People Ex Rel. Sklodowski v. State

Citations: 674 N.E.2d 81; 284 Ill. App. 3d 809; 220 Ill. Dec. 810Docket: 1-93-2951, 1-93-3171, 1-93-3172, 1-93-3173 cons.

Court: Appellate Court of Illinois; November 26, 1996; Illinois; State Appellate Court

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An appellate court case involves plaintiffs Robert Sklodowski and others challenging the State of Illinois and specific state officials—Governor Jim Edgar, Senate President Philip Rock, House Speaker Michael Madigan, Comptroller Dawn Clark Netsch, and Treasurer Patrick Quinn—regarding alleged failures to contribute to retirement pension benefits and the impairment of contractual rights. The plaintiffs, alongside the State Employees' Retirement System (SERS), State Universities' Retirement System (SURS), Teachers' Retirement System (TRS), and the Illinois Retired Teachers Association (intervenor), appealed a circuit court decision that dismissed their second amended complaint, as well as various counterclaims and an intervenor's petition for a writ of mandamus. The dismissal was based on the separation of powers doctrine, which limits the ability of the judiciary to intervene in matters of legislative and executive authority. The case highlights issues surrounding retirement benefits and governmental responsibilities in Illinois.

Plaintiffs, counterplaintiffs, and intervenor appeal on several grounds: (1) the judiciary can compel State officials to fulfill nondiscretionary duties without infringing on the separation of powers; (2) they possess a constitutional interest in the financial health of State retirement systems; and (3) both federal and State contract clauses forbid the impairment of pension contract rights. Counterplaintiffs SERS, SURS, and TRS argue that their claims are not barred by the legislative supremacy clause. Additionally, plaintiffs assert that their second amended complaint sufficiently alleges a breach of fiduciary duty and a civil rights violation against the defendants.

In 1963, Illinois established five retirement systems, governed by distinct sections of the Illinois Pension Code. Amendments in 1989 mandated that starting in the 1990 fiscal year, the State's contributions to these systems would incrementally increase over seven years, aiming to meet specific funding requirements by 1996. Plaintiffs filed a class action against defendants, including the systems' board of trustees, seeking a writ of mandamus, declaratory judgment, and enforcement based on the alleged failure to comply with the 1989 law. They claimed that the State's failure to contribute as mandated constitutes unlawful impairment of participants' contractual rights under the Illinois Constitution's pension protection clause. Additionally, they alleged breaches of fiduciary duty under the Illinois Pension Code and violations of both the U.S. and Illinois Constitutions' contract clauses, as well as a count against individual defendants for deprivation of property under color of State law, in violation of 42 U.S.C. § 1983. The court affirms in part and reverses in part the lower court's ruling.

Intervenor's motion to intervene was approved on October 2, 1992. Subsequently, on December 21, 1992, counterplaintiffs SURS and TRS responded to the plaintiffs' second amended complaint and filed an amended counterclaim against the Governor, Comptroller, and Treasurer, alleging violations of pension benefits and contractual rights under both the U.S. and Illinois constitutions. On the same date, the intervenor filed a three-count complaint against the State and its officials for similar violations. 

On February 19, 1993, the State and its officials moved to dismiss the complaints, arguing lack of jurisdiction due to sovereign immunity, separation of powers issues preventing the court from directing legislative appropriations or budgeting, and the inapplicability of a writ of mandamus. The Governor also moved to dismiss the amended counterclaim, and motions from the State and Governor echoed these arguments regarding the intervenor's complaint. 

On August 6, 1993, the trial court dismissed all complaints and counterclaims, citing the separation of powers doctrine. Following this, SERS filed a motion on August 23, 1993, to answer and counterclaim, which was granted but later dismissed on August 31 based on the same doctrine. Motions for reconsideration were filed by SERS, SURS, TRS, and the intervenor but were denied on September 3, 1993, leading to subsequent appeals.

On April 16, 1996, defendants filed a renewed motion to dismiss the appeals as moot, citing the repeal of Public Act 86-273 by Public Act 88-593, which established automatic appropriations for state contributions to retirement systems. In response, plaintiffs, counterplaintiffs, and the intervenor argued that beneficiaries who entered the retirement systems between the act's effective and repeal dates had vested rights under the Illinois Constitution and that the public interest exception to mootness justified judicial review. They further contended that Public Act 88-593 was in effect when the court previously denied the motion to dismiss as moot, asserting that the circumstances had not changed. The court is considering defendants' renewed motion to dismiss alongside the case.

The standard of review for a trial court's dismissal of a complaint is de novo. When reviewing such a dismissal, the court must view the allegations favorably to the plaintiff and affirm the dismissal if no facts could support a claim for relief. The State's argument, based on the State Lawsuit Immunity Act, contends that the trial court lacks subject matter jurisdiction and should dismiss any claims against the State of Illinois. Plaintiffs counter that they are seeking a writ of mandamus to compel public officials to perform mandatory duties, which does not constitute a claim against the State. They argue that since the Court of Claims lacks equity jurisdiction and cannot grant the relief sought, the trial court is the appropriate venue.

Counterplaintiffs SERS and SURS maintain that challenges to the constitutionality of State officials' actions are not barred by sovereign immunity. The State Lawsuit Immunity Act prohibits making the State a defendant in court, except in limited circumstances. The Illinois Court of Claims Act grants exclusive jurisdiction to the Court of Claims for claims against the State based on Illinois law. A relevant case, Board of Trustees of Community College District No. 508 v. Burris, established that a suit contesting State officials' interpretations of their obligations does not represent a claim against the State.

In this instance, plaintiffs assert their claims are against individual officials regarding their statutory obligations, not the State itself. Thus, while the trial court's dismissal of claims against the State is valid, it should be based on sovereign immunity rather than separation of powers. Plaintiffs and counterplaintiffs argue that the trial court erred in its dismissal based on separation of powers, asserting that the judiciary has the responsibility to enforce compliance with mandatory statutory obligations of the executive and legislative branches, highlighting the necessity of judicial oversight for the enforcement of Public Act 86-273.

Defendants contend that the relief sought by plaintiffs, counterplaintiffs, and intervenor requires legislative appropriations and executive budget preparation, thus arguing that the judiciary cannot compel these functions due to the separation of powers doctrine outlined in the Illinois Constitution. They assert that no branch may exercise powers belonging to another. However, the judiciary has the authority to ensure that actions by the executive branch do not violate rights established by the Constitution or statutes. A writ of mandamus may be issued when there is a clear right to relief, a clear duty for the defendant to act, and clear authority to comply. Mandamus compels action but does not dictate the manner of that action. 

In this case, plaintiffs are not asking the judiciary to dictate how the defendants should perform their duties but rather to enforce compliance with Public Act 86-273, which mandates a specific level of funding for retirement systems over seven years. The plaintiffs assert they have a contractual right to state contributions under this Act, establishing a mandatory duty for state officials to comply. The Illinois Constitution requires the Governor to submit a budget according to state law, and legislative leaders must certify procedural compliance for bills. Given the judiciary's role in protecting rights under the law, the trial court was not barred from considering the merits of the claims and issuing a writ of mandamus. The dismissal of the plaintiffs' and intervenor's claims was therefore deemed erroneous.

Plaintiffs, counterplaintiffs, and intervenors assert that the defendants' inadequate funding of State retirement systems infringes upon the pension protection clause of the Illinois Constitution (Ill. Const. 1970, art. XIII, 5). They contend that Public Act 86-273, which amended the Pension Code, constitutes a binding contract with retirement system participants. In contrast, defendants argue that the pension protection clause does not grant beneficiaries a contractual right to enforce funding mechanisms and only ensures payment of benefits when due. The pension protection clause is interpreted as establishing contractual protections for pension plans. The provisions of the Pension Code are deemed actual terms of the contractual relationship under section 5. Courts aim to ascertain legislative intent when interpreting statutes, presuming the legislature does not enact meaningless laws and is aware of previous judicial decisions. The legislature acknowledged the extent of underfunding in 1989 and enacted Public Act 86-273 to obligate itself to fund the retirement systems. By increasing State contributions over seven years under this act, these requirements became contractual terms with pension beneficiaries, who provided consideration by continuing their service and contributions. This situation contrasts with the People ex rel. Federation of Teachers v. Lindberg case, where the court found no vested contractual rights due to the relevant statutory language predating the 1970 Constitution and not reflecting legislative intent to establish such rights.

The Lindberg court determined that if the legislature intended to create a contractual right regarding pension funding, it could have explicitly stated so. It noted that concerns about funding adequacy should be addressed by the legislature. In contrast, the current case indicates that the legislature established a contractual relationship with pension beneficiaries through Public Act 86-273, which mandated increased state contributions over seven years to address underfunded retirement systems. The plaintiffs argue that the legislature did not fulfill its contribution obligations as defined by the Act. The court highlighted that Public Act 86-273 lacks limiting language that would suggest the commitments made are merely goals, unlike Public Act 88-593, which the defendants cite to argue that the appeals are moot. Accepting the defendants' position would allow the legislature to alter its contractual obligations unilaterally, undermining the validity of laws as contracts. The court distinguished this case from McNamee v. State of Illinois, where the plaintiffs claimed that a change in funding calculations impaired their pension benefits. The McNamee court found no violation of section 5, article XIII since the plaintiffs did not demonstrate a reduction in benefits. Conversely, the current legislature, through Public Act 86-273, has taken on a greater obligation than merely paying benefits, requiring incremental increases in contributions to fully fund pension obligations.

The framers of the constitution did not intend to regulate pension fund funding; however, the legislature, through Public Act 86-273, committed to a funding level for pension funds, even though the Act lacked specific implementation details. Plaintiffs aim to enforce this funding obligation without dictating the methods for compliance. Relevant case law establishes that the Governor has a duty to prepare a budget aligned with constitutional and statutory requirements, and that systematic funding methods adopted by the legislature constitute vested contractual rights for pension system members. The plaintiffs assert that the financial health of their pension funds is precarious, with concerns of insufficient funds to meet future benefits. The trial court must determine if this situation equates to default or bankruptcy, but the plaintiffs have established a valid cause of action.

Public Act 86-273 established a contribution formula for the pension funds, granting plaintiffs vested rights in its funding provisions until the Act's repeal in 1994. Beneficiaries may claim impairment of benefits without first being denied them, and the plaintiffs have claimed that the defendants' underfunding has impaired their benefits. They argue that the defendants' failure to budget and contribute as mandated by the Act violated their contract rights and the constitutional prohibition against contract impairment under both federal and state law. The trial court did not address this issue, but given the plaintiffs' established contractual rights and their claims of impairment due to underfunding, the dismissal of their complaints and counterclaims was erroneous.

The court will not address the parties' arguments regarding standing, fiduciary duties, or property rights violations, as the defendants did not challenge these issues on appeal and the trial court did not rule on them. The court affirms the dismissal of claims against the State of Illinois based on sovereign immunity, reverses the dismissal of claims against other defendants, and remands the case for further proceedings. The court denies the defendants' motion to dismiss the case as moot. The plaintiffs referenced a 1995 Supreme Court report highlighting the State's underfunding of retirement systems, with significant unfunded liabilities and a legislative commitment to improve funding by 2045. Additionally, the plaintiffs' claim that Public Act 88-593 is unconstitutional due to its impact on contract rights is not considered, as this Act was enacted after the appeal was filed.