State must adhere to cba despite lack of appropriated funds

The Illinois Appellate Court has upheld an award of Arbitrator Edwin Benn finding the state's refusal to implement a scheduled wage increase to be contrary to the cba. State v. AFSCME Council 31

The cba, as modified by subsequent Cost Sharing Agreements (CSAs), called for the implementation of a 2% wage increase on July 1, 2011. However, citing adverse economic conditions and the absence of sufficient appropriated funds from the General Assembly, the State refused to implement the increase. While the Governor's proposed budget fully funded all collective bargaining agreements, the budget passed by the  General Assembly did not include funds for certain contractual increases.

The Union grieved the refusal to implement the increase, and Arbitrator Benn sustained the grievance, ordering the State to immediately pay the increase (and future increases) and to make whole affected employees. In doing so the Arbitrator rejected the State's argument that he should interpret and apply provisions of the Illinois Public Labor Relations Act and the State Constitution which, it contended, effectively prohibited the State from implementing the increase in the absence of appropriated funds. Noting that his authority was limited to interpreting the parties' contract, the Arbitrator declined to engage in an analysis of the statutory or constitutional limitations. Those issues, he concluded, were more appropriately decided by the courts.

The State sought to set aside the award as contrary to public policy, but the trial court substantially declined. The Appellate Court has now affirmed that decision.

The Court noted that the State's Constitution proscribed laws impairing the obligations of contracts, and that the IPLRA expressly authorized the State to enter into multi-year agreements. The Court concluded that the State's position would render multi-year agreement unenforceable. The Court summarized its holding:

Like the State of Iowa in Iowa Council 61, the State of Illinois here argues that if the General Assembly chooses to appropriate all its funds to specific purposes other than the payments of amounts the State's agents agreed to pay state employees, then the State owes its employees nothing. Such an interpretation of the CBA and the CSAs, as documents that commit the State to nothing, cannot stand. The State's interpretation of the General Assembly's appropriation power would allow the General Assembly in every appropriation bill to impair the State's obligations under its contracts. We adopt the reasoning of the Iowa Supreme Court in Iowa Council 61. The State, through its authorized agents, may commit the State to pay parties who enter into contracts with the State, even before the General Assembly has appropriated funds for the contract. Iowa Council 61, 484 N.W.2d at 394; see also Association of Surrogates & Supreme Court Reporters v. State of New York, 940 F.2d 766, 771 (2d Cir. 1991). If the State seeks to make the contract contingent on appropriation, it must make that contingency explicit in the contract. See Carlstrom v. State, 694 P.2d 1, 4 (Wash. 1985).
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Update: The Illinois Supreme court has overturned the lower court and vacated Arbitrator Benn's Award as contrary to public policy. Public policy challenges to arbitration awards- three recent cases