* Crain’s…
A federal judge could decide today whether insurers collectively owed more than $2 billion by the state of Illinois can move to the front of the long line of vendors waiting to get paid.
If they win, Illinois Comptroller Susana Mendoza, who pays the state’s bills, says she could lose the little room she has to decide who gets paid first. Currently, she says, she prioritizes payments for agencies that care for the most vulnerable populations: children, elderly and people with disabilities, among others. […]
The bill backlog for vendors has reached $14.4 billion, Mendoza said. Of that, private insurers that are contracted to manage the care of about two-thirds of Illinois’ 3.1 million Medicaid recipients are owed more than $2 billion. The budget crisis has created a ripple effect: When insurers don’t get paid, they don’t pay doctors and hospitals. Patients, particularly those on the state health insurance plan, lose out if their providers turn them away or make them pay upfront for care. […]
Consent decrees and court orders dictate how about 90 percent of bills are paid. But Mendoza has the discretion to prioritize who gets the remaining 10 percent, a small pool of money she wants to protect.
If the insurers win their federal case, the comptroller could lose control to the court of where that money flows. A victory for the insurers could be a “breaking point” for Illinois, she said.
* More…
A question I’ve had for a while now is what happens when the state just doesn’t have the cash to satisfy all these court orders? Does a federal or state judge take charge? And which judge? The state is dealing with several federal consent decrees and a state court which has ordered employees are to be paid without an appropriation.
*** UPDATE 1 *** The judge didn’t issue a ruling today. Both sides were told to return to court next Tuesday.
*** UPDATE 2 *** From the courtroom…
* From Tony’s story…
Two years ago, Judge Joan Lefkow ordered the state must pay Medicaid providers even though it is operating without a budget. The state is now virtually out of money — its backlog of bills has grown beyond $14.2 billion — and Medicaid service providers said the state isn’t paying them fast enough.
During a Wednesday court hearing, Lefkow suggested that Medicaid payments be paid faster — but she stopped short of issuing a ruling. “I don’t know what I’m going to do here,” said Lefkow, who called for another court hearing next week, where she is expected to make a decision.
“It doesn’t seem right that Medicaid payments are being de-prioritized, shall we say,” Lefkow said. “Ultimately this comes down to a political issue.” […]
As the hearing concluded, Lefkow addressed the attorneys who have been representing the state government during the budget impasse.
“I don’t envy you,” Lefkow said.
- A guy - Wednesday, May 24, 17 @ 10:54 am:
That really might be the absolute worst job in government.
- cover - Wednesday, May 24, 17 @ 11:09 am:
= A question I’ve had for a while now is what happens when the state just doesn’t have the cash to satisfy all these court orders? Does a federal or state judge take charge? And which judge? The state is dealing with several federal consent decrees and a state court which has ordered employees are to be paid without an appropriation. =
Presumably that would mean ANY payments not court-ordered, including general state aid to schools, would no longer be made.
- Responsa - Wednesday, May 24, 17 @ 11:11 am:
Has any one ever asked Mendoza why she thought she wanted this job? No matter who holds it, it seems frustrating, thankless, and virtually powerless in the maelstrom that is Illinois. And how this mess enhances Susana’s political future is beyond me.
- Henry Francis - Wednesday, May 24, 17 @ 11:17 am:
If the state truly does run out of cash and it goes to the courts, how would the courts view Rauner’s vetoes of the appropriations that have been sent to his desk?
Wouldn’t the argument be but for the Guv’s vetoes, there would be appropriations and cash to pay these bills and comply with court orders?
Sure the Guv’s people would argue that he can’t be forced to sign a budget without his reforms, but I don’t think the Court would care about any reforms. They want their orders complied with. If the legislature gave the Guv the ability to comply with the court orders and he rejected it on policy grounds, I doubt the court would be sympathetic.
- DuPage Saint - Wednesday, May 24, 17 @ 11:26 am:
Return for what reason? A ruling? More arguments? Briefs?
I would imagine if judge orders something to be paid and not done some one somewhere would be held in contempt or state asserts seize but that would be way down the line
- DuPage - Wednesday, May 24, 17 @ 11:29 am:
Reaching the “breaking point” is Rauner’s goal.
- Last Bull Moose - Wednesday, May 24, 17 @ 11:33 am:
This is when the legal and practical definitions of bankruptcy collide. Legally the State cannot file for court bankruptcy protection from its creditors. Practically, the State is bankrupt when it cannot pay what it is legally obligated to pay.
I think we are then in uncharted waters. Legal precedents on sovereign insolvency date from the 1840’s. Indiana turned many of its transportation projects over to private investors when the State could not make interest payments.
Today would be much more complicated. The State is bigger and interconnections with Federal laws are in place.
- Oswego Willy - Wednesday, May 24, 17 @ 11:37 am:
===Practically, the State is bankrupt when it cannot pay what it is legally obligated to pay.===
… and yet there was a sun setting of the income tax.
Illinois isn’t bankrupt.
Illinois needs a strong working of cuts and revenue to get her books in order.
You can’t have a tax cut, then claim to be bankrupt.
Math is still math.
- JB13 - Wednesday, May 24, 17 @ 11:42 am:
Perhaps more to the point: What happens when a court orders something, and the state/people say “No”?
- Anotheretiree - Wednesday, May 24, 17 @ 11:48 am:
I thought for awhile that the only hope would be for a Judge to react to his/her order of payment being ignored, by issuing contempt orders and to start jailing. Judges can’t force taxes to be raised, but they can issue payment orders. A refusal to pay(by not having a budget) is a direct challenge to judicial authority. Jailing should start with the Governor and move downward. I wish I had the wherewithal to sue for my $752 in unpaid dental bills based on constitutional non diminishment. It is a tiny part of the debt but its the principal that matters.
- RNUG - Wednesday, May 24, 17 @ 11:54 am:
From a cynical viewpoint, having ALL the State’s existing revenue dedicated to court ordered payments and continuing appropriations (bonds, pensions) could be the best thing to happen to the State. That way, it will be crystal clear to John Q. Public taxpayer the problem is lack of revenue to pay even the basics.
Maybe then the discussion will change to how revenue gets raised: an expanded sales tax on services, a higher flat tax or a progressive income tax. Or some combination there of.
And it might even include a discussion about a higher income tax to support additional State school funding support in exchange for permanently lowered and capped School district property taxes.
- Hamlet's Ghost - Wednesday, May 24, 17 @ 12:00 pm:
If Illinois does have the highest state and local tax burden in the nation, where does all that money go?
Since no one seems able to answer, perhaps the assertion that Illinois has the highest state and local tax burden in the nation is fake news, spread as astroturf, for political reasons.
- Judgment Day - Wednesday, May 24, 17 @ 12:12 pm:
“This is when the legal and practical definitions of bankruptcy collide. Legally the State cannot file for court bankruptcy protection from its creditors. Practically, the State is bankrupt when it cannot pay what it is legally obligated to pay.
I think we are then in uncharted waters. Legal precedents on sovereign insolvency date from the 1840’s. Indiana turned many of its transportation projects over to private investors when the State could not make interest payments.
Today would be much more complicated. The State is bigger and interconnections with Federal laws are in place.”
——————-
IMO, “Uncharted Waters” would be a real understatement.
This is where it starts to get really interesting.
First off, the courts (especially Federal) rarely want to willingly jump into these types of financial messes. Especially potentially needing ‘court ordering’ taxation changes. The court are not big fans of having to get involved in those types of environments.
It’s one thing for the Court to say who gets to be in line for payment, it’s a whole different issue being asked to implement revenue increases.
We could see the federal courts looking into establishing a fiscal administration ’structure’ something like what Puerto Rico is currently under, only with no bankruptcy provisions, but with a court appointed ‘Financial Master’ who would be in control of state financial matters, which would likely be mostly everything.
The implications of that are enormous.
VERY INTERESTING.
- anonime - Wednesday, May 24, 17 @ 12:44 pm:
If insurer move to the top of the list, does that mean state employee medical bills will be paid too?
- City Zen - Wednesday, May 24, 17 @ 12:47 pm:
==You can’t have a tax cut, then claim to be bankrupt.==
You can’t exempt an entire sector of the population from paying taxes either and claim to be bankrupt.
- Oswego Willy - Wednesday, May 24, 17 @ 12:52 pm:
- City Zen -
So Illinois can’t go bankrupt.
So there’s that. The point, after all.
- RNUG - Wednesday, May 24, 17 @ 1:17 pm:
== You can’t exempt an entire sector of the population from paying taxes either and claim to be bankrupt. ==
I take that to mean you are in favor of eliminating all the loopholes and special credits big businesses use to avoid the corporate income tax in Illinois?
- Demoralized - Wednesday, May 24, 17 @ 1:18 pm:
==You can’t exempt an entire sector of the population from paying taxes either==
You keep barking up that tree and see where you end up. Retirement income isn’t going to be taxed. Let it go already.
- Arthur Andersen - Wednesday, May 24, 17 @ 4:15 pm:
With all due respect to the esteemed jurist who drew the short straw, (could you see Zagel in this role? Half the State’s lawyers would be in jail for contempt) I have a major problem with a circuit judge picking and choosing who gets paid based on large part on who can afford to sue. Seems to me that our local hospitals, as two fine examples, should show some restraint and Catholic humility and get the cranes outta the air and cut spending instead of running to court. I wonder how much was spent on reaffirming the choice of Children’s Hospital mascot that could have gone to the provision of care.
- RNUG - Wednesday, May 24, 17 @ 11:29 pm:
== We could see the federal courts looking into establishing a fiscal administration ’structure’ something like what Puerto Rico is currently under, only with no bankruptcy provisions, but with a court appointed ‘Financial Master’ who would be in control of state financial matters, which would likely be mostly everything. ==
Before that happens, I can see a Federal or state judge ordering the GA and Governor to sit down and work things out by a given date. And if they don’t, finding them in contempt, jailing the 4 leaders and the Gov, then ordering their seconds to get a budget deal done.
Of course, that also has lots of Federal / State legal ramifications if a Federal judge did it; would be a lot cleaner if it was a State judge …