Illinois & Governor Dodge Suit on Promised Wages

CHICAGO (CN) - Illinois Gov. Pat Quinn and his administration are not liable for millions of dollars in promised pay raises to state employees that were never appropriated in the state's 2012 budget, the 7th Circuit ruled.

In the face of major budget deficits, Illinois brokered a series of deals with the American Federation of State, County and Municipal Employees, a union representing about 40,000 state workers in 51 different departments and agencies, to cut costs.

The final agreement trimmed several hundred million dollars in 2011 and 2012 by deferring general wage increases and instituting a furlough program. Illinois agreed to limit layoffs and keep facilities open in exchange for the concessions, which saved over $400 for the two years.

Governor Quinn submitted the proposed 2012 budget to the State General Assembly which included full funding of the wage increases owed. The budget passed the assembly but without the necessary appropriations to fund the obligations to the union. Quinn cut an additional $376 million with a line-item veto before approving a final $33 billion budget.

The day after the budget became law, a memo from the State's Department of Central Management Services informed the unions of the shortfall caused by the legislature and announced that the pay freeze would stay in place. The freeze affected approximately 30,000 union employees across 14 state agencies, saving the state about $75 million.

The union filed suit, charging Governor Quinn and his administration with violating the Contacts Clause and Equal Protection Clause of the U.S. Constitution, as well as several state laws.

U.S. District Judge Sue E. Meyerscough dismissed the case, however, ruling that it failed to state a claim and was barred by the Eleventh Amendment.

The union's appeal was met with similar resistance by the 7th Circuit, which affirmed the dismissal.

Judge Daniel Manion, writing for the three-judge panel, first affirmed that the suit was blocked by the Eleventh Amendment. Despite the union's assertions that it was only requesting prospective relief, there is "no question that the 'essence of the relief sought' is the payment of funds out of the treasury to the employees at the 14 state agencies whose budgets did not contain sufficient appropriations to pay wage increases," Manion wrote.

The court also rejected the union's Contracts Clause arguments, pointing to the Illinois Public Sector Relations Act, which controls the union's collective bargaining agreement states that all negotiations are "subject to the appropriation power of the employer [which is the state]."

"Because plenary appropriation authority lies with the legislative branch... the executive branch's hands are tied by the appropriations doled out by the General Assembly and so the State cannot be held liable for a breach of contract when, because of a lack of appropriations, insufficient funds exist to fulfill a contractual obligation," Manion wrote.

Manion similarly disposed of the Equal Protection arguments, applying the rational-basis test.

"Council 31's argument ignores the heavy burden a plaintiff bears when asserting an Equal Protection claim that is subject only to rational-basis scrutiny," he wrote. "Instituting cost-saving measures is unquestionably a legitimate governmental interest, particularly for a government in such dire financial straits."

Separate state-level litigation is still in progress. Illinois filed suit, seeking to enjoin an arbiter's order to pay the promised wage increases.

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