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The Board of Trustees of the Public School v. the Board of Education of the City of

September 28, 2012

THE BOARD OF TRUSTEES OF THE PUBLIC SCHOOL TEACHERS' PENSION AND RETIREMENT FUND OF CHICAGO, PLAINTIFF-APPELLANT,
v.
THE BOARD OF EDUCATION OF THE CITY OF CHICAGO, AND MARY B. RICHARDSON-LOWRY, DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Cook County No. 10 CH 29362 Honorable Rita Mary Novak, Judge Presiding.

The opinion of the court was delivered by: Justice Garcia

JUSTICE GARCIA delivered the judgment of the court, with opinion. Justice Palmer specially concurred, with opinion.

Presiding Justice Lampkin dissented, with opinion.

OPINION

¶ 1 The plaintiff, the Board of Trustees of the Public School Teachers' Pension and Retirement Fund of Chicago (the Fund), appeals from the circuit court's grant of summary judgment to the defendants, the Board of Education of the City of Chicago (BOE) and Mary B. Richardson-Lowry, in her capacity as the BOE's president when suit was filed. The Fund claims the BOE was required to make its employer contribution for fiscal year 2010 to the pension and retirement fund based on actual contributions by the State of Illinois rather than on estimates provided in the Fund's letter of February 19, 2009, which it issued in accordance with the Illinois Pension Code (Pension Code) (40 ILCS 5/1-101 et seq. (West 2008)). The parties' dispute centers on the provision in the Pension Code that required the Fund, on or before February 28, to "certify to the Board of Education the amount of the required Board of Education contribution."

40 ILCS 5/17-129 (West 2008).*fn1 The parties disagree on the amount certified in the Fund's letter. The Fund contends it certified the gross amount of the BOE's contribution not reduced by the estimated contributions by the State. The BOE contends the Fund certified the net amount, the gross amount less the estimated contributions by the State.*fn2 The Fund's letter of February 19, 2009, set out both amounts. The circuit court granted the BOE's motion for summary judgment, ruling that the lower employer-contribution figure was the certified amount, which, once certified, could not be revised under the Pension Code.

¶ 2 On our de novo review of the grant of summary judgment to the BOE and the denial of the Fund's motion for summary judgment, we conclude the circuit court erred when it denied the Fund's summary judgment motion. Under the Pension Code, the BOE's contribution to the teachers' pension and retirement fund for fiscal year 2010 had to reflect the State's actual contributions rather than estimates the Fund provided in its letter of February 19, 2009. While reasonable persons can disagree on the amount the Fund certified in its letter of February 19, the outcome here does not turn on the amount certified. Rather, this case turns on whether the employer contribution to be made by the BOE for fiscal year 2010 was subject to revision after the "certification" deadline date of February 28, 2009, provided in section 17-129(c) of the Pension Code. The BOE's reading of section 17-129(c) that an amount, once certified, was not subject to revision after February 28, 2009, would place that requirement in conflict with other provisions in section 17-129 of the Pension Code. The Pension Code requires "the Board of Education [to] contribut[e] at the rate required under this subsection." 40 ILCS 5/17-129(b)(ii) (West 2008). The objective of the Pension Code is to achieve assets "at 90% of the total actuarial liabilities of the Fund" by the projected year. 40 ILCS 5/17-129(b)(iii) (West 2008). Under the Pension Code, the State's contribution to the retirement and pension fund "shall be a credit against any contribution required to be made by the Board of Education." 40 ILCS 5/17-129(b)(v) (West 2008). The Fund's letter of February 19, 2009, made clear that the lower figure of the BOE's employer contribution was based on estimates of the State's contributions, which turned out to be highly inaccurate. The record establishes that the State did not make its first payment to the Fund for fiscal year 2010 until July or August 2009. Because the State's contribution for fiscal year 2010 could not have been known by the Fund before the start of the fiscal year, the legislature could not have intended the BOE's employer contribution, certified by the Fund, to be set in stone for the upcoming fiscal year if not revised by February 28, 2009. Rather, the Pension Code only required the Fund to "certify" that its determination of the BOE's employer contribution was based on "actuarial tables and other assumptions *** of the actuary."

40 ILCS 5/17-129(c) (West 2008). Stated differently, the Fund had to "certify" that the amount of the BOE's contribution was reached by actuarial analysis, the underlying basis of which the BOE was to receive. Whether the certified amount was the gross amount or the gross amount reduced by estimates of the State's contribution, either amount was subject to revision based on the State's actual contributions to the Fund for fiscal year 2010. The former amount was subject to decrease while the latter amount was subject to increase, but after the subtraction or addition of the actual contributions by the State, the difference and sum would be the same. To be clear, we hold that the deadline date of February 28, 2009, set forth in section 17-129(c) did not set immutably the BOE's employer contribution for fiscal year 2010. Once the State's actual contributions became known for fiscal year 2010, the Fund acted within its fiduciary duty under the Pension Code to seek the employer contribution from the BOE on the basis of the contributions the Fund actually received from the State. We reverse with directions that summary judgment be entered in favor of the Fund.

¶ 3 BACKGROUND

¶ 4 The Public School Teachers' Pension and Retirement Fund of Chicago was created by the Illinois legislature to administer the pension and retirement fund for Chicago public school teachers and other members. The Pension Code provides that the Fund's revenue shall be comprised of contributions from at least four sources: (1) deductions from teachers' salaries; (2) employer contributions; (3) appropriations from the State, and (4) earnings on investments. 40 ILCS 5/17-127 (West 2008). Under the Pension Code, the employer is "The Board of Education and [any duly authorized] charter school." 40 ILCS 5/17-105.1 (West 2008). In addition to the contributions from the four sources, the Pension Code also provides for additional and employer contributions "intended to offset a portion of the cost to the Fund of the increases in retirement benefits resulting from" amendatory acts in 1998. 40 ILCS 5/17-127(b), 17-127.2 (West 2008).

¶ 5 The Pension Code requires the Fund to determine the amount of the BOE's required contributions for each fiscal year based on actuarial tables and other assumptions to meet the funding plans established by statute. 40 ILCS 5/17-129(c) (West 2008). The fiscal year for the Fund runs from July 1 to June 30 of the following year. 40 ILCS 5/17-108 (West 2008). Pursuant to the Code, on or before February 28, the Fund must "certify to the [Chicago] Board of Education the amount of the required Board of Education contribution for the coming fiscal year." 40 ILCS 5/17-129(c) (West 2008).

¶ 6 The dispute between the parties began with the February 19, 2009 letter issued by the executive director of the Fund in compliance with section 17-219(c) of the Pension Code. We excerpt that portion of the letter that addresses the BOE's employer contribution:

"Board of Education Required Contribution.

As of June 30, 2008 the ratio of the actuarial value of assets to the total actuarial liability is 79.7%. Using the results of the June 30, 2008 valuation as a starting point and assuming the Board pays the required contribution in Fiscal Year 2009, the actuary has projected the ratio of the actuarial value of assets to the total actuarial liability as of June 30, 2009 to be 78.7%. Thus, on the basis of the funding plan established by Public Act 89-15 as revised by Public Act 90-548, the actuary has calculated the total employer required contribution for Fiscal Year 2010 to be $393,266,000. State appropriations are estimated to be $65,000,000. Additional contributions under Section 17-127 of the Pension Code amount to $10,058,000 and additional Board of Education contributions under Section 17-127.2 of the Pension Code amount to $10,723,000. Thus, based on the contribution, the net Board of Education contribution requirement for Fiscal year 2010 under the funding plan specified in Section 17-129 of the Pension Code is calculated to be $307,485,000." (Emphasis in original.)

¶ 7 The BOE contends that based on the February 19 letter, "the Fund certified to the Board of Education that its Employer Contribution was $307,485,000," which it paid.

¶ 8 On the other side of the amount-certified dispute, the Fund asserts in its main brief that the executive director's letter of February 19, 2009, "certified to the BOE that 'the actuary has calculated the total employer required contribution for the Fiscal Year 2010 to be $393,266,000.' "

¶ 9 The letter also addressed the additional BOE contributions pursuant to section 17-127.2 of the Pension Code. 40 ILCS 5/17-129 (West 2008). There is no disagreement between the parties regarding the figure provided for the additional contribution. The letter states:

"Additional Board of Education Contributions.

According to Section 17-127.2 of the Pension Code, the Board of Education shall make additional contributions of .58% of each teacher's salary to the Fund to offset a portion of the cost of benefit increases enacted under Public Act 90-582, except that no additional contributions are required if for the previous fiscal year the ratio of the fund's assets to total actuarial liabilities was at least 90%.

As the funded ratio as of June 30, 2008 is 79.7% additional Board of Education contributions will be required for Fiscal Year 2010. Based on a projected payroll of $1,978,286,000 for Fiscal Year 2010, we have determined the additional Board of Education contribution under Section 17-127.2 of the Pension Code to be $10,723,000." (Emphasis in original.)

¶ 10 The Fund's February 19, 2009, letter attached a 25-page "Actuarial Valuation" of the assets and liabilities of the teachers' retirement and pension fund. The pension fund valuation report stated that as of June 30, 2008, "[t]he ratio of the actuarial value of assets to the actuarial liability, or funded ratio, is 79.7%." The report determined "the additional State contributions under Section 17-127 of the Pension Code to be $10,058,000." (Emphasis in original.) The report stated, "State appropriations are estimated to be $65,000,000." The report concluded: "Thus, based on the total employer required contribution for Fiscal Year 2010 and other sources of employer contribution, the net Board of Education contribution requirement for Fiscal Year 2010 under the funding plan specified in Section 17-129 of the Pension Code is calculated to be $307,485,000."

¶ 11 On August 14, 2009, the executive director of the Fund sent the BOE a letter that "serve[d] to amend the February 19, 2009 notification sent to [the BOE] for the required employer contribution to be made to the Pubic School Teachers' Pension and Retirement Fund of Chicago (CTPF) for Fiscal Year 2010." The letter explained that the appropriations were reduced from an estimated amount of $65 million to $32,500,000, and the additional contribution from the State under section 17-127 was reduced from $10,058,000 to $5,029,000. As a result, "the net Board of Education contribution requirement for Fiscal Year 2010 specified in Section 17-219 of the Pension Code is calculated to be $345,014,000 or an increase of $37,529,000 from the estimate on February 19, 2009." The Fund asserted that because its letter of February 19, 2009, made clear the BOE's contribution was based on estimated contributions from the State, "the entire $345,014,000 [from the BOE] becomes due by June 30, 2010."

¶ 12 In its responsive letter of August 27, 2009, the BOE rejected the Fund's assertion that $345,014,000 was due. The BOE asserted the basis for its rejection: "Nothing in the language of Section 17-219c suggests that the [Fund] has the authority -- after February 28, 2009 -- to make an additional or amended certification to [the BOE] for fiscal year 2010."

¶ 13 In its complaint filed July 8, 2010, the Fund sought declaratory judgment, injunctive relief, and a writ of mandamus, triggered by the BOE's failure to deposit with the Fund the employer contribution demanded. The complaint alleged that the Fund "sent its certification of the required Employer Contribution" to the BOE in the gross amount of $393,266,000. The complaint alleged that the certification letter "provided an estimate of the amounts [the Fund's executive director] thought the State might appropriate for the Fund." The actual appropriations would "be a credit [under section 17-129(b)(v)] against any contribution required to be made by the [BOE]." The complaint characterized its August 14, 2009 letter to the BOE as setting forth "a revised estimate of the amount *** the State might appropriate for the Fund in Fiscal Year 2010." The complaint alleged that the gross amount of the BOE's contribution of $393,266,000 did not change; only the "credit" the BOE would receive based on the State's actual appropriations was revised downward. Ultimately, the complaint alleged that the State actually appropriated $34,422,116.74, resulting in a total contribution due from the BOE of $358,843,883.26. According to the complaint, the BOE had contributed $307,485,00, plus the additional contribution amount of $10,723,000, leaving a balance due of $40,635,883.26, which should have been paid by June 30, 2010, the end of the fiscal year.

¶ 14 The Fund filed its motion for summary judgment, contending it certified the gross amount of employer contribution due from the BOE for fiscal year 2010 to be $393,266,000. This gross amount was then reduced by the actual contribution by the State and the amount contributed by the BOE, leaving a balance due from the BOE of $37,716,141.59.*fn3 The circuit court denied the Fund's motion and granted the BOE 14 days to file its own motion for summary judgment.

¶ 15 In its motion for summary judgment, the BOE contended the Fund's letter of February 19, 2009, certified "the Board of Education's required contribution for fiscal year 2010 to be $307,485,000," which was not subject to revision under the Pension Code. The circuit court adopted the BOE's position. The court determined that the amount certified was the amount the BOE would be required to contribute based on estimates of the State's contributions as set forth in the Fund's letter of February 19, 2009, its only communication before the Pension Code date of February 28, which could not be revised under the Pension Code. The circuit court granted the BOE summary judgment on each count of the Fund's complaint.

¶ 16 ANALYSIS

¶ 17 The BOE contends "the Fund's deadline to certify the Employer Contribution is February 28." Premised on a "deadline to certify," the BOE argues, "Section 5/17-219(c) does not allow the Fund to amend its demand after February 28; nor does it allow the Fund to seek 'an increase' in payment from 'the estimate' in the same fiscal year. *** Consequently, the Fund was bound by the $307,485,000 figure, the amount it had certified on February 19, 2009."

¶ 18 Adopting a less binding meaning to the term "certify," the Fund contends the primary question before this court is, "What was 'the amount of the required Board of Education contribution' that IPC § 17-129(c) required the Fund to 'certify' to BOE before February 28, 2009 for the coming FY 2010?" The Fund asserts that amount was $393,266,000. The Fund does not contend the BOE was required to contribute the gross amount for fiscal year 2010 as the "certified" amount; the Fund contends that amount was subject to be decreased by the State's actual contributions to the Fund during fiscal year 2010 under subsection 17-129(b)(v).

¶ 19 Thus, only the BOE contends the term "certify" binds the Fund as to the BOE's employer contribution for fiscal year 2010 if not revised by February 28, 2009, which the circuit court adopted in granting the BOE summary judgment. It therefore follows that in order for the BOE to prevail under our de novo review, the net amount the Fund "certified" for fiscal year 2010, as the BOE contends, must be immutable after February 28, 2009.

ΒΆ 20 The parties agree that our review is de novo. De novo review applies to questions of statutory construction. In re Andrew B., 237 Ill. 2d 340, 348 (2010). It was the construction of section 17-129(c), as urged by the BOE and adopted by the circuit court, that served as the predicate for the grant of summary judgment to the BOE, which is also subject to ...


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