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Graham v. Illinoisstate Toll Highway Authority

March 19, 1998

STEPHEN GRAHAM ET AL., APPELLEES,
v.
THE ILLINOISSTATE TOLL HIGHWAY AUTHORITY ET AL., APPELLANTS.



The opinion of the court was delivered by: Justice Bilandic

At issue in this case is the constitutionality of sections 24 and 25 of the Toll Highway Act. These provisions set forth the procedure for spending of toll highway revenues by the Toll Highway Authority. 605 ILCS 10/24, 25 (West 1996). This spending scheme has been in force, in substantially its present form, since 1953 and was held constitutional by this court under the Illinois Constitution of 1870. We are here called upon to determine whether this method of spending withstands scrutiny under the Illinois Constitution of 1970. We now hold that the method of spending set forth in the Toll Highway Act does not violate the 1970 Constitution.

FACTS

The Illinois State Toll Highway Authority (the Authority) was established by the Toll Highway Act in 1967. 1967 Ill. Laws 2748 (eff. April 1, 1968). The Authority is the successor to the Illinois State Toll Highway Commission, which had been established by statute in 1953. 1953 Ill. Laws 1314 (eff. July 13, 1953). Insofar as pertains to this appeal, the 1967 statute is substantively the same as the 1953 statute, except that the term "Authority" is substituted for "Commission."

The Authority is "an instrumentality and an administrative agency of the State of Illinois" created to finance, construct, operate and maintain a system of toll highways through and within the State of Illinois. 605 ILCS 10/1, 8 (West 1996). The Authority consists of 11 directors, two of whom are the Governor and the Secretary of Transportation, ex officio, and the remainder of whom are appointed by the Governor with the advice and consent of the Senate. 605 ILCS 10/3 (West 1996). The Toll Highway Act also creates an advisory committee, composed of 7 members of the House of Representatives appointed by the Speaker, 7 members of the Senate appointed by the President, and 15 members appointed by the Governor. The advisory committee advises the Authority on all matters relating to policy and the administration of the toll highway system. 605 ILCS 10/3.1 (West 1996).

The Toll Highway Act grants the Authority the power to, inter alia: acquire, own, use and dispose of real and personal property; enter into contracts; employ and discharge employees; retain special counsel; and make and repeal resolutions, by-laws, rules, rates and regulations. 605 ILCS 10/3, 8 (West 1996). The Authority is also empowered to fix the rate for tolls for the privilege of using the toll highways. The tolls are to be set at the lowest reasonable rates that will provide sufficient funds for the operations and debt service of the Authority. 605 ILCS 10/10, 19 (West 1996). The Toll Highway Act further grants the Authority the power to issue bonds for any lawful purpose to be paid solely out of the revenues of the Authority. 605 ILCS 10/17 (West 1996). Prior to issuing bonds for a proposed toll highway, the Authority must hold a public hearing, submit preliminary plans to the Governor for his approval, and obtain authorization by joint resolution of the General Assembly. 605 ILCS 10/14.1, 14.2 (West 1996). All bonds issued by the Authority must state on their face that they do not represent a debt of the State of Illinois and are payable solely from the revenues of the Authority. 605 ILCS 10/17(h) (West 1996). The Toll Highway Act further provides that, if any funds are appropriated to the Authority by the General Assembly, the Authority must repay those funds to the state treasury. 605 ILCS 10/18 (West 1996). When all bonds and other obligations of the Authority have been paid, or a sufficient amount for payment has been set aside in trust, and all money appropriated by the General Assembly has been repaid to the state treasury, the toll highways shall become a part of the state free highway system and the Authority shall be dissolved. 605 ILCS 10/21 (West 1996).

The Toll Highway Act also requires the Authority to file an annual report covering its activities for the preceding calendar year, an annual capital plan and a 10-year capital plan. In addition, the Auditor General is required to annually audit the books and records of the Authority and to file a certified copy of that audit with the Governor and the Legislative Audit Commission, to be open to public inspection. 605 ILCS 10/23 (West 1996).

The provisions of the Toll Highway Act at issue in this appeal, sections 24 and 25, set forth the Authority's spending power. 605 ILCS 10/24, 25 (West 1996). In pertinent part, section 24 provides that all moneys received by the Authority shall be paid to the state treasurer to be held as a special fund known as the Illinois State Toll Highway Authority Fund (the Toll Fund). The moneys in the Toll Fund are to be disbursed on the order of the Authority for the purposes provided in the Act. Section 24 states that the Toll Fund is to be considered "always appropriated" for the purposes of such disbursements. 605 ILCS 10/24 (West 1996). Section 25 provides for the expenses of the Authority and the compensation of its members to be paid from the proceeds of bond issues or the revenues received by the Authority. 605 ILCS 10/25 (West 1996).

According to the record, the Authority has approximately $980 million in revenue bonds outstanding. The bonds are secured under various trust indentures. The trustee is the First National Bank of Chicago (the Bank).

The plaintiffs, Stephen Graham, William DeWoskin and Manuel Kramer, purporting to represent the class of users of the toll highway system, filed this action for injunction and declaratory relief in the circuit court of Cook County in September 1995. The complaint named the Authority, Treasurer Judy Baar Topinka, and Comptroller Loleta Didrickson, as defendants. The Bank was granted leave to intervene by the circuit court. The plaintiffs' second-amended complaint contained five counts. Only count II is the subject of this appeal. Count II alleged that, in violation of section 2 of article VIII of the 1970 Constitution, the Governor had not budgeted, and the General Assembly had not appropriated for, any expenditures of funds by the Authority for fiscal year 1996. Count II sought to enjoin the Authority from spending money "unless and until there is a valid appropriation" to the Authority.

The circuit court denied the Authority's motions for dismissal and for Judgement on the pleadings as to count II, and ruled that the provisions of the Toll Highway Act which authorize spending without an annual appropriation violate the Illinois Constitution of 1970. The plaintiffs moved for a preliminary injunction preventing the defendants from making any payments out of the toll funds "other than to make payments of principal and interest on outstanding bonds issued by [the Authority] or such other payments necessary for maintaining the public health and safety, as may be ordered by the Court." The circuit court denied the plaintiffs' motion for a preliminary injunction in the form requested by the plaintiffs. Instead, the court granted a preliminary injunction enjoining the defendants from processing any warrant or paying any expense of the Authority or making any disbursement on behalf of the Authority, other than debt service. The circuit court's preliminary injunction order stated that it was stayed until December 15, 1997. The order further provided that "f any party can demonstrate that an appropriation for the Authority, which complies with the requirements of article VIII of the 1970 Constitution, has been enacted providing authority for expenditures by the Authority, the court will vacate the injunction."

The Authority and the Bank appealed directly to this court pursuant to Supreme Court Rule 302(a) (134 Ill. 2d R. 302(a)). The plaintiffs filed an appeal to the appellate court, pursuant to Supreme Court Rule 307(a), from the denial of the preliminary injunction in the form requested by the plaintiffs. That appeal was subsequently transferred to this court and consolidated with the Authority's and the Bank's appeals. We allowed the Illinois Health Facilities Authority, the Illinois Educational Facilities Authority, the Illinois Housing Development Authority, and the University of Illinois, Southern Illinois University and Northern Illinois University to file amicus curiae briefs on behalf of the defendants, and the Village of Long Grove and Michael J. Madigan, Speaker of the Illinois House of Representatives and Emil Jones, Jr., Minority Leader of the Illinois Senate, to file amicus curiae briefs on behalf of the plaintiffs. 155 Ill. 2d R. 345. On November 25, 1997, this court entered an order staying the circuit court's preliminary injunction order until further order of this court.

The Authority has filed a motion to strike the plaintiffs' cross-appellants' reply brief. That motion was taken with the case. We now grant that motion in part. The portion of the plaintiffs' cross-appellants' reply brief that contains argument that is not confined to the plaintiffs' cross-appeal is stricken. See 155 Ill. 2d R. 343(b)(1) (cross-appellant's reply brief must be confined strictly to replying to the cross-appellee's arguments on the cross-appeal). The portion of the cross-appellants' reply brief that is confined to the cross-appeal stands.

ANALYSIS

The issue presented in this appeal is whether the method of spending authorized in sections 24 and 25 of the Toll Highway Act violates the Illinois Constitution of 1970. Those sections provide, in pertinent part, as follows:

"24. Except as otherwise provided in any bond resolution, the proceeds derived from the sale of bonds, and all receipts and income derived from tolls, licenses, gifts, donations, concessions, fees, rentals, and all other revenues from whatever source derived, shall, within three days after receipt thereof, be paid to the Treasurer of the State of Illinois, and held by him as a special fund known as the Illinois State Toll Highway Authority Fund, except that the Authority may retain portions of the Illinois State Toll Highway Authority Fund as a locally maintained construction fund revolving account and as a revenue fund revolving account, where authorized by a bond resolution, and as locally maintained change funds, where necessary for the operations of the Authority. The State Treasurer shall be ex officio custodian of such special fund, which fund shall be held, invested and disbursed for the purposes provided herein upon the order of the Authority and in accordance with provisions and covenants of any bond resolution authorizing the issuance of bonds which have not been paid or deemed paid. *** Said special fund shall be considered always appropriated for the purposes of disbursements, as provided in this Act, and shall be paid out and disbursed only as provided herein, and shall not, at any time be appropriated or diverted to any other use or purpose." 605 ILCS 10/24 (West 1996).

"25. After the issuance of revenue bonds to finance the construction of toll highways, and repayment from the proceeds of such bonds of any amount repayable to the state treasury pursuant to Section 18, the expenses of the Authority, and the compensation of the members thereof, and all other costs of said toll highways and its administration and operation shall be paid from the proceeds of such bond issues or from the moneys received by the Authority as tolls or otherwise in the operation of said toll highways." 605 ILCS 10/25 (West 1996).

The plaintiffs argue that these provisions are unconstitutional because they permit the Authority to spend money without an annual legislative appropriation as required by the 1970 Constitution. The Authority and the Bank, on the other hand, contend that the legislature acted within constitutional bounds when it authorized the Authority to spend its revenues for the purposes specified in the Act without an annual legislative appropriation.

This court has previously considered the constitutionality of the method of spending set forth in the toll highway legislation. In People v. Illinois Toll Highway Comm'n, 3 Ill. 2d 218 (1954), this court upheld various aspects of the predecessor statute to the Toll Highway Act against challenges based upon provisions of the 1870 Constitution. In particular, this court rejected a constitutional challenge to the statute's spending scheme. The predecessor statute's spending provision was identical, in relevant part, to that contained in sections 24 and 25. Like the current statute, the predecessor statute provided that the revenues collected by the Commission were to be paid to the state treasurer and held by him as a special fund and disbursed upon the order of the Commission. Ill. Rev. Stat. 1953, ch. 121, par. 314a45. The plaintiff argued that this provision violated article IV, section 17, of the 1870 Constitution, which provided that "no money shall be drawn from the treasury except in pursuance of an appropriation made by law." In rejecting this argument, the court stated:

"he section [of the toll highway legislation] complained of provides that moneys withdrawn from the State Treasury special fund shall be considered always appropriated for the purposes of disbursements and are to be paid out and disbursed only as provided in the act, which prohibits appropriations or diversions to any other use or purpose than specified. This, in effect, is an appropriation by the General Assembly. The income receipts from the operation of the contemplated toll highways are not a tax but a toll. It was held in Green v. Black, 352 Ill. 623, that the General Assembly's control of State revenues and finances is restricted only by our constitution and that the General Assembly may provide as to revenues other than State taxes and fees of State officers, that when such revenues are collected they may be appropriated to a use specified in the act. It was then declared that such is, in effect, an appropriation of such revenues to the purpose so specified." Toll Highway Comm'n, 3 Ill. 2d at 228-29.

The Toll Highway Comm'n decision also considered whether the predecessor statute violated a provision of the 1870 Constitution prohibiting the State of Illinois from being made a defendant in any court. Ill. Const. 1870, art. IV, §26. The predecessor statute, like the current version, authorized suits for damages to be brought against the Commission. Ill. Rev. Stat. 1953, ch. 121, pars. 314a39, 314a52. In resolving this issue, this court reasoned that it must determine whether the Commission was a "mere department" of the state government or was an "independent legal entity." Toll Highway Comm'n, 3 Ill. 2d at 224. The court concluded that, although in many respects the Commission is "intimately associated with the regular organs of government," the "financial structure of the Commission is otherwise largely independent of the regular State government." As the court explained:

"The funds which [the Commission] obtains from the sale of bonds and from tolls are segregated and may be used only for toll highway purposes. Conversely, the State assumes no liability upon the bonds issued by the commission or upon any other contractual obligations which it incurs. Whatever effect a recovery of damages against the commission would have upon general, tax-derived revenues of the State is limited to the remote right which is given the State to receive any surplus remaining when the commission is ultimately dissolved." Toll Highway Comm'n, 3 Ill. 2d at 225.

This court concluded that subjecting the Commission to suit did not violate the constitutional prohibition on subjecting the state to suit. In so holding, the court relied primarily on the fact that "under no circumstances can the general funds of the State be reached in order to satisfy an obligation of the commission." Toll Highway Comm'n, 3 Ill. 2d at 227.

Based upon the Toll Highway Comm'n decision, the Authority contends that this court has already held that the method of spending contained in the Toll Highway Act meets constitutional requirements. The Authority argues that this decision should be controlling in this case. We agree that, were we still guided by the provisions of the 1870 Constitution, this court's decision in Toll Highway Comm'n would be controlling. The challenged spending structure of the current statute is virtually identical to that challenged in the Toll Highway Comm'n case. In that decision, this court expressly differentiated between the funds spent by the Toll Commission and the general funds of the state. This court went on to hold that, because the toll revenues were not state taxes or the fees of state officers, the General Assembly could constitutionally authorize the Authority to spend those revenues for the purposes specified in the statute without an annual legislative appropriation. In a later decision, this court clarified that the basis for the Toll Highway Comm'n holding was the character of the funds involved. In Bowes v. Howlett, 24 Ill. 2d 545, 548-49 (1962), the court addressed the constitutionality of a statutory provision containing a continuing appropriation from the general revenues of the state. The court invalidated the provision because the 1870 Constitution prohibited continuing appropriations. In so holding, the court distinguished the Toll Highway Comm'n decision as follows:

"There, the moneys involved were revenues to be derived from operation of the toll road facilities. Here, our comments thus far have been addressed to the $500,000 from general revenues of the State. General revenues are those derived from the imposition of taxes, fees, and all other revenues which constitute funds of the State, , as distinguished from revenues collected by an authority from members of the public who use the facilities. [Citations.] The constitutional *** requirement of prior specific appropriation and provision for lapse of appropriations apply to the former but not the latter type of revenue." (Emphasis added.) Bowes, 24 Ill. 2d at 548-49.

Other statutes authorizing state-related entities to spend their own revenues without an annual appropriation were also upheld by this court under the 1870 Constitution. See, e.g., Green v. Black, 352 Ill. 623, 626-27 (1933); see also People ex rel. Kirk v. Lindberg, 59 Ill. 2d 38, 40 (1974) (recognizing that "numerous decisions sustained the validity [under the 1870 Constitution] of expenditures from the State treasury without current appropriations").

Accordingly, our precedent is clear that the spending structure set forth in sections 24 and 25 of the Toll Highway Act did not violate the 1870 Constitution. The plaintiffs do not dispute this Conclusion under the 1870 Constitution. The plaintiffs, however, contend that the Toll Highway Act's spending structure cannot withstand scrutiny under the Illinois Constitution of 1970. Specifically, the plaintiffs urge that section 2 of article VIII ...


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