2014 IL App (1st) 130416
No. 1-13-0416
SIXTH DIVISION June 27, 2014
IN THE APPELLATE COURT OF ILLINOIS FIRST JUDICIAL DISTRICT
BOARD OF TRUSTEES OF THE RIVERDALE ) Appeal from the POLICE PENSION FUND, ) Circuit Court of ) Cook County. Plaintiff-Appellant, ) ) v. ) No. 11 CH 35736 ) VILLAGE OF RIVERDALE, ) The Honorable ) Franklin Valderrama, Defendant-Appellee. ) Judge Presiding.
JUSTICE LAMPKIN delivered the judgment of the court, with opinion. Presiding Justice Rochford and Justice Hall concurred in the judgment and opinion.
OPINION
&1 Plaintiff, the Board of Trustees of the Riverdale Police Pension Fund (Pension Board)1,
appeals the order of the circuit court granting summary judgment in favor of defendant, the
Village of Riverdale (Village)2, and denying partial summary judgment in favor of plaintiff.
Plaintiff contends the circuit court erred in finding sections 3-125 and 3-127 of the Illinois
Pension Code (Pension Code) (40 ILCS 5/3-125 (West 2008); 40 ILCS 5/3-127 (West 2010)) did
not provide plaintiff with a contractual right to a specified level of funding of the Riverdale
1 The Illinois Public Pension Fund Association filed a brief in support of plaintiff as an amicus curiae. 2 The Illinois Municipal League filed a brief in support of defendant as an amicus curiae. 1-13-0416
Police Pension Fund (Pension Fund). Plaintiff additionally contends the circuit court erred in
failing to find defendant liable for underfunding the Pension Fund. Based on the following, we
affirm in part and reverse in part and remand for additional proceedings.
&2 FACTS
&3 Defendant Village is a municipality as defined by section 3-103 of the Pension Code. 40
ILCS 5/3-103 (West 2010). In accordance with section 3-101 of the Pension Code, the Village
established the Pension Fund for the benefit of the municipality's police officers, participants,
and beneficiaries. See 40 ILCS 5/3-101 (West 2010). Plaintiff Pension Board is an
administrative agency created by the Pension Code (40 ILCS 5/3-128 (West 2010)) with the
exclusive authority to control and manage the Pension Fund (40 ILCS 5/3-132 (West 2010)). In
addition, the Pension Board has the authority to order the payment of pensions and other benefits
to beneficiaries. 40 ILCS 5/3-132 (West 2010). Section 3-143 of the Pension Code directs the
Pension Board to "certify" in an annual report the estimated amount necessary in the calendar
year to "meet the annual requirements of the fund as provided in Section 3-125 and 3-127." 40
ILCS 5/3-143 (West 2010).
&4 Section 3-125 of the Pension Code provided3:
"The city council or the board of trustees of the municipality shall annually levy a
tax upon all the taxable property of the municipality at the rate on the dollar
which will produce an amount which, when added to the deductions from the
salaries or wages of police officers, and revenues available from other sources,
will equal a sum sufficient to meet the annual requirements of the police pension
fund. The annual requirements to be provided by such tax levy are equal to (1)
the normal cost of the pension fund for the year involved, plus (2) the amount 3 The statute has since been amended.
2 1-13-0416
necessary to amortize the fund's unfunded accrued liabilities as provided in
Section 3-127. The tax shall be levied and collected in the same manner as the
general taxes of the municipality, and in addition to all other taxes now or
hereafter authorized to be levied upon all property within the municipality, and
shall be in addition to the amount authorized to be levied for general purposes as
provided by Section 8-3-1 of the Illinois Municipal Code, approved May 29,
1961, as amended. The tax shall be forwarded directly to the treasurer of the
board within 30 business days after receipt by the county.
The police pension fund shall consist of the following moneys which shall
be set apart by the treasurer of the municipality:
(1) All moneys derived from the taxes levied hereunder;
(2) Contributions by police officers under Section 3-125.1;
(3) All moneys accumulated by the municipality under any previous
legislation establishing a fund for the benefit of disabled or retired police officers;
(4) Donations, gifts or other transfers authorized by this Article." 40 ILCS
5/3-125 (West 2008).
&5 Section 3-127 of the Pension Code provides:
"The board shall establish and maintain a reserve to insure the payment of all
obligations incurred under this Article excluding retirement annuities established
under Section 3-109.3. The reserve to be accumulated shall be equal to the
estimated total actuarial requirements of the fund.
If the pension fund has a reserve of less than the accrued liabilities of the
fund, the board of the pension fund, in making its annual report to the city council
3 1-13-0416
or board of trustees of the municipality, shall designate the amount, calculated as
a level percentage of payroll, needed annually to insure the accumulation of the
reserve to the level of the fund's accrued liabilities over a period of 40 years from
July 1, 1993 for pension funds then in operation, or from the date of establishment
in the case of a fund created thereafter, so that the necessary reserves will be
attained over such a period." 40 ILCS 5/3-127 (West 2010).
&6 Moreover, pursuant to section 22-403 of the Pension Code, the pension funds may only
be expended for public purposes and not for any corporate purposes. 40 ILCS 5/22-403 (West
2010).
&7 On August 19, 2010, the Pension Board filed the underlying case seeking a declaratory
judgment where it alleged the Village breached its statutory funding obligations under sections
3-125 and 3-127 of the Pension Code (40 ILCS 5/3-125 (West 2008); 40 ILCS 5/3-127 (West
2010)) by failing to levy the appropriate taxes for pension contributions from 2000 through 2010.
Plaintiff requested a judgment declaring that the Village's tax levies and amounts contributed to
the Pension Fund were insufficient and requiring the Village to annually assess taxes in concert
with sections 3-125 and 3-127 of the Pension Code. Plaintiff further requested an order requiring
the Village to turn over all pension contributions in its possession.
&8 According to the Pension Board's complaint, the Illinois Department of Insurance
regulates public pension funds, such as the one at issue here. In that capacity, the Illinois
Department of Insurance issues an annual report to the Pension Board indicating the tax amount,
as determined by an actuary, necessary to meet the municipal contribution requirements provided
by the Pension Code. The actuarial report then is forwarded by the Pension Board to the Village.
According to the Pension Board's complaint, the Village did not follow the recommendations of
4 1-13-0416
the Illinois Department of Insurance during certain fiscal years and, as a result, as of the end of
the 2005 fiscal year, the Village owed the Pension Fund a sum of approximately $615,408.
&9 On January 12, 2011, the Village filed its initial answer, and discovery ensued. In an
interrogatory sent by the Pension Board to the Village, the Pension Board inquired:
"As of this date, is there any amount of money owed to the Riverdale
Police Pension Fund, for annual pension fund contributions by Defendant from its
General Fund, or any other Village Fund to the Pension Fund, and if so state:
(a) the exact amount owed to the Pension Fund;
(b) the specific reason why the defendant filed, refused or neglected to
deposit property taxes levied, collected and received by the defendant on behalf of
the plaintiff, with the Pension Fund;
(c) If the defendant admits that it failed, refused or neglected to deposit
property taxes levied, collected and received by it, on behalf of the Pension Fund,
state what the defendant did with those property taxes and if these funds were
used by the Village, what the defendant used those funds for."
The Village responded that there was money owed to the Pension Fund due to an "accounting
practices" oversight. The Village stated that the funds owed to the Pension Fund were deposited
into the "Village pooled account" and used "for general operations." Then, in response to the
Pension Board's request to admit facts, the Village stated that, from 2003 to 2010, it did not
follow the tax levy recommendations issued by the Illinois Department of Insurance and did not
retain its own actuary to determine the appropriate tax levy amounts pursuant to section 3-125 of
the Pension Code. In addition, the Village revealed the taxes levied in comparison to those
recommended by the Illinois Department of Insurance, such that: (1) for 2003, the
5 1-13-0416
recommendation was $432,261 and the Village levied $420,000; (2) for 2004, the
recommendation was $473,860 and the Village levied $262,940; (3) for 2005, the
recommendation was $486,673 and the Village levied $262,940; (4) for 2006, the
recommendation was $603,772 and the Village levied $280,000; (5) for 2007, the
recommendation was $651,990 and the Village levied $440,000; (6) in 2008, the
recommendation was $754,607 and the Village levied $440,000; (7) in 2009, the
recommendation was $849,300 and the Village levied $440,000; and (8) in 2010, the
recommendation was $1,018,396 and the Village levied $866,168.
&10 In August 2011, the Pension Board filed a motion for partial summary judgment as to
liability, arguing that it was entitled to summary judgment where it was undisputed that money
was owed to the Pension Fund due to the Village's failure to remit those property taxes received
by the Village but not transferred to the Pension Fund and its failure to comply with the tax levy
recommendations issued by the Illinois Department of Insurance. The Village responded that
summary judgment was not proper because the Pension Code did not yet require the Pension
Fund to be fully funded and such a finding was not proper pursuant to McNamee v. State of
Illinois, 173 Ill. 2d 433 (1996). On February 17, 2012, the circuit court denied the Pension
Board's motion for partial summary judgment without expressing its basis for doing so and
provided the Village with the opportunity to file affirmative defenses. In response, the Village
filed the affirmative defense that the Pension Code did not require the Pension Fund to be fully
funded yet.
&11 On June 22, 2012, after the close of discovery, the Village filed a motion for summary
judgment, arguing that it was not liable pursuant to McNamee because the Pension Board did not
allege any Pension Fund participant had been denied benefits due to alleged underfunding and
6 1-13-0416
there was no evidence the benefits had been impaired. The Village additionally cited People ex
rel. Illinois Federation of Teachers v. Lindberg, 60 Ill. 2d 266 (1975), and argued that section 5
of article XIII of the Illinois Constitution (Ill. Const. 1970, art. XIII, § 5) does not create a
contractual basis for pension fund participants to expect a particular level of funding, but instead
only provides the right to benefits upon retirement. The Village included its expert witness'
testimony that there was no measurable actuarial damage caused to the Pension Fund as a result
of the alleged underfunding and no default on payments to beneficiaries of the Pension Fund.
Additionally, the Village argued that the Pension Board failed to provide any evidence that the
Pension Fund was on the verge of default or imminent bankruptcy. Attached to the motion was
the deposition transcript of the Village's actuary expert, Arthur Tepfer, a letter from Tepfer to the
Village's counsel dated April 16, 2012,4 and a letter from the Village's counsel to Tepfer dated
May 22, 2012,5 as well as the Pension Board's complaint and the Village's affirmative defenses.
&12 The Pension Board responded that there were contested issues of material fact as to the
amount of damages in the case, which precluded the entry of summary judgment. The Pension
Board cited testimony from its witnesses establishing that the Village had a net pension
obligation of over $1 million due to the Village's failure to submit pension contributions in
satisfaction of the annual required amount and that the Pension Fund suffered resulting "financial
damage." The Pension Board further argued that McNamee was distinguishable because it did
4 This letter advises the Village's counsel as to the documents Tepfer reviewed in preparation of his
actuarial opinion, which included, inter alia, the court pleadings, the Pension Fund's actuarial reports for 1998-99
and 2007-08, the Pension Fund's balance sheet, audit reports for the Village for 2000 and 2002-10, the Illinois
Department of Insurance actuarials, and property tax levy and distribution documents. 5 The letter advises Tepfer that his deposition testimony will be used to support the Village's motion for
summary judgment.
7 1-13-0416
not involve underfunding of a municipality's police pension fund and did not include an analysis
of section 3-125 of the Pension Code. Instead, McNamee involved the constitutionality of an
amendment to section 3-127 of the Pension Code. Moreover, in response to the Village's
repeated allegation that no beneficiary had been denied pension benefits and that there was no
evidence the Pension Fund was on the verge of default or imminent bankruptcy, the Pension
Board stated, "so what!"
&13 On January 14, 2013, in a written order, the circuit court granted the Village's motion for
summary judgment. In doing so, the circuit court noted that the Village admitted it did not
follow the Illinois Department of Insurance's actuarial reports for the years 2003 through 2010.
The court determined that McNamee, as cited by the Village, was factually distinguishable from
the case at bar "because it did not address the issue in this case, to wit: whether the Pension
Board has a vested contractual right to the pension funding level in the Riverdale Police Pension
Fund." Finding this was a case of first impression wherein there was no case law determining
whether statutory funding levels may be enforced under the Pension Code, the circuit court then
relied on Illinois cases dealing with statutory funding under the Pension Protection Clause of the
Illinois Constitution (Ill. Const. 1970, art. XIII, § 5). After a thorough review of Lindberg and
People ex rel. Sklodowski v. State, 182 Ill. 2d 220 (1998), the circuit court held:
"While Sections 3-125, 2-127 and 22-403 of the Pension Code are clearly
designed to ensure the financial integrity of the pension funds, the Court notes
that none of the sections mention any right to enforce certain statutory funding
levels. Nor do any of the foregoing sections expressly give the Pension Board
final decision making authority to determine the amount needed to ensure the
police pension fund's reserve. In construing [s]ections 3-125, 3-127 and 22-403
8 1-13-0416
of the Pension Code in their entirety, based on the plain and ordinary language
therein, the Court finds that the legislature could not have intended to remove all
discretion from the municipality in determining the amount of tax levies and
contributions to the pension funds in any particular year. Consequently, the Court
finds no genuine issue of material fact precluding the entry of summary judgment
in favor of the Village."
This appeal followed.
&14 ANALYSIS
&15 The Pension Board contends the circuit court erred in granting summary judgment in
favor of the Village regarding the claim for breach of sections 3-125 and 3-127 of the Pension
Code and in denying partial summary judgment in favor of the Pension Board as to the Village's
liability for all amounts of contributions due and owing the Pension Fund.
&16 Summary judgment should be granted where the pleadings, depositions, and admissions
on file, together with the affidavits, demonstrate that there is no genuine issue of material fact
and the moving party is entitled to judgment as a matter of law. 735 ILCS 5/2-1005(c) (West
2010). Summary judgment is a drastic measure that should only be granted if the movant’s right
thereto is clear and free from doubt. Outboard Marine Corp. v. Liberty Mutual Insurance Co.,
154 Ill. 2d 90, 102 (1992). We review a trial court’s decision granting summary judgment de
novo. Id.
&17 I. Summary Judgment Regarding Statutory Funding
&18 The Pension Board asserts that the circuit court erred in granting summary judgment on a
legal theory not presented by the Village. The Pension Board argues the circuit court sua sponte
found the Pension Board lacked standing to bring a claim against the Village where the Pension
9 1-13-0416
Code did not give the Pension Board a vested contractual right to statutory funding of the
Pension Fund. In contrast, the Village sought summary judgment on the basis of the McNamee
decision and because there were no measurable actuarial damages, proof that pension payments
were not made to beneficiaries, or evidence that the Pension Fund faced bankruptcy.
&19 In response, the Village argues that it raised the Pension Board's lack of standing as an
affirmative defense and as an argument in its motion for summary judgment where it argued that
the Pension Code did not yet require full funding of the Pension Fund, the Pension Fund had not
suffered any measurable actuarial damage and was not on the verge of default or imminent
bankruptcy, and there was no evidence that any beneficiaries had been denied benefits due to the
alleged underfunding of the Pension Fund. Consequently, the Village maintains that the Pension
Fund's injury is speculative and cannot form the basis of declaratory relief. In the alternative, the
Village argues that standing is a matter of subject matter jurisdiction and can be considered by
the court even if not raised by either party.
&20 Our review of the pleadings at issue reveals that the Village did not expressly raise a lack
of standing affirmative defense. Generally, the failure to raise standing as an affirmative defense
results in waiver. Lebron v. Gottlieb Memorial Hospital, 237 Ill. 2d 217, 252-53 (2010).
However, while not express, the pleadings demonstrate that the Village essentially raised a lack
of standing defense by asserting that the Pension Board's underfunding claim was speculative
and lacked merit. Specifically, in its affirmative defenses, the Village argued that it did not
breach its statutory duty to fund the Pension Fund where section 3-127 of the Pension Code does
not require complete funding until 2033 and where numerous variables, e.g., the interest rate and
the particulars of the participating officers in terms of length of service, number, etc., were not
within the Village's control.
10 1-13-0416
&21 Nevertheless, in its written order, the circuit court stated that it did not consider a
standing or ripeness challenge because the Village did not expressly raise either as affirmative
defenses. Notably, the cases relied upon by the circuit court to conclude that the Pension Board
raised a meritless claim did not address the issue of standing. See Sklodowski, 182 Ill. 2d 220,
McNamee, 173 Ill. 2d 433; Lindberg, 60 Ill. 2d 266 (considering whether there was a contractual
right to funding based on the pension protection clause (Ill. Const. 1970, art. XIII, § 5)).
Therefore, although the parties seemingly agree that summary judgment was granted based on
the Pension Board's lack of standing, no such finding was made by the circuit court.6
&22 As to the Pension Board's argument that the circuit court's basis for granting summary
judgment was sua sponte and, therefore, improper, we disagree. The Village's motion for
summary judgment argued that judgment was proper as a matter of law because there were no
proven injuries to beneficiaries and, pursuant to McNamee, there was no constitutional or
contractual right to a particular level of funding. Review of the circuit court's written order
demonstrates that it considered McNamee at length and found it distinguishable where it did not
deal with the "specific issue," namely, "whether statutory funding levels may be enforced under
the Pension Code." The circuit court considered the issue before the court to be one of first
impression and relied on cases dealing with the pension protection clause for guidance. Those
cases included Lindberg and Sklodowski. Sklodowski relied upon Lindberg and McNamee, both
cited by the Village as bases for granting summary judgment. Therefore, the circuit court did not
grant summary judgment sua sponte but, rather, upon the grounds submitted by the Village.
&23 We now turn to the question of whether the Village was statutorily required to provide a
particular level of funding pursuant to the Pension Code, as alleged in the Pension Board's
6 As a result, we need not address the parties' additional arguments regarding standing.
11 1-13-0416
complaint. Resolving the question on appeal requires our consideration of sections 3-125 and 3-
127 of the Pension Code. We are guided by the familiar principles of statutory construction.
&24 The primary goal of statutory construction is to ascertain and give effect to the intent of
the legislature. Metropolitan Life Insurance Co. v. Hamer, 2013 IL 114234, ¶ 18. The best
method for determining legislative intent is the statutory language, which must be given its plain
and ordinary meaning. Id. A court may not depart from the plain language by reading
exceptions, limitations, or conditions into the statute that conflict with the clearly expressed
legislative intent. Id. The language of the statute must be read in context and should be given a
reasonable construction without being rendered superfluous. See Prazen v. Shoop, 2013 IL
115035, ¶ 21. In ascertaining the legislature's intent, a court may also consider the reason and
necessity for the law, the evils sought to be remedied, and the purposes to be achieved. Id.
Where statutory language is clear and unambiguous, it will be given effect without resort to other
aids of construction. Kunkel v. Walton, 179 Ill. 2d 519, 533-34 (1997). However, where the
meaning of a statute is unclear from the language, the court may look to other sources such as
legislative history to determine the legislature's intent. Id. A statute is ambiguous when it is
capable of being understood by reasonably well-informed individuals in two or more different
manners. Gruszeczka v. Illinois Workers' Compensation Comm'n, 2013 IL 114212, ¶ 16.
&25 Section 3-125, at the relevant time, provided that the Village "shall annually levy a tax
upon all the taxable property of the municipality" to produce a "sum sufficient to meet the annual
requirements of the police pension fund." 40 ILCS 5/3-125 (West 2008). The "annual
requirements" included: "(1) the normal cost of the pension fund for the year involved, plus (2)
the amount necessary to amortize the fund's unfunded accrued liabilities as provided in Section
3-127." 40 ILCS 5/3-125 (West 2008). Pursuant to section 3-127, the purpose of the "reserve" is
12 1-13-0416
to insure the payment of pension obligations. See 40 ILCS 5/3-127 (West 2010). The Pension
Board must maintain a reserve to amoritize the fund’s unfunded accrued liabilities. See 40 ILCS
5/3-127 (West 2010); Board of Trustees of the Police Pension Fund v. City of Evanston, 281 Ill.
App. 3d 1047, 1050 (1996). Based on the plain language of the statutes, the Village was
required to levy taxes sufficient to cover the cost of the pension fund of the given year, as well as
the amoritized amount to cover the fund's unfunded accrued liabilities. Section 3-127, however,
advised that, in the event the pension fund has a reserve of less than the accrued liabilities of the
fund, the Pension Board must calculate the amount necessary to attain full funding over the
course of 40 years from July 1, 1993, for those funds in existence at the time or 40 years from the
creation of funds thereafter. 40 ILCS 5/3-127 (West 2010).
&26 The question before us is whether the plain language of the Pension Code created a
contractual obligation under which the Village was required to remit funds to the Pension Fund
in concert with that reported as necessary by the Pension Board. As stated, the Village moved
for summary judgment on the bases that, pursuant to McNamee, there was no right to a particular
level of funding, and the Pension Board did not provide evidence demonstrating any
beneficiaries were denied benefits due to the alleged underfunding.
&27 We first review McNamee. In McNamee, participants in police pension funds brought an
action for declaratory and injunctive relief claiming an amendment to section 3-127 of the
Pension Code violated the participants’ constitutional pension rights by making the funds less
secure. McNamee, 173 Ill. 2d at 434. The amendment at issue changed the method of
computing the annual amount necessary to amortize the unfunded accrued liability of police
pension funds. Id. at 435-36. Specifically, the amendment changed the beginning date of the 40-
year amoritization period from 1980 to 1993 and changed the method of computing the annual
13 1-13-0416
amount required to amortize the unfunded accrued liability from a level dollar amount to a
percentage of payroll. Id. at 436.
&28 In holding that section 5 of article XIII of the Illinois Constitution (the pension protection
clause) (Ill. Const. 1970, art. XIII, § 5) created a contractual right to receive benefits from a
pension fund but did not control funding, the supreme court relied on the history of the provision
and the evils it was intended to address by considering the debates from the constitutional
convention. McNamee, 173 Ill. 2d at 439-44. Additionally, the supreme court cited Lindberg,
wherein the supreme court also relied on the constitutional convention debates to conclude that
the Pension Protection Clause did not require any particular level of funding. Id. at 444. Rather,
in Lindberg, the supreme court stated that the pension protection clause “does not create a
contractual basis for participants to expect a particular level of funding, but only a contractual
right ‘that they would receive the money due them at the time of their retirement.’ ” Id. (quoting
Lindberg, 60 Ill. 2d at 271). Ultimately, where the participants did not contend the amendment
to section 3-127 diminished their right to receive pension benefits or that the new funding
method placed the fund on the verge of “default or imminent bankruptcy,” the supreme court
concluded there was no violation of the pension protection clause. (Internal quotation marks
omitted.) McNamee, 173 Ill. 2d at 446-47.
&29 The Pension Board argues that McNamee is distinguishable because the supreme court
only considered section 3-127 of the Pension Code and not section 3-125. The Pension Board is
correct that section 3-125 was not at issue in McNamee; however, the portion of section 3-125 at
issue here, namely, the funding directives for accrued liabilities, is defined by section 3-127.
Consequently, the supreme court’s analysis of the rights provided by the language of section 3-
127 is relevant to the case before us.
14 1-13-0416
&30 We further consider Sklodowski, wherein the supreme court addressed pension funding
and whether participants in various state employee retirement systems had a contractual right to a
particular level of funding. In Sklodowski, the statute relevant to that case was Public Act 86-273
(eff. Aug. 23, 1989), which, similar to section 3-127, described a method of amortizing the
unfunded retirement system liability over the course of 40 years as a level percentage of payroll.
Sklodowski, 182 Ill. 2d at 223. Based on McNamee and Lindberg, the supreme court concluded
that the pension protection clause extended protection to pension benefits only. Id. at 231.
Consequently, the supreme court similarly held that the beneficiaries did not have an enforceable
contractual right to control funding vis a vis the pension protection clause. Id.
&31 The supreme court, however, recognized that McNamee established that a beneficiary
need not wait to bring a claim under the pension protection clause until benefits were actually
diminished. Id. at 232. Rather, if a beneficiary could demonstrate that a pension fund was on the
“verge of default or imminent bankruptcy,” a group action could be taken because such evidence
would show that pension benefits were impaired. (Internal quotation marks omitted.) Id.
However, in Sklodowski, where the beneficiaries there only alleged an opinion that the funding
levels at the time were insufficient to meet future funding obligations, the allegation was
insufficient to demonstrate an impairment of benefits. Id.
&32 Finally, in Sklodowski, the supreme court dismissed the beneficiaries' argument that, even
if the pension protection clause was not intended to control pension funding, the legislature
intended to create vested contractual rights by establishing specific contribution levels. In doing
so, the supreme court relied on the presumption that "laws do not create private contractual or
vested rights, but merely declare a policy to be pursued until the legislature ordains otherwise."
Id. at 231. The beneficiaries failed to overcome that presumption. Id. at 232. Moreover, the
15 1-13-0416
supreme court stated that "[t]he funding provisions contained in the Pension Code give no
indication of a legislative intention to establish a contractual right." Id.
&33 In concluding that the beneficiaries had neither a contractual nor a constitutional right to
enforce the level of pension fund contributions mandated by the statute at issue, the supreme
court stated:
"The framers of the Illinois Constitution were careful to craft in the pension
protection clause an amendment that would create a contractual right to benefits,
while not freezing the politically sensitive area of pension financing. In addition,
the funding provisions contained in the Pension Code do not evince a legislative
intent to create vested contractual rights in favor of beneficiaries." Id. at 233.
&34 Our analysis is further guided by cases wherein this court has considered whether it is
within the city council's discretion to determine the taxes to be levied in satisfaction of sections
3-125 and 3-127. In City of Evanston, the city council levied a tax for the police pension fund
that was less than the amount certified by the pension board as necessary to fund the pension
fund. City of Evanston, 281 Ill. App. 3d at 1050. This court held that “a city council need not
accept the dollar amount recommended to it by a police pension board, but that it must follow
Illinois law in calculating the amount it selects as an alternative.” Id. at 1049. In so finding, this
court concluded that sections 3-125 and 3-127 of the Pension Code do not contain language
indicating that the city council would be bound by the pension board’s conclusion as to the
amount required to fund the pension fund. Id. at 1052; see also Village of Spring Grove v.
County of McHenry, 309 Ill. App. 3d 1010, 1015 (2000).
&35 In Board of Trustees of the Police Pension Fund v. City of Rockford, 96 Ill. App. 3d 102
(1981), the police and firemen’s pension boards petitioned for a writ of mandamus compelling
16 1-13-0416
the city council to levy taxes in conformity with their interpretations of sections 3-125 and 3-127
of the Pension Code and the similar sections applicable to firemen. The city council refused to
levy taxes for the full sum necessary to meet the obligations of the pension funds and their
reserve requirements as reported by the pension board, which, as with the case at bar, was based
on the actuarial computations of the Illinois Department of Insurance. In analyzing the language
of the statute, this court stated:
“While sections 3-125 and 3-127 *** of the Act are couched in mandatory
language in that the word ‘shall’ is used, we find no specific reference to the
actuarial findings of the Illinois Department of Insurance indicating that its
calculations are binding on the city council. Since the tax levy requested by the
pension boards is derived from the actuarial findings of the Illinois Department of
Insurance, the question at issue is whether the city council has any discretion to
depart from these findings in enacting the tax levy for the police and firemen’s
pension funds.” City of Rockford, 96 Ill. App. 3d at 106-07.
&36 While recognizing the case was factually distinguishable, the City of Rockford court
considered language found in Lindberg, wherein the supreme court held that compulsory
participants in pensions plans did not have a contractual right to funding. Id. at 107-08.
Ultimately, this court affirmed the dismissal of the petition for the writ of mandamus, holding
that:
“While the finance and reserve sections of the Illinois Pension Code
(sections 3-125 and 3-127 for police pensions and 4-118 and 4-120 for firemen’s
pensions) are clearly designed to insure the financial integrity of these pension
funds, we do not believe it was their purpose to remove all discretion from the
17 1-13-0416
city council in determining the dollar amount to be levied for these funds in any
particular year and to require the city council to accept the Police Board and the
Firemen’s Board reports as mandatory in that regard.” Id. at 108.
&37 Overall, sections 3-125 and 3-127 of the Pension Code have been interpreted as not
mandating that taxes be levied in strict concert with the funding recommended by a city council.
Moreover, the supreme court has consistently held that a beneficiary is entitled to receive his
pension benefits, but that the reserve portion of the "annual requirement" is not a fixed
entitlement. We, therefore, find the McNamee, Lindberg, and Sklodowski interpretations of
sections 3-125 and 3-127 are relevant to the Pension Code and not just the pension protection
clause.
&38 Turning to the case before us, the Pension Board has not satisfied its burden of citing
specific language in the Pension Code that demonstrates a legislative intent to establish a
contractual right to funding. See Sklodowski, 182 Ill. 2d at 231-32 (citing Fumarolo v. Chicago
Board of Education, 142 Ill. 2d 54, 104 (1990)). "A party who asserts that a State law creates
contractual rights has the burden of overcoming the presumption that a contract does not arise
out of a legislative enactment." Fumarolo, 142 Ill. 2d at 104. In fact, the Pension Board has not
presented any argument to support its allegation that the Pension Code created a contractual right
to funding. Review of sections 3-125, 3-127, and 22-403 of the Pension Code, which restricts
the use of pension funds to public purposes and not corporate purposes, demonstrates the
legislature's intent to insure that beneficiaries "receive the money due them at the time of their
retirement." Lindberg, 60 Ill. 2d at 271. There is no language in the relevant statutes using the
term "contract" in relation to funding or establishing anything more than statutory rights. See
Fumarolo, 142 Ill. 2d at 104-05. A court may not depart from the plain statutory language by
18 1-13-0416
reading exceptions, limitations, or conditions into the statute that conflict with the clearly
expressed legislative intent. Hamer, 2013 IL 114234, ¶ 18. Consequently, we conclude that the
Pension Code does not create a contractual right to funding.
&39 Our conclusion is supported by the legislature's recent enactment of Public Act 98-599,
known as the Reform Act to the Pension Code, which, as of July 1, 2014, provides the pension
boards of four of the State's pension systems with the express right to file suit if the State does
not maintain the funding levels called for by the Reform Act. See Pub. Act 98-599 (eff. July 1,
2014) (adding 40 ILCS 5/2-125(c), 14-132(c), 15-156(b), 16-158.2(a)). The legislature's action
demonstrates that, contrary to the Pension Board's argument, the Pension Code does not provide
an implied right to enforce funding levels. See People v. Ellis, 199 Ill. 2d 28, 39 (2002) ("[i]f
possible, the court must give effect to every word, clause, and sentence; it must not read a statute
so as to render any part inoperative, superfluous, or insignificant; and it must not depart from the
statute's plain language by reading into it exceptions, limitations, or conditions the legislature did
not express").
&40 We do recognize that the McNamee court established that a cause of action need not wait
until benefits are actually diminished; however, the Pension Board did not provide evidence, nor
even allege, the Pension Fund was on the "verge of default or imminent bankruptcy." (Internal
quotation marks omitted.) McNamee, 173 Ill. 2d at 446-47; Sklodowski, 182 Ill. 2d at 232.
Rather, the Pension Board has failed to establish that any beneficiary has been denied benefits.
Consequently, the right to benefits has not been impaired.
&41 In sum, where this court has found the statutes provide the Village with discretion in
implementing the funding recommendations certified by the Pension Board, where the Pension
Board failed to satisfy its burden of providing statutory language to establish a contractual right
19 1-13-0416
to specified funding, and where there is no evidence that the fund is currently at risk of denying
benefits, the Village was entitled to summary judgment as a matter of law.
&42 As a final note, it bears repeating that, because we have concluded that the circuit court
properly considered whether the Pension Board was entitled to the pension funding alleged in its
complaint or whether the Village was entitled to summary judgment on the bases submitted, it
was unnecessary for this court to consider the additional arguments regarding standing. Simply
stated, the statutes do not provide a cause of action for underfunding so long as there is no
allegation or proof the fund at issue is on the verge of default or imminent bankruptcy.
&43 II. Partial Summary Judgment Regarding Liability
&44 The Pension Board also appeals the circuit court’s denial of its motion for partial
summary judgment as to liability. The Pension Board contends that sections 3-125 and
3-127 provide the basis for filing suit and requests an order requiring the Village to levy
taxes to fully fund the Pension Fund where it is undisputed that the Village underfunded
the Pension Fund. In addition, the Pension Board argues that the Village is liable for the
Pension Fund's portion of the property taxes levied and collected.
&45 As previously determined, the Pension Code does not provide a contractual right
to funding. Consequently, the circuit court did not err in denying the Pension Board's
partial motion for summary judgment where there was no basis for a finding of liability
for underfunding.
&46 Turning to the issue of the money collected by the Village as a result of taxes that
were levied, yet not remitted to the Pension Fund, we find the Village was liable pursuant
to relevant sections of the Pension Code. In response to an interrogatory, the Village
admitted that "[b]ecause of accounting practices, there was oversight by the Village of
20 1-13-0416
Riverdale in paying the Police Pension Fund its portion of property taxes received" and
instead the money was deposited into the "Village pooled account and was used for
general operations."
&47 The language of section 3-125, in relevant part, provided that "[t]he police
pension fund shall consist of the following moneys which shall be set apart by the
treasurer of the municipality: (1) All moneys derived from the taxes levied hereunder"
and "[t]he tax shall be forwarded directly to the treasurer of the board within 30 business
days after receipt by the county." 40 ILCS 5/3-125 (West 2008). Moreover, section 3-
132 of the Pension Code adds that the Pension Board has the power and duty to control
and manage the Pension Fund, instructing that "[a]ll money received or collected shall be
credited by the treasurer of the municipality to the account of the pension fund and held
by the treasurer of the municipality subject to the order and control of the board." 40
ILCS 5/3-132 (West 2010). Finally, section 22-403 provides:
"Any tax heretofore or hereafter levied for the benefit or purposes of any such
pension fund by the tax-levying body authorized by the law creating such fund to
levy such tax, and any payment or contribution to such fund made by the State, or
by any county, city, town, municipal corporation or body politic and corporate
located in the State, is hereby declared to be so levied or so contributed for
governmental purposes under such law, and not for the corporate purposes of such
tax-levying body, or of the State, or of any county, city, town, municipal
corporation or body politic and corporate of the State, irrespective of the nature or
character of the duties performed or services rendered by any employee member
of any such pension fund." 40 ILCS 5/22-403 (West 2010).
21 1-13-0416
&48 Based on the language of these statutes, we conclude that, to the extent the
Village exercised its authority in levying taxes for the benefit of the Pension Fund, the
money collected by the Village must be forwarded to the treasurer of the Pension Board.
Accordingly, although there is no contractual right to specified funding, a Pension Board
is entitled to its portion of the monies actually received as a result of the taxes that were
levied under the statute.
&49 As stated, in the Village's response to the Pension Board's interrogatory, the
Village admitted that money was owed to the Pension Fund. The Village further
admitted that the amount was "to be determined in deposition of Maggie Britton and any
possible actuarial expert deposition for the [Village] in addition to Ms. Britton's
testimony." The record contains an excerpt of Britton's deposition testimony; however,
that excerpt does not establish the amount of tax money collected yet not remitted to the
Pension Fund by the Village. Accordingly, we reverse, in part, the circuit court's
February 17, 2012, order denying the Pension Board's motion for partial summary
judgment as to the Village's liability for the money collected on behalf of the Pension
Fund. We remand for a determination of the amount of collected tax money that is owed
to the Pension Fund.
&50 We note that the Illinois Public Pension Fund Association has expanded the
Pension Board's argument beyond that raised in its appellate brief or in its memorandum
of support for its motion for partial summary judgment. As a "friend" of the court, the
sole function of an amicus is to advise or make suggestions to the court within the
purview of the issues framed by the parties. In re J.W., 204 Ill. 2d 50, 73 (2003). We,
22 1-13-0416
therefore, need not consider whether the Village treasurer breached his fiduciary duty to
the Pension Board or whether the Village engaged in fraud.
&51 CONCLUSION
&52 We affirm the judgment of the circuit court granting summary judgment in favor
of the Village on the issue of funding the Pension Fund. We also affirm, in part, the
judgment of the circuit court denying partial summary judgment against the Pension
Board where there is no basis for a finding of liability for underfunding. We, however,
reverse, in part, the judgment of the circuit court denying partial summary judgment
against the Pension Board regarding the tax money levied and collected on the Pension
Fund's behalf. We remand for a determination of the appropriate amount owed to the
Pension Fund.
&53 Affirmed in part and reversed in part; cause remanded for additional proceedings.