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* Today’s pension ruling was not really a surprise to anyone who pays much attention to this stuff.
But the biggest development may well turn out to be embedded in Justice Kilbride’s dissent on the Supreme Court’s other ruling today. The Supremes decreed that the lack of an enacting appropriation meant unionized state employees were not legally entitled to back pay, even though the pay was in their contract. Kilbride specifically warned that state vendors could very well suffer as a result…
I would reverse the judgment of the appellate court and affirm the judgment of the circuit court. I would hold that the state employees’ contractual rights to raises continues under the contract clause of the Illinois Constitution (Ill. Const. 1970, art. I, §16), even if that obligation cannot immediately be enforced because of lack of appropriations, and that public policy strongly favors holding the State to its contractual obligations.
The State seeks to extinguish completely state employees’ contractual rights to their raises and not merely to establish that the contractual rights may only be enforced with sufficient legislative appropriation. I do not believe the appropriations clause of the Illinois Constitution (Ill. Const. 1970, art. VIII, § 2(b)) may be used by the State to frustrate its contractual obligations. […]
Similarly, when the State of Illinois does not fulfill its contracts, both employees and vendors suffer. There are sound fiscal reasons for holding the State to its contractual obligations. Stability in fulfilling state contracts benefits the citizens of this state. Indeed, allowing the State to extinguish contractual obligations by failing to appropriate funds is fiscally dangerous. I do not believe the majority does the State any favor in exonerating it from contractual liability by simply failing to appropriate sufficient funds. This is especially true given the current budget crisis.
Today’s decision may, in fact, further impair the State’s ability to function. The State of Illinois must finance its affairs, purchase products and supplies, contract for public improvements, infrastructure and various services but, apparently, under the majority’s approach, the State has no obligation to pay for those products, improvements, and services. Unfortunately, I believe the majority opinion interjects uncertainty into the State’s responsibility for its contracts and will likely impair its ability to secure future contracts with its employees and vendors. Ultimately, the citizens, businesses, and taxpayers of the State will suffer the consequences.
Emphasis added, and a big hat tip to an eagle-eyed commenter.
…Adding… There is a bit of good news for vendors in the majority opinion, however…
The appellate court expressed concern that recognizing the appropriation contingency in this case “would allow the General Assembly in every appropriation bill to impair the State’s obligations under its contracts,” in violation of the contracts clause of the Illinois Constitution (Ill. Const. 1970, art. I, § 16). 2014 IL App (1st) 130262, ¶ 39. The partial concurrence and partial dissent (dissent) shares the appellate court’s concern, suggesting that under today’s decision, the State may now avoid its contractual obligations simply by not making the necessary appropriations. Infra ¶ 69. This case, however, does not involve every species of contract with the State. Rather, this case involves a multiyear collective bargaining agreement that is, by statute, “[s]ubject to the appropriation power of the employer.” 5 ILCS 315/21 (West 2014). Accordingly, the pay raises in the CBA were always contingent on legislative funding, and the failure of that contingency to occur cannot “impair” AFSCME’s agreement with the State. […]
Finally, we disagree with the dissent that our decision creates uncertainty as to the State’s obligations, generally, under its contracts. We reiterate that this case involves a particular contract: a multiyear collective bargaining agreement. Whether other state contracts with different provisions and different controlling law could also be subject to legislative appropriation without offending the contracts clause is not before us. The dissent’s attempt to address those issues is ill-advised. See People v. White, 2011 IL 109689, ¶ 153 (courts of review should exercise judicial restraint, particularly when constitutional issues are involved, and not make unnecessary law).
posted by Rich Miller
Thursday, Mar 24, 16 @ 9:59 am
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Kilbride is on the money here. Absolutely correct.
That is one heck of a way to run a railroad.
Comment by Anonymous Thursday, Mar 24, 16 @ 10:04 am
Bruce Rauner may very well win…
“So if I dibg have a budget, it’s like the ultimate default, the state doesn’t have to pay anyone, and vendors are out of luck?
Perfect.”
We let a stranger in our house, now this stranger coukd very well ruin our name, credit, prestige… our word…
… so the stranger can decimate unions.
Rauner could take this and win and lose every race from now until 2020…
… and Illinois let it happen.
Yep, with Rauner, the taxpayers… lose(?)
Comment by Oswego Willy Thursday, Mar 24, 16 @ 10:05 am
If Kilbride is right, have fun clawing back the money the state owes you for goods and services you’ve been providing since July 1.
More “leverage” for the governor.
Based on this, if I were still doing the business with the state, I’d cut them off, right now.
And in the future, I’d insist on cash upfront.
Quite simply, the state cannot be trusted to honor its contracts or pay its bills.
Comment by wordslinger Thursday, Mar 24, 16 @ 10:05 am
Given what Justice Kilbride has written, What happens to the pensions funds if and when they are depleted and the pensions must come out of the General Revenue fund? Couldn’t the GA refuse to appropriate the funds and the pensioners are out of luck?
Comment by Huh? Thursday, Mar 24, 16 @ 10:07 am
Many vendors were taking bridge loans from banks to cover costs on the promise of payment. The banks have gotten smart and now want a letter from the state saying the state will pay the vendor for the services. Letters with this type of promise are not being issued. Kilbrides decision may put the nail in the coffin of many vendors.
Comment by illinifan Thursday, Mar 24, 16 @ 10:13 am
I wonder where this leaves the state employee health insurance claims- and if it differs by insurance company, their contracts with the providers, and the employees’ status(active or retired). For example Healthlink Tier 1 providers can only bill the employees for deductibles and co-pay not for the rest of the bill.
Comment by Thoughts Matter Thursday, Mar 24, 16 @ 10:13 am
So why would anyone deal with the Governor? He has no authority to make a deal and provide the monies for the services. Did the Supreme’s make the Governor useless in deal making?
Comment by Tony Thursday, Mar 24, 16 @ 10:14 am
This right here is going to jump everything into federal court on due process grounds. And federal courts don’t care about Illinois’ insane pension clause.
Just saying.
Comment by Will Caskey Thursday, Mar 24, 16 @ 10:14 am
Very soon vendors will probably cutting off the state. Second unless I’m confused the gov can agree to whatever with afsme and then cut the funding to make the contract unenforceable. Bad news for all around.
Comment by Union thug Thursday, Mar 24, 16 @ 10:14 am
Hah! Welcome, Illinois vendors, to the uncertainty state employees have been living with for nearly a decade.
Comment by RIJ Thursday, Mar 24, 16 @ 10:15 am
Pensions and bonds are paid before vendors, Will. Illinois would have to be 100% flat broke before we didn’t get some kind of payout.
Comment by RIJ Thursday, Mar 24, 16 @ 10:19 am
In a letter cited in the Fax several days ago a writer from a social agency opined that the state could not appropriate money for his agency for this year and effectively never pay them. The writer was right on. Horrible decision.
Comment by oldman Thursday, Mar 24, 16 @ 10:19 am
Also, serious question: how does this ruling not indicate that the state simply doesn’t have to make pension payments/payouts as contracted?
Comment by Will Caskey Thursday, Mar 24, 16 @ 10:19 am
“Based on this, if I were still doing the business with the state, I’d cut them off, right now.”
On the money Word. Are you listening CWLP? Mayor Langfelder?
Comment by Sangamo Sam Thursday, Mar 24, 16 @ 10:19 am
Yea seriously, why have the vendors not cut off more services already? To me, that seems like a pretty good pressure point a lot of these folks could flex if they wanted
Comment by Johnny Pyle Driver Thursday, Mar 24, 16 @ 10:22 am
Perhaps it is time for the City of Springfield to shut off the utilities for state buildings due to nonpayment of bills! Reading the dissent should have the city very concerned. No water no electricity etc might get some action done.
Comment by Nearly Normal Thursday, Mar 24, 16 @ 10:22 am
Kilbride has it backwards. The continued ability of the state to spend money without constitutional appropriations is the problem causing this mess. If you want a solution to the budget mess shut down the state government completely. Then, and apparently only then, will we see some action.
Comment by Downstate Illinois Thursday, Mar 24, 16 @ 10:24 am
===“Based on this, if I were still doing the business with the state, I’d cut them off, right now.”====
And yet so many vendors haven’t, aren’t and won’t. What in the world could their motivation be?
Comment by A guy Thursday, Mar 24, 16 @ 10:26 am
Vendors have not cut off services as they have been told they should be paid. They have been given letters to take to banks to help get bridge loans. The banks are starting to get smart and want these letters from the state to provide a guarantee of payment, and that part is proving to be a challenge. Vendors like all of us are in uncharted waters as we have never had a situation where appropriations for a FY have not taken place.
Comment by illinifan Thursday, Mar 24, 16 @ 10:28 am
Vendors should cease providing services today. The only end to this mess is a total shutdown.
Comment by relocated Thursday, Mar 24, 16 @ 10:28 am
Will, it’s called the Illinois Constitution. Care to try again?
Comment by RIJ Thursday, Mar 24, 16 @ 10:28 am
===And yet so many vendors haven’t, aren’t and won’t. What in the world could their motivation be?===
They were foolish to trust Bruce Rauner.
So, - A Guy -, you think vendors shouldn’t be paid? That’s “good”?
Comment by Oswego Willy Thursday, Mar 24, 16 @ 10:28 am
===On the money Word. Are you listening CWLP? Mayor Langfelder? ===
I suspect CWLP is continuing disconnects for regular customers who do not pay. As a state regulated utility, I suspect those customers would have a cause of action to demand CWLP treat them in the same manner they treat non-paying government customers. The promise of future payment by the State is no good anymore.
Comment by Markus Thursday, Mar 24, 16 @ 10:29 am
I would stop providing the state anything and let Rauner enjoy is federal court time
Comment by illinois manufacturer Thursday, Mar 24, 16 @ 10:30 am
This Pandora’s Box never should have been opened.
Before the usual broken records start with the Because…. Rauner! routine, we should recall that this case stems from the actions of a Democratic governor and Democratic legislature declining to honor contractual obligations with union members. Those actions were then upheld by a Democratic-leaning state Supreme Court.
This is a bad precedent created by Democrats, and now it has been handed to Rauner. Thank them for this.
Comment by Anonymous Thursday, Mar 24, 16 @ 10:30 am
Rauner doesn’t care about the people of Illinois. Vendors are “taxpayers” too…
See, ideology is more important than governing. People that aren’t his kids, or he can clout over really don’t matter.
People… are obstacles… to overcome.
Comment by Oswego Willy Thursday, Mar 24, 16 @ 10:31 am
Will Caskey @10:19 am, I’m wondering same thing - perhaps because pensions are constitutionally protected, whereas regular wages are not?
Comment by Robert the Bruce Thursday, Mar 24, 16 @ 10:31 am
The ISC pension ruling today makes clear that the pension protection clause trumps everything else. If the pension funds were to dry up, and then the state refused to appropriate money to pay pensions from current revenue, then courts would order those payments to be made anyway. While this offers me some comfort as a pension recipient, I nevertheless find this ISC ruling abhorrent and completely agree with Kilbride. All contractual obligations should be honored in full. Period.
Comment by Andy S. Thursday, Mar 24, 16 @ 10:32 am
“Nice boiler you have there, sorry we can’t fix it unless you pay cash up front, after all you are the state of Illinois.”
Comment by Steve Thursday, Mar 24, 16 @ 10:35 am
most if not every single state contract I’ve ever read contains language which essentially says payment for services is “subject to appropriation” from the ILGA. this is not a new concept
Comment by Dozer Thursday, Mar 24, 16 @ 10:37 am
–And yet so many vendors haven’t, aren’t and won’t. What in the world could their motivation be?–
What do you mean they “won’t?” Plenty have. You can read all about it here virtually every day.
When Catholic Charities shuts down programs because the state isn’t paying its bills and honoring its contracts, what do you think that is?
Your choice to be uninformed is not the basis for a sound opinion.
Comment by wordslinger Thursday, Mar 24, 16 @ 10:39 am
Everyone should read what Dozer just said: three times.
Comment by Steve Thursday, Mar 24, 16 @ 10:39 am
===This is a bad precedent created by Democrats, and now it has been handed to Rauner. Thank them for this. ===
But the Comptroller’s $3.8 billion estimate of bills being held by State agencies due to lack of appropriations is all on Rauner’s watch and accumulated by his administration.
Comment by Markus Thursday, Mar 24, 16 @ 10:40 am
Illinois needs to change the signage at the boarders. For those arriving ” Welcome to Illinois enter at your own risk”. For the signs on the way out ” Leaving Illinois - Congratulations”
Comment by Sue Thursday, Mar 24, 16 @ 10:40 am
Here comes the hurricane.
Comment by Trolling Troll Thursday, Mar 24, 16 @ 10:41 am
Most contract I’ve seen in dealing with the state have a “subject to appropriations” clause, so it shouldn’t come as a shock that they won’t get paid unless the money’s appropriated
Comment by Anonymous Thursday, Mar 24, 16 @ 10:43 am
Just as a side not. The CTU needs to recall their action for next week. This is NOT the time to do it.
Just sayin’.
Comment by Jack Stephens Thursday, Mar 24, 16 @ 10:46 am
This just in…bankers are no longer willing to pay vendors 85 cents on the dollar for State accounts receivables. I’ll let you know when the ‘free market’ determines a ‘new’ going price.
Comment by Beaner Thursday, Mar 24, 16 @ 10:47 am
Quite simply, the state cannot be trusted to honor its contracts or pay its bills.
That is correct, in my opinion as well.
Comment by VanillaMan Thursday, Mar 24, 16 @ 10:53 am
Free market just reacted went from 85 to 1.There is always a speculator. He just hurt some bankers…need to increase reserves. Bankers hate that. How many business has Gov business killed.
Comment by illinois manufacturer Thursday, Mar 24, 16 @ 10:55 am
Does this not indirectly diminish the pensions of those who never got their back pay?
Comment by Tired Thursday, Mar 24, 16 @ 10:56 am
== Given what Justice Kilbride has written, What happens to the pensions funds if and when they are depleted and the pensions must come out of the General Revenue fund? Couldn’t the GA refuse to appropriate the funds and the pensioners are out of luck? ==
To date, the IL SC has said the pensions must been paid when due. They haven’t qualified any decision with “subject to appropriation” or “subject to funding availability”.
Comment by RNUG Thursday, Mar 24, 16 @ 10:56 am
If I was the holder of a multi-year lease for either equipment or property, I would be starting to get nervous.
Comment by RNUG Thursday, Mar 24, 16 @ 10:58 am
If it’s like a private deferred pay. Sees was paid but not income tax so no pension affect.If sers was paid
Comment by illinois manufacturer Thursday, Mar 24, 16 @ 10:59 am
People talking about pension - STOP IT! Get a grip, it’s not an issue here. Read the earlier post that makes it clear that pensions are protected. You want to discuss it, discuss it there.
Comment by Norseman Thursday, Mar 24, 16 @ 11:00 am
As others have said, there’s a real big hurt coming to a lot of folks who depended upon Rauner promises to provide services on the basis of an IOU. Rauner’s impasse is a gift of pain that continues to give.
Comment by Norseman Thursday, Mar 24, 16 @ 11:04 am
==If I was the holder of a multi-year lease for either equipment or property, I would be starting to get nervous.
I’d also increase the risk premium next time I lease to the state. I know the Superstars are geniuses who understand economics and all, except when they don’t. They are increasing the costs of state government down the road more than they ever hoped to save (assuming they bought their own arguments.
Comment by ArchPundit Thursday, Mar 24, 16 @ 11:06 am
Dumping the whole enchilada on the current strained voters is the fault of the policies up to that point. The powers that be set the rules and rates and then did not keep up with the promise. The promise is as good as the constitution or solvency. I am afraid someone is going to come up short. Wow in Illinois this is all the politicians relatives and friends. That will be ugly.
Comment by The reaper Thursday, Mar 24, 16 @ 11:07 am
=Illinois needs to change the signage at the boarders. For those arriving ” Welcome to Illinois enter at your own risk”. For the signs on the way out ” Leaving Illinois - Congratulations”=
People will vote with their feet.
Comment by John Doe Thursday, Mar 24, 16 @ 11:07 am
Doesn’t the Supremes ruling also suggest that the state has no legal authority to pay existing payrolls given no appropriation?
Comment by Magic Dragon Thursday, Mar 24, 16 @ 11:07 am
==What do you mean they “won’t?” Plenty have. You can read all about it here virtually every day.==
Sure, but those aren’t services necessary to keep the business of the state running. Start shutting off lights, water, supplies, fuel, etc, and we’re talking something completely different
Comment by Johnny Pyle Driver Thursday, Mar 24, 16 @ 11:07 am
If the legislature passed an appropriation bill right now to pay employees through the rest of the fiscal year, would that force the Governor’s hand? He could sign it to show good faith. Or he could veto it saying we don’t have the money.
Comment by Casual observer Thursday, Mar 24, 16 @ 11:20 am
–If the legislature passed an appropriation bill right now to pay employees through the rest of the fiscal year, would that force the Governor’s hand? He could sign it to show good faith.–
The governor chose months ago to full vetoes on all appropriation bills except K-12.
He did not use his veto powers to protect employee pay.
As far as good faith goes…. we’re almost at 10 months for not paying bills, and no effort by the governor to change that.
He’s been quite clear that is not at the top of his list of priorities.
Comment by wordslinger Thursday, Mar 24, 16 @ 11:24 am
Agreed Word. I would still love to see the floor votes.
Comment by Casual observer Thursday, Mar 24, 16 @ 11:28 am
I wonder how this affects Rauner’s desire to privatize. What company will want to sign a contract with the state knowing they may never be paid?
Comment by CharlieKratos Thursday, Mar 24, 16 @ 11:47 am
Downstate @ 10:24 is spot on.
A solution to the budget impasse would have been found long ago if the state had shut down the way the Federal government is forced to when there is no budget.
But then, this impasse is being kept in place, on purpose, by someone (Rauner) who is using it to advance his own agenda. He very well knows he can allow social services to wither, while funding K - 12 education, thereby keeping most of the voters from feeling the effects. At this point in time I find it difficult to believe he has such a deep, abiding interest in school children around the state.
Comment by South Central Thursday, Mar 24, 16 @ 11:52 am
“no effort by the governor to change that.”
The GA seems content with the impasse for the time being as well. Or, at least, one important member of the GA.
Comment by Anonymous Thursday, Mar 24, 16 @ 11:59 am
=Vendors should stop providing services today=
And the IPI says; Yep, right on schedule.
Comment by Hedley Lamarr Thursday, Mar 24, 16 @ 12:08 pm
Federal contracts case on appeal?
Comment by Phoenix Thursday, Mar 24, 16 @ 12:36 pm
–The GA seems content with the impasse for the time being as well.–
They are passing appropriation bills that are vetoed.
Comment by wordslinger Thursday, Mar 24, 16 @ 12:39 pm
This appears to be the crisis Rauner has been waiting for.
Comment by Mama Thursday, Mar 24, 16 @ 12:50 pm
==- Dozer - Thursday, Mar 24, 16 @ 10:37 am:
“most if not every single state contract I’ve ever read contains language which essentially says payment for services is “subject to appropriation” from the ILGA. this is not a new concept”==
The difference is the State was trustworthy before Rauner became the governor. Think about it.
Comment by Mama Thursday, Mar 24, 16 @ 12:54 pm
Governor, please tell me how “not honoring contracts” is business friendly.
Comment by Mama Thursday, Mar 24, 16 @ 12:58 pm
There are going to be some tough conversations for vendors as the State now begins it’s FY17 procurement and contracting phase. Vendors should know better this time around. I wouldn’t be surprised to see higher costs back into all new contracts and solicitation responses. Or just lack of responses.
Comment by TD Thursday, Mar 24, 16 @ 1:36 pm
-If you want a solution to the budget mess shut down the state government completely. Then, and apparently only then, will we see some action. -
That’s kind of like saying a thermonuclear explosion would remove urban blight. Man people have no idea how much is at stake.
Comment by Honeybear Thursday, Mar 24, 16 @ 2:59 pm
Rich thanks for being vigilant for the fiscal implications for our states great not for profits, which you have personally very supportive of, relating to things like today’s Supreme Court decision. Those of us who work in this sector under state grants and contracts generally aren’t in this business to get rich. The not for profits have continued to provide services in some cases without compensation for months because we are committed to those we serve, not the State which pays our agencies.
Justice Kilbride’s dissent places in front of us all the reality that we could be collectively out millions of dollars. Its a deep quandary for many not for profits. Its not so easy as just telling the state no pay no work as some posters suggest. We are in many cases the life line for disabled people,for seniors attempting to live in their own homes with dignity,or for people with chronic heath conditions who have exhausted medical insurance policies.
Again thanks to Rich for his humanity in the midst of the disaster facing our state on so many levels.
Comment by Rod Thursday, Mar 24, 16 @ 3:41 pm
It does occur that since 2/3 of IL government is dysfunctional and impotent, for over a year now, perhaps the only solution left is an ‘active’ judiciary, which raunner already hates.
The some-will; some-won’t ruling is a very slippery slope the supreemies put IL on the path to.
Comment by sal-says Thursday, Mar 24, 16 @ 3:46 pm
Obviously the state doesn’t need to pay its bond payments. There is no constitutional protection on bonds.
Comment by Liberty Thursday, Mar 24, 16 @ 4:23 pm
Rich, does this mean the state may not pay you for Capitol Fax subscriptions?
Comment by Mama Thursday, Mar 24, 16 @ 4:33 pm
Mama, lol.
I don’t worry myself with such things.
Comment by Rich Miller Thursday, Mar 24, 16 @ 4:36 pm
Justice Kilbride is correct, and the Court is apparently painfully unaware that “subject to appropriation…” is boilerplate language in every state contract.
There are any number of employers right now in Illinois who are operating on contracts with the state that are “subject to appropriations” without payment, but atleast with the good faith belief that they will receive payment some day.
A lot of for-profit companies, in fact.
Comment by Juvenal Thursday, Mar 24, 16 @ 4:40 pm
===If I was the holder of a multi-year lease for either equipment or property, I would be starting to get nervous.===
I do and I am.
Comment by Way Way Down Here Friday, Mar 25, 16 @ 6:32 am