Appeal from the Circuit Court of Sangamon County; the Hon.
Simon L. Friedman, Judge, presiding.
JUSTICE GREEN DELIVERED THE OPINION OF THE COURT:
The principal issue in this appeal is whether certain statutory provisions (Ill. Rev. Stat. 1981, ch. 24, par. 8-11-1; ch. 85, par. 902; and ch. 102, par. 34) require the defendants to credit municipalities with the interest income which accrues on tax receipts collected, invested, and distributed by the defendants pursuant to the Municipal Retailers' Occupation Tax Act (Ill. Rev. Stat. 1981, ch. 24, par. 8-11-1). We conclude that these provisions do require defendants to credit plaintiffs with such interest income.
On September 29, 1982, the plaintiffs, village of Pawnee and city of Springfield, municipalities which have allegedly levied taxes pursuant to the Municipal Retailers' Occupation Tax Act (MROTA) (Ill. Rev. Stat. 1981, ch. 24, par. 8-11-1), filed a three-count complaint in the circuit court of Sangamon County against the defendants, J. Thomas Johnson, Director of the Department of Revenue of the State of Illinois (Director), Roland W. Burris, Comptroller of the State of Illinois (Comptroller), and Jerry Cosentino, Treasurer of the State of Illinois (Treasurer).
Plaintiffs alleged that although MROT receipts are kept in interest-bearing accounts after collection and prior to disbursement, defendants, and their predecessors in office, have failed to credit the plaintiffs with the interest income earned on such receipts.
Count I of the complaint alleged that by failing to credit plaintiffs with the interest income earned on the tax receipts, defendants, and their predecessors in office, have violated the provisions of the MROTA, section 2 of "An Act relating to certain investments of public funds by public agencies" (Public Funds Act) (Ill. Rev. Stat. 1981, ch. 85, par. 902), and section 1 of "An Act in relation to the deposit of public funds" (Public Deposits Act) (Ill. Rev. Stat. 1981, ch. 102, par. 34).
Counts II and III of the complaint, respectively, alleged that defendants' failure to credit plaintiffs with the interest income earned on MROT receipts constituted a breach of fiduciary duty and a constitutional violation of the General Assembly's exclusive right to raise revenue (Ill. Const. 1970, art. IX, sec. 1).
On January 20, 1983, plaintiffs filed an amended motion for class determination (Ill. Rev. Stat. 1981, ch. 110, par. 2-802) seeking to include all Illinois municipalities within the proposed class.
On February 23, 1983, the trial court entered orders (1) allowing the plaintiffs' motion for certification as a class, and (2) allowing defendants' motion to dismiss in bar of action each count of the complaint for failure to state a cause of action. Plaintiffs maintain on appeal that the trial court erred in dismissing their complaint because each of the three counts properly states a cause of action.
• 1 The Director has the "full power" to administer and enforce the MROTA (Ill. Rev. Stat. 1981, ch. 24, par. 8-11-1). The MROTA also provides that the Director shall collect all taxes and penalties due under the Act and pay over all such receipts to the Treasurer, who holds these receipts as trustee. On or before the 25th day of each month the Director must certify to the Comptroller the share to be paid each municipality. The municipalities' share is the amount collected during the second preceding calendar month by the Department for the municipality, less certain deductions including a 2% administrative charge which is to be retained by the Treasurer "to cover the costs incurred by the Department in administering and enforcing [the MROTA]." (Ill. Rev. Stat. 1981, ch. 24, par. 8-11-1.) The Comptroller is required to cause warrants to be drawn for each municipality in the amount certified by the Director.
We note, however, that the MROTA does not expressly provide a method for allocating interest income earned on MROT receipts. Plaintiffs argue that the MROTA must be construed in pari materia with section 1 of the Public Deposits Act (Ill. Rev. Stat. 1981, ch. 102, par. 34) and section 2 of the Public Funds Act (Ill. Rev. Stat. 1981, ch. 85, par. 902).
Section 1 of the Public Deposits Act requires only that a "treasurer or other custodian of public funds" must invest collected funds which are "not needed for immediate disbursement" within two working days at "prevailing [interest] rates or better."
Because neither the MROTA nor the Public Deposits Act specifically addresses the issue of interest income earned on MROT receipts, an analysis of section 2 of the Public Funds Act is necessary for the resolution of this issue. Section 2 provides:
"To the extent a public agency has custody of funds not owned by it or another public agency and does not otherwise have authority to invest such funds, the public agency may invest such funds as if they were its own. Such funds must be released to the appropriate person at the earliest reasonable time, but in no case exceeding 31 days, after the private person becomes entitled to the receipt of them. All earnings accruing on any investments or deposits made pursuant to the provisions of this Act shall be credited to the public agency by or for which such investments or deposits were made, except where by specific statutory provisions such earnings are directed to be credited to and paid to a particular fund." (Emphasis added.) Ill. Rev. Stat. 1981, ch. 85, par. 902.
Plaintiffs argue that section 2, as interpreted by the supreme court in City of Peoria v. O'Connor (1981), 85 Ill.2d 195, 421 N.E.2d 912, provides that the interest income earned on funds invested by one public agency (e.g., the State Treasurer) on behalf of another public agency (e.g., the municipalities) should be credited to the public agencies for which the investments were made. On the other hand, defendants, relying on a reading of the entire last paragraph of section 2 and the legislative ...