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February 06, 2023

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Illinois Budgetary Shortfalls: Can Your Government Entity be Liable because of Budgetary Concerns?

While we continue to hear of the financial peril facing the state of Illinois, we know it is not just the state that is trying to address increased operating expenses with diminished resources. Townships, cities, road districts, counties, and all other units of Illinois government continue to explore options in how to best handle and manage taxpayer dollars in a fiscally responsible manner. As a result, there are increased instances where decisions are being made to cut and/or eliminate projects, improvements, or services. As similar financial decisions are made in the future, one major consideration that must be reviewed is the potential increase of exposure to liability.

I. Areas Where Diminished or Emilinated Funding Could Lead to Liability

The most obvious area where a public body may face liability for deciding against or failing to act relates to lawsuits filed under tort theories, such as negligence, but that is not the only action that could be at issue. Governing boards may need to consider whether or not they should continue to pay/act on contracts and may also face claims from employees who are dismissed under what employees call the cover or pretext of "budget constraints."

A. Public Improvements

In Nichols v. City of Chicago Heights, a group of property owners claimed their homes were damaged during a large rainstorm, as "sewer water containing pollutants, feces, dirt, debris, and other noxious matter from the [City's] sewerage system overflowed into plaintiffs' homes." Nichols v. City of Chicago Heights, 2015 IL App (1st) 122994, ¶¶ 1-2.

During the course of the litigation, the city provided evidence of efforts it was undertaking in the maintenance and operation of its sewer system. Numerous aspects were proposed to be completed as part of a multi-year program because of budget constraints. Nichols, 2015 IL App (1st) 122994-U, ¶ 8.

In finding for the City, the court (among other things) concluded that the city's maintenance replacement plan for the system was a policy decision, and focused on correspondence from the Mayor to a local sanitary district which said the city was "trying to stretch the city's dollars and use the city's resources" to try and fix various issues with the sewage system, and "attempting to find a solution within its budgetary constraints." Nichols, 2015 IL App (1st) 122994-U, ¶ 38. Using this and similar evidence, the court found these actions "fit precisely" in the definition of a policy determination (and therefore, the City was immune under the state's Tort Immunity Act) because the city had "to balance competing interests and to make a judgment call as to what solution will best serve each of those interests." Id. (quoting Harinek v. 161 N. Clark St., 181 Ill. 2d 335, 342).

1. Does Nichols End the Analysis?

While the appellate court in Nichols held for the City, public bodies facing similar budget constraints may not see a similar result depending on the facts at issue. Countless lawsuits are filed against public bodies annually based on the state or condition of public property (e.g., streets, sidewalks, parks, etc.), and based on the actions (or inactions) of those governments (including snow/salt treatment). In these lawsuits, plaintiffs allege negligence, but can, and have regularly alleged "willful and wanton" behavior based on the theory that the public body had knowledge of a dangerous condition but did not do anything about it.

Therefore, even if a plaintiff's claims for negligence are dismissed under a provision of the Tort Immunity Act, the willful and wanton counts could remain. The Illinois Supreme Court explains the difference between negligence and willful and wanton conduct as the latter "approach[ing] the degree of blame associated with intentional harm because the defendant deliberately inflicts a highly unreasonable risk of harm upon others in conscious disregard of that risk." Dunbar v. Latting, 250 Ill. App. 3d 786, 792 (3d Dist. 1993) (quoting Burke v. 12 Rothschild's Liquor Mart, Inc., 148 Ill. 2d 429, 450 (1992). Illinois courts consistently hold that a plaintiff must show that after a public body knew of an impending danger or it "fail[ed] to discover the danger through recklessness, or carelessness when it could have been discovered." Lynch v. Bd. of Educ. of Collinsville Comm. Unit Dist. No. 10, 82 Ill. 2d 415, 429 (1980).

For example, a plaintiff's case will be allowed to proceed to trial where a public body takes no action to correct a condition even though it knew about the condition and knew others were injured and/or a public body intentionally removes a safety feature from recreational property. See Straub v. City of Mt. Olive, 240 Ill. App. 3d 967 (4th Dist. 1993); Benhart v. Rockford Park Dist., 218 Ill. App. 3d 554 (2d Dist. 1991).

B. Employment

Another difficult decision in a tough budget cycle can include temporary or permanent lay offs. In Cipolla v. Village of Oak Lawn, the village advised an employee that her position was being eliminated as a result of a budget gap that totalled over $1 million. Cipolla v. Village of Oak Lawn, 2015 IL App (1st) 132228.

The employee did not file a lawsuit related to the budget gap, however. Instead, she alleged that the actual decision was based on her age after learning, among other things, that someone in an executive session of the village board meeting called her "older." Cipolla, 2015 IL App (1st) 132228, ¶ 6. She also noted the village hired a budget director and gave raises to finance department employees after she was laid off.

In reviewing the evidence, the court concluded the plaintiff's arguments should fail. First, numerous village officials testified about the budget shortfall, which undercut the idea that the budget cuts were a "pretext" for terminating her. Id. Secondly, testimony conflicted about whether someone actually called her "older" during an executive/closed session village trustee meeting. Id. ¶ 62. Perhaps most importantly, the evidence demonstrated other employees lost their jobs as a result of the village's effort to cut costs. Id.

Cipolla shows it will be very important for a public body to diligently review the needs for any reduction in workforce, and be prepared to back it up with evidence. Also, just because members of the public body may feel that they can say what they want in a closed session, the Cipolla decision and the Open Meetings Act demonstrate that what is said could eventually come out and potentially expose other discussions. 5 ILCS 120/1 et seq. Governing board members who were in the session may be asked to testify about what was said. Also, the Open Meetings Act requires verbatim recordings of closed sessions. Nothing precludes a plaintiff asking a court for access to the recordings, even if only for an in camera inspection, especially if there is an additional allegation that the public body failed to follow the appropriate procedures under the Open Meetings Act. See, e.g., 5 ILCS 120/2.06.

II. Conclusion

We commend those public officials who are faced with making tough decisions in an effort to save taxpayer funds while still trying to provide essential services. This decision making process will continue to get tougher before the economy gets better. It is imperative that no decision be made without an analysis about whether it could expose the public body to liability.

© 2023 Heyl, Royster, Voelker & Allen, P.CNational Law Review, Volume V, Number 231

About this Author

John Redlingshafer, Commercial Litigation Attorney, Heyl Royster Law Firm

John practices in the firm's governmental law, tort litigation, and business and commercial litigation practice groups. He has spent his entire legal career with Heyl Royster, beginning in 2004 in the Peoria office. He concentrates on government law, representing numerous townships, villages, fire districts, road districts, and other governmental entities in a broad range of issues, including negotiations on intergovernmental agreements and compliance with statutory regulations. He also has worked with both governmental bodies and developers/corporations in various...

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