Judge throws out lawsuit challenging $14 billion in state bonds

Judge throws out lawsuit challenging $14 billion in state bonds

Illinois Policy Institute CEO Tillman vows to appeal


Capitol News Illinois

SPRINGFIELD – A Sangamon County Circuit Court judge this week declined to hear a lawsuit challenging the constitutionality of two of the state’s general obligation bond issuances, but the lead plaintiff in the case has vowed to appeal.

John Tillman, CEO of the Illinois Policy Institute, a conservative-leaning think tank, filed a petition in July seeking permission to challenge the legality of bonds the state issued in 2003 and 2017, arguing they violated the Illinois Constitution’s requirement that such debt may be issued only “for specific purposes.”

At issue were $10 billion in “pension funding” bonds the state issued in 2003, early in Democratic Gov. Rod Blagojevich’s administration, and another $15.2 billion the state issued in 2017 to pay down debts owed by the state employee health insurance system. The latter was part of a budget package that ended the state’s historic two-year budget impasse which occurred under former Republican Gov. Bruce Rauner.

At the time the lawsuit was filed July 1, Tillman asserted, roughly $14.35 billion remained outstanding.

Tillman, who filed the suit as a private citizen, and co-plaintiff Warlander Asset Management LP, a New York-based hedge fund that holds some of the outstanding bonds, sought an order to block the state from making further payments on the bonds.

State Treasurer Michael Frerichs, who was named as a defendant in the case, called the lawsuit, “another political stunt by Mr. Tillman and the extremists at the Illinois Policy Institute,” and on Thursday, Circuit Judge Jack D. Davis II seemed to agree, saying the statutes authorizing the bonds provided ample specificity about their purposes.

“Despite Tillman striving mightily to do so, he cannot ignore the plain language of the statutes in question,” Davis wrote in a four-page order. “Tillman’s proposed complaint is chock-full of conclusory and argumentative statements describing the financial condition of the state that are irrelevant and which the court must disregard. Indeed, it resembles far more of a political stump speech than it does a legal pleading.”

The judge also said allowing the case to move forward “would result in an unjustified interference with the application of public funds” and that Tillman was asking the court to “address a non-justiciable political question and substitute its judgment for the Illinois Legislature some two decades after it occurred.”

Under Illinois law, before a citizen can file a suit seeking to block the spending of public funds, they must first get permission from the court by showing reasonable grounds. It was that petition seeking permission to file a suit that Davis rejected Thursday.

Tillman issued a statement late Thursday blasting the decision and vowing to appeal.

“It was premature for the court to decide the case on the merits at the petition stage,” he said. “Moreover, I disagree with the court’s conclusion that whether general obligation bonds have a specific purpose is a purely political question. The Illinois Supreme Court has ruled that the judiciary is in fact required to determine whether a challenged purpose is specific or not, and has done so on other occasions.”

Moody’s Investment Services, one of three credit rating agencies that rate Illinois bonds, said the court’s decision was positive news for the state, but that an appeal could pose problems.

“The judge’s ruling (Thursday) denying a lawsuit that sought to invalidate some of Illinois’ general obligation debt is positive for the state and in line with our view that the plaintiffs’ argument lacked merit,” Ted Hampton, vice president and senior credit officer at Moody's, said in a statement. “However, an appeal by the plaintiffs could still complicate the state’s near-term debt issuance plans."

Peter Hancock

Peter HancockPeter Hancock

Peter was one of the founding reporters with Capitol News Illinois. A native of the Kansas City area, he has degrees in political science and education from the University of Kansas.

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