A Chicago appeals court has ruled a state hearing officer was within his discretion when he decided not to swallow a suburban village's contention it didn't contribute to fire and police pensions, because of financial hardship brought on by the Great Recession and its impacts on the village’s economy.
The Dec. 19 ruling was rendered by Justice John Simon, of the Illinois First District Appellate Court, with concurrence from Justices Maureen Connors and Mary Mikva. The ruling favored the Illinois Department of Insurance and its Public Pension Division, in its litigation with the village of North Riverside.
The Department of Insurance determined North Riverside had not contributed, as required by law, to the village's police and firefighter pension funds for several years prior to 2013. An administrative hearing was held, during which the village was given opportunity to show “good and sufficient cause,” per the Illinois Pension Code, why it should be given a pass on the lapses.
Village Finance Director Sue Scarpiniti testified the village had neglected its obligations because the village was short of funds as a result of the recession, which decreased tax revenue.
Worsening the situation, a restaurant supply company, which was the village's largest tax revenue producer, moved to another municipality, according to Scarpiniti. Also, the village is not a home rule community, so it was barred from raising property taxes to the necessary level to cover losses.
Other information that came out at the hearing undermined the village's position. According to court papers, sales tax revenue actually rose, because of tax rate hikes. The hearing officer also noted the village did kick in to the Illinois Municipal Retirement Fund, which covers the retirement plans for city employees other than police and firefighters. The hearing officer further pointed out that despite the recession, the village continued paying part of garbage collection and water service for residents, even though other municipalities were passing cost increases along to their residents.
The state did not accept the village's explanations, ordering the municipality to pay into the pensions. The village went to Cook County Circuit Court in 2014, hoping a judge would overturn the state's ruling; Judge Sophia Hall refused. The village then appealed in 2015, arguing a mixture of law and fact, but still found no success.
The village maintained the “good and sufficient cause” requirement was too broad, giving the hearing officer too much latitude, with interpretations liable to “vary wildly” from officer to officer. However, Justice Simon said, if anything, the requirement worked to the village's favor, because its looseness gave the village “free reign” to advance any explanations it chose at the hearing.
Simon also found the village did not take advantage of opportunities to raise additional funds, and elected to not distribute the funds it had on hand to the police and fire pensions.
“There was evidence that the Village spent its money on discretionary endeavors it prioritized more than contributing to the police and firefighter pensions. That is a violation of the Pension Code. The Village had simply made choices to allocate funds elsewhere,” Simon said.
In addition, Simon pointed out the village failed to make pension contributions for a number of years before the economic downturn, but the village based its “whole case" on the recession.
North Riverside had been represented by the firm of Odelson & Sterk, of south suburban Evergreen Park.