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Pay Now Illinois files new lawsuit asking for same treatment as state workers

Thursday, Feb 9, 2017

* The Illinois Supreme Court has already ruled that a state contract provision can’t be paid without a legal appropriation. But filing this suit in the same circuit which ruled in favor of AFSCME’s lawsuit to pay state workers without an appropriation is definitely an interesting idea….

Pay Now Illinois (PNI), a coalition of Illinois-based human and social service agencies and companies, filed suit today in St. Clair County Circuit Court against Governor Bruce Rauner, Comptroller Susana Mendoza and directors of three statewide agencies, seeking a preliminary and permanent injunction that would force Illinois to begin timely payments for services performed under binding contracts dating back to the start of the current fiscal year, July 1, 2016.

The suit, a direct result of Illinois’ 20-month budget impasse, was filed in St. Clair County where, in 2015, a circuit court ruled in the case of AFSCME v. State of Illinois that the State of Illinois must pay state employees on a timely basis, despite the lack of a budget or agreed-to appropriations by the General Assembly and the Governor. State employees have not missed a single paycheck since the start of the budget impasse on July 1, 2015.

“Precedent has been set with the ruling in St. Clair County that required state workers be paid; we feel our constitutional claims are as strong, or possibly stronger,” Pay Now Illinois Chair Andrea Durbin said. “We are hoping for the same success so that we can get paid what is owed us, and we can be certain of getting paid in the future. After all, why should state workers be paid, but not state contractors? The state must provide assurance that it is a responsible business partner.”

The Pay Now Illinois suit in St. Clair County claims that with the adoption on June 30, 2016 of the six-month Stop Gap Bill – PA 99-524 – the state paid some outstanding contracts for fiscal year 2016, but did so by reducing or terminating funding of contracts for fiscal year 2017. “The so-called ‘Stop Gap’ Bill has unlawfully reduced or capped the liability of the State to plaintiffs on the contracts for services in fiscal year 2017 – contracts that had been agreed to in writing or orally before P.A. 99-524 was adopted on June 30, 2016,” the suit says.

As a result of unpaid contracts and an uncertain future, social service agencies are facing severe cash squeezes, according to the lawsuit. Over 40 percent of the plaintiffs are using or have fully expended their lines of credit, and more than 32 percent are struggling with liquidity issues. Approximately 76 percent have already taken actions to reduce staffing expenditures, while nearly 60 percent of the plaintiffs have reduced services. Failure to pay for work that has been carried out “is causing permanent and not temporary damage” to the agencies and “irreparable injury to the client populations that have lost services and damaged the credibility of the plaintiff organizations with many vulnerable and emotionally troubled persons,” the lawsuit says.

The suit also claims that the state’s failure to pass a fully funded, balanced budget is a violation of the state’s constitution. The lack of a budget removes the security to contract holders that they will be paid. And the lack of appropriations removes the opportunity for a legal remedy against the state for failure to pay its obligations, violating the plaintiffs’ rights to due process. It goes on to warn, “In the absence of injunctive relief, not only the plaintiff organizations but the entire State-supported infrastructure for providing human services faces irreparable and lasting injury.”

In addition to the Governor and Comptroller, other defendants in the suit are James Dimas, Secretary of the Illinois Department of Human Services; Jan Bohnhof, Director of the Illinois Department on Aging; and, John R. Baldwin, Acting Director of the Illinois Department of Corrections. PNI plaintiffs include 37 Illinois-based human and social service agencies and companies.

This is Pay Now Illinois’s second suit against the governor and others seeking payment on overdue bills. The first suit, filed in May of 2016, is now on appeal before the Appellate Court of the First District of Illinois. On August 31, 2016, Cook County Circuit Court Judge Rodolfo Garcia dismissed PNI’s first suit, which had sought an immediate preliminary injunction and full payment of unpaid contracts dating back to July 1, 2015. Agreeing that this case presented important constitutional issues, he urged PNI to expeditiously appeal the suit to a higher court for resolution.

“We are suing to get paid, but also to protect the integrity of contracts in the State of Illinois,” Durbin said. “Right now, nobody doing business with the State of Illinois can be certain of getting paid. And that is no way to run a business. If the State can get away with not paying our contracts, does any contract holder have security that the State’s word is good? Will they believe that the State of Illinois has integrity?” [Emphasis added.]

* The proposed remedy for the constitutional violation of not enacting “a fully funded, balanced budget”

Grant preliminary and permanent injunctive relief requiring the defendant state officers to specifically perform their obligations of payment under the contacts attached hereto and on a timely basis pay the vouchers submitted and to be submitted for the remainder of the fiscal year

* More from the lawsuit

Nonetheless, defendants have paid other creditors in the absence of agreed-to appropriations.

While such payments have occurred under various court orders, the defendant Governor announced that the State should continue to pay State employees without agreed-to appropriations even if the order requiring such payment in AFSCME v. State were to be dissolved—and that he would take every available action to ensure they would get paid even without an appropriation.

At the same time, defendants—including the defendant Governor—will not pay plaintiffs in the absence of agreed to appropriations.

Yep. Consider him called out. Finally.

- Posted by Rich Miller        

  1. - VanillaMan - Thursday, Feb 9, 17 @ 11:55 am:

    If we only had a governor, and not a whiny victim.

  2. - Ron Burgundy - Thursday, Feb 9, 17 @ 11:57 am:

    Will be an interesting read, especially to see if it differs enough from the first suit in Cook County to justify not being part of that suit, which is on appeal. Will face an argument that if it is just changed circumstances since the first suit was filed, it should have been filed there as an amendment, and not “forum shopped” down to St. Clair County.

  3. - GOP Extremist - Thursday, Feb 9, 17 @ 12:11 pm:

    Pay Illinois Now has been added to Rather than trying to create a crisis in order to pass a massive tax increase, Madigan and the coalitions he controls should be working towards compromising on a balanced budget with structural changes that will grow our economy.

  4. - Ghost - Thursday, Feb 9, 17 @ 12:11 pm:

    Supreme Court has already ruled this isnt allowed.

    State worker pay was based on fed law that requires workers be paid. no equivalant for contracts

  5. - The Captain - Thursday, Feb 9, 17 @ 12:15 pm:

    He’s being sued by his own wife for the job he’s done as Governor, the failure narrative is not going to be a difficult message to burn in, especially for a guy who ran on a record of success in 2014.

  6. - RNUG - Thursday, Feb 9, 17 @ 12:16 pm:

    While I’ve been quietly cheering this on, I wanted the case to be about fraudently contracting for services, knowing no appropriation existed and the vendor would likely not get paid. This one about trying to enforce a contract without an appropriation is, I think, a bit more questionable. Still a valid issue to raise, but I think weaker than an outright fraud claim.

    There is one major difference between the payroll ruling and this case. Federal law required minimum wage for those essential workers and recipients of Federal funds, period. If they had to work, they had to be paid. Since the State said they couldn’t figure out who to pay, the judge somewhat reluctantly agreed to the State’s proposal to pay everyone. It was a questionable stop-gap that everyone was willing to cover their eyes and accept.

    Going to be interesting to read the judge’s take on this suit. My guess is they kick it on narrow grounds back to the Court of Claims process.

  7. - Anonymous - Thursday, Feb 9, 17 @ 12:16 pm:

    Look for the governor to email employees of these social service agencies a video about how he wants them to be paid even without an appropriation in 3…2…1…

  8. - Puzzled - Thursday, Feb 9, 17 @ 12:23 pm:

    I’ve always been a bit puzzled by this. Why is it legal for the state to appropriate money for schools when that means it doesn’t have enough money to fulfill contractual obligations? Aren’t contracts protected by federal laws?

    I would have thought that first the state would be forced to fulfill contracts, and only after it had done that would it be able to spend money on schools and universities etc.

    I work at a university and have a kid in school so I’m happy that I’m wrong (though it’s more than a bit annoying that the state isn’t paying approved medical insurance claims) but I’m still puzzled.

  9. - Juice - Thursday, Feb 9, 17 @ 12:24 pm:

    RNUG, agree with you completely on the fraud claim.

    On the employee pay claim, the Cook County case focused on the federal fair labor standards act, and the AG won. The St. Clair case relied more heavily on the impairment of the State’s collective bargaining agreement. Which makes the Governor’s position even more absurd since the largest CBA was terminated many moons ago by him.

  10. - A Jack - Thursday, Feb 9, 17 @ 12:30 pm:

    I am pretty sure the State’s out is that the contract boilerplate mentions that payment was conditional on an appropriation.

    Now, if the contracting agencies provided the services because they were mislead or coerced, then I think they would have a case.

  11. - wordslinger - Thursday, Feb 9, 17 @ 12:37 pm:

    RNUG, great points.

    If the Rauner Administration hasn’t been fraudulent under the law in their planned reneging on state contracts, they certainly have acted in obvious bad faith.

    Even after all these months, it’s incredible to me that so many accept the willful reneging on state contracts as a legitimate partisan political tactic.

    I would have thought that beyond the pale, no matter your politics. I was way wrong.

  12. - RNUG - Thursday, Feb 9, 17 @ 12:41 pm:

    == I am pretty sure the State’s out is that the contract boilerplate mentions that payment was conditional on an appropriation. ==

    I’ve seen the “no appropriation” clause used to get out of purchase / lease of major pieces of equipment by removing explicit line items in an agency’s budget bill, but in those cases either delivery was refused by the State or the equipment was immediately returned. Think that’s a bit different than the State taking delivery / consuming services.

    Pretty sure any contract dispute suit that does not claim outright fraud or coersion will get kicked back to the Court of Claims process.

  13. - Andrea Durbin - Thursday, Feb 9, 17 @ 12:44 pm:

    A Jack, read the complaint please. Both the Illinois and United States constitutions prohibit the impairment of contracts. By not paying us, and by blocking our access to a remedy in Court of Claims, which requires a prior appropriation, our contracts are impaired. That is ONE of the claims we make in the suit. This overrides the “subject to appropriation” issue. You can’t sign away your Constitutional rights.

  14. - Oswego Willy - Thursday, Feb 9, 17 @ 12:46 pm:

    Great work by - RNUG -.

    To the Post,

    ===At the same time, defendants—including the defendant Governor—will not pay plaintiffs in the absence of agreed to appropriations.===

    … and Rich…

    ===Yep. Consider him called out. Finally.===

    I’ll point to - RNUG - to the issues on the process and the litigation, but I want to acknowledge and thank those involved in finally calling out the governor.

    At this point, and there should NEVER Havd been an “at this point” moment in this situation, the blaming and calling out is the legal finger pointed directly where it needs to be, and arguing, making the case, that the purposeful way Social Services have been dismissed and other hostages are weighed and measured at the cost of social services or others needs to end.

    The thought process that this is many, that’s just not remotely accurate, and further, the “fear”, real or otherwise, of standing up for yourselves, facing retribution later seems eons away, now that so many social service groups are now gone.

    Keep up the pressure where the pressure needs to be.

    Don’t back down, rise up, and be heard and show the hypocrisy.


  15. - Ron Burgundy - Thursday, Feb 9, 17 @ 12:48 pm:

    A potential problem with a fraud claim might be that some members of this coalition are under multi-year deals which began before the impasse, which would hurt an argument that they were fradulently induced. Might split off part of the coalition. This theory at least keeps them all in the same boat.

  16. - A Jack - Thursday, Feb 9, 17 @ 12:53 pm:

    It does seem with past administrations that they couldn’t do a contract until an appropriation was created. I don’t see how they could have legally signed a contract without an appropriation for that item. Contracts were late at least one fiscal year I remember because of a temporary budget impasse.

  17. - pawn - Thursday, Feb 9, 17 @ 12:58 pm:

    Wordslinger, there are no more norms. Not in Illinois and not at the federal level, either.

  18. - RNUG - Thursday, Feb 9, 17 @ 12:59 pm:

    == A potential problem with a fraud claim might be that some members of this coalition are under multi-year deals which began before the impasse, which would hurt an argument that they were fradulently induced. ==

    I hear you, but you can counter that with the argument that the State should have terminated or suspended the contract when they knew appropriations were not going to be forthcoming.

    Continued acceptance by the State of services at that point is where you would claim deliberate fraud.

  19. - A Jack - Thursday, Feb 9, 17 @ 1:01 pm:

    I think there has always been some question as to the legality of multi-year contracts because of the appropriation issue. Which until now hasn’t really been an issue since the state passed a budget sooner or late and was creditworthy enough for service providers to trust the state.

    A few more years of this type of governance and the only ones that will give Illinois credit are title loan companies.

  20. - BK Bro - Thursday, Feb 9, 17 @ 1:10 pm:

    Illinois is drifting into defacto insolvency/bankruptcy. The Federal government needs to establish some kind of orderly process for situations like this. Instead of a streamlined bk court, Illinois is being hit with collective mashup of creditors looking to get a piece of the shrinking pie. Lockbox amendment and pension clause plays in to further complicate the situation.

    I get that most folks here are fearful of the term “bankruptcy,” but it would provide a much more stable, predictable process. What we have now is a waiting game with speculative individual court cases. What a mess.

  21. - Flynn's mom - Thursday, Feb 9, 17 @ 1:14 pm:

    That’s bigly!!

  22. - RNUG - Thursday, Feb 9, 17 @ 1:18 pm:

    == I think there has always been some question as to the legality of multi-year contracts because of the appropriation issue. ==

    Yes. That’s a primary reason for the boilerplate non-appropriation clause out, to avoid that issue.

  23. - Anonymous - Thursday, Feb 9, 17 @ 1:24 pm:

    Andrea, people waive their constitutional rights all the time. Ever hear of Miranda? Are you an attorney?

  24. - Rich Miller - Thursday, Feb 9, 17 @ 1:32 pm:

    ===people waive their constitutional rights all the time. Ever hear of Miranda? Are you an attorney?===

    You’re obviously not one. Man, that has to be the dumbest comment of the day. Sure, you can waive your rights, but it has to be done voluntarily.


  25. - SC - Thursday, Feb 9, 17 @ 2:07 pm:

    The major issue that these groups are going to face is that these are likely illegal contracts since the Governor has no right to indebt the State without an appropriation. Illegal contracts are typically unenforceable.

  26. - Anonymous - Thursday, Feb 9, 17 @ 2:43 pm:

    What are the odds that the court rules that without the appropriation the state cannot be forced to pay, that the state should have voided the contracts as soon as it was clear that the appropriation wasnt there (as in, immediately after the governor vetoed the approps bill) and that the state’s failure to void the contract constitutes fraud?

    That’d be some outcome, but is it really likely?

  27. - Demoralized - Thursday, Feb 9, 17 @ 2:45 pm:

    I’ve never understood why anybody continues to provide the state with goods and services knowing full well they may not be paid anytime soon. That is the reason the state never shut down without a budget. Vendors continued to provide goods and services. So long as they continue to do that the state isn’t under a lot of pressure to do anything.

  28. - Demoralized - Thursday, Feb 9, 17 @ 2:47 pm:

    ==that these are likely illegal contracts==

    All contracts contain language making them subject to appropriation.

  29. - Anon - Thursday, Feb 9, 17 @ 3:32 pm:

    Demoralized, 9% interest.

  30. - Anon - Thursday, Feb 9, 17 @ 3:34 pm:

    My guess is some of the vendors are really hurting but Bruce’s friends are happy to park their money for a good ROI.

  31. - Anotheretiree - Thursday, Feb 9, 17 @ 4:00 pm:

    I’m wondering if a similar claim by retirees over non payment of medical claims would be a viable lawsuit ? The court has held that membership in the pension system is a contract and can’t be diminished. Or would they hold that its dependent on appropriations ? In all these cases perhaps a federal lawsuit based on the U.S. constitution specifying contracts may not be impaired.

  32. - RNUG - Thursday, Feb 9, 17 @ 4:20 pm:

    == In all these cases perhaps a federal lawsuit based on the U.S. constitution specifying contracts may not be impaired. ==

    Federal courts, given the choice, tend to take a hands off approach when it is the State itself as an entity dealing with the state’s own employees and vendors / contractors.

    That’s not to say you can’t make or bring a federal case, but the threshold is usually a bit higher. To build a solid case, you need to exhaust state level remedies first and/or show said remedies either aren’t available or that federal law doesn’t allow whatever the state level remedy is. That’s why I keep saying you need to come up with something that can’t be resolved via the Court of Claims procedure.

    The good thing about going the Court of Claims route is, if successful, the State acknowledges the debt and, by implication, the validity of the contract that led to the claim. Still doesn’t get you paid without an appropriation, but you’re at least in the queue and it’s pretty hard for the State to renounce the debt later.

  33. - pawn - Thursday, Feb 9, 17 @ 4:23 pm:

    RNUG, providers say that they can’t go to Court of Claims without a prior appropriation. In any event, I have heard of providers waiting 5 years to be paid through CofC. As a practical matter, that is not a remedy if you are out of business before then.

  34. - RNUG - Thursday, Feb 9, 17 @ 4:31 pm:

    == providers say that they can’t go to Court of Claims without a prior appropriation. In any event, I have heard of providers waiting 5 years to be paid through CofC. ==

    Yes, I’ve heard of that. It’s a Catch-22 of sorts. I know someone who, before they retired, had to represent the agency side in Court of Claims cases, and I’ve heard some stories …

  35. - RNUG - Thursday, Feb 9, 17 @ 4:45 pm:

    == I’m wondering if a similar claim by retirees over non payment of medical claims would be a viable lawsuit ? ==

    That’s going to be tricky. So far, most of the time, they aren’t denying the claim, just delaying the payment. Now if it reaches denial of payment or denial of service, that’s a bit different issue since retirees are (in some cases, like dependent or less than 20 years service under SERS, or TRS/SURS paying partial or full premium) partially paying for the insurance.

    But even those cases, the issue becomes who do you sue? The end provider, the insurance company (if not the CIGNA managed state self-funded plan), the State itself, or even drag in the feds via minimum standards of service under Medicare Advantage programs?

    About the only simple approach would be to claim, citing the Kanerva ruling, that the State is, effectively, not providing the protected insurance benefit … and see if a judge buys it and will issue an order to pay without an appropriation.

  36. - RNUG - Thursday, Feb 9, 17 @ 6:15 pm:

    == That’d be some outcome, but is it really likely? ==

    I wouldn’t want to project any odds. But I will say I believe that scenario is what actually happened.

    About the only part of it I have a question about is how much of it was part of an intentional and deliberate plan, or if they just kind of fell into it and failed to get out of it due to incompetence or lack of institutional knowledge.

  37. - Anonymous - Thursday, Feb 9, 17 @ 7:08 pm:

    Don’t rebut Rich or he censors.

Sorry, comments for this post are now closed.

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