by Robert A. Stuart Legal and Legislative Counsel

GOVERNOR THOMPSON SIGNS H.B. 1468 PERMITTING LEVY OF TAX FOR PAYMENT OF WORKMENS COMPENSATION AND LIABILITY UNDER OCCUPATIONAL DISEASES ACT

One of the most serious problems incurred by park districts and other local governmental units in the ever increasing costs of government has been the increase in insurance premiums required for the protection of the local government entity under state mandated programs including the Workmens Compensation Act, the Occupational Diseases Act, the Unemployment Compensation Act and other similar mandated programs.

On August 11, 1978 Governor Thompson signed into law H.B. 1468 (Public Act 80-1341). This Act in making numerous amendments to Sections 9-101 through 9-107 of the "Local Governmental and Governmental Employees Tort Immunity Act" (Ch. 85 Ill. Rev. Stats. 1975) has authorized park districts and other local public entities to levy a tax for the payment of insurance premiums required under the mandated Workmens Compensation Act as well as insurance to protect the entity against liability imposed under the Occupational Diseases Act. The amendments greatly broaden the purposes for which the tax may be levied.

Generally, PA-80-1341 has the following results:

(1) Broadens the definition of "local taxing entity" to include as a public entity which has taxes levied on its behalf as well as the direct power to levy the tax itself. This would include joint district associations for the handicapped as an example.

(2) Includes the amicable settlement of tort claims as well as judgments as a proper purpose for which the tax may be levied.

(3) Includes as a proper purpose for the levy of the tax the payment of a judgment obtained against the employee only in the event the employee incurred personal judgment while acting within the scope of his employment.

(4) Includes as a proper purpose for the levy of the tax the payment for liability imposed under the provisions of the Workmens Compensation Act or the Occupational Diseases Act, as well as liability incurred for negligence (or tort). This would include:

(a) Insurance premiums.

(b) Payment of judgments (as a self-insurer).

*(c) Settlement of claims (further authorizes the postponement of payment for a one year period in the event the governing board is of the opinion that the tort judgment is too great to be paid out of revenues for the ensuing fiscal year.)
*The settlement may be made only when the governing board considers it advisable to enter into such a compromise (Section 9-102).

(d) Authorizes the issuance of bonds without referendum for the payment of any or all tort judgments or settlements outstanding in an amount necessary to discharge the obligation. Bonds are not limited other than by constitutional limits of indebtedness.

(e) Authorizes the establishment of a reserve for payment of expected losses. The need for such a reserve must be based upon reasonable evidence and the funds held in a special reserve account for the purposes set forth in the Act. This reserve fund may be invested subject to the restriction that all interest from such investment must be used only for the purposes for which the funds itself can be used (in this respect it is unlike the working cash fund).

(f) Authorizes the levy of the tax for purposes of employing claims services for the settlement of claims.

Section 1. Sections 9-101, 9-102, 9-103, 9-104, 9-105, 9-106, and 9-107 of the "Local Governmental and Governmental Employees Tort Immunity Act," approved August 13, 1965, as amended, are amended to read as follows:

(Ch. 85, par. 9-101)

Sec. 9-101. As used in this Article:

(a) "Board" means the governing body of a local taxing entity.

(b) "Fiscal year" means the fiscal year prescribed for a local public entity or adopted by the local public entity as authorized by law.

Illinois Park and Recreation 8 September/October, 1978

(c) "Local taxing entity" means a local public entity that has the power to levy or have levied on its behalf taxes or assessments upon property within the territory of the entity.

(d) "Tort judgment" means a Final Judgment founded on an injury, as defined by this Act, proximately caused by a negligent or wrongful act or omission of a local public entity or an employee of a local public entity while acting within the scope of his employment.

(e) "Settlement" means a payment based on an injury or event which a local public entity reasonable believes might have been caused by a negligent or wrongful act or omission of the local public entity or an employee while acting within the scope of his employment.

(f) "Claims service" means any arrangement whereby skilled personnel are employed or retained to investigate, settle, or defend an injury or event which is alleged to have been caused by, or which a local public entity reasonable believes might have been caused by. a negligent or wrongful act or omission of the local public entity or an employee while acting within the scope of his employment. The term "claims service" shall include, but not be limited to, loss control before or after an injury or event and the retention of independent legal counsel for purposes of defending claims under this Act.

(Ch. 85, par. 9-102)

Sec. 9-102. A local public entity is empowered and directed to pay any tort judgment or settlement for which it or an employee while acting within the scope of his employment is liable in the manner provided in this Article. A local public entity may make payments to settle or compromise a claim or action which has been or might be filed or instituted against it when the governing body or person vested by law or ordinance with authority to make over-all policy decisions for such entity considers it advisable to enter into such a settlement or compromise.

(Ch. 85, par, 9-103)

Sec. 9-103. (a) A local public entity may protect itself against any liability which may be imposed upon it or one of its employees under this Act or the Workmen's Compensation Act or the Occupational Diseases Act by means including, but not limited to, insurance, self-insurance, the purchase of claims services, or participation in a reciprocal insurer as provided in Sections 72, 76 and 81 or the Insurance Code. Insurance shall be carried with a company authorized by the Department of Insurance to write such insurance coverage in Illinois. A local public entity may self-insure provided it complies with any other statutory requirements. The expenditure of funds of a local public entity to protect itself or its employees against liability proper for any local public entity.

(b) A local public entity may contract for or purchase any of the guaranteed fund certificates or shares of guaranteed capital as provided for in Section 56 of the Illinois Insurance Code. The expenditure of funds of the local public entity for said contract or purchase is proper for any local public entity.

(c) Every policy for insurance coverage issued to a local public entity shall provide or be endorsed to provide that the company issuing such policy waives any right to refuse payment or to deny liability thereto within the limits of said policy by reason of the non-liability of the insured public entity for the wrongful or negligent acts of itself or its employees and its immunity from suit by reason of the defenses and immunities provided in this Act.

(Ch. 85, par. 9-104)

Sec. 9-104. (a) If a local public entity does not pay a tort judgment or settlement during the fiscal year in which it becomes final and if, in the opinion of its governing body, the unpaid amount of the tort judgment is not too great to be paid out of revenues for the ensuing fiscal year, the governing body shall pay the balance of the judgment during the ensuing fiscal year.

(b) If the local public entity does not pay the tort judgment or settlement during the fiscal year when it becomes final and its governing body is of the opinion that the unpaid amount of the judgment or settlement is so great that undue hardship will arise if the entire amount is paid out of the revenues for the ensuing fiscal year, the governing body shall pay the judgment or settlement, with interest thereon, in not more than 10 annual installments. Each payment shall be of an equal portion of the principal of the tort judgment or settlement. The governing body, in its discretion, may prepay any one or more installments or any part of an installment.

(Ch. 85, par. 9-105)

Sec. 9-105. The board of a local taxing entity may, instead of following the procedure under subdivision (b) of Section 9-104 or when it considers the action advisable, issue bonds for the payment of any or all tort judgments or settlements outstanding against the entity. Such bonds may be issued in an amount necessary to discharge the obligation of the entity under such judgments or settlements and in an amount, including existing indebtedness, in excess of any heretofore or hereafter imposed statuatory limitation as to debt but subject to constitutional limits.

(Ch. 85, par. 9-106)

Sec. 9-106. A local public entity that derives revenue for its maintenance and operation from rates and charges made for services or facilities it provides shall in each fiscal year make rates and charges or both, or otherwise provide funds, in an amount sufficient to pay all its tort judgments and settlements in accordance with this Article and its obligations under the Workmen's Compensation Act and the Occupational Diseases Act.

(Ch. 85, par. 9-107)

Sec. 9-107. A local public entity may levy or have levied on its behalf taxes annually upon all taxable property within its territory at a rate that will produce a sum which will be sufficient to pay the cost of settlements or judgments under Section 9-102. to pay the costs of protecting itself or its employees against liability under Section 9-103, to pay the costs of and principal and interest on bonds issued under Section 9-105, to pay tort judgments or settlements under Section 9-104 to the extent necessary to discharge such obligations. Provided it complies with any other applicable statutory requirements, the local public entity may self-insure and establish reserves for expected losses for any liability for which the local public entity is authorized to levy or have levied on its behalf taxes for the purchase of insurance or the payment of judgments or settlements under this Section. The decision of the board to establish a reserve shall be based on reasonable evidence.

Funds raised pursuant to this Section shall be used only to purchase insurance, to purchase claims services, to pay for judgments or settlements, or to otherwise provide protection to the local public entity or its employees against liability under this Act or the Workmen's Compensation or Occupational Diseases Acts. Funds raised pursuant to this Section may be invested temporarily in any obligation which is guaranteed as to the payment of principal and interest by the United Slates of America or any instrumentality of the United Stales of America. Interest on such funds shall be used only for purposes for which the funds can be used.

Any tax levied under this Section shall be levied and collected in like manner with the general taxes of the entity and shall be exclusive of and in addition to the amount of tax that entity is now or may hereafter be authorized to levy for general purposes under any statute which may limit the amount of tax which that entity may levy for general purposes. The county clerk of the county in which any part of the territory of the local taxing entity is located, in reducing tax levies under the provisions of any Act concerning the levy and extension of taxes, shall not consider any tax provided for by this Section as a part of the general tax levy for the purposes of the entity nor include such tax within any limitation of the percent of the assessed valuation upon which taxes are required to be extended for such entity.

Revenues derived from such tax shall be paid to the treasurer of the local taxing entity as collected and used for the purposes of this Section and of Section 9-J02, 9-103, 9-104 or 9-105, as the case may be. If payments on account of such taxes are insufficient during any year to meet such purposes, the entity may issue tax anticipation warrants against the current tax levy in the manner provided by statute.

Section 2. This amendatory Act takes effect upon its becoming a law.

Illinois Parks and Recreation 9 September/October, 1978