Pilsen Neighbors Community Council v. Netsch

• Decision Date: 03 April 1992
• Docket Number: No. 91-1374,91-1374
• Citation: 960 F.2d 676
• Parties: PILSEN NEIGHBORS COMMUNITY COUNCIL and National Consumers Foundation, Plaintiffs-Appellants, v. Dawn Clark NETSCH, Comptroller of the State of Illinois, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 676

960 F.2d 676

PILSEN NEIGHBORS COMMUNITY COUNCIL and National Consumers Foundation, Plaintiffs-Appellants, v. Dawn Clark NETSCH, Comptroller of the State of Illinois Defendant-Appellee.

No. 91-1374.

United States Court of Appeals, Seventh Circuit.

Argued Dec. 5, 1991.

Decided April 3, 1992.

Michael P. Seng (argued), Jane M. Whicher, and Harvey M. Grossman, Roger Baldwin Foundation, Chicago, Ill., for plaintiffs-appellants.

Rosalyn B. Kaplan, Asst. Atty. Gen. and Thomas R. Dodegge (argued), Office of the Atty. Gen., Chicago, Ill., for defendant-appellee.

Robert L. Graham and Ellen L. Partridge, Jenner & Block, Chicago, Ill., for amicus curiae.

Before CUMMINGS and MANION, Circuit Judges, and ESCHBACH, Senior Circuit Judge.

CUMMINGS, Circuit Judge.

Plaintiffs Pilsen Neighbors Community Council ("Pilsen Neighbors") and National Consumers Foundation ("NCF") challenge the constitutionality of the Illinois Voluntary Payroll Deduction Act, which allows Illinois state employees to direct a specified portion of their pay to certain participating charities. Pilsen Neighbors and NCF are tax-exempt, non-profit corporations who applied unsuccessfully to the Illinois Comptroller's Office in 1980 for qualification under the Act's predecessor statute. They allege in their complaint for declaratory judgment and injunctive relief that their exclusion from the deduction program violated their right to free expression and association under the First and Fourteenth Amendments, as well as their right to due process and equal protection under the Fourteenth Amendment. In October 1987, Judge Moran denied plaintiffs' motion for summary judgment. 672 F.Supp. 295. The case was later transferred to Judge Leinenweber, who granted defendant's motion for summary judgment in January 1991. Plaintiffs appeal. ¹

I.

A. The Voluntary Payroll Deductions Act of 1983

When this suit was filed in October 1980, the Illinois state employees' charitable deduction program was governed by the Wage Deductions for United Fund Act, Ill.Rev.Stat. ch. 127, pp 371, 372 (1981). This Act, as its title implies, allowed only United Funds to participate in the payroll deduction program. A United Fund was defined as

The organization conducting the single, annual, consolidated effort to secure funds for distribution to agencies engaged in charitable and public health, welfare and service purposes, which is commonly known as the United Fund, or the organization which serves in place of the United Fund organization in communities where an organization known as the United Fund is not organized.

Id. p 371. It is apparent that this definition referred to organizations that conduct workplace fundraising drives in a particular community on behalf of a group of charities in that community. These organizations, commonly known as United Ways, Community Chests, United Appeals, or United Funds, typically conduct a highly publicized fundraising drive, and a large percentage of the contributions come from payroll deductions made by workers in the private sector. ²

The Illinois legislature repealed the Wage Deductions Act in 1983 and replaced it with the Voluntary Payroll Deductions Act of 1983, Ill.Rev.Stat. ch. 15, pp 501-505 (1991) ("VPDA"). Since the plaintiffs ask only for injunctive and declaratory relief, the VPDA, not its predecessor, is at issue in this appeal. The articulated purpose of the VPDA is

to lessen the burdens of State government and of local communities in meeting needs of human health and welfare; to provide a convenient channel through which State public servants may contribute to these efforts; to minimize or eliminate disruption of the State workplace and costs to State taxpayers that such fund-raising may entail; to serve needs of human health and welfare; and to ensure that recipient agencies are responsible in the uses of the moneys so raised.

p 502. Under the VPDA, state employees may authorize the withholding of a portion of their salary for contribution to a maximum of four participating charities. p 504.

A charitable organization may participate in the program either as a United Fund under Paragraph 503(c) or as a "Qualified Organization" under Paragraph 503(b). The VPDA retains in Paragraph 503(c) the same definition of United Fund that existed in the statute it replaced. Therefore, like its predecessor, the VPDA grants to those organizations qualifying as a United Fund automatic access to the state employees payroll deduction program.

The VPDA differs from its predecessor by permitting Qualified Organizations other than United Funds to solicit contributions from state employees. Paragraph 503(b) sets forth the steps that an organization must take before becoming a Qualified Organization:

1) Submit the signatures of at least 4000 employees within a 12-month period. ³ Each signature must indicate that the organization is one for which the employee intends to authorize withholding.

2) Certify that all benefiting agencies are tax exempt under the Internal Revenue Code, comply with the Illinois Human Rights Act, and comply with Illinois law regulating the solicitation of funds by charities.

3) Certify that all benefiting agencies actively conduct health or welfare programs and provide services to individuals directed at one or more of an enumerated list of 18 common human needs within a community (e.g., family and child care services, or health care services); and that all benefiting agencies provide these services to persons in the community and surrounding area in which the organization conducts its fund drive (unless the agency provides disaster relief services).

4) Certify that the organization has accurately disclosed its percentage of fund-raising and overhead costs.

5) Certify that all benefiting agencies use a majority of the funds received in a particular community if so requested by the employee.

6) Certify that neither the organization nor its member organizations will solicit State employees for contributions at their workplace, except pursuant to the VPDA.

7) Provide one of the enumerated health and human care services for at least 2 years before becoming qualified.

In order to remain a participant in the state workplace charitable deduction program, a Qualified Organization must receive at least 500 payroll deduction requests during each solicitation period. If a Qualified Organization fails to receive 500 deduction requests, it must repeat the entire qualification process outlined above. During each campaign, Qualified Organizations also must disclose their percentage of fundraising and overhead costs "to all solicited employees * * * in the form of a factual statement on all petitions and payroll deduction authorization cards." p 503(b)(6).

Unlike organizations qualifying under Paragraph 503(b), an organization that qualifies as a United Fund under Paragraph 503(c) need not obtain 4000 signatures to become eligible for the program. It also need not certify the services and status of its benefiting agencies, nor disclose its fundraising and overhead costs, nor obtain 500 deductions each year in order to remain in the program.

The Illinois Comptroller is responsible for certifying United Funds and Qualified Organizations under the Act, and also has authority to "promulgate and issue reasonable rules and regulations as deemed necessary for the administration of this Act." p 505. Pursuant to this authority, the Comptroller has promulgated regulations now codified at 80 Ill.Admin.Code §§ 2500.10-2500.70 (1991). In addition, the Illinois Department of Central Management Services has promulgated regulations relating to the program at 80 Ill. Admin. Code §§ 2650.1-2650.30 (1991).

B. The Plaintiffs

Pilsen Neighbors is a tax-exempt, non-profit corporation organized for the benefit of a large Mexican-American community in Chicago's Pilsen neighborhood. Its activities include leadership training, coordination of several social service delivery agencies, support of various schools and educational programs in the Pilsen community, development of economic plans in the community, and assistance in the areas of naturalization and voter registration. Pilsen Neighbors applied to the Comptroller for access to the United Fund program on June 23, 1980. The application was denied on June 30, 1980, and Pilsen Neighbors has not reapplied for United Fund status and has not attempted to become a Qualified Organization under the VPDA.

NCF, also a tax-exempt, non-profit corporation, is organized to provide research, education and funding to consumer and citizen organizations. One organization it assists is the Illinois Public Action Council, a federation of over 75 organizations including senior citizen groups, homeowners associations, church groups, tenants groups, taxpayer organizations, labor unions, community organizations, and health and energy coalitions. Another organization that NCF supports is Metro Seniors in Action, a federation of 23 senior citizen organizations in the City of Chicago. Like Pilsen Neighbors, NCF applied for and was denied access to the Illinois charitable payroll deduction program in 1980, and has taken no further actions to become part of the program as revised in 1983.

In their 1980 letters to the Illinois Comptroller, neither Pilsen Neighbors nor NCF asserted that they were a United Fund, or that they were the organization running the single, annual, consolidated charity drive in their community, or that they served in place of a United Fund in their community.

C. The State Employees Combined Appeal

Illinois sponsors an annual drive known as the State Employees Combined Appeal ("SECA") designed to encourage its employees to participate in the charitable payroll deduction program. The SECA drive is governed by rules at 80 Ill.Admin.Code §§ 2650.1-2650.30. Under Section 2650.15, the SECA drive commences the second Tuesday after Labor Day and can last no longer than eight weeks. Each...