Arbitrator rules Illinois must pay raises to workers

CHICAGO Tue Jul 19, 2011 3:52pm EDT

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CHICAGO (Reuters) - Illinois has to follow through on its contract with state workers and pay them a 2 percent raise in the current budget, an arbitrator ruled on Tuesday.

Edwin Benn, the arbitrator who heard the case brought by the American Federation of State, County and Municipal Employees Council 31, said the state violated its 2008-2012 collective bargaining agreement with workers when Governor Pat Quinn on July 1 announced that raises were not included in the fiscal 2012 budget he had just signed into law.

"These are hard fiscal times for the state -- no doubt," Benn said in his ruling. He added however, that the state made a promise that must be kept.

Grant Klinzman, the Democratic governor's spokesman, said the arbitrator's ruling will be appealed.

"The fiscal year 2012 budget does not provide the money for pay raises for nearly 30,000 state employees at 14 agencies," he said. "Funding these raises would mean that these agencies would not be able to make payroll for the entire year, disrupting core services for the people of Illinois, including children, the elderly and those with special needs."

Union Executive Director Henry Bayer said the union was prepared to defend the ruling in state court while it continues to pursue a federal lawsuit it filed against the state.

"This is a question of whether the fundamental right of working people to bargain collectively will be upheld in Illinois," Bayer said in a statement.

Quinn had said the $32.98 billion general funds budget he signed on June 30 did not appropriate money for the raises.

The cash-strapped state still owes billions of dollars in bills and other obligations incurred in fiscal 2011 despite hiking income tax rates in January.

Illinois' widening structural deficit, huge unfunded pension liability, inability to pay its bills on time, cascading bond ratings and propensity to borrow its way out of financial problems have made the state a major worry in the U.S. municipal bond market.

(Reporting by Karen Pierog; Editing by Dan Grebler)

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