                                        2016 IL 119618



                                           IN THE
                                 SUPREME COURT
                                              OF
                           THE STATE OF ILLINOIS



               (Docket Nos. 119618, 119620, 119638, 119639, 119644 cons.)

      MARY J. JONES et al., Appellees, v. MUNICIPAL EMPLOYEES’ ANNUITY
               AND BENEFIT FUND OF CHICAGO et al., Appellants.


                                 Opinion filed March 24, 2016.



         JUSTICE THEIS delivered the judgment of the court, with opinion.

         Chief Justice Garman and Justices Thomas, Kilbride, and Karmeier concurred
     in the judgment and opinion.

         Justices Freeman and Burke took no part in the decision.



                                           OPINION

¶1       The question presented in this consolidated appeal is whether Public Act
     98-641 (eff. June 9, 2014) (Act), which amends the Illinois Pension Code as it
     pertains to certain pension funds for employees of the city of Chicago, violates the
     pension protection clause of the Illinois Constitution. Ill. Const. 1970, art. XIII, § 5.
     On motions for summary judgment, the circuit court of Cook County declared the
     Act to be unconstitutional in its entirety and permanently enjoined its enforcement
     because it diminished pension benefits in violation of the pension protection clause.
     For the reasons that follow, we affirm.
¶2                                    BACKGROUND

¶3       Illinois has established various public pension systems, including four pensions
     for public employees of the city of Chicago (the City). These pension funds include
     the Municipal Employees’, Officers’, and Officials’ Annuity and Benefit Fund
     (MEABF) (40 ILCS 5/8-101 et seq. (West 2012)), the Laborers’ and Retirement
     Board Employees’ Annuity and Benefit Fund (LABF) (40 ILCS 5/11-101 et seq.
     (West 2012)), the Firemen’s Annuity and Benefit Fund (FABF) (40 ILCS 5/6-101
     et seq. (West 2012)), and the Policemen’s Annuity and Benefit Fund (PABF) (40
     ILCS 5/5-101 et seq. (West 2012)).

¶4        At issue in this appeal are the City pensions impacted by Public Act 98-641,
     which include MEABF and LABF (collectively the Funds). Participants in the
     MEABF include most civil servant employees of the City, as well as nonteacher
     employees of the Chicago public school system. 40 ILCS 5/8-107 (West 2012).
     Participants in the LABF include primarily labor service workers. 40 ILCS
     5/11-110 (West 2012). These funds operate in a similar way to the state-funded
     retirement systems, in many respects. The City pension funds are all subject to the
     pension protection clause of the Illinois Constitution, which provides:
     “Membership in any pension or retirement system of the State, any unit of local
     government or school district, or any agency or instrumentality thereof, shall be an
     enforceable contractual relationship, the benefits of which shall not be diminished
     or impaired.” Ill. Const. 1970, art. XIII, § 5. Also, the City pension funds provide
     traditional defined benefit plans under which members receive specified annuities
     upon retirement generally based upon the member’s salary, years of service, and
     age at retirement.

¶5       As with the state-funded pensions, prior to the enactment of Public Act 98-641,
     for employees hired prior to January 1, 2011, annuity payments under the Funds
     were subject to 3% automatic annual increases beginning after the member’s first
     full year of retirement, and compounded annually. 40 ILCS 5/8-137, 8-137.1,
     11-134.1, 11-134.3 (West 2012). For employees hired after January 1, 2011, the
     annuity adjustments were tied to the Consumer Price Index. 40 ILCS 5/1-160 (West
     2012).

¶6       The benefits under MEABF and LABF are funded from three sources:
     contributions from the City, contributions from the employees, and investment
     returns. Prior to Public Act 98-641, the employees contributed 8.5% of their salary

                                            -2-
     toward their pension on an annual basis. 1 40 ILCS 5/8-137(b), 8-174(a), 8-182,
     11-134.1, 11-170, 11-174 (West 2012). The City contributed an amount based on a
     fixed multiplier, 1 or 1.25 times the annual employee contributions (40 ILCS
     5/8-173(a), 11-169 (West 2012)), which was historically paid largely from property
     tax proceeds.

¶7       As we explained in In re Pension Reform Litigation, 2015 IL 118585, ¶ 11
     (hereinafter referred to as Heaton), the public pensions, including the City
     pensions, have been historically inadequate to cover the benefits owed to members.
     The specific concerns over funding deficiencies in the City pension funds have
     been well documented. As reported in 1949, “every fund in Illinois suffers at this
     time an actuarial insolvency.” Report of the Illinois Public Employees Pension
     Laws Commission of 1949, 10 (1949). In 1969, the Illinois Pension Laws
     Commission explained:

         “The inadequacy of the provisions for financing the employer’s share of the
         cost contained in the pension laws enacted many years ago has resulted in large
         unfunded accrued liabilities. The revenue provisions have not been sufficiently
         flexible to meet the increasing costs occasioned by salary increases and
         additions to membership. The method of financing the employer’s obligation
         by means of fixed tax levies or arbitrary state appropriations is outmoded and
         fails to provide revenues sufficient to meet not only the accruing service cost
         but also interest on the accrued liability.” Report of the Illinois Pension Laws
         Commission of 1969, 106 (1969).

¶8        These concerns over the ongoing funding deficiencies led to the adoption of the
     pension protection clause in 1970. At the constitutional convention, Delegate
     Kinney raised specific issues relevant to the City pensions. She particularly noted
     the concerns related to the proposed adoption of home rule powers for
     municipalities, including that the municipalities might abandon their pension
     obligations, leaving civil servants unprotected. 4 Record of Proceedings, Sixth
     Illinois Constitutional Convention 2926 (statements of Delegate Kinney).

¶9       “The solution proposed by the drafters and ultimately approved by the people
     of Illinois was to protect the benefits of membership in public pension systems not
     by dictating specific funding levels, but by safeguarding the benefits themselves.”

         1
          This percentage includes contributions for the age and service annuity, widow’s annuity, and
     the contributions toward the compounded annual annuity increases.
                                                   -3-
       Heaton, 2015 IL 118585, ¶ 15. The drafters intended that, by guaranteeing pension
       benefits, the General Assembly would “take the necessary steps to fund the pension
       obligations.” 4 Record of Proceedings, Sixth Illinois Constitutional Convention
       2925 (statements of Delegate Green).

¶ 10       Despite the warnings that the funding mechanism was not sufficient to cover
       the projected future benefits, and the adoption of the pension protection clause, the
       method of funding remained static with respect to the MEABF and the LABF. The
       Pension Code continued to set City contribution levels at a fixed multiple of
       employee contributions. This contribution level had no relationship to the
       obligations that the funds were accruing. Annual actuarial valuations of the Funds
       continued to show that the actuarially required contributions needed to fund the
       benefits were not being met.

¶ 11       For example, in the 2007 Comprehensive Annual Financial Report, the
       MEABF Board reported that instead of a multiple of 1.25 times the employee
       contributions received, the most recent actuarial valuation “shows that an employer
       contribution multiple of 2.97 is needed to adequately finance the Plan.” Municipal
       Employees’ Annuity and Benefit Fund of Chicago, 2007 Comprehensive Annual
       Financial Report 9, available at http:www.meabf.org/assets/pdfs/pubs/
       2007CAFR.pdf. The MEABF Board also noted that the “statutory employer
       contributions have been less than the Annual Required Contribution (ARC) for the
       past five years and are again expected to be less than the ARC for 2008.” Id. at 64.
       The method of funding also failed to account for downturns in the economy which
       affected the performance of the Funds’ investments. Thus, the City pension funds
       continued to remain vulnerable, ultimately carrying significant unfunded liabilities.

¶ 12       It was undisputed that if the funds remained on the same trajectory they would
       continue to pay out more in benefits than they received in contributions and
       investment returns, leading to a path of insolvency. It is now projected that without
       reforms, the MEABF and LABF will be insolvent in about 10 and 13 years,
       respectively.

¶ 13      Against this backdrop, as with the state-funded pensions, the General Assembly
       adopted several legislative strategies to deal with the underfunded City pensions. In
       2011, the Pension Code was amended to require, starting in 2015, that the City
       contribute amounts sufficient to enable the Chicago police and firefighter pension
       funds to reach 90% actuarial funding by 2040. See Pub. Act 96-1495, § 5 (eff. Jan.

                                               -4-
       1, 2011). 2 No such legislation was passed with respect to the MEABF and the
       LABF at that time. Instead, in 2014, the General Assembly ultimately enacted
       Public Act 98-641, the legislation at issue in this case.

¶ 14       Introduced as Senate Bill 1922, Public Act 98-641 was intended to “address an
       immediate funding crisis that threatens the solvency and sustainability of the public
       pension systems *** serving employees of the City of Chicago.” Pub. Act 98-641,
       § 1 (eff. June 9, 2014). The General Assembly expressly found that the financial
       crisis could not be addressed by increased funding alone, without also increasing
       employee contribution rates and reducing the annual adjustments for current and
       future retirees. Id.

¶ 15        Under the Act, the City’s funding contribution progressively increases leading
       to actuarially-based payments beginning in 2021 to bring the funds to 90% funding
       levels by 2055. 40 ILCS 5/8-173(a-5), 11-169(a-5) (West 2014). However, for the
       first five years, from 2016-2020, the City would continue to contribute under the
       current multiplier framework, with an increased rate each year. Id.

¶ 16        Additionally, if the City fails to timely pay the required contributions, the
       Funds may certify the delinquent amounts to the Comptroller. Beginning in 2016,
       the Comptroller “must *** deduct and deposit into the Fund[s] the certified
       amounts or a portion of those amounts” specified from the grants of state funds to
       the City. 40 ILCS 5/8-173(a-10), 11-169(a-10) (West 2014). If the City fails to
       make its contributions to the Funds, the Act provides a mechanism by which the
       retirement boards of these Funds may initiate mandamus proceedings in the circuit
       court. 40 ILCS 5/8-173.1(a), 11-169.1(a) (West 2014). The court may order a
       reasonable payment schedule “without significantly imperiling the public health,
       safety, or welfare.” 40 ILCS 5/8-173.1(b), 11-169.1(b) (West 2014).

¶ 17       The Act also increases the required employee contributions for members of the
       Funds. Instead of contributing 8.5% of their salary, the Act increases member
       contributions by .5% each year from 2015 to 2019, when the contribution reaches
       11% of their salary. The contribution then remains fixed at 11% unless the funds
       reach a 90% funding ratio, at which point member contributions would decrease to
       9.75% so long as the fund maintains the 90% ratio. If the funds fall below that


           2
            An actuarial funding percentage is the value of plan assets, divided by plan liabilities. Thus, a
       funding percentage of 90% would mean a fund has $0.90 for each $1 of fund liability.
                                                       -5-
       mark, the employee contribution increases again to 11% of their salaries. 40 ILCS
       5/8-174, 11-170 (West 2014).

¶ 18        Similar to Public Act 98-599, which was found unconstitutional in Heaton, the
       Act includes a comprehensive set of provisions designed to reduce annuity benefits
       for members of MEABF and LABF. The Act replaces the former provisions under
       which retirees receive flat 3% annual increases with a new system which limits the
       amount of annual increases. The increase is now equal to the lesser of three percent
       or half the annual unadjusted percentage increase in the Consumer Price Index. 40
       ILCS 5/8-137(b-5)(3), 11-134.1(b-5)(3) (West 2014). The Act additionally
       removes the compounding component, and instead of an annual increase,
       eliminates the increases entirely in specific years, and postpones the time when a
       retiree begins receiving the initial increase. 3 40 ILCS 5/8-137(b-5)(1), (2),
       11-134.1(b-5)(1), (2) (West 2014).

¶ 19       After the Act was signed into law, two separate lawsuits challenging its
       constitutionality were filed in the circuit court of Cook County in December 2014:
       Jones v. MEABF, No. 2014 CH 20027 (Cir. Ct. Cook Co.), and Johnson v.
       MEABF, No. 2014 CH 20668 (Cir. Ct. Cook Co.). The Jones plaintiffs include 14
       individual participants in the MEABF, some of whom are current employees and
       others who are retirees currently receiving an annuity, as well as four labor unions
       whose members are participants in the MEABF. 4 The defendants include MEABF
       and its board of trustees. The Johnson plaintiffs include one current employee
       participant in the MEABF, three retiree participants currently receiving annuities
       from the LABF, and the Municipal Employees Society of Chicago. The defendants
       include MEABF and LABF.

¶ 20       Both complaints sought a declaration that Public Act 98-641 is unconstitutional
       in violation of the pension protection clause because it diminishes pension benefits,
       and sought to enjoin its enforcement. The City and the State were permitted to
       intervene in both cases to defend the constitutionality of the Act. Thereafter, the
       City filed an affirmative defense that the Act represented a valid exercise of the
       City’s reserved sovereign powers to modify contractual rights and obligations.

           3
            For retirees with an annual annuity of less than $22,000, the increase may not be less than 1%
       in non-suspended years and is equal to 1% in suspended years. 40 ILCS 5/8-137(b-5)(4),
       8-137.1(b-5)(3) (West 2014).
           4
            These unions include the American Federation of State, County and Municipal Employees
       Council 31, Chicago Teachers Union Local 1, IFT-AFT, Teamsters Local 700, and the Illinois
       Nurses Association.
                                                     -6-
       However, during the pendency of the proceedings, this court entered its decision in
       Heaton, 2015 IL 118585, invalidating Public Act 98-599 as a violation of the
       pension protection clause. In light of this court’s ruling, the City advised the circuit
       court that it would not proceed with its reserved sovereign powers affirmative
       defense.

¶ 21       The parties ultimately filed cross-motions for summary judgment. The State
       adopted the City’s motion. Defendants argued that the Act does not diminish or
       impair benefits because it results in a “net benefit” for the Funds’ participants and
       will save the Funds from an otherwise inevitable insolvency. The City additionally
       maintained that any payment of benefits owed prior to the Act was not the
       obligation of any government entity but, rather, was the obligation solely of the
       Funds themselves, and that under the Pension Code “participants’ benefits [were]
       limited to sums on hand in the funds.” Therefore, under the Act, the pension funds
       will be saved from insolvency and put on a path to full actuarial funding, making
       the Funds’ participants “better off” than without the Act. Additionally, defendants
       argued that the modification of benefits under the Act is permissible as the product
       of a bargained-for exchange between the City and the labor unions.

¶ 22       On July 24, 2015, the circuit court issued its thorough ruling, declaring the Act
       unconstitutional. In rendering its opinion, the court found that the Act diminished
       pension benefits in violation of the pension protection clause in the same manner as
       the recent legislation struck down in Heaton. The court rejected the “net benefit”
       argument as “contrary to the pension protection clause, its purpose, and the
       Supreme Court’s interpretation of it.” The court reasoned that the argument rested
       on a misapprehension of the scope of the protections in the pension protection
       clause, disregarded settled distinctions between pension benefits and funding
       choices, and failed to account for the fact that the so-called “net benefits” are
       subject to legislative repeal at any time.

¶ 23       The court additionally rejected defendants’ assertion that the Act was a valid
       bargained-for exchange, finding that (1) the unions were not acting as agents in a
       collective bargaining process, (2) the unions could not have represented the retired
       members while at the same time acting as representatives of the active employees,
       and (3) nothing in the process that led to the enactment of the Act barred the
       individual plaintiffs from asserting their constitutional rights or operated as a
       waiver of those rights. Lastly, the court held that the unconstitutional provisions of


                                                -7-
       the Act could not be severed and that the Act was therefore unenforceable in its
       entirety.

¶ 24       The circuit court subsequently made the express written findings under Illinois
       Supreme Court Rule 18 (eff. Sept. 1, 2006), required when a statute is declared
       unconstitutional. The City and the Funds then appealed directly to this court
       pursuant to Illinois Supreme Court Rule 302(a) (eff. Oct. 4, 2011), and the State
       joined the City’s appeal. This court subsequently granted the City’s motion to
       consolidate the appeals.



¶ 25                                        ANALYSIS

¶ 26      These consolidated appeals are procedurally before us as a result of the circuit
       court’s ruling on cross-motions for summary judgment. See 735 ILCS 5/2-1005(c)
       (West 2014). When parties file cross-motions for summary judgment, they
       mutually agree that there are no genuine issues of material fact and that only a
       question of law is involved. Gurba v. Community High School District No. 155,
       2015 IL 118332, ¶ 10. Thus, our review is de novo. Id.

¶ 27        The sole question of law presented for our review is whether Public Act 98-641
       violates the pension protection clause set forth in article XIII, section 5, of the
       Illinois Constitution of 1970 (Ill. Const. 1970, art. XIII, § 5). That section provides:
       “Membership in any pension or retirement system of the State, any unit of local
       government or school district, or any agency or instrumentality thereof, shall be an
       enforceable contractual relationship, the benefits of which shall not be diminished
       or impaired.” Id.

¶ 28      This court has twice recently construed the plain language of this clause in
       Kanerva v. Weems, 2014 IL 115811, and Heaton, 2015 IL 118585. We have
       considered its object and purpose, and reaffirmed the scope of its protections,
       consistent with earlier holdings from this court and the appellate court since the
       pension protection clause was adopted in 1970.

¶ 29       As we have explained, under the clause, a public employee’s membership in a
       pension system is an enforceable contractual relationship, and the employee has a
       constitutionally protected right to the benefits of that contractual relationship.
       Heaton, 2015 IL 118585, ¶ 46. Those constitutional protections attach at the time
       an individual begins employment and becomes a member of the public pension
                                              -8-
       system. Id. Thus, under its plain and unambiguous language, the clause prohibits
       the General Assembly from unilaterally reducing or eliminating the pension
       benefits conferred by membership in the pension system. Id. ¶ 46 & n.12.

¶ 30       Having reaffirmed these constitutional principles, this court explained in
       Heaton that the provisions in Public Act 98-599 designed to reduce annuity
       benefits, including the provisions which jettisoned the benefits related to the annual
       annuity increases, diminished “the value of retirement annuities” for current
       members. Id. ¶ 47; id. ¶ 27 (specifically referencing Public Act 98-599, the
       replacement of the “flat 3% annual increases to [retirees’] annuities” with a
       “variable formula” and elimination of “at least one and up to five annual annuity
       increases”). This court held that those provisions “contravene the clear
       requirements of article XIII, section 5.” Id. ¶ 47. We explained that “there is simply
       no way that the annuity reduction provisions in Public Act 98-599 can be
       reconciled with the rights and protections established by the people of Illinois when
       they ratified the Illinois Constitution of 1970 and its pension protection clause.” Id.
       Accordingly, we concluded that the General Assembly overstepped the scope of its
       legislative power, and we declared those provisions invalid. Id.

¶ 31        The provisions in Public Act 98-641 have the same impact. They reduce the
       value of annual annuity increases, eliminate them entirely for certain years,
       postpone the time at which they begin, and completely eliminate the compounding
       component. The Act expressly states that these changes “apply regardless of
       whether the employee was in active service on or after the effective date of this
       amendatory Act.” 40 ILCS 5/8-174(a), 11-170(a) (West 2014). These
       modifications to pension benefits unquestionably diminish the value of the
       retirement annuities the members of MEABF and LABF were promised when they
       joined the pension system. Accordingly, based on the plain language of the Act,
       these annuity reducing provisions contravene the pension protection clause’s
       absolute prohibition against diminishment of pension benefits, and exceed the
       General Assembly’s authority. 5

¶ 32      We are cognizant that in enacting Public Act 98-641, the General Assembly
       expressly relied on the exigent circumstances of a fiscal crisis that threatens the

           5
             Notably, under the new provisions, not only are the benefits of current employees and retirees
       diminished, the current employees are now required to contribute more to obtain the reduced
       benefits. However, we need not consider the additional impact of these increased contributions in
       this case.

                                                      -9-
       Funds’ solvency to justify its diminishment of benefits in the interest of the greater
       public welfare. We do not dispute the accuracy of those findings. However, we
       thoroughly considered and rejected this justification in Heaton. We explained that
       there was “no possible basis for interpreting the provision to mean that its
       protections can be overridden if the General Assembly deems it appropriate.”
       Heaton, 2015 IL 118585, ¶ 75. To do so would require that we “ignore the plain
       language of the constitution and rewrite it to include ‘restrictions and limitations
       that the drafters did not express and the citizens of Illinois did not approve.’
       [Citation.]” Id. We held that to accept the position “that reducing retirement
       benefits is justified by economic circumstances would require that we allow the
       legislature to do the very thing the pension protection clause was designed to
       prevent it from doing.” Id.

¶ 33       Notwithstanding our holding in Heaton, that the annuity reducing provisions
       plainly violated the pension protection clause, and that exigent circumstances
       cannot serve as a basis for the General Assembly to unilaterally override those
       constitutional protections, defendants contend that Public Act 98-641 survives
       constitutional infirmity for two reasons: (1) the Act, when read as a whole, does not
       diminish or impair pension benefits but, instead, saves them in a manner that
       confers a “net benefit” or “offsetting benefit” to members; and (2) the Act was the
       result of a bargained-for exchange supported by consideration.



¶ 34                                     I. “Net Benefit”

¶ 35       Defendants argue that the Act provides an offsetting benefit to members
       because it rescues the Funds from insolvency and guarantees that the pensions will
       be paid, by imposing an enhanced statutory funding obligation on the City, by
       moving to a new method of actuarial based funding, and by providing statutory
       enforcement mechanisms. Distilled to its essence, defendants’ argument is that the
       Act’s new promise of financial stability offsets the diminishment of benefits,
       thereby conferring a benefit when viewed as a whole.

¶ 36      The argument starts from the flawed premise that the provisions of the Act that
       enhance the City’s funding obligation or change the method of funding to fully
       fund the pensions are “benefits” entitled to constitutional protection. This notion
       conflicts with settled precedent. As we explained in Kanerva, the benefits protected
       by the pension protection clause include those benefits that are “attendant to
                                               - 10 -
       membership in the State’s retirement systems” (2014 IL 115811, ¶ 41), including
       “subsidized health care, disability and life insurance coverage, eligibility to receive
       a retirement annuity and survivor benefits.” Id. ¶ 39. Legislative funding choices,
       however, remain outside the protections of article XIII, section 5, as consistently
       explained by this court over the past 40 years in People ex rel. Illinois Federation of
       Teachers v. Lindberg, 60 Ill. 2d 266 (1975), McNamee v. State, 173 Ill. 2d 433
       (1996), and People ex rel. Sklodowski v. State, 182 Ill. 2d 220 (1998).

¶ 37       In each of those cases, the plaintiffs argued that certain statutory pension
       funding schemes or appropriations of pension funding were to be treated as
       enforceable contractual rights protected by the pension protection clause, and
       created a binding funding obligation. The plaintiffs asserted that the failure to
       adhere to those funding provisions diminished or impaired their contract rights
       under the pension clause. Lindberg, 60 Ill. 2d at 271; McNamee, 173 Ill. 2d at
       436-37; Sklodowski, 182 Ill. 2d at 229. Particularly, in McNamee, the plaintiffs
       claimed that amendments to the statutory scheme “violated their constitutionally
       protected right to the ‘benefit’ of a more secure fund created by the prior funding
       method.” McNamee, 173 Ill. 2d at 439. Notably, in both McNamee and Sklodowski,
       the State responded, relying on this court’s precedent, that the “pension protection
       clause creates enforceable contractual rights only to receive benefits, not control
       funding” (Sklodowski, 182 Ill. 2d at 229), and “does not encompass how those
       benefits are funded” (McNamee, 173 Ill. 2d at 439).

¶ 38       This court agreed with the State and rejected the plaintiffs’ claims. After an
       exhaustive review of the constitutional convention debates regarding the purpose of
       the clause, we explained that “[t]he framers of our constitution simply did not
       intend that [the pension protection clause] control the manner in which the state and
       local governments fund their pension obligations.” McNamee, 173 Ill. 2d at 446.
       Rather, “the purpose of the amendment was to clarify and strengthen the right of
       state and municipal employees to receive their pension benefits, but not to control
       funding.” Id. at 440. We held that the clause “creates an enforceable contractual
       relationship that protects only the right to receive benefits.” Id. at 446. Thus,
       consistent with Lindberg, McNamee and Sklodowski, passing a funding statute that
       aims to provide full funding by increasing the multiplier used to determine the
       City’s contribution, or by changing the method of funding to an actuarially based
       funding requirement to ensure the Funds reach 90% funding by 2055 and beyond
       does not create a “benefit” protected by the pension protection clause.

                                               - 11 -
¶ 39        Furthermore, we reject the proposition that Public Act 98-641 evinces a
       legislative intent to establish an enforceable contractual right to full actuarial
       funding that would be protected against impairment by subsequent legislation. To
       address this argument, we begin with the understanding that “the principal function
       of a legislature is not to make contracts, but to make laws that establish the policy
       of the state.” National R.R. Passenger Corp. v. Atchison Topeka & Santa Fe Ry.
       Co., 470 U.S. 451, 466 (1985). These policies are “inherently subject to revision
       and repeal.” Id. Otherwise, “ ‘the essential powers of a legislative body’ ” would be
       drastically limited. A.B.A.T.E. of Illinois, Inc. v. Quinn, 2011 IL 110611, ¶ 34
       (quoting National R.R. Passenger Corp., 470 U.S. at 466); see also Envirite Corp.
       v. Illinois Environmental Protection Agency, 158 Ill. 2d 210, 215 (1994) (“There is
       no vested right in the continuance of a law. The legislature has an ongoing right to
       amend a statute.”); Choose Life Illinois, Inc. v. White, 547 F.3d 853, 858 n.4 (7th
       Cir. 2008) (“It is axiomatic that one legislature cannot bind a future legislature.”).

¶ 40       Based on these principles, it is presumed “that laws do not create private
       contractual or vested rights, but merely declare a policy to be pursued until the
       legislature ordains otherwise.” Sklodowski, 182 Ill. 2d at 231-32 (citing Fumarolo
       v. Chicago Board of Education, 142 Ill. 2d 54, 104 (1990)). The presumption that a
       statute does not create contractual obligations is not overcome “absent some clear
       indication that the legislature intends to bind itself contractually,” and that intention
       must be “clearly and unequivocally expressed.” National R.R. Passenger Corp.,
       470 U.S. at 465-66.

¶ 41       Despite the City’s reliance on the General Assembly’s stated purpose in
       enacting the legislation to save the Funds from insolvency and the inclusion of
       enforcement mechanisms, nothing in the Act’s funding provisions expressly
       provides for an enforceable contractual right to an “actuarial funding guarantee.”
       Indeed, the language in the enforcement provisions is qualified in many respects.
       40 ILCS 5/8-173.1, 11-169.1 (West 2014). For example, the Act provides that the
       Funds may bring a mandamus action at their discretion if the City fails to make its
       required annual contributions, and limits any repayment plans to those that do not
       “significantly imperil[ ] the public health, safety, or welfare.” 40 ILCS
       5/8-173.1(b), 11-169.1(b) (West 2014). Nothing in that language supports a
       legislative intent to establish clearly and unequivocally an enforceable contractual
       right of the members of the Fund to an “actuarial funding guarantee.” Accordingly,
       for all of these reasons, the statutory funding provisions are not a “benefit” that can
       be “offset” against an unconstitutional diminishment of pension benefits.
                                                 - 12 -
¶ 42       Finally, and most importantly, we reject the City’s assertion that the funding
       provisions in the Act must be regarded as a “benefit” because they replace an
       illusory set of unfunded statutory promises. The City maintains that prior to the
       Act, members of the Funds only had a right to the money available in their
       respective funds upon retirement. The City’s argument rests on section 22-403 of
       the Pension Code, which provides that “[a]ny pension payable under any law
       hereinbefore referred to shall not be construed to be a legal obligation or debt of the
       State, or *** city ***, but shall be held to be solely an obligation of such pension
       fund.” 40 ILCS 5/22-403 (West 2012).

¶ 43       The City’s contention, if adopted by this court, would be inconsistent with the
       plain meaning of the pension protection clause, would undermine our holding in
       Heaton, and would lead to an absurd and unjust result. Rather, as we have
       explained, the Illinois Constitution mandates that members of the Funds have “a
       legally enforceable right to receive the benefits they have been promised”—not
       merely to receive whatever happens to remain in the Funds. Heaton, 2015 IL
       118585, ¶ 46; Lindberg, 60 Ill. 2d at 271 (holding that the pension protection clause
       was a guarantee that members of the pension system would receive pension
       payments when they became due at retirement). The whole purpose of establishing
       the clause was “to eliminate any uncertainty as to whether state and local
       governments were obligated to pay pension benefits to their employees.”
       Sklodowski, 182 Ill. 2d at 228-29. The clause was “intended to force the funding of
       the pensions indirectly, by putting the state and municipal governments on notice
       that they are responsible for those benefits.” McNamee, 173 Ill. 2d at 442. How the
       benefits would be financed “was a matter left to the other branches of government.”
       Heaton, 2015 IL 118585, ¶ 16. Thus, the General Assembly and the City have been
       on notice since the ratification of the 1970 Constitution that the benefits of
       membership must be paid in full, and that they must be paid without diminishing or
       impairing them.

¶ 44        Since members of the Funds already have “a legally enforceable right to receive
       the benefits they have been promised” (id. ¶ 46), the clause already guarantees that
       pension participants will receive the money due them at the time of their retirement.
       By offering a purported “offsetting benefit” of actuarially sound funding and
       solvency in the Funds, the legislation merely offers participants in those funds what
       is already guaranteed to them—payment of the pension benefits in place when they
       joined the fund. To put it simply, in 10 years, the members of the Funds will be no
       less entitled to the benefits they were promised. Thus, the “guaranty” that the
                                               - 13 -
       benefits due will be paid is merely an offer to do something already constitutionally
       mandated by the pension protection clause. Since participants already enjoy that
       legal protection, we reject the notion that the promise of solvency can be “netted”
       against the unconstitutional diminishment of benefits.

¶ 45        To the extent that section 22-403 of the Pension Code purports to establish that
       MEABF and LABF members only have a right to amounts the Funds have on hand
       by virtue of the legislatively-prescribed funding choices, that section cannot
       overcome the constitutional guarantee. Id. ¶ 80 (“[A]ll [legislative] acts, contrary
       [to] or in violation of the constitutional charter, are void.”). Section 22-403 was
       originally enacted in 1945 (see 1945 Ill. Laws 1670 (§ 3)), prior to the 1970 Illinois
       Constitution and, thus, prior to the establishment of a contractual relationship
       between employer and employee. See Arnold v. Board of Trustees of the County
       Employees’ Annuity & Benefit Fund, 84 Ill. 2d 57, 60-61 (1981) (at that time, the
       retirement annuity provided to members of most pension funds was not
       characterized as contractual in nature). Thus, by declaring a contractual
       relationship rather than a gratuitous one, the pension clause established a legal
       obligation to pay pension benefits to the employees where previously there had
       been none. Sklodowski, 182 Ill. 2d at 228.

¶ 46       Section 9 of the Transition Schedule of the 1970 Illinois Constitution provides
       in pertinent part:

             “The rights and duties of all public bodies shall remain as if this
          Constitution had not been adopted with the exception of such changes as are
          contained in this Constitution. All laws, *** not contrary to, or inconsistent
          with, the provisions of this Constitution shall remain in force, until they shall
          expire by their own limitation or shall be altered or repealed pursuant to this
          Constitution.” Ill. Const. 1970, Transition Schedule § 9.

       Thus, to the extent that section 22-403 is inconsistent with the mandate in the
       pension protection clause, it did not survive ratification of the Illinois Constitution.
       See, e.g., Kanellos v. County of Cook, 53 Ill. 2d 161, 166-67 (1972) (referendum
       provision in pre-1970 statute invalid under section 9 where it conflicted with home
       rule powers granted under the 1970 Constitution).

¶ 47       Ultimately, the City’s “offsetting benefit” theory rests on the proposition that
       what it deems as “modest” diminishments are necessary to prevent insolvency in
       the future. Although we recognize that fiscal soundness is important, the General
                                                - 14 -
       Assembly may not utilize an unconstitutional method to achieve that end. Maddux
       v. Blagojevich, 233 Ill. 2d 508, 528 (2009) (“If a statute is unconstitutional, courts
       are obligated to declare it invalid” and “[t]his duty cannot be evaded or neglected,
       no matter how desirable or beneficial the legislation may appear to be.”). To allow
       such a construct to justify diminishing benefits would be merely an end run around
       the reserved sovereign powers argument, as explained in Heaton. The City’s theory
       would allow the legislature “through its funding decisions, [to] create the very
       emergency conditions used to justify its suspension of the rights conferred and
       protected by the constitution.” Heaton, 2015 IL 118585, ¶ 85. This is the very
       circumstance that the pension protection clause was intended to foreclose. To be
       clear, the constitution removed the option of unilaterally diminishing benefits as a
       means of attaining pension stability. Whether members of the Funds may be “better
       off” under the new terms of the Act despite the unconstitutional diminishment of
       their benefits, as defendants contend, is not for the General Assembly to decide
       unilaterally. The fundamental point here is that determination must be made, if at
       all, according to contract principles by mutual assent of the members, and not by
       legislative dictates.



¶ 48                               II. Bargained-for Exchange

¶ 49       The City next contends that the Act was not a product of unilateral action but,
       instead, codified a bargained-for exchange made between the City and the unions
       representing the Funds’ participants. The City maintains that the legislation was the
       result of negotiations between the City and its unions, over several years. In
       support, the City presented the affidavit of Matthew Brandon, the
       Secretary/Treasurer and Chief of Staff of Service Employees International Union
       Local 73 (SEIU).

¶ 50       Brandon stated that “a working group drawn from the 31 MEABF and LABF
       member unions was formulated to participate in negotiations with city
       representatives pertaining to the terms of such legislation.” Over a period of about
       two and a half years, representatives of the City “met with this working group to
       discuss developing a mutually beneficial solution to the pension crises.” As a result
       of the negotiations, the City representatives and the unions’ working group arrived
       at a proposal, which was presented to the legislature.


                                               - 15 -
¶ 51       Brandon asserted that before the proposed legislation was presented to the
       General Assembly, elected representatives from the 31 unions met to determine
       whether the unions could reach a consensus to support the terms of the proposed
       legislation. As a result of the meeting, 28 of the 31 unions represented at the
       meeting voted in favor of the proposed legislation. Following the vote, union
       representatives met with legislators to confirm their support for the proposed
       legislation.

¶ 52       The affidavit presented by Brandon also refers to “an affiliated committee
       comprised of and established for the benefit of SEIU retirees,” and states that he
       apprised the committee members of the “status and progress of the negotiations,”
       and that he informed the committee of the “final terms” of the bill, and that no
       committee members voiced an objection to the proposed negotiated terms. The
       legislation was promoted as the “product of arms-length negotiations between the
       City of Chicago and the duly elected representatives of the unions that advocated
       on behalf of the union members and retirees.”

¶ 53       Even taking as true the facts advanced to support the City’s claim, we hold that
       as a matter of law, members of the Funds did not bargain away their constitutional
       rights in this process. To be sure, ordinary contract principles allow for the
       modification of pension benefits in a bargained-for exchange for consideration.
       Buddell v. Board of Trustees, State University Retirement System, 118 Ill. 2d 99,
       104-05 (1987) (pension rights can be modified “in accordance with usual contract
       principles”). As we explained in Heaton, the pension protection clause was not
       intended to prohibit the legislature from providing “additional benefits” and
       requiring additional employee contributions or other consideration in exchange.
       Heaton, 2015 IL 118585, ¶ 46 n.12. Likewise, nothing prohibits an employee from
       knowingly and voluntarily agreeing to modify pension benefits from an employer
       in exchange for valid consideration from the employer. Kraus v. Board of Trustees
       of the Police Pension Fund, 72 Ill. App. 3d 833, 849 (1979); see also York v.
       Central Illinois Mutual Relief Ass’n, 340 Ill. 595, 602 (1930) (“one party to a
       contract cannot by his own acts release or alter its obligations. The intention must
       be mutual.”).

¶ 54       In the context of the collective bargaining process for public employees,
       employees designate a particular union as their exclusive agent for collective
       bargaining negotiations. See 5 ILCS 315/6 (West 2014). The cases that defendants
       rely upon to support a bargained-for exchange argument involved agreements
                                              - 16 -
       reached through the collective bargaining process. See Ballentine v. Koch, 674
       N.E.2d 292, 296 (N.Y. Ct. App. 1996) (“[B]ecause plaintiffs designated the PBA as
       their agent for the collective bargaining negotiations at issue here and were thus
       bound by its actions taken on their behalf during the negotiation process [citation],
       the PBA’s waiver of the constitutional protections of [New York’s pension
       protection clause] is valid as to plaintiffs ***.”); Schacht v. City of New York, 346
       N.E.2d 518, 519 (N.Y. Ct. App. 1976) (“Plaintiff, having designated the union to be
       her agent for collective bargaining purposes, is bound by agreements made by that
       union on her behalf.”).

¶ 55        In this case, it is undisputed that the unions were not acting as authorized agents
       within a collective bargaining process. Thus, we need not resolve whether the vote
       taken by union representatives as expressed in the Brandon affidavit bound
       members of the Funds in a collective bargaining process. Rather, we agree with the
       trial court that “these negotiations were no different than legislative advocacy on
       behalf of any interest group supporting collective interests to a lawmaking body.”
       The individual members of the Funds have done nothing that could be said to have
       unequivocally assented to the new terms or to have “bargained away” their
       constitutional rights. Accordingly, nothing in the legislative process that led to the
       enactment of the Act constituted a waiver of the Funds members’ constitutional
       rights under the pension protection clause.



¶ 56                                      III. Severability

¶ 57       Finally, we must consider whether the invalid provisions may be severed from
       the remaining provisions of the statute, which is a question of legislative intent.
       Heaton, 2015 IL 118585, ¶ 91. We look first to the statute’s own severability
       provision, which creates a rebuttable presumption of legislative intent. Id. ¶ 95. To
       rebut the presumption, the court must determine whether the legislature would have
       passed the law without the invalid parts. Id. We consider “whether the legislative
       purpose in passing the act is significantly undercut or altered by the elimination of
       those invalid sections.” Id.

¶ 58       Applying these principles to the present case, the Act’s severability provision
       specifies certain sections of the Act that are declared “mutually dependent and
       inseverable.” Pub. Act 98-641, § 93 (eff. June 9, 2014). These sections include the
       provisions pertaining to the annual annuity increases, which we have found to be
                                                - 17 -
       unconstitutional, as well as the provisions pertaining to the City’s financing
       obligations and the enforcement mechanisms. With respect to these sections, the
       severability clause provides, “If any of those provisions is held invalid other than as
       applied to a particular person or circumstance, then all of those provisions are
       invalid.” Id.

¶ 59       The circuit court found that this expression of legislative intent was confirmed
       by the General Assembly’s express findings along with the representations made
       by legislative proponents that the legislation intended to tie the reduction in
       employee benefits to the funding and enforcement provisions of the Act “as part of
       a unified package.” Accordingly, the circuit court held that “the General Assembly
       would not have enacted Public Act 98-641 without the invalid provisions.” The
       parties do not dispute the circuit court’s conclusion, and we agree with the circuit
       court’s assessment that the Act is unenforceable in its entirety.



¶ 60                                      CONCLUSION

¶ 61      For all of the foregoing reasons, the judgment of the circuit court declaring
       Public Act 98-641 to be unconstitutional and permanently enjoining its
       enforcement is affirmed.

¶ 62      Affirmed.




                                               - 18 -
