* AP…

A federal judge says she’ll decide soon whether to order Illinois to pay health-care bills for low-income and other groups even as the state heads into another fiscal year without a budget.

Judge Joan Lefkow said during a Tuesday morning hearing in Chicago that she’d deliberate on the question of forcing Medicaid payments and post a ruling in the civil case later the same day. […]

But advocates for low-income families and others who rely on Medicaid say an order would help clarify that payments to health-care providers should be as high or a higher priority than other payments, including state salaries.

* Tribune…

Two years after Lefkow’s ruling, a cash crunch in Illinois’ main checking account has caused the state to fall behind on a number of payments, including about $2 billion owed to Medicaid providers. Lawyers for Medicaid recipients argue that the doctors and hospitals who are owed the money are starting to cut off services to the poor people who need their care, putting the state in violation of federal consent decrees. […]

Yates argued Tuesday that the state is in violation of the 2015 order because it hasn’t kept current on the payments, instead sending dollars to pay other bills as required under state law. Yates argued that those payments are being made for “political reasons,” while the payments ordered by a federal court are being pushed to the back of the line.

* NBC 5…

More than two dozen health care providers and insurance companies have asked for a federal ruling.

“All we’re asking for today is that the consent decree takes precedent over pension obligations,” attorney Thomas Yates, executive director of the Legal Council for Health Justice said. […]

Lawyers representing the Illinois Attorney General’s office claim that the state is paying its bills, but “just not as prompt as the plaintiffs would like.”

During Tuesday’s hearing, Judge Lefkow said Illinois has “an insolvency situation,” comparing the state’s finances with bankruptcy – but she was reluctant to tell State Comptroller Susana Mendoza which bills to prioritize.

* A motion filed by the attorney general argues the judge has no authority to order the sped-up payments. However, just in case…

If, however, the Court grants the requested relief, Defendants request that the Court make the order effective July 1, 2017 (the beginning of the next fiscal year), for two reasons. First, as Defendants’ counsel advised the Court during the June 6, 2017 hearing, Moody’s Investor’s Service issued a statement on June 1, 2017, in which Moody’s stated that one of the factors that could lead to a downgrade of the rating on Illinois’ general obligation bonds is the entry of “[c]ourt rulings that increase the volume of payment obligations that are legally prioritized.” And, as Defendants’ counsel also advised during the June 6 hearing, a rating downgrade would have the immediate effect of triggering provisions in several credit swap agreements that could require an immediate payment of approximately $39 – 107 million and an increase in the interest rate the State pays under the swap agreements, which would further reduce the cash available to the State to pay its obligations.

If this Court enters an order granting Plaintiffs their requested relief, that order could lead to another downgrade. However, if the Court grants relief but the order is not effective until July 1, 2017, that likely will avoid an immediate downgrade and also would send a message to the Illinois General Assembly and Governor that they have until June 30 to resolve the State’s budget impasse and avoid the consequences of the Court’s order. If the budget impasse is not resolved by July 1, that fact alone likely will lead to a rating downgrade, regardless of the effective date of the Court’s order.

Second, making any order effective July 1 will give Defendants some additional time to determine how to comply with the Court’s order. Although Defendants do not know how the Court might word an order granting relief, Defendants anticipate that they will need some time to figure out how in practical terms to comply with any such order, given that, as has been described in earlier hearings, the State’s cash flow crisis leaves Defendants with no obvious way to satisfy Plaintiffs’ request for relief.

* Related…

* Mendoza Interview: ‘I Shouldn’t Have This Much Power’