers Association
(intervenor) appeal from an order of the circuit court dismissing
plaintiffs' second amended complaint, counterplaintiffs SURS' and
TRS' amended counterclaim, counterplaintiff SERS' counterclaim and
intervenor's complaint for a writ of mandamus against defendants,
the State of Illinois and its officials, Jim Edgar (Governor),
Philip Rock (President of the Senate), Michael Madigan (Speaker of
the House of Representatives), Dawn Clark Netsch (Comptroller) and
Patrick Quinn (Treasurer) based on the separation of powers
doctrine.
On appeal, plaintiffs, counterplaintiffs and intervenor argue
that (1) the constitutional separation of powers doctrine does not
prevent the judiciary from ordering State officials to perform
nondiscretionary duties; (2) they have a contractual interest under
the State constitution in the financial integrity of the State
retirement systems; and (3) the federal and State contracts clauses
prohibit impairment of pension contract rights. Counterplaintiffs
SERS, SURS and TRS also contend that the constitutional legislative
supremacy clause does not prohibit their claims. Plaintiffs also
contend that their second amended complaint stated (1) a valid
claim against defendants for breach of fiduciary duty and (2) a
viable claim for a civil rights violation. For the reasons set
forth below, we affirm in part and reverse in part.
In 1963, the State of Illinois created five retirement
systems: SERS, SURS, TRS, the General Assembly Retirement System,
and the Judges Retirement System of Illinois. Each retirement
system is governed by a separate section of the Illinois Pension
Code (Pension Code) (40 ILCS 5/1--101 et seq. (West 1993)). In
1989, Illinois Public Act 86-273, effective August 23, 1989, added
the following language to sections 2--124, 14--131(f), 15--155(a),
16--158(b) and 18--131(2) of the Pension Code (Ill. Rev. Stat.
1991, ch. 108« (now 40 ILCS 5/1--101 et seq. (West 1993))), which
pertain to the five retirement systems:
"Starting with the fiscal year which ends in
1990, the State's contribution [to the
retirement systems] shall be increased
incrementally over a 7-year period so that by
the fiscal year which ends in 1996, the
minimum contribution to be made by the State
shall be an amount that when added to other
sources of employer contributions, is
sufficient to meet the normal cost and
amortize the unfunded liability over 40 years
as a level percentage of payroll, determined
under the projected unit credit actuarial cost
method. The State contribution, as a
percentage of the applicable employee payroll,
shall be increased in equal increments over
the 7 years period until the funding
requirement specified above is met."
Plaintiffs subsequently filed a class action in behalf of the
participants of the retirement systems against defendants, and
naming as nominal defendants the board of trustees of the
retirement systems, seeking a writ of mandamus, declaratory
judgment and an enforcement order based on defendants' alleged
failure to comply with Public Act 86-273. Plaintiffs alleged in
their second amended complaint that defendants' "actions
(specifically the State's failure to contribute as required under
P.A. 86-273) and the individual Defendants' past and continuing
improper budgeting (Governor) and appropriation (President of
Senate and Speaker of the House), contrary to that required by P.A.
86-273, constitute unlawful impairment of the participants'
contractual rights under Article 13, 5 of the 1970 Illinois
Constitution [pension protection clause]." Ill. Const. 1970, art.
XIII, 5. Plaintiffs further alleged that the State, in failing
"to act in accordance with P.A. 86-273," breached its fiduciary
duties under the Illinois Pension Code (40 ILCS 5/1--109(d) (West
1992)) and that defendants' "actions in budgeting, appropriating
and contributing different lesser amounts than those required by
P.A. 86-273 constitute the passage of law impairing obligations of
contract, in violation with the Contract Clause of the United
States Constitution" (U.S. Const., art. I, 10) "and/or an invalid
attempt to grant the State freedom from making its contribution
required by P.A. 86-273," thereby violating article I, section 16,
of the Illinois Constitution (Ill. Const. 1970, art. I, 16).
Plaintiffs' second amended complaint also included a count against
the individual defendants alleging that they deprived plaintiffs of
property under color of State law in violation of 42 U.S.C. 1983.
Intervenor's motion to intervene was granted on October 2,
1992. On December 21, 1992, counterplaintiffs SURS and TRS
answered plaintiffs' second amended complaint and filed an amended
counterclaim against the Governor, Comptroller and Treasurer
alleging impairment of pension benefits and impairment of
contractual rights in violation of article I, section 10, of the
United States Constitution (U.S. Const., art. I, 10) and article
I, section 16, of the Illinois Constitution (Ill. Const. 1970, art.
I, 16). On the same day, intervenor filed a three-count complaint
against the State, Governor, Comptroller and Treasurer alleging
that they impaired the pension benefits and contractual rights to
benefits of participants in SURS and TRS in violation of the
federal and State constitutions.
On February 19, 1993, the State, Governor, Senate President
and House Speaker moved to dismiss plaintiffs' second amended
complaint, arguing that the trial court lacked jurisdiction over
the State pursuant to the doctrine of sovereign immunity; the
doctrine of separation of powers prevented the court from
compelling the General Assembly to appropriate public funds; the
doctrine of separation of powers prevented the trial court from
compelling the Governor to budget a certain amount of money because
budgeting is an executive function; and a writ of mandamus was not
available because "plaintiffs do not seek to compel State officials
to perform ministerial duties." On the same day, the Governor
moved to dismiss the amended counterclaim filed by
counterplaintiffs SURS and TRS, and the Governor and the State
moved to dismiss intervenor's complaint. Both motions were
substantially similar in content to the Governor's and State's
motion to dismiss plaintiffs' second amended complaint.
On August 6, 1993, the trial court granted the motions to
dismiss plaintiffs' second amended complaint, SURS' and TRS'
amended counterclaim and intervenor's complaint, finding that the
separation of powers doctrine prevented the trial court from
"directing the Legislature to take any specific conduct."
On August 23, 1993, counterplaintiff SERS filed a motion for
leave to answer plaintiffs' second amended complaint and to file a
counterclaim and motion to substitute counsel. On August 31, the
trial court granted SERS' motion, but dismissed its answer and
counterclaim based on the separation of powers doctrine. On
September 2, 1993, SERS, SURS and TRS moved for reconsideration of
the August 6 and August 31 orders dismissing SURS' and TRS' amended
counterclaim and SERS' counterclaim, respectively. On September 3,
intervenor moved for reconsideration of the trial court's August 6
order dismissing its complaint. On the same day, the trial court
denied all of the motions for reconsideration. These appeals
followed.
On April 16, 1996, defendants filed a "Renewed Motion to
Dismiss Appeals as Moot" with this court, arguing that Public Act
86-273, upon which complainants rely, was repealed by Public Act
88-593. Public Act 88-593 provides for continuing automatic
appropriations of required State contributions to the retirement
systems to bring the pension systems to a 90% funding ratio by the
end of fiscal year 2045. In response, plaintiffs,
counterplaintiffs and intervenor argued that all beneficiaries who
entered their respective retirement systems between August 23,
1989, the date Public Act 86-273 became effective, and August 22,
1994, the date it was repealed, have a vested contractual right to
enforce the terms of Public Act 86-273 pursuant to article XIII,
section 5, of the Illinois Constitution. Plaintiffs,
counterplaintiffs and intervenor further argue that the public
interest exception to the mootness doctrine permits this court to
review the dismissal of their complaints and counterclaims despite
the fact that Public Act 86-273 has been repealed.
In addition, plaintiffs and counterplaintiff TRS argue that
Public Act 88-593 became effective on August 22, 1994, and was
therefore in effect when this court first denied defendants'
original motion to dismiss as moot and, therefore, this court
should again deny the motion because the circumstances have not
changed. We have taken defendants' renewed motion to dismiss with
this case. The standard of review of a trial court's order
dismissing a complaint is de novo. Anastos v. Chicago Regional
Trucking Ass'n, 250 Ill. App. 3d 300, 618 N.E.2d 1049 (1993). In
considering the dismissal of an action, a reviewing court must
interpret the allegations of the complaint in a light most
favorable to the plaintiff and, if it appears that no set of facts
from the pleadings could be proved which would entitle the
plaintiff to relief, the dismissal must be affirmed. Turner v.
Rush Medical Hospital, 182 Ill. App. 3d 448, 537 N.E.2d 890 (1989),
appeal denied, 127 Ill. 2d 643, 545 N.E.2d 133.
I.
Before reaching plaintiffs', counterplaintiffs' and
intervenor's arguments, we first address the State's contention
that the trial court lacks subject matter jurisdiction over it
pursuant to the State Lawsuit Immunity Act (745 ILCS 5/1 (West
1992)) and that "[t]o the extent *** that the pleadings attempt to
assert a cause of action against the State of Illinois, they had to
be dismissed." Plaintiffs counter that they sought "by mandamus
to compel public officials to perform clear and mandatory duties
and that is not an action against the State." Plaintiffs further
maintain that since "the Court of Claims has no equity jurisdiction
and cannot award the mandamus and declaratory relief Plaintiffs
seek," the trial court is the proper forum to grant this relief.
Counterplaintiffs SERS and SURS argue that questions involving the
constitutionality of the State defendants' actions are not barred
by the doctrine of sovereign immunity.
Pursuant to the State Lawsuit Immunity Act (745 ILCS 5/1 (West
1992)), "[e]xcept as provided in the 'Illinois Public Labor
Relations Act' *** or '[an act] to create the Court of Claims ***,'
the State of Illinois shall not be made a defendant or party in any
court." The Illinois Court of Claims Act (705 ILCS 505/8(a) (West
1992)) provides that the Court of Claims shall have exclusive
jurisdiction to hear "[a]ll claims against the state founded upon
any law of the State of Illinois, or upon any regulation thereunder
by an executive or administrative officer or agency."
In Board of Trustees of Community College District No. 508 v.
Burris, 118 Ill. 2d 465, 472, 515 N.E.2d 1244 (1987), a community
college district's board of trustees brought an action against the
State Comptroller and the Director of the Department of Commerce
and Community Affairs seeking reimbursement from the Comptroller
for the cost of providing veterans' scholarships or declaratory
judgment requiring the Director to notify the General Assembly of
the State's failure to fully fund the veterans' scholarship
program. Plaintiff there argued that it was entitled to
reimbursement under the State Mandates Act for funds expended on
veterans' scholarships. The District 508 court found that because
plaintiff's action "challenges the defendants' interpretation of
their obligations under the Mandates Act," plaintiff's "suit is not
one against the State, but is one that contests the conduct of
State officials in allegedly proceeding in violation of the law."
District 508, 118 Ill. 2d at 473.
Here, as in District No. 508, plaintiffs' cause of action, by
their own admission, is not against the State but is one against
the other named defendant officials regarding their interpretation
and performance of statutory obligations. Accordingly, the claims
against the State itself are barred. We find, however, that the
proper basis for dismissal of the State as a party is the doctrine
of sovereign immunity and not, as the trial court found, separation
of powers. Williams v. Board of Education of the City of Chicago,
222 Ill. App. 3d 559, 584 N.E.2d 257 (1991).
II.
Plaintiffs, counterplaintiffs and intervenor first contend
that the trial court erred in dismissing their complaints and
counterclaims based on the separation of powers doctrine because
defendant officials' obligations under Public Act 86-273 to fund
the retirement systems are mandatory and it is the judiciary's
responsibility to ensure compliance with the law by the executive
and legislative branches. Counterplaintiffs SERS and SURS assert
further that, without judicial oversight, Public Act 86-273 is
meaningless and unenforceable. Defendants argue that the relief
plaintiffs, counterplaintiffs and intervenor seek can be
accomplished only through enacting appropriations, which is a
legislative prerogative, and the preparation of a budget, which is
an executive prerogative; therefore, the judiciary cannot compel
the exercise of these functions in a particular manner because of
the separation of powers doctrine.
"The legislative, executive and judicial branches are
separate. No branch shall exercise powers properly belonging to
another." Ill. Const. 1970, art. II, 1. Once rights are created
by the constitution or statute, "[i]t is within the realm of
judicial authority to assure that the action of the members of the
executive branch does not deprive [individuals] of an institution
of rights conferred by statute or by the Constitution." Dixon
Ass'n for Retarded Citizens v. Thompson, 91 Ill. 2d 518, 533, 440 N.E.2d 117 (1982). A writ of "mandamus is discretionary and is
appropriate only where there is a clear right to the requested
relief, a clear duty of the [defendant] to act, and clear authority
in the [defendant] to comply with the writ." Orenic v. Illinois
State Labor Relations Board, 127 Ill. 2d 453, 467-68. "[W]hile
mandamus will not lie to direct the manner in which the discretion
is to be exercised, it is available to compel the performance of an
action which requires the exercise of discretion or even compel the
exercise of discretion itself." Rock v. Thompson, 85 Ill. 2d 410,
417-18, 426 N.E.2d 891 (1981) (opinion of Goldenhersh, C.J., joined
by Ward and Clark, JJ.); see also Fergus v. Marks, 321 Ill. 510,
517-18 (1926) (finding that where an officer "may be compelled by
mandamus to act, the court in such a case is simply compelling
action and not the manner of action").
Here, plaintiffs, counterplaintiffs and intervenor sought to
have the judiciary order defendant officials by mandamus to comply
with Public Act 86-273, which already provides, as enacted by the
legislature, a level of funding of the retirement systems over a
seven-year period. Plaintiffs do not seek to have the judiciary
compel the manner or means in which defendants perform their duties
to achieve compliance. In fact, "where a statute categorically
commands the performance of an act, so much money as is necessary
to pay the command may be disbursed without explicit
appropriation." Antle v. Tuchbreiter, 414 Ill. 571, 581, 111 N.E.2d 836 (1953). Additionally, as more fully discussed below,
plaintiffs, counterplaintiffs and intervenor have a clear
contractual right to the State contributions provided by Public Act
86-273, which is thus a mandatory rather than a discretionary duty
upon the State, and defendant officials thus have a duty and
authority to act to comply with that Act; as plaintiffs point out,
section 2(a) of article VIII of the Illinois Constitution (Ill.
Const., art. VIII, 2(a)) requires the Governor to submit a budget
in accordance with State law and section 8 of article IV (Ill.
Const., art. IV, 8) requires "defendants Speaker of the House and
President of the Senate to certify that the procedural requirements
for passage have been met for each bill that passes both houses.
Because it is the responsibility of the judiciary to assure that
the actions of the executive and legislative branches do not
deprive individuals of rights conferred by statute or the
constitution (Dixon Ass'n, 91 Ill. 2d 518), the trial court
therefore was not barred by the separation of powers doctrine from
considering, based on the merits of plaintiffs', counterplaintiffs'
and intervenor's claims, whether to issue a writ of mandamus to
compel defendant officials to comply with Public Act 86-273.
Accordingly, we find that the trial court erred in dismissing
plaintiffs' second amended complaint, counterplaintiffs SURS' and
TRS' amended counterclaim, counterplaintiff SERS' counterclaim and
intervenor's complaint.
III.
Plaintiffs, counterplaintiffs and intervenor next maintain
that defendants' failure to adequately fund the State retirement
systems violates the pension protection clause of the Illinois
Constitution. Ill. Const. 1970, art. XIII, 5. They further argue
that Public Act 86-273 became part of the State's contract with the
retirement system participants when the legislature amended the
Pension Code. Defendants counter that the pension protection
clause does not "endow" beneficiaries "with a contractual right to
enforce the funding mechanism" of Public Act 86-273, which they
assert does not provide continuing appropriations, but protects
them only from the State's failure to pay benefits to beneficiaries
"when they are due."
Section 5 of Article XIII of the Illinois Constitution of 1970
(Ill. Const. 1970, art. XIII, 5) 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
benefits of which shall not be diminished or impaired [pension
protection clause]." This clause has been interpreted as creating
"contractual protection for all pension plans." (Emphasis added.)
Buddell v. Board of Trustees, State Universities Retirement System
of Illinois, 118 Ill. 2d 99, 102, 514 N.E.2d 184 (1987). The
provisions of the Pension Code are "actual terms" of the
contractual relationship established in section 5. Kerner v. State
Employees' Retirement System of Illinois, 72 Ill. 2d 507, 514, 382 N.E.2d 243 (1978). In construing a statute, a court's "objective
is to ascertain and give effect to the legislative intent as
determined from the necessity or reason for the enactment and the
meaning of the words employed. Kerner, 72 Ill. 2d at 512. It is
well settled that the legislature in passing a law is presumed not
to have "intended a meaningless act." Niven v. Siquiera, 109 Ill. 2d 357, 367, 487 N.E.2d 937 (1985). The law assumes that the
legislature in enacting new law is "aware of judicial decisions
concerning prior and existing law and legislation." Kozak v.
Retirement Board of the Firemen's Annuity & Benefit Fund of
Chicago, 95 Ill. 2d 211, 218, 447 N.E.2d 394 (1983).
Here, in 1989 the legislature was aware of the magnitude of
the retirement systems' underfunding and, as a result, enacted
Public Act 86-273. It is clear that the legislature, by enacting
Public Act 86-273, intended to bind itself to the obligation of
paying these funds to the retirement systems. Moreover, when the
legislature amended the Pension Code to add the requirement of an
increase in State contributions over a seven-year period to each of
the five retirement systems pursuant to Public Act 86-273 in order
to attain full funding, those requirements became part of the
State's contract with the pension beneficiaries. Beneficiaries in
each system provided consideration for this added term of the
contract by continuing to render their services to the State and to
pay their own contributions.
This is not a situation like that in People ex rel. Federation
of Teachers v. Lindberg, 60 Ill. 2d 266, 326 N.E.2d 749 (1975),
upon which defendants rely, where participants in several teachers'
pension funds challenged the governor's item reduction of fiscal
appropriations to the funds, arguing that the Pension Code
establishing a contractual relationship between themselves and the
State obligated the State to fulfill its funding commitments. The
Lindberg court found that the statutory language relied upon by the
plaintiffs was made a part of the Pension Code before the adoption
of the 1970 Constitution, at a time when such pensions were
uniformly not considered as creating any contractual right, and
which, the Lindberg court determined, did not evidence the
legislature's intent to establish a vested contractual right.
Lindberg, 60 Ill. 2d at 275. In so finding, the Lindberg court
concluded that "had the legislature wished to establish a
contractual right, it would have been a simple matter to so state."
Lindberg, 60 Ill. 2d at 275. The court lastly stated: "Plaintiffs
have asserted that the respective pension systems are inadequately
funded. The question of the specific fiscal appropriations
necessary to meet these deficiencies is one which *** should be
directed to the legislature." Lindberg, 60 Ill. 2d at 277.
In the present case, the legislature, pursuant to section 5 of
article XIII which established an enforceable contractual
relationship between pension beneficiaries and the State, did in
fact do just as the Lindberg court indicated it had the power to do
by specifically enacting Public Act 86-273 which promised pension
beneficiaries an increase in State contributions over a seven-year
period for the specific purpose of fully funding the admittedly
underfunded retirement systems. In other words, the legislature
provided for the "how much" and "when" as to funding the retirement
systems. Plaintiffs here did not claim that the legislature must
make specific appropriations, but rather that, by enacting Public
Act 86-273, the legislature failed to make contributions pursuant
to the formula it established to require it to make contributions
to the funds during a seven-year period in order to fully fund the
pension systems. We further observe that Public Act 86-273 does
not contain any limiting language, as possibly Public Act 88-593
(40 ILCS 5/1--103.3) does which defendants cite to in support of
their motion to dismiss these appeals as moot, to indicate that the
legislature's commitment expressed in Public Act 86-273 is a
"goal." Like the situation in Lindberg, the legislature could have
included some limiting language to indicate that its intent was not
to obligate itself to a level of funding over the seven-year
period, but it did not do so. To accept defendants' position would
result in allowing the legislature to unilaterally change the terms
of its contract once the time for compliance with the former terms
is required. Such a practice could continue indefinitely, thus
making each law (contract) meaningless.
We further note that our supreme court's recent decision in
McNamee v. State of Illinois, No. 79592 (October 18, 1996), upon
which defendants rely and which was filed subsequent to the
issuance of the opinion in this case, is distinguishable from the
case at bar. In McNamee, the plaintiffs alleged that an amendment
changing the method of computing the annual amount required to
amortize the unfunded accrued liability of police pensions
diminished and impaired their pension benefits because the new
method would "allow municipalities to contribute lower initial
annual contributions to the funds, thereby making the funds less
secure" (slip op. at 3) and that they had a "protected contractual
right [pursuant to section 5, article XIII] to the 'benefit' of the
more secure fund created by the prior funding method" (slip op. at
5). The McNamee court, in interpreting the intent of the framers
of our constitution, found that section 5 of article XIII creates
an enforceable contractual right to pension benefits, but does not
"control the manner in which the state and local governments fund
their pension obligations" (slip op. at 12). Because the
plaintiffs did not allege that the amendment diminished their right
to receive pension benefits, the McNamee court held that the
amendment did not violate section 5, article XIII. The court also
found that "[t]the word 'impaired' is meant to imply and to intend
that if a pension fund would be on the verge of default or imminent
bankruptcy, a group action could be taken to show that these rights
should be preserved" (slip op. at 12), and that the plaintiffs had
not alleged that the new funding method would impair their benefits
by placing the fund on the verge of default or imminent bankruptcy.
In the present case, however, the legislature, by enacting
Public Act 86-273, has imposed upon itself a greater obligation
beyond its contractual obligation set forth in section 5, article
XIII, by in fact requiring that it incrementally increase its
contributions to the pension funds over a seven-year period to
fully fund the pension funds--to pay its outstanding debt to the
pension funds--rather than to be obligated only to pay benefits to
participants as they become due, just as the Lindberg court
indicated the legislature had the power to do. In other words,
although the intent of the framers of the constitution was not to
control the funding of the pension funds, the legislature, by
enacting Public Act 86-273, promised the pension funds a level of
funding, notwithstanding that the Act itself does not set forth the
means by which the legislature was to perform its promise. Thus,
it is this obligation that the plaintiffs here seek to compel
defendants to perform; plaintiffs do not seek to dictate the
specific means by which defendants are to comply with the promised
funding under Public Act 86-273. See Dadisman v. Moore, 181 W. Va.
779, 384 S.E.2d 816 (1988) (holding that the Governor has a
ministerial duty to prepare a budget consistent with the West
Virginia Constitution and statutes) and Weaver v. Evans, 80 Wash. 461, 495 P.2d 639, 649 (1983) (holding that the legislature's
adoption of a systematic method of funding "becomes one of the
vested contractual pension rights flowing to members of the
system"). We additionally note that unlike the plaintiffs in
McNamee, plaintiffs, counterplaintiffs and intervenor here have all
in one form or another alleged that the financial status of their
separate pensions funds is in a precarious state and that there
will be no funds from which to pay benefits by 2008, 2009. Whether
this status is the equivalent of "on the verge of default or
bankruptcy" must be determined by the trial court, but as pleaded,
plaintiffs, counterplaintiffs and intervenor have stated a
recognized cause of action.
Here, Public Act 86-273 provided a formula for contributions
to the pension funds. Plaintiffs, counterplaintiffs and intervenor
had a vested contract right in the funding provisions under Public
Act 86-273 from the date Public Act 86-273 became effective until
August 22, 1994, when it was repealed by Public Act 88-593. It is
clear from McNamee, that beneficiaries need not wait until they
have been denied benefits before they can make a claim that their
benefits have been impaired. Plaintiffs, counterplaintiffs and
intervenor adequately alleged in their respective complaints and
counterclaims that, through defendants' underfunding of the
retirement systems, their benefits have been impaired.
Accordingly, the trial court erred in dismissing plaintiffs' second
amended complaint, counterplaintiffs SURS' and TRS' amended
counterclaim, counterplaintiff SERS' counterclaim and intervenor's
complaint.
IV.
Plaintiffs, counterplaintiffs and intervenor also contend that
defendants' failure to budget, contribute and appropriate the
proper amounts to the systems, as required by Public Act 86-273,
impaired their contract rights and violated article I, section 10,
of the federal constitution (U.S. Const., art. I, 10) and article
I, section 16, of the State constitution (impairment of contracts
clauses) (Ill. Const. 1970, art. I, 16).
Article I, section 10, of the United States Constitution
provides that "[n]o State shall *** pass any *** Law impairing the
Obligation of Contracts." U.S. Const., art. I, 10. Article I,
section 16, of the Illinois Constitution provides that "[n]o ***
law impairing the obligation of contracts or making an irrevocable
grant of special privileges or immunities, shall be passed." Ill.
Const. 1970, art. I, 16.
We first note that the trial court did not make any finding on
this issue. However, based on our determination above, that
plaintiffs, counterplaintiffs and intervenor have a contractual
right in the funding provision of Public Act 86-273, as well as
their allegations in their respective complaints and counterclaims
that through defendants' underfunding of the retirement systems, by
failing to budget, appropriate and contribute funds, their benefits
have been impaired, we find that they have stated a recognized
cause of action. Accordingly, the trial court erred in dismissing
plaintiffs' second amended complaint, counterplaintiffs SURS' and
TRS' amended counterclaim, counterplaintiff SERS' counterclaim and
intervenor's complaint.
Lastly, the parties' following arguments need not be addressed
by this court for the reasons stated: (1) Plaintiffs argue that
they have standing to bring this action even though all retirement
system benefits are presently being paid by the State because
"system bankruptcy is not a predicate for standing." Defendants,
however, do not challenge plaintiffs on this "issue" on appeal; (2)
Counterplaintiffs SERS, SURS and TRS argue that they have a
responsibility to act in behalf of their members and that they are
entitled to bring claims in favor of their participants and
beneficiaries. Defendants do not challenge counterplaintiffs on
this "issue" on appeal and, moreover, the trial court did not
address this issue; (3) Plaintiffs contend that defendants breached
their fiduciary duties under the Pension Code and (4) that they
also violated plaintiffs' property rights protected by 42 U.S.C.
1983 when they budgeted, appropriated and contributed lesser
amounts to the retirement systems than required by law. The trial
court did not make any finding regarding these two claims and we
therefore do not address them.
For the reasons stated, we affirm the circuit court's
dismissal of plaintiffs', counterplaintiffs' and intervenor's
claims against the State of Illinois based on sovereign immunity;
we reverse the court's dismissal of plaintiffs', counterplaintiffs'
and intervenor's claims against all other defendants; and we remand
this cause for further proceedings consistent with the views
expressed herein. We also deny defendants' renewed motion to
dismiss this case as moot.
Affirmed in part and reversed in part; cause remanded.
HARTMAN, P.J., and SCARIANO, J., concur.
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