(Adds comments from judge, court filing by attorneys for disabled groups, background on budget impasse)
CHICAGO, Sept 1 (Reuters) - A U.S. judge on Tuesday declined to find Illinois in contempt of court for failing to make timely payments to providers of services for disabled residents as the state struggles to operate without a budget.
Judge Sharon Johnson Coleman said her dismissal of a civil contempt motion filed by attorneys for the disabled will allow the state to work on payment issues with service providers "without that hammer hanging over your head for now."
Republican Governor Bruce Rauner and Democrats who control the House and Senate have been at an impasse over a spending plan for the fiscal year that began July 1. However, courts have ordered state money to continue to flow for human services covered under existing consent decrees and for state payroll.
Coleman acknowledged on Tuesday that lawyers could come back with another contempt motion "at the drop of a hat" if the state fails to comply with her order to make timely payments for services required under a 2011 consent decree that covered more than 10,000 residents with developmental disabilities.
In a court filing late on Monday, those lawyers also said they could ultimately argue that payments required under federal consent decrees would trump payments mandated under Illinois law.
The Illinois Comptroller's office, which pays the state's bills, said Illinois must also comply with state laws requiring payments for debt service on bonds, as well as for schools, pensions and other services.
Coleman alluded to a statement last week from Comptroller Leslie Munger that "taxpayers deserve better than government by court order."
"This court will not allow political wrangling by parties," the judge said.
John Stevens, an attorney for Munger, told reporters that Illinois lacks sufficient cash to pay all its bills on a daily basis. He declined to comment on the possibility that payments in compliance with consent decrees could be pushed to the front of the line by a court if Illinois' cash-flow situation worsens.
In a court filing on Friday, the state said monthly priority payments total more than $2 billion, leaving the state at least $300 million short of money each month.
Reporting by Karen Pierog; Editing by Chizu Nomiyama and Matthew Lewis