Arlington Heights Police Pension Fund v. Pritzker

2023 IL App (2d) 220198, 212 N.E.3d 608, 464 Ill. Dec. 198

• Court: Appellate Court of Illinois
• Decided: February 7, 2023
• Docket: 2-22-0198
• Status: Published

Opinion

2023 IL App (2d) 220198 No. 2-22-0198 Opinion filed February 7, 2023 ______________________________________________________________________________

IN THE

APPELLATE COURT OF ILLINOIS

SECOND DISTRICT ______________________________________________________________________________

THE ARLINGTON HEIGHTS POLICE ) Appeal from the Circuit Court PENSION FUND, THE AURORA POLICE ) of Kane County. PENSION FUND, THE CHAMPAIGN ) POLICE PENSION FUND, THE CHICAGO ) HEIGHTS POLICE PENSION FUND, THE ) CHICAGO RIDGE POLICE PENSION ) FUND, THE CICERO POLICE PENSION ) FUND, THE De KALB POLICE PENSION ) FUND, THE ELGIN POLICE PENSION ) FUND, THE ELMHURST POLICE PENSION ) FUND, THE EVANSTON POLICE PENSION ) FUND, THE MOKENA POLICE PENSION ) FUND, THE PALOS HEIGHTS POLICE ) PENSION FUND, THE RANTOUL POLICE ) PENSION FUND, THE VILLA PARK ) POLICE PENSION FUND, THE WOOD ) DALE POLICE PENSION FUND, THE ) WOODRIDGE POLICE PENSION FUND, ) THE MAYWOOD FIREFIGHTERS’PENSION) FUND, THE PLEASANTVIEW ) FIREFIGHTERS’ PENSION FUND, THOMAS) HENDERSON,SCOTT MAY, LAWRENCE ) SUTTLE, DANIEL HOFFMAN, PATRICK ) SIMONS, PATRICK KELLY, GENE ) KEELER, STEVEN ANKARLO, LEE ) MORRIS, DEAN MANN,PAUL MOTT, JIM ) KAYES, JAMES ROSCHER, THOMAS ) QUIGLEY, VICTOR VALDEZ, THOMAS ) TUREK, WILLIAM CZAJKOWSKI, DAVID ) DELANEY, RICHARD WEIKAL, DAVID ) FLOWERS SR., ROBERT MILLER, DAN ) RANKOVICH, AARON WERNICK, ) TIMOTHY SCHOOLMASTER, DAVE ) LOEHMAN, MIKE HERBERT, MATTHEW ) 2023 IL App (2d) 220198

BROSS, MICHAEL TITTLE, SCOTT ) SHROEDER, BENJAMIN DEFILIPPIS, ) JORDAN ANDERSON, DENNIS KOLETSOS,) WILLIAM BODNAR, and FRED ) MALAYTER, ) ) Plaintiffs-Appellants, ) ) v. ) No. 21-CH-55 ) JAY ROBERT “J.B.” PRITZKER, in His ) Official Capacity as Governor of the State of ) Illinois; CHRISTOPHER B. MEISTER, in His ) Official Capacity as Executive Director of the ) Illinois Finance Authority; DANA POPISH ) SEVERINGHAUS, in Her Official Capacity as ) Acting Director of Insurance; ) THE BOARD OF TRUSTEES ) FOR THE POLICE OFFICERS’ PENSION ) INVESTMENT FUND; and THE BOARD ) OF TRUSTEES FOR THE FIREFIGHTERS’ ) PENSION INVESTMENT FUND, ) Honorable ) Robert K. Villa, Defendants-Appellees. ) Judge, Presiding. ______________________________________________________________________________

PRESIDING JUSTICE McLAREN delivered the judgment of the court, with opinion. Justices Hutchinson and Jorgensen concurred in the judgment and opinion.

OPINION

¶1 The plaintiffs who are individual active- and retired-beneficiary representatives from

multiple suburban and downstate police and firefighter pension funds appeal from the trial court’s

order granting summary judgment in favor of defendants. We affirm.

¶2 I. BACKGROUND

¶3 In 2019, defendant Governor Jay Robert “J.B.” Pritzker signed into law Public Act 101-

610 (eff. Jan. 1, 2020) (Act) that, inter alia, amended portions of the Illinois Pension Code (40

ILCS 5/1-101 et seq. (West 2018)). Prior to the Act, there were approximately 650 local police

and firefighter pension funds for municipalities with populations between 5000 and 500,000.

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These funds were governed by five-member boards comprised of two appointed members, two

members elected by active members, and one member elected by other beneficiaries (i.e., retirees).

Id. §§ 3-128, 4-121. Each board was responsible for determining the retirement, disability, and

death benefits payable to fund members and other beneficiaries. Id. §§3-148, 4-139. Member and

employer contribution requirements were set in the Pension Code. See id. §§ 3-125, 3-125.1, 4-

118, 4-118.1. Employers were required to make contributions that, added to the employee

contributions, were sufficient to cover the fund’s “normal cost” (the amount necessary to pay the

additional benefits earned by current services) and to fund 90% of its actuarial liabilities by 2040,

paying down unfunded liabilities by a specified amount each year. Id. §§ 3-125, 4-118.

¶4 Among other things, the Act consolidated all existing relevant police and firefighter

pension fund assets into two statewide police and firefighter pension investment funds, one for

police and one for firefighters. The local funds were to transfer custody of and investment

responsibility for their assets to the appropriate investment fund, which was to invest and

administer the pooled assets of the funds collectively. However, each local fund retained a separate

“account” such that the “operations and financial condition of each participating pension fund

account shall not affect the account balance of any other participating pension fund.” 40 ILCS

5/22B-118(c), 22C-118(c) (West 2020). The returns on the investments were to be “allocated and

distributed pro rata among each participating pension fund account in accordance with the value

of the pension fund assets attributable to each fund.” Id. The statewide investment fund boards

were to be comprised of nine members: three officers or executives from participating

municipalities, three active participants of the local funds (who were elected by active

participants), two beneficiaries from the local funds (elected by beneficiaries), and one member

recommended by the Illinois Municipal League (appointed by the governor and confirmed by the

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Senate). Id. §§ 22B-115(b)(1)-(4), 22C-115(b)(1)-(4). The Act provided that the local funds

retained “exclusive authority to adjudicate and award” retirement and other benefits, and the

investment funds “shall not have the authority to control, alter, or modify, or the ability to review

or intervene in, the proceedings or decisions” of the local funds. Id. §§ 3-124.3, 4-117.2. In

addition, the Act authorized the Illinois Finance Authority to lend up to $7.5 million to each

investment fund that, if borrowed, would be repaid with interest. Id. §§ 22B-120(h), 22C-120(h).

¶5 Plaintiffs filed a three-count complaint seeking declaratory, injunctive, and other relief and

a finding that the Act violated article XIII, section 5, of the Illinois Constitution (Ill. Const. 1970,

art. XIII, § 5), commonly known as the pension protection clause (count I), and/or article I, section

16 of the Illinois Constitution (Ill. Const. 1970, art. I, § 16), commonly known as the contracts

clause (count II), and/or article I, section 15 of the Illinois Constitution (Ill. Const. 1970, art. I,

§ 15), commonly known as the takings clause (count III). The trial court granted certain of

defendants’ motions to dismiss; all of the named funds were dismissed as plaintiffs for lack of

standing, and count II was dismissed against the remaining plaintiffs for failing to state a cause of

action under the contracts clause. These rulings are not challenged on appeal. The trial court later

entered summary judgment on counts I and III in favor of defendants. It is from this grant of

summary judgment that this appeal arises.

¶6 II. ANALYSIS

¶7 Plaintiffs contend that the trial court erred in granting summary judgment in favor of

defendants. Summary judgment is appropriate only when “the pleadings, depositions, and

admissions on file, together with the affidavits, if any, show that there is no genuine issue as to

any material fact and that the moving party is entitled to a judgment as a matter of law.” 735 ILCS

5/2-1005(c) (West 2020). A triable issue that will preclude the entry of summary judgment exists

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where the material facts are disputed or where reasonable persons might draw different inferences

from undisputed facts. G.I.S. Venture v. Novak, 2014 IL App (2d) 130244, ¶ 8. In determining

whether a genuine issue of material fact exists, we must construe the materials of record strictly

against the movant and liberally in favor of the nonmoving party. Harlin v. Sears Roebuck & Co.,

369 Ill. App. 3d 27, 31 (2006). While the use of summary judgment is to be encouraged as an aid

in the expeditious disposition of a lawsuit, it is a drastic means of disposing of litigation and should

be allowed only when the right of the moving party is clear and free from doubt. G.I.S. Venture,

2014 IL App (2d) 130244, ¶ 8. A grant of summary judgment is reviewed de novo. Harlin, 369 Ill.

App. 3d at 31.

¶8 Plaintiffs first argue that the trial court erred in granting summary judgment on count I,

where the court found that the Act did not violate the pension protection clause, which states:

“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. Our supreme court has held that “the clause means precisely what it says: ‘if something

qualifies as a benefit of the enforceable contractual relationship resulting from membership in one

of the State’s pension or retirement systems, it cannot be diminished or impaired.’ ” In re Pension

Reform Litigation, 2015 IL 118585, ¶ 45 (quoting Kanerva v. Weems, 2014 IL 115811, ¶ 38). Once

someone begins work and becomes a member of a public retirement system, “any subsequent

changes to the Pension Code that would diminish the benefits conferred by membership in the

retirement system cannot be applied to that individual.” Id. ¶ 46. The protection of the pension

protection clause “is broad because it ‘protects all of the benefits that flow from the contractual

relationship arising from membership in a public retirement system.’ ” (Emphasis added.)

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Williamson County Board of Commissioners v. Board of Trustees of the Illinois Municipal

Retirement Fund, 2020 IL 125330, ¶ 32 (quoting Matthews v. Chicago Transit Authority, 2016 IL

117638, ¶ 54).

¶9 Plaintiffs first assert that the Act violates the pension protection clause because it impairs

the members’ rights to vote in the election of local pension board members “and to have that local

board control and invest local pension funds.” According to plaintiffs, voting rights are a benefit

that flows from the contractual relationship and, therefore, cannot be changed.

¶ 10 Plaintiffs are correct that the clause’s protections extend beyond the pension payment itself.

For example, in Williamson County, the plaintiffs, all elected members of the Williamson County

Board of Commissioners, had satisfied the requirements of the Pension Code to participate in the

Illinois Municipal Retirement Fund (IMRF). The legislature subsequently amended the Pension

Code to add a requirement that altered the IMRF eligibility for elected county board members,

requiring county board adoption of an IMRF participation resolution within 90 days of each

election when a member of the county board is elected or reelected. Williamson County, 2020 IL

125330, ¶ 9. The plaintiffs’ participation in IMRF was terminated when Williamson County failed

to adopt such a resolution in a timely manner.

¶ 11 In finding the amendment to the Pension Code unconstitutional, our supreme court noted

that “immediate and direct diminishments to public pension benefits *** is not the only category

of unilateral legislative change prohibited by article XIII, section 5, of the Illinois Constitution.”

Id. ¶ 40. To “illustrate this distinct protection of article XIII, section 5, of the Illinois Constitution

that prohibits the legislature from unilaterally imposing new limitations or requirements on public

pension benefits that did not exist when the public employee was hired” (id. ¶ 42), the court

reviewed two cases in which the court had previously found improper new requirements placed on

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pension benefits: (1) Buddell v. Board of Trustees, 118 Ill. 2d 99 (1987) (involving changes to

employees’ right to purchase service credit for time spent in military service, without limitations),

and (2) Carmichael v. Laborers’ & Retirement Board Employees’ Annuity & Benefit Fund, 2018

IL 122793 (involving amendments to the Pension Code that eliminated the ability of the plaintiffs

to purchase service credit during a leave of absence to work for a local union). Noting that “the

calculation of retirement annuity benefit is based on a formula that considers the number of service

credits of the employee and the employee’s final earnings on the date of retirement,” the court

concluded that the termination of the plaintiffs’ continued participation in IMRF, predicated on

the new statutory requirements, “decreased their service credits and negatively impacted their

annuity benefit calculation.” Williamson County, 2020 IL 125330, ¶ 48. Thus, the amendment

constituted a new requirement for the plaintiffs’ continued IMRF participation and it “diminished

or impaired their protected public pension benefits.” Id. ¶ 50.

¶ 12 The benefits at issue in Williamson County, Buddell, and Carmichael were benefits that

affected the participants’ ability to continue participation (Williamson County) or their ability to

increase their service credits (Buddell and Carmichael), thereby negatively affecting the

calculation of their eventual benefit payments. These are the types of benefits “that flow from the

contractual relationship arising from membership in a public retirement system.” (Internal

quotation marks omitted.) Id. ¶ 32. These benefits directly impacted the participants’ eventual

pension benefit.

¶ 13 As our supreme court has said:

“The benefits protected by the pension protection clause include those benefits attendant

to membership in the State’s retirement system, such as subsidized health care, disability

and life insurance coverage, and eligibility to receive a retirement annuity and survivor

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benefits (see Jones v. Municipal Employees’ Annuity & Benefit Fund, 2016 IL 119618,

¶ 36; Kanerva, 2014 IL 115811, ¶¶ 39, 41), along with the right to purchase optional

service credit in the state pension system for past military service (see Buddell v. Board of

Trustees, 118 Ill. 2d 99, 105-06 (1987)).” Carmichael, 2018 IL 122793, ¶ 25.

¶ 14 We determine that the ability to vote in the election of local pension board members and

to have that local board control and invest local pension funds is not of the same nature and

essentiality as the ability to participate in the fund, accumulate credited time, or receive health

care, disability, and life insurance coverage. Voting for the local board is, at best, ancillary to a

participant’s receipt of the pension payment and other assets. The local boards were entrusted with

investing the contributions so that payments could be made to participants. However, choosing

who invests funds does not guarantee a particular outcome for benefit payments. The local boards

also did not have any say in the actual method of funding; contribution requirements were set in

the Pension Code. See 40 ILCS 5/3-125, 3-125.1, 4-118, 4-118.1 (West 2018). Our supreme court

has held that the pension protection clause does not control the manner in which state and local

governments fund their pension obligations. See Jones v. Municipal Employees’ Annuity and

Benefit Fund of Chicago, 2016 IL 119618, ¶ 38. Voting for the board members who deal with the

funding of the pension fund is no more than a procedure that may have some impact on the funding;

it is not a direct impact on the payment of benefits. Where the methods of funding a retirement

system are not governed by the pension protection clause, we cannot say that the right to choose

who invests the funds of the system is more of a protected benefit. Thus, we conclude that the trial

court did not err in granting summary judgment on this basis.

¶ 15 Plaintiffs next argue that the trial court failed to consider their argument that the Act

diminishes and impairs their pension benefits because it “requires the local funds to pay for the

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newly-created and consolidated funds’ startup costs, administration, and operation, as well as

transition costs of up to $15,000,000 plus interest.” Plaintiffs make no argument as to how the

requirement to pay for the administration of the funds would in any way impair or diminish the

payment of their pension benefits. The local funds are already required to pay the costs of

administration of the local funds, and plaintiffs do not cite any evidence to show that the costs of

administration of the new funds, even including startup costs, would be any greater. The quotation

referencing $15 million plus interest is misleading, at best. Section 22B-120(h) of the Act does not

require the borrowing, let alone spending, of $15 million for such expenses. It merely authorizes

the Illinois Finance Authority to lend up to $7.5 million to each investment fund that, if borrowed,

would be repaid with interest. See 40 ILCS 5/22B-120(h), 22C-120(h) (West 2020). We further

note that the level of benefit payments is not determined by the level of funding in the fund.

Member and employer contribution requirements are set in the Pension Code; if more money were

to be required to pay the already-established benefits, future contribution requirements could be

amended. Plaintiffs present no evidence that the Act actually reduced the funding available for the

payment of benefits.

¶ 16 We find no error in the trial court’s grant of summary judgment in defendants’ favor as to

count I and grant plaintiffs no relief.

¶ 17 Plaintiffs next contend that the Act violates the takings clause of the Illinois Constitution.

Article I, section 15 of the Illinois Constitution states: “Private property shall not be taken or

damaged for public use without just compensation as provided by law. Such compensation shall

be determined by a jury as provided by law.” Ill. Const. 1970, art. I, § 15.

¶ 18 Plaintiffs spend a great deal of their argument attacking the trial court’s conclusion, based

on the case of Empress Casino Joliet Corp. v. Giannoulias, 231 Ill. 2d 62 (2008), that a takings

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clause claim must be tied to real property. However, we are not bound by the reasoning of the trial

court and may affirm on any basis presented in the record. See People ex rel. Alvarez v. $59,914

United States Currency, 2022 IL 126927, ¶ 24. We need not address the issue of real property, as

plaintiffs failed to establish the existence of an elemental requirement—that of “private property.”

As we stated in our pension protection clause analysis (supra ¶ 14), while plaintiffs have a

constitutional right to receive pension benefits, they do not have a property right in any particular

assets or level of funding. Plaintiffs are individual active and retiree/beneficiaries of the local

funds: they have no right to the investments held by the funds; rather, they are entitled only to

present or future payments from the funds. No plaintiff has any right to direct the investment of

the monies held by the funds or direct that they receive any different course of payments (either in

amount or frequency) beyond that established by statute and the funds. Simply put, plaintiffs do

not own the funds that the Act requires to be transferred to the new statewide police and firefighter

pension investment funds. The Act does nothing more than require one type of government-created

pension fund to transfer assets to another type of government-created pension fund. Plaintiffs’

rights to receive benefit payments are not impacted by these transfers. As the “property” at issue

here is not the private property of the plaintiffs, the takings clause is neither relevant nor applicable

here. Thus, we find no error in the trial court’s grant of summary judgment on count III.

¶ 19 III. CONCLUSION

¶ 20 For these reasons, the judgment of the circuit court of Kane County is affirmed.

¶ 21 Affirmed.

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Arlington Heights Police Pension Fund v. Pritzker, 2023 IL App (2d) 220198

Decision Under Review: Appeal from the Circuit Court of Kane County, No. 21-CH-55; the Hon. Robert K. Villa, Judge, presiding.

Attorneys Daniel F. Konicek, and Amanda J. Hamilton, of Konicek & Dillon, for P.C., of Geneva, for appellants. Appellant:

Attorneys Kwame Raoul, Attorney General (Jane Elinor Notz, Solicitor for General, and Richard S. Huszagh, Assistant Attorney General, of Appellee: counsel), Richard F. Friedman and Langdon D. Neal, of Neal & Leroy, LLC, Michael A. Scodro and Brett E. Legner, of Mayer Brown LLP, and Joseph M. Burns, Taylor E. Muzzy, and David Huffman-Gottschling, of Jacobs, Burns, Orlove, and Hernandez LLP, all of Chicago, for appellees.

Paul Denham and Jill D. Leka, of Clark Baird Smith LLP, of Rosemont, for amicus curiae Illinois Municipal League.

Joseph Weishampel, Margaret Angelucci, and Jerry Marzullo, of Asher, Gittler & D’Alba, Ltd., of Chicago, for amicus curiae Associated Firefighters of Illinois.

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