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Saturday, January 25, 2020

Judge denies suit over IL debt, says court can't rule if lawmakers violated state constitution's 'specific purpose' rule

By Jonathan Bilyk | Aug 29, 2019

Jb pritzker seiu
Illinois Gov. JB Pritzker | Youtube screenshot

A judge in Springfield has refused to permit a lawsuit to continue which asserted the state’s constitution never intended to allow the state government from using debt, issued under the state’s bonding authority, to pay for operating expenses.

The plaintiff in the case has vowed to appeal, saying the judge reached a wrong and hasty conclusion on the questions at the heart of the dispute.

On Aug. 29, Sangamon County Associate Judge Jack D. Davis II denied the request by plaintiff John Tillman, of suburban Golf, together with Warlander Asset Management LP, to file suit to block the state from continuing to pay off $14 billion in “structural debt” bonds issued in 2003 and 2017.

Illinois Policy Institute CEO John Tillman

Tillman is chief executive officer of the Illinois Policy Institute, which has offices in Chicago and Springfield. Warlander is an investment firm based in New York, which has loaned $25 million to Illinois, according to court documents.

The complaint was based around Section 9 of the Illinois state constitution, which limits the state’s ability to take on general obligation debt. Specifically, the complaint sought to argue the state violated Section 9 by failing to identify a “specific purpose” for the debt when issuing the bonds at question in the case.

The lawsuit named as defendants Gov. JB Pritzker, state treasurer Michael Frerichs and state comptroller Susana Mendoza.

The state responded to the petition by calling it a “policy paper masquerading as a complaint” which “seeks to conduct a fiscal policy debate in a courtroom.”

The state argued the Illinois constitution’s “specific purpose” language is vague, and empowers the state government to issue bonds for any reason, including funding state operations.

Tillman responded by calling the state’s interpretation “a strained reading” of the clause, which “misapprehends nearly every aspect” of his petition.

He said the state’s interpretation “does violence” to the constitution’s text, its meaning and its prior interpretation in Illinois’ courts.

In his order issued Aug. 29, however, Judge Davis largely echoed the state’s arguments.

In passing the legislation authorizing the issuance of the bonds, Davis said the state identified purposes for each. In 2003, the purpose was to fund state worker pensions. In 2017, lawmakers said the bonds were needed to “make good on health insurance vouchers the State promised to pay to vendors that accepted State issued insurance for services rendered prior to July 1, 2017,” Judge Davis wrote.

The judge said he found “the legislation stated with reasonable detail the specific purposes for the issuance of the bonds and assumption of the debt as well as the objectives to be accomplished by enactment of the legislation.”

“Despite Tillman striving mightily to do so, he cannot ignore the plain language of the statutes in question,” the judge wrote. “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 said allowing Tillman to proceed with his lawsuit would “result in an unjustified interference with the application of public funds” and would lead to a court substituting its interpretation of the constitution for the will of the General Assembly and other elected officials, which the judge said was a “non-justiciable political question.”

The Illinois Attorney General’s Office, which argued in court on behalf of the state defendants, welcomed the ruling.

Annie Thompson, spokesperson for the Attorney General’s Office, said they were “pleased” with the judge’s decision.

“As we stated in our written submissions and oral argument, the plaintiffs waited nearly two decades after the first bonds were issued and billions of dollars were paid into the pension funds, and then waited several years after the second bonds were issued and payments were made on the backlog of bills owed to the state’s service providers and other vendors,” Thompson said in a prepared statement. “The delay along demonstrates that the petition was always without merit.”

Tillman, however, said he "strongly disagree(d)" with the decision and would appeal, where he was "confident" he would "prevail."

“It was premature for the Court to decide the case on the merits at the petition stage,” Tillman said in a prepared statement. “Moreover, I disagree with the court’s conclusion that whether the 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.”

Tillman has been represented by attorneys from the firms of Webber & Thies, of Urbana, and White & Case, of Chicago.

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Organizations in this Story

Webber & ThiesIllinois General AssemblySangamon Circuit CourtIllinois State Treasurer Mike FrerichsIllinois State Comptroller Susana A. MendozaIllinois Governor J.B. Pritzker