APPEAL from the Circuit Court of Cook County; the Hon.
THADDEUS V. ADESKO, Judge, presiding.
MR. JUSTICE SOLFISBURG DELIVERED THE OPINION OF THE COURT:
Rehearing denied March 17, 1965.
Victor E. Engelmann, a taxpayer, here appeals from a judgment of the circuit court of Cook County, County Division, overruling three objections to 1960 taxes of the Board of Education of the City of Chicago and two objections to 1960 taxes of the Chicago Park District.
The first objection to the Board of Education's levy involves its educational fund. It is charged that the appropriation in that fund for "Provision for Teachers' Sick Leave Accrued $3,730,243.67", which is stated to be an estimated current liability as of January 1, 1960, is illegal, objector asserting that there was no such liability. It is alternately charged that if there was such a liability it was not properly itemized under the applicable statutory requirements.
By statute (Ill. Rev. Stat. 1959, chap. 122, par. 34-49) the Board of Education budget is required to include appropriations for all estimated liabilities incurred during prior years and unpaid at the beginning of the fiscal year.
Section 22-6 of the School Code (Ill. Rev. Stat. 1959, chap. 122, par. 22-6) requires all school districts in the State to grant their full-time teachers sick leave of not less than ten days at full pay in each school year. It is also provided that "If any such teacher or employee does not use the full amount of annual leave thus allowed, the unused amount shall accumulate to a minimum available leave of thirty days at full pay, including the leave of the current year."
Pursuant to this provision, the Board of Education allows twelve days per year of sick leave at full pay, and its rules provide that the unused amount thereof shall accumulate to a maximum of one hundred and twenty days. The record shows that on January 1, 1960, the Board of Education employed more than 18,000 teachers who had accumulated and were entitled to take 390,433 days of sick leave at full pay, representing a total of $9,893,981. The Board of Education estimated that some of this leave would expire unused, resulting in a reduction in the amount of the estimated liability to $3,730,243.67.
The Board of Education's 1960 budget also contained an appropriation in the amount of $135,748,396 for regular teachers' salaries to be paid during the year 1960. The record shows that when a teacher takes some of his accrued sick leave the full pay to which that teacher is entitled is paid out of the current appropriation. It is also shown that where a substitute teacher is hired to take the place of such an absent teacher, the substitute's pay is charged against the liability for the accrued sick leave of the absent teacher.
It is clear that there was a liability on January 1, 1960, that the statute required the Board of Education to appropriate for. We in effect so held in People ex rel. Brenza v. Morrison Hotel Corp. 4 Ill.2d 542, 551-2. The record shows that during the year 1960 the Board of Education in fact had to expend $3,194,195 on account of accrued sick leaves that were taken during that year. Had the Board of Education not appropriated for that liability, it is obvious that its operations would have been very seriously curtailed.
Objector argues, however, that the Board, instead of appropriating $3,730,243.67 as an accrued liability, should have made a current appropriation in the same amount for "substitute teachers." Not only is that a case of a distinction without a difference in legal consequence, but the statute must necessarily control on the question of where in the budget the item is properly placed. As already noted, the statute required an appropriation for all liabilities existing at the beginning of the fiscal year. This was such an item. The obligation was for sick leaves that had been accrued and not taken. It was not an obligation to be incurred, but one that had already accrued.
Objector concedes that the liabilities required to be appropriated for under the statute include both contingent as well as absolute liabilities, and unliquidated as well as liquidated liabilities. His claim that no liability is involved in this instance, however, rests on the argument that no money was due and owing to any identifiable person or persons as of January 1, 1960, all regular and substitute teachers having been paid in full for their services to that date. He cites Webster's second definition of liability as "That which one is under obligation to pay, or for which one is liable" (Webster's International Dictionary, 2d ed., Unabridged), and argues that "obligation to pay" implies that two identifiable parties must therefore be involved one who has the duty to pay and one who is entitled to be paid. But Webster's first definition is the "State or quality of being liable; as, the liability of an insurer." Clearly, in the case of many of the contingent liabilities of an insurer, the ones who are entitled to be paid are not known. More precisely, an accrued liability "represents a portion of an amount which will eventually be due but which is not due at the date of the balance sheet." (Bell and Johns, Auditing, 3rd ed., chap. 14, p. 301, Prentice-Hall, 1952.) In the instant case, as of January 1, 1960, an amount would eventually be due, although not due on that date, because of leaves that had been earned and accrued but had not yet been taken. Similarly, "it is a well established principle that provision for an expense which will have to be paid, even though the amount may not be determined, is a liability rather than a reserve." (Bell, Accounting, 4th ed., p. 15, Ronald Press, 1949.) There can be no doubt that "Provision for Teachers' Sick Leave Accrued" is a provision for an expense which will have to be paid on account of sick leave accrued prior to January 1, 1960.
Objector asks to whom the Board owed an obligation as of January 1, 1960, on account of accrued sick leave, and he argues that the Board could not be under any obligation to substitute teachers that would be required during the year 1960 but had not yet been hired. However, the fact cannot be denied that prior to January 1, 1960, teachers had earned and there was accrued on the books of the Board sick leaves totaling $9,893,981. That was the result of something that had happened prior to January 1, 1960; not something that would occur thereafter. The contingency involved was as to when the already earned and accrued sick leave would be taken. The Board clearly had the continuing obligation to provide for the day when the leave that had been earned would be taken. When it in fact was taken, there is no question that the Board would be compelled to hire substitutes to take the place of those teachers absent on leave earned in prior years. Past experience showed that that contingent obligation would become absolute during the year 1960 in the estimated amount of $3,730,243.67. As already observed, the actual amount that had to be disbursed during the year 1960 on account of this contingency was $3,194,195. This was the result of events that had occurred in 1959 and prior years, and was therefore properly reflected as an obligation as of January 1, 1960.
As to the objector's alternate contention that the appropriation is not properly described, it too is without merit. The liability is on account of accrued or accumulated sick leave, and it was so described in the budget. That the charges against it are for the pay of substitute teachers in no way misleads any taxpayer to his detriment. We have held that liabilities described as "accounts payable" that include "cost of sick leaves" are adequately described. (People ex rel. Brenza v. Morrison Hotel Corp., 4 Ill.2d 542, 552.) That the actual amount involved in the liability for accumulated sick leave is separately stated rather than lumped into an item merely described as "accounts payable" is to the advantage of the taxpayer, not to his prejudice. Objector has argued that the governing statute (Ill. Rev. Stat. 1959, chap. 122, par. 34-49) requires that appropriations for expenditures to be made during the current fiscal year must identify the organization unit, purpose or object. The statute makes no such requirement in regard to liabilities accrued and unpaid, and in ...