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The Board of Education of Schaumburg Community v. the Teachers' Retirement System of the

January 7, 2013

THE BOARD OF EDUCATION OF SCHAUMBURG COMMUNITY CONSOLIDATED SCHOOL DISTRICT NO. 54, PLAINTIFF-APPELLANT,
v.
THE TEACHERS' RETIREMENT SYSTEM OF THE STATE OF ILLINOIS; THE BOARD OF TRUSTEES OF THE TEACHERS' RETIREMENT SYSTEM OF THE STATE OF ILLINOIS; AND RICHARD W. INGRAM, EXECUTIVE DIRECTOR OF THE TEACHERS'
SYSTEM OF THE STATE OF ILLINOIS,
DEFENDANTS-APPELLEES.



Appeal from Circuit Court of Sangamon County Honorable Retirement John Schmidt, Judge Presiding. No. 11MR638

The opinion of the court was delivered by: Justice Pope

Carla Bender 4th District Appellate Court, IL

JUSTICE POPE delivered the judgment of the court, with opinion. Justices Appleton and Knecht concurred in the judgment and opinion.

OPINION

¶ 1 On October 28, 2011, the Board of Trustees for the Teachers' Retirement System of the State of Illinois (TRS) voted to uphold the recommended decision of TRS's claims hearing committee (Committee). In re Schaumburg Community Consolidated School District No. 54, The Board of Trustees of the Teachers' Retirement System (October 28, 2011). The Committee recommended denying the Board of Education of Schaumburg Community Consolidated School District No. 54's (District) request for an exemption from an assessment issued pursuant to section 16-158(f) of the Illinois Pension Code (Pension Code) (40 ILCS 5/16-158(f) (West 2008)) against the District because the District provided some of its administrators raises in excess of 6% in the years preceding their retirements pursuant to the District's voluntary retirement program (Retirement Program). In April 2012, the circuit court denied the District's request for administrative review. The District appeals, arguing TRS's interpretation of section 16-158(g) of the Pension Code (40 ILCS 5/16-158(g) (West 2008)) and sections 1650.483 and 1650.484 of title 80 of the Illinois Administrative Code (Administrative Code) (80 Ill. Adm. Code 1650.483, 1650.484 (2005) is contrary to law and the plain language of its own regulations. We affirm the circuit court's affirmance of TRS's decision.

¶ 2 I. BACKGROUND

¶ 3 On February 26, 2003, the District and its teachers' union agreed the Retirement Program would continue for the duration of the teachers' collective-bargaining agreement and would be available for retirements with an effective date prior to June 30, 2011. The term of the collective-bargaining agreement between the teachers' union and the District was July 1, 2003, to June 20, 2009. The District's board of education approved the Retirement Program on March 18, 2004.

¶ 4 Retired District administrators and now TRS annuitants Robert Dewing, Craig Gaska, Mary Marello, Judith McDonald, Robert Kaplan, Joyce Drenth, and Patrick Hayes received retirement incentives pursuant to "Option C" of the District's Retirement Program. "Option C" provided various retirement incentives to the administrators, including salary increases in excess of 6% per year.

¶ 5 The administrators at issue in this case did not have written contracts with the District nor were they union members covered by the collective-bargaining agreement between the teachers' union and the District. However, the District considered them entitled to benefits and retirement incentives under the Retirement Program. The administrators fulfilled the notice requirements of the Retirement Program. Pursuant to the incentives in the Retirement Program, each administrator's salary was increased by 20% over the prior years' compensation for the remaining two years.

¶ 6 TRS required the District to pay $586,387.81 plus interest of $1,245.81 into the Retirement System pursuant to section 16-158(f) of the Pension Code because the raises given by the District to the administrators exceeded 6%. The District claimed these raises were exempt and sought review of the assessment.

¶ 7 In its recommended decision, the Committee found the primary issue on administrative review had already been decided by TRS in In re Urbana School District No. 116, The Board of Trustees of the Teachers' Retirement System (August 7, 2008). The Committee found the District in this case, like the Urbana School District, ignored section 10-23.8a of the School Code (105 ILCS 5/10-23.8a (West 2008)), which governs the employment of administrators, by arguing the administrators were employed pursuant to employment policies and not employment contracts. While the administrators in this case did not have written employment contracts, the Committee found these administrators had one-year contracts by operation of law. As a result, according to the Committee's recommended decision, the administrators received the retirement incentives in question under nonexempt contracts.

¶ 8 As a result, the Committee found section 1650.484 of title 80 of the Administrative Code (80 Ill. Adm. Code 1650.484 (2005)) did not apply to the administrators in question in this case because the administrators had contracts by operation of law. According to the Committee:

"Section 1650.484 applies to a small group of TRS members, who are at-will employees such as certain employees of the Illinois State Board of Education, TRS and in the Regional Offices of Education. However, assuming arguendo that 1650.484 does apply to these administrators, according to paragraph (c) of the rule, they would have been assumed to have a one year contract running from July 1, 2005[,] to June 30, 2006. Even under this scenario, the administrators did not exercise their retirement incentive rights under the exempt contract and the retirement incentives were not paid under the exempt contract, making Schaumburg ineligible for exemption." In re Schaumburg Community Consolidated School District No. 54, Recommended Decision of the Claims Hearing Committee, at 9 (July 27, 2011).

As a result, the Committee found the assessment the District received was statutorily required under section 16-158(f) of the Pension Code (40 ILCS 5/16-158(f) (West 2008)).

¶ 9 On October 28, 2011, TRS made a final administrative decision, upholding the recommended decision of the Committee. In November 2011, the District filed a complaint for administrative review in the circuit court. The District asked the circuit court to reverse and set aside TRS's October 28, 2011, administrative decision. On April 4, 2012, the circuit court denied plaintiff's complaint for administrative review, thereby upholding the decision of TRS.

¶ 10 This appeal followed.

¶ 11 II. ANALYSIS

ΒΆ 12 According to our supreme court's decision in Provena Covenant Medical Center v. Department of Revenue, 236 Ill. 2d 368, 386, 925 NE.2d 1131, 1142 (2010), "[w]hen an appeal is taken to the appellate court following entry of judgment by the circuit court on administrative review, it is the decision of the administrative agency, not the ...


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