Polich v. Chicago School Finance Authority

• Decision Date: 11 March 1980
• Docket Number: No. 52957,52957
• Citation: 79 Ill.2d 188,402 N.E.2d 247
• Parties: , 37 Ill.Dec. 357 Patricia POLICH et al., Petitioners, v. CHICAGO SCHOOL FINANCE AUTHORITY et al., Respondents.
• Court: Illinois Supreme Court

Page 247

402 N.E.2d 247

79 Ill.2d 188, 37 Ill.Dec. 357

Patricia POLICH et al., Petitioners, v. CHICAGO SCHOOL FINANCE AUTHORITY et al., Respondents.

No. 52957.

Supreme Court of Illinois.

March 11, 1980.

Winston & Strawn, Chicago (Edward J. Wendrow, Calvin Sawyier, Edward L. Foote, Chicago, and Thomas J. Campbell, Chicago, of counsel), for petitioners.

Albert E. Jenner, Jr., Anton R. Valukas, Michael J. Rovell, John H. Mathias, Jr., Linda L. Listrom and Robert Markowski, Chicago (Jenner & Block, Chicago, of counsel), for respondent Chicago School Finance Authority.

William R. Quinlan, Corp. Counsel, Chicago (Martin J. Healy, First Asst. Corp. Counsel, and Lee J. Schwartz, Sp. Asst. Corp. Counsel, Chicago, of counsel), for respondent City of Chicago.

DeJong, Poltrock & Giampietro, Chicago (Lawrence A. Poltrock, Wayne B. Giampietro, Kathrin A. Koenig, and Gregory N. Freerksen, Chicago, of counsel), and Stephen G. Daday, law student, for amicus curiae Chicago Teachers Union, Local No. 1, AFT, AFL-CIO.

GOLDENHERSH, Chief Justice:

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 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, 175 N.E. 572; Thorpe v. Mahin (1969), 43 Ill.2d 36, 250 N.E.2d 633; Dee-El Garage, Inc. v. Korzen (1972), 53 Ill.2d 1, 289 N.E.2d 431; Continental Illinois National Bank & Trust Co. v. Zagel (1979), 78 Ill.2d 387, 36 Ill.Dec. 650, 401 N.E.2d 491, 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. 18-8.9(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:

"(a) Before or at the time of issuing any Bonds, the Authority shall demand and direct the City Council of the City to provide by ordinance for the levy and collection of a direct annual tax upon all the taxable property located within the school district without limit as to rate or amount sufficient to pay and discharge the principal thereof at maturity or on sinking fund installment dates and to pay the interest thereon as it falls due. The taxes as levied shall also include such additional amounts to the extent that the collections in the prior years were insufficient to pay and discharge such principal thereof at maturity, such sinking fund installments, if any, and interest thereon as it fell due and the amount so collected shall be placed in the debt service reserve fund. The City Council of the City shall levy and collect such tax as directed by the Authority. Such tax shall be in addition to and exclusive of the maximum of all taxes which the Authority, the Board or the City Council of the City is now, or may hereafter be, authorized by law to levy for any and all school purposes. Any such ordinance shall be in force upon its adoption."

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, 251 N.E.2d 175, People ex rel. Bergan v. New York Central R.R. Co. (1945), 390 Ill. 30, 60 N.E.2d 228, People ex rel. Burow v. Block (1916), 276 Ill. 286, 114 N.E. 527, Morgan v. Schusselle (1907), 228 Ill. 106, 81 N.E. 814, 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 holding that the legislature had exceeded its powers under article IX, section 5, of the Constitution of 1848, the court said:

"The validity of this act can hardly be considered an open question in this court, since the decision of The People ex rel. McCagg v. The Mayor of Chicago, 51 Ill. 17; Same ex rel. Wilson v. Salomon, ib. 37; Same ex rel. South Park Commissioners v. The Common Council of Chicago, ib. 58, and Harward v. St. Clair Drainage Company, ib. 130.

We held, in these cases, that the fifth section of the ninth article of the constitution, authorizing the legislature to give the corporate authorities of cities and towns the right of taxation for corporate purposes, was to be construed as a limitation upon the power of the legislature to grant the right of corporate or local taxation to any other persons than the corporate or local authorities. We further held, that, by corporate authorities, as used in this clause of the constitution, must be understood those municipal officers who are either directly elected by the people of the municipality, or appointed in some mode to which they have given their assent. We further held, in the first of the above cited cases, that the commissioners of Lincoln Park were not corporate authorities, and in the last case, that the drainage company were not such authorities within the meaning of the constitution.

These cases, in our judgment, are conclusive against the validity of the act under consideration. These police commissioners are not the corporate authorities of East St. Louis, and, therefore, can have no power of taxation." 53 Ill. 302, 304-05. Article IX, section 9, of the Constitution of 1870, in force when the other cases cited were decided, provided in part:

"The general assembly may vest the corporate authorities of cities, towns and villages with power to make local improvements by special assessment, or by special taxation of contiguous property, or otherwise. For all other corporate purposes, all municipal corporations may be vested with authority to assess and collect taxes; * * *."

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...