Court Opinion

ID: 4150148
Source: CourtListenerOpinion
Date Created: 2017-03-03 19:06:06.106268+00
Date Added: 2024-06-11T14:49:20.743607
License: Public Domain

FILED
                                                                                 March 3, 2017
                                   2017 IL App (4th) 160417                      Carla Bender
                                                                             4th District Appellate
                                        NO. 4-16-0417                              Court, IL

                                IN THE APPELLATE COURT

                                         OF ILLINOIS

                                     FOURTH DISTRICT

JOSEPHINE ‘JODY’ PISANI, on Behalf of Herself and a        )      Appeal from
Class of Persons Similarly Situated; INTERNATIONAL         )      Circuit Court of
BROTHERHOOD OF ELECTRICAL WORKERS                          )      Sangamon County
LOCAL 193; INTERNATIONAL UNION OF                          )      No. 15MR978
PAINTERS & ALLIED TRADES COUNCIL 58;                       )
INTERNATIONAL ASSOCIATION OF MACHINISTS                    )
& AEROSPACE WORKERS DISTRICT 9;                            )
CARPENTERS LOCAL 270; and PLUMBERS,                        )
STEAMFITTERS & REFRIGERATION FITTERS                       )
LOCAL 137,                                                 )
               Plaintiffs,                                 )
               v.                                          )
THE CITY OF SPRINGFIELD,                                   )
               Defendant-Appellee                          )
(JOSEPHINE ‘JODY’ PISANI, on Behalf of Herself and a       )
Class of Persons Similarly Situated; and                   )
INTERNATIONAL BROTHERHOOD OF                               )      Honorable
ELECTRICAL WORKERS LOCAL 193, Plaintiffs-                  )      Chris Perrin,
Appellants).                                               )      Judge Presiding.

              JUSTICE APPLETON delivered the judgment of the court, with opinion.
              Justices Holder White and Knecht concurred in the judgment and opinion.

                                           OPINION

¶1            Plaintiffs are Josephine “Jody” Pisani and her union, the International

Brotherhood of Electrical Workers Local 193. Defendant is the City of Springfield, Illinois.

Pisani sues on behalf of herself and a class of defendant’s employees who (1) are participants in

the Illinois Municipal Retirement Fund (Fund) and (2) refrained from taking advantage of a
vacation buyback provision in defendant’s code of ordinances before the city council passed an

amendment, in 2015, that repealed the provision.

¶2              Before its repeal, the provision allowed defendant’s employees to cash in their

unused vacation days several months before their retirement. The lump sum boosted their final

rate of earnings, thereby boosting the amount of their retirement annuity, payable out of the

Fund. Plaintiffs claimed that the elimination of this pension-spiking opportunity violated the

pension protection clause (Ill. Const. 1970, art. XIII, § 5) and the contracts clause (Ill. Const.

1970, art. I, § 16). They sought a declaratory judgment to that effect as well as an injunction

against the enforcement of the 2015 amendment.

¶3              The parties filed cross-motions for summary judgment. The trial court granted

defendant’s motion and denied plaintiffs’ motion. Plaintiffs appeal.

¶4              We conclude that the trial court’s rulings are correct because, instead of

modifying the pension contract itself, the 2015 amendment to defendant’s code of ordinances

changed a vacation day policy—a change that had only an incidental, indirect effect on pension

benefits. Changes in the terms and conditions of employment that indirectly affect the amount of

a pension by affecting a number that is plugged into the pension formula are not

“diminish[ments] or impair[ments]” of pension benefits, within the meaning of the pension

protection clause. Ill. Const. 1970, art. XIII, § 5.

¶5              Did the amendment, however, violate the contracts clause? In their brief, plaintiffs

do not explain why that clause would call for a different result. They argue only the pension

protection clause, as if their theory of a violation of the contracts clause were redundant and

added nothing. Therefore, our conclusion as to the pension protection clause disposes of both

                                                  -2-
counts of the complaint, and we affirm the trial court’s judgment.

¶6                                        I. BACKGROUND

¶7             In article 7 of the Illinois Pension Code (40 ILCS 5/7-101 et seq. (West 2014)),

the General Assembly created the Fund, a statewide public-pension system, which is governed

by a board of eight members (Board) (40 ILCS 5/7-174(a) (West 2014)). Defendant participates

in the Fund. Participating municipalities and their participating employees contribute to the Fund

(40 ILCS 5/7-172, 7-173 (West 2014)), and out of the invested contributions, the Board pays

annuities and other benefits (40 ILCS 5/7-195 (West 2014)).

¶8             Annuities are payable “during the life of the annuitant” (40 ILCS 5/7-119 (West

2014)), and the amount of the annuity depends on what the employee’s earnings were, among

other factors. (Length of service is another factor.) Take the retirement annuity as an example.

Section 7-142(a)(1)(b) of the Pension Code (40 ILCS 5/7-142(a)(1)(b) (West 2014)) provides a

formula for calculating the monthly amount of the retirement annuity, and the final rate of

earnings is a variable in that formula.

¶9             “Earnings” and “final rate of earnings” are variables, having no fixed numerical

value in article 7 of the Pension Code. They have fixed meanings (40 ILCS 5/7-114, 7-116 (West

2012)) but no fixed numerical value—variables are variable. (Sometimes, in this opinion, we will

cite the 2012 edition of the Illinois Compiled Statutes instead of the current, 2014 edition. The

reason is that certain sections of article 7 as they appear in the 2014 edition include language

added by Public Act 98-599, § 15 (eff. June 1, 2014), which the supreme court struck down, in

its entirety, in In re Pension Reform Litigation, 2015 IL 118585, ¶ 96. Enacting an

unconstitutional amendment to a statute leaves the statute as it was before the amendment—in

                                               -3-
this case, as it was in the 2012 edition of the Illinois Compiled Statutes. See People v. Gersch,

135 Ill. 2d 384, 390 (1990).) Section 7-114(a)(1) of the Pension Code defines “ ‘[e]arnings’ ” as

“[t]he total amount of money paid to an employee for personal services or official duties as an

employee ***, including compensation, fees, allowances, or other emolument paid for official

duties.” 40 ILCS 5/7-114 (West 2012). In its amicus curiae brief, the Board tells us it has passed

a resolution stating that money for unused vacation days meets the statutory definition of

earnings. The Board, however, does not provide us a copy of this resolution, nor can we find this

resolution on the Board’s website. It does not matter, because the parties appear to agree that

money for unused vacation days meets the statutory definition of “ ‘[e]arnings.’ ” Id.

¶ 10           The definition of “ ‘[e]arnings’ ” remains the same regardless of the type of

benefit. Id. The definition of “ ‘[f]inal rate of earnings,’ ” by contrast, depends on the type of

benefit. 40 ILCS 5/7-116(a), (b), (c) (West 2012). Again, we will use the retirement annuity as

our example. For purposes of a retirement annuity, the “ ‘[f]inal rate of earnings’ ” is “the

monthly earnings obtained by dividing the total earnings received by the employee during the

period of either (1) the 48 consecutive months of service within the last 120 months of service in

which his total earnings were the highest or (2) the employee’s total period of service, by the

number of months of service in such period.” 40 ILCS 5/7-116(a) (West 2012).

¶ 11           This definition of the “ ‘[f]inal rate of earnings’ ” opens the door to a strategy

known as “pension spiking.” The Board explains:

               “Generally speaking, the amount of a [Fund] retiree’s pension is based upon the

               highest [4] years of their last [10] years of [Fund] employment (the ‘final rate of

               earnings’), and this typically is an employee’s final [4] years of [Fund]

                                               -4-
               employment. Pension spiking occurs when payouts are made in excess of a

               person’s normal salary progression up to this period. Lump-sum payments made

               during the final[-]rate[-]of[-]earnings period are a common cause of pension

               spiking.”

Such a lump-sum payment could be in the form of money for unused vacation days. In any

event, regardless of what the lump sum is for, the objective is to make the final rate of earnings

artificially large, so as to increase the amount of the annuity.

¶ 12           Because pension spiking, to quote the Board, “is likely one of the many causes of

the serious underfunding problem *** in Illinois,” the General Assembly has passed laws that

are calculated to prevent pension spiking. One such law is the 125% rule, which dates from

January 1, 1964 (1963 Ill. Laws 2337). The 125% rule provides:

                       “(d) In computing the final rate of earnings: *** (5) the earnings to be

               considered for each of the final three months of the final earnings period for

               persons who first became participants before January 1, 2012[,] and the earnings

               to be considered for each of the final 24 months for participants who first become

               participants on or after January 1, 2012[,] shall not exceed 125% of the highest

               earnings of any other month in the final earnings period ***.” 40 ILCS 5/7-

               116(d)(5) (West 2012).

For illustration, assume that an employee hired before January 2012 intends to retire at the end of

December 2018. If, during the final three months of employment (October, November, and

December 2018), the employee cashes in, say, 200 unused vacation days, the resulting artificially

high earnings will be ignored, for purposes of the final rate of earnings, to the extent they exceed

                                                 -5-
125% of the employee’s highest earnings in any other month during the final earnings period

(the highest consecutive 48 months in the last 10 years). See id.

¶ 13           On September 30, 2003, defendant passed an ordinance that made possible an end

run around the 125% rule. Springfield Code of Ordinances § 36.58(b)(13) (added Sept. 30,

2003). This ordinance, which we will call “the 2003 ordinance,” allowed employees to collect a

“lump[-]sum vacation buy back payment” before the final three months of the final earnings

period:

                       “(13) Payment option at [Fund] Retirement: In lieu of a lump sum

               payment of accumulated vacation leave at the time of termination and upon

               [defendant’s] receipt of an employee’s written statement of intent to retire

               pursuant to [Fund] eligibility, either regular retirement or early retirement, an

               employee who provides at least four months advance written notice to [defendant]

               of the date the employee intends to retire may elect to receive a lump sum

               vacation buy back payment on the last paycheck in the month following the date

               of the written notice of intent to retire. The amount paid shall be based on the

               employee’s current salary at the time of the payment.” Id.

Thus, on August 31, 2008, for example, an employee might provide defendant written notice of

his or her intent to retire on December 31, 2018. The employee might cash in his or her 200

unused vacation days in September 2018. By paying this lump sum to the employee in

September 2018, defendant would make the payment before “the final three months of the final

earnings period,” thereby avoiding application of the 125% rule. 40 ILCS 5/7-116(d)(5) (West

2012). The employee’s final rate of earnings would be artificially inflated (see 40 ILCS 5/7-

                                               -6-
142(a)(1) (West 2014)), and so would the employee’s retirement annuity (see id.), which would

be payable for life (see 40 ILCS 5/7-119 (West 2014)).

¶ 14          Several years after the passage of the 2003 ordinance, the General Assembly

devised a deterrent against pension spiking, or maybe it would be more aptly characterized as a

restitutionary remedy. Henceforth, pursuant to what the Board calls an “[a]ccelerated[-

][p]ayment *** provision,” pension spikes would come out of the municipality’s budget, in the

form of an up-front payment to the Fund. The provision is found in subsection (k) of section 7-

172 (40 ILCS 5/7-172(k) (West 2014)), a subsection added by Public Act 97-609, § 10 (eff. Jan.

1, 2012):

                      “(k) If the amount of a participating employee’s reported earnings for any

              of the 12-month periods used to determine the final rate of earnings exceeds the

              employee’s 12 month reported earnings with the same employer for the previous

              year by the greater of 6% or 1.5 times the annual increase in the Consumer Price

              Index-U, as established by the United States Department of Labor for the

              preceding    September,     the    participating   municipality   or   participating

              instrumentality that paid those earnings shall pay to the Fund, in addition to any

              other contributions required under this Article, the present value of the increase in

              the pension resulting from the portion of the increase in salary that is in excess of

              the greater of 6% or 1.5 times the annual increase in the Consumer Price Index-U,

              as determined by the Fund. This present value shall be computed on the basis of

              the actuarial assumptions and tables used in the most recent actuarial valuation of

              the Fund that is available at the time of the computation.” 40 ILCS 5/7-172(k)

                                                -7-
               (West 2014).

Basically, over and above any other contributions article 7 requires, the participating

municipality has to pay the Fund the present value of an increase in the employee’s pension to

the extent that the increase results from an artificial inflation of the employee’s earnings—and

subsection (k) specifies what an artificial inflation is (“If the amount of a participating

employee’s reported earnings for any of the 12-month periods used to determine the final rate of

earnings exceeds the employee’s 12 month reported earnings with the same employer for the

previous year by the greater of 6% or 1.5 times the annual increase in the Consumer Price Index-

U [(for urban consumers)], as established by the United States Department of Labor for the

preceding September ***.” Id.).

¶ 15           After a while, defendant began feeling the sting of the accelerated payment

provision. On May 12, 2015, Melina M. Tomaras-Collins, the director of defendant’s Office of

Human Relations, wrote the aldermen a letter spelling out the financial implications of the 2003

ordinance. A copy of her letter is attached to plaintiffs’ complaint as exhibit C. She notes that,

from June 2012 to the end of 2014, defendant made over $3.5 million in accelerated payments to

the Fund. On the basis of these accelerated payments that defendant has made thus far, she

projects that defendant will “have a potential exposure of $44 million in accelerated payments

exclusively associated with the current policy of allowing [defendant’s] employees to liquidate

their unused vacation time up to a year in advance of their retirement date.” (Emphasis omitted.)

She suggests that “abolishing this pension sp[i]ke mechanism will provide [a] positive impact on

[defendant’s] finances and the [taxpaying] community as a whole.”

¶ 16           On July 21, 2015, the city council passed an ordinance (2015 ordinance), which

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repealed the lump-sum vacation payout provision of the 2003 ordinance. Springfield Code of

Ordinances § 36.58(b)(13) (repealed July 21, 2015). As of June 1, 2016, defendant’s employees

no longer would be allowed to cash out their vacation balances up to a year in advance of their

retirement date.

¶ 17           On August 19, 2015, Tomaras-Collins sent a letter to all future retirees employed

by defendant, alerting them to this change—notifying them that the window for pension spiking

soon would close. A copy of her letter is attached to the complaint as exhibit D, and it reads:

                       “Since 2003, potential City retirees have had access to a benefit allowing

               them to cash out their unused vacation time for a lump sum payment up to one

               year in advance of their retirement date. This benefit will expire on May 31, 2016.

                       Since you are a City employee who will be eligible to retire on or before

               May 31, 2017, you will be allowed to take advantage of this lump sum payment

               benefit provided that you submit proper notice of intent to retire on or before the

               expiration date stated above. Your notice of intent to retire may be submitted up

               to 12 months in advance of your retirement date, and your actual retirement date

               must be on or before May 31, 2017.

                       We are not encouraging early retirement but to help us plan for

               succession, we ask that you provide as much notice as possible. Enclosed is a

               form that needs to be submitted regarding notice of your future retirement. ***

               The form must be turned in to the Office of Human Resources on or before May

               31, 2016.”

¶ 18           In the complaint, Pisani alleges that, for the following reasons, this change in

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defendant’s policy put her in a dilemma. She has been an employee of defendant for

approximately 15 years and is a participant in the Fund. She “is eligible to take advantage of the

pension calculation at issue in this litigation, but [she] does not want to leave City employment at

this point in her career.” She and the union, of which she is a member, “bring this action on

behalf of a class consisting of all City employees who are [Fund] participants and who will not

take advantage of the vacation pay formula currently in place before it is set to expire on May

31, 2016.” In short, the dilemma was not wanting to retire as of yet, but having to choose

between, on the one hand, early retirement and a pension spike or, on the other hand, to work

with no pension spiking opportunity.

¶ 19           Pisani contends that she and other employees of defendant should not be put to

this choice. Plaintiffs contend that the opportunity for a pension spike is constitutionally

protected. Count I of their complaint seeks a declaratory judgment that the 2015 ordinance

violates the pension protection clause of the Illinois Constitution (Ill. Const. 1970, art. XIII, § 5),

in that “it diminishes and impairs Plaintiffs’ [Fund] membership rights and pension benefits.”

Count II seeks a declaratory judgment that the 2015 ordinance violates the contracts clause of the

Illinois Constitution (Ill. Const. 1970, art. I, § 16), in that, “[b]y serving [defendant] as

employees and making all *** contributions [to the Fund] as required by law, Plaintiffs gave

good and valuable consideration to Defendant” and, consequently, are “entitled to the benefit of

their contract,” the obligations of which the 2015 ordinance allegedly would impair.

¶ 20           The parties filed cross-motions for summary judgment, and, on May 4, 2016, the

trial court granted defendant’s motion and denied plaintiffs’ motion. The court reasoned as

follows:

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                      “1. The ability of [defendant’s] employees to receive an early lump sum

               payment for unused vacation is a not a benefit of the enforceable contractual

               relationship resulting from membership in one of the State’s pension or retirement

               systems. It is a local[-]employer[-]generated policy that is available to all [of

               defendant’s] employees.

                      2. The ability of [defendant’s] employees to receive an early lump[-]sum

               payment for unused vacation is not a benefit that is derived directly from

               membership in the [Fund] or from the *** Pension Code. It is derived solely from

               city ordinance and employment with [defendant].

                      3. The 2015 Ordinance does negatively impact the amount of a retiring

               City employee’s earnings upon termination of employment. The earnings number

               is used by [the Board] in its pension calculations to determine a retiring City

               employee’s final rate of earnings. The negative impact of this ordinance on a

               retiring City employee’s pension annuity is incidental. Peters v. City of

               Springfield, 57 Ill. 2d 142 (1974).”

¶ 21                                     II. ANALYSIS

¶ 22           By filing cross-motions for summary judgment, the parties signified their

agreement that the issues in this case were purely legal, instead of factual, and they invited the

trial court to decide these legal issues. See Bremer v. City of Rockford, 2016 IL 119889, ¶ 20.

The court did so by granting defendant’s motion and denying plaintiffs’ motion. Our standard of

review is de novo. See id.

                                               - 11 -
¶ 23           Let us, then, evaluate plaintiffs’ argument anew. They argue a violation of the

pension protection clause (Ill. Const. 1970, art. XIII, § 5), and, additionally, they assert a

violation of the contracts clause (Ill. Const. 1970, art. I, § 16). They make no reasoned argument

regarding the contracts clause as distinct from the pension protection clause. Therefore, we will

disregard the invocation of the contracts clause. See Block 418, LLC v. Uni-Tel Communications

Group, Inc., 398 Ill. App. 3d 586, 590 (2010).

¶ 24           That leaves the pension protection clause. It provides: “Membership in any

pension or retirement system of the State, any unit of local government or school district, or any

agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of

which shall not be diminished or impaired.” Ill. Const. 1970, art. XIII, § 5.

¶ 25           Plaintiffs claim that the vacation buyback provision in the 2003 ordinance is a

pension benefit that cannot “be diminished or impaired.” Id. They reason as follows. By the

terms of the 2003 ordinance, only employees who are participants in the Fund may take

advantage of the vacation buyback provision. The 2003 ordinance offers a “Payment option at

[Fund] Retirement,” and to exercise this payment option, the employee has to submit a “written

statement of intent to retire pursuant to [Fund] eligibility.” (The 2003 ordinance uses the initials

“IMRF” to signify the Fund.) Springfield Code of Ordinances § 36.58(b)(13) (added Sept. 30,

2003). Because the vacation buyback provision is a pension-spiking benefit “limited to,

conditioned on, and flow[ing] directly from membership” in the Fund, the 2015 ordinance, which

purports to take this benefit away from Pisani and similarly situated employees, is

unconstitutional under the pension protection clause as plaintiffs interpret it. Kanerva v. Weems,

2014 IL 115811, ¶ 40. In their view, the right of defendant’s employees, under the 2003

                                               - 12 -
ordinance, to convert unused vacation days to additional, lump-sum compensation, specifically

for the purpose of increasing the amount of their retirement annuity, “qualifies as a benefit of the

enforceable contractual relationship resulting from membership in one of the State’s pension or

retirement systems,” and by taking this valuable pension benefit away, the 2015 ordinance

violates the pension protection clause. Id. ¶ 38.

¶ 26           It is true that an “enforceable contractual relationship result[s] from membership

in one of the State’s pension or retirement systems,” specifically, in this case, from membership

in the Fund. Id. But the contractual relationship is between the participating employee and the

State of Illinois. See Schroeder v. Morton Grove Police Pension Board, 219 Ill. App. 3d 697,

700 (1991) (“The ‘contractual relationship’ between the State and the employee is formed and

governed by the actual terms of the contract or pension at the time the employee initially

contributes to the system.”); Gualano v. City of Des Plaines, 139 Ill. App. 3d 456, 458 (1985)

(“[A]n employee’s ‘contractual relationship’ with the State incorporates the law which exists at

the time when his contractual rights to his pension vest.”). Pisani has a pension contract not with

defendant, but with the State—or with the Fund’s eight-member board, which is an “agency or

instrumentality” of the State (Ill. Const. 1970, art. XIII, § 5). See Miller v. Retirement Board of

Policemen’s Annuity & Benefit Fund, 329 Ill. App. 3d 589, 600 (2001) (“[T]he application of the

[statutory] amendment to [the] plaintiffs amounted to a change in the terms of their contract with

the pension system and directly diminished their benefits under the contract.”); Kraus v. Board of

Trustees of the Police Pension Fund, 72 Ill. App. 3d 833, 844 (1979) (“Application of [the

statutory] amendment to [the] plaintiff would amount to a change in the terms of his contract

with the pension system *** and would directly diminish his benefits under the contract.”). To

                                                - 13 -
be sure, Pisani has a contract with defendant, too—an employment contract—but, in this

employment contract, defendant never promised to pay her a pension. As a participating

municipality, defendant merely has a statutory duty to make contributions to the Fund (see 40

ILCS 5/7-172 (West 2014)), and if defendant fails to do so, the Board will have statutory

remedies against defendant (see 40 ILCS 5/7-172.1(a) (West 2014)); but defendant has no

contractual duty to pay Pisani a pension. That is the Board’s contractual duty. See Miller, 329 Ill.

App. 3d at 600; Kraus, 72 Ill. App. 3d at 844. A retirement annuity is one of the “benefits” of

Pisani’s “contractual relationship” with the State. Ill. Const., art. XIII, § 5. It is the State, the

Board, that has contracted to pay her a retirement annuity on the conditions set forth in statutory

law. The terms and conditions of her pension contract are in legislation passed by the General

Assembly, not in defendant’s ordinances. See Kanerva, 2014 IL 115811, ¶ 57 (“[T]he State’s

provision of health insurance premium subsidies for retirees is a benefit of membership in a

pension or retirement system within the meaning of article XIII, section 5, of the Illinois

Constitution, and the General Assembly was precluded from diminishing or impairing that

benefit for those employees, annuitants, and survivors whose rights were governed by the

version of section 10 of the Group Insurance Act that was in effect prior to the enactment of

Public Act 97-695 ***.” (Emphasis added.)); Di Falco v. Board of Trustees of the Firemen’s

Pension Fund of the Wood Dale Fire Protection District No. One, 122 Ill. 2d 22, 26 (1988)

(“[T]he ‘contractual relationship’ is governed by the actual terms of the Pension Code at the time

the employee becomes a member of the pension system.” (Emphasis added.)); In re Marriage of

Winter, 387 Ill. App. 3d 21, 34 (2008) (same). Because the vacation buyback provision was in

defendant’s ordinance instead of in Illinois statutory law, it was not a benefit of the “contractual

                                               - 14 -
relationship” to which the pension protection clause refers. Ill. Const. 1970, art. XIII, § 5.

¶ 27           The cases on which plaintiffs rely in their brief are distinguishable because, in all

those cases, the General Assembly attempted to modify the pension contract by amending

Illinois statutory law. See Pension Reform Litigation, 2015 IL 118585, ¶ 27; Kanerva, 2014 IL

115811, ¶ 1; Buddell v. Board of Trustees, State University Retirement System of Illinois, 118 Ill.

2d 99, 101 (1987); Felt v. Board of Trustees of the Judges Retirement System, 107 Ill. 2d 158,

160 (1985); Miller, 329 Ill. App. 3d at 600. In all those cases, a party to the pension contract, the

State, diminished or impaired pension benefits by modifying the Pension Code or the State

Employees Group Insurance Act of 1971. That is not what happened in this case. Instead,

defendant had an employment policy, which was expressed in an ordinance, and defendant

revised its employment policy by passing another ordinance.

¶ 28           To express our point in a slightly different way, if “[m]embership in [a] pension

or retirement system of the State” is “an enforceable contractual relationship, the benefits of

which shall not be diminished or impaired,” that is just an elaborate way of saying the benefits of

membership in the pension or retirement system of the State shall not be diminished or impaired.

Ill. Const. 1970, art. XIII, § 5. The vacation buyback provision was not a benefit of membership

in the Fund, a pension or retirement system of the State. If it were, all members of the Fund

would have had the vacation buyback option, simply by virtue of being members of the Fund—

but they did not. Instead, it was uniquely a benefit of being an employee of defendant, until the

2015 ordinance took that benefit away.

¶ 29           We realize that changes in the terms and conditions of employment can have just

as palpable an effect on pension benefits as amendments to Illinois statutory law. By reducing an

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employee’s rate of compensation—or, more drastically, by laying off the employee—a

municipality could just as effectively diminish the employee’s future pension as a cost-saving

amendment to the Pension Code could. The diminishment would be no less real for being

indirect. Nevertheless, in the case the trial court cited, Peters, the supreme court held the pension

protection clause to be inapplicable to a change in the terms and conditions of employment, even

though the change would cause the employee to receive a smaller pension than he otherwise

might have received. Peters, 57 Ill. 2d at 151-52.

¶ 30           In Peters, defendant adopted an ordinance reducing the mandatory retirement age

of its police officers and firefighters from 63 years to 60 years. Id. at 143-44. The plaintiffs, who

were firefighters 60 years of age or older (id. at 150), challenged the ordinance as

unconstitutional under the pension protection clause (id. at 143-44). They argued the ordinance

had “ ‘diminishe[d] and impair[ed] their pension rights’ ” by “ ‘forcing [them] to retire before

[they had] obtain[ed] their maximum pension benefits.’ ” Id. at 144.

¶ 31           The supreme court was unpersuaded that, just because a change in the terms and

conditions of employment took away an opportunity to maximize pension benefits, the change

violated the pension protection clause. Id. at 151-52. The supreme court reasoned as follows:

                       “The firemen’s pension fund formula is based on salary and length of

               service and obviously any change in these variables will affect the amount of the

               pension. Municipal employment is not static and a number of factors might

               require that a public position be abolished, its functions changed, or the terms of

               employment modified. Although this court has not previously considered the

               nature of the ‘enforceable contractual relationship’ contemplated by section 5 of

                                               - 16 -
               article XIII, a similar provision is contained in the Constitution of New York and

               has been construed by the courts of that State. [Citations.] From our review of the

               constitutional debates and the authorities, we conclude that the purpose and intent

               of the constitutional provision was to insure that pension rights of public

               employees which had been earned should not be ‘diminished or impaired’ but that

               it was not intended, and did not serve, to prevent the defendant City from

               reducing the maximum retirement age, even though the reduction might affect the

               pensions which plaintiffs would ultimately have received.” Id.

The import of that quoted passage is that a change in “salary” is not a “ ‘diminish[ment] or

impair[ment]’ ” of pension benefits within the meaning of the pension protection clause, even

though the change “will affect the amount of the pension.” Id. (quoting Ill. Const. 1970, art. XIII,

§ 5). The same logic applies to a change in the final rate of earnings. The contractual relationship

between Pisani and the Board is a relationship in which the final rate of earnings is a variable,

having no fixed numerical value (see 40 ILCS 5/7-142(a)(1) (West 2014)), just as, in Peters, the

contractual relationship between firefighters and the pension fund was a relationship in which the

length of service was a variable (Peters, 57 Ill. 2d at 151). The pension contract was the formula,

with its variables, and no matter what numbers were plugged into the formula, it—and therefore

the pension contract—remained the same. The final rate of earnings in the present case is like the

length of service in Peters: they are variables, x and y. The point of Peters is that the pension

protection clause protects the statutory formula, not the inputs from the employment relationship.

¶ 32           Plaintiffs point out that, in Miller, 329 Ill. App. 3d at 601, the appellate court

distinguished Peters, and plaintiffs seem to imply that, in the present case, Peters is

                                               - 17 -
distinguishable for the same reason it was in Miller. Actually, Miller is significantly different

from the present case because, in Miller, the General Assembly amended the Pension Code. Id.

at 600. The amendment changed the pension formula that was enshrined in Illinois statutory law,

substituting one variable of the formula for another variable, and the new variable had a

detrimental effect on the plaintiffs’ pensions. Id. “Unlike Peters,” the appellate court remarked,

“the amendment *** did not create a mere incidental effect on pension calculations but, rather,

directly changed a fixed variable in the pension formula.” Id. at 601. In the present case, by

contrast, there was no change to the Pension Code. There was no change to the statutory formula

by which the monthly amount of the retirement annuity was calculated. Instead, there was a

change to the terms and conditions of employment, and this change had an incidental, indirect

effect on the amount of the retirement annuity. Therefore, it is Miller that is distinguishable from

the present case, and Peters is directly on point.

¶ 33                                    III. CONCLUSION

¶ 34           For the foregoing reasons, we affirm the trial court’s judgment.

¶ 35           Affirmed.

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