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Appeals brief: Judge wrongly cut short taxpayer suit vs IL over constitutionality of $14B bond issues

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By Jonathan Bilyk | Dec 4, 2019

Fourth district appellate courthouse
Illinois Fourth District Appellate Court, Springfield | Jonathan Bilyk

An Illinois state appeals court has been asked to decide if a judge in Springfield improperly ducked the question of whether state lawmakers illegally borrowed billions of dollars to pay down bills, when such actions may be forbidden by the Illinois state constitution.

On Dec. 4, lawyers for John Tillman, CEO of the Illinois Policy Institute, filed an opening brief in the Illinois Fourth District Appellate Court in Springfield in their appeal of the decision of a Sangamon County judge who ruled Tillman, as a taxpayer, couldn’t sue the state for issuing state bonds in 2003 and 2017.

In the brief, Tillman, of suburban Golf, argued Judge Jack D. Davis II wrongly dismissed Tillman’s petition to file a lawsuit, both because the judge wrongly rejected Tillman’s proposed lawsuit “on the merits,” at the wrong stage in the proceedings, and because the judge wrongly asserted the courts have no role in reviewing state lawmakers’ borrowing decisions.

John Tillman

“… The court’s cursory treatment did not meaningfully address Tillman’s arguments regarding the constitutional text, history, or precedent,” Tillman’s lawyers wrote in the brief. “It also relied on a material misstatement of the purpose of the 2017 Act, and incorrectly held that Tillman’s claim was a ‘non-justiciable political question,’ even though the Illinois Supreme Court had already adjudicated just such a claim.”

Earlier this year, Tillman, then in partnership with investment firm Warlander Asset Management, filed his petition in Sangamon County court in Springfield, seeking permission to sue the state to block the state government from continuing to pay off $14 billion the so-called general obligation bonds issued in 2003 and 2017.

Warlander, based in New York, has loaned $25 million to Illinois, according to court documents.

Warlander is not included in Tillman’s appellate brief.

Tillman’s complaint centered on Article IX Section 9(b) of the Illinois state constitution, which he argues limits the state’s ability to borrow money. The complaint zeroes in on the provision’s text requiring lawmakers to identify “specific purposes” for debt when issuing new long term bonds.

In the appellate brief, Tillman said the language bars the state from issuing bonds simply to finance deficits and “plug holes” in the state’s budget, should tax revenue dip or other obligations, like worker pensions, place a greater demand on existing tax receipts.

Tillman said lawmakers in 2003 and 2017 failed on both occasions to identify those “specific purposes,” keeping voters and taxpayers in the dark as to how that money was being spent, and unconstitutionally leaving it to the state’s executive branch – and the state comptroller’s office, in particular – to decide how the borrowed money would be spent.

The state has not yet replied to Tillman’s brief, and has a month to do so. But in proceedings before Judge Davis, the state ridiculed Tillman’s petition, and asserted the “specific purposes” language merely required lawmakers to generally state what the money is to be spent on, allowing state leaders to issue long-term debt for any reason, including the funding of government in the current year.

In 2003, the bonds were issued ostensibly to help the state pay its pension obligations.

And in 2017, state lawmakers said bonds were needed to help the state pay down a backlog of billions of dollars in unpaid bills, or “vouchers,” owed to state vendors, including to health care providers owed money under the state’s health insurance program.

Judge Davis declared the state bond issues were constitutional because “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.”

In his appellate brief, however, Tillman said the state’s arguments, and the ruling from Judge Davis, ignore the history behind Section 9(b), Illinois Supreme Court precedent and the reality of the state budget.

Tillman said the writers of the state’s 1970 constitution, and the Illinois Supreme Court, believed more is required than just a “detailed recitation” of the purpose for issuing bonds.

Tillman noted the state routinely distinguishes between the state’s general operational spending and spending designated for “specific purposes.”

Tillman noted, for instance, Illinois Gov. JB Pritzker’s 2020 budget distinguishes between the state’s “operating expenditures” – payroll and other regular day-to-day spending - and its “capital expenditures,” including specific transportation and building projects.

In that budget, pension contributions are classified under the general operating expenditures, and “not an ‘identifiable improvement’” in the capital spending plan.

By that standard, Tillman said, the 2003 bonds should be considered unconstitutional.

“The purpose of the 2003 Act was … to free up funds that would have been spent on pensions for any number of operating expenses – in essence, dumping more money into the general fund to facilitate deficit spending,” Tillman wrote. “As the State admits, this is exactly what the specific-purpose requirement prohibits.”

Similarly, Tillman said, the 2017 bonds should be considered unconstitutional because they essentially fueled “backdoor” deficit financing to pay a backlog of bills the state allowed itself to accumulate.

“… Under the specific-purposes requirement the State cannot simply say ‘I want more money, I’m going to issue these bonds, dump it into the general revenue fund,’” Tillman’s brief said. “But that is exactly what the State did by building a backlog of unpaid vouchers for regular bills to the tune of $15.245 billion, and then borrowing to cover the deficit.

“If the State cannot borrow billions to dump into the general-revenue fund to cover operating expenses, it also cannot do the reverse: overspend its operating budget, build up a huge backlog of unpaid vouchers to vendors, and then borrow to pay them off.”

Tillman’s brief asserted Judge Davis particularly mishandled this aspect of the case, asserting the state law authorizing the bonds specified the bonds would be used to pay health care providers. Tillman said the act contained no such language, and the state comptroller’s office chose, at its discretion, to prioritize those payments.

Tillman argued lawmakers could not give the comptroller that kind of authority under the state constitution.

Tillman’s brief further assailed Judge Davis’ finding that his petition represented a “political question” reserved to lawmakers by the state constitution, and beyond the reach of the courts.

“Far from being a non-justiciable political question, the determination of whether the legislature has exceeded its constitutional bounds is a core judicial function,” Tillman wrote.

The authors of the state constitution, he said, “enacted the ‘specific purposes’ language based on the understanding that it would be judicially enforced,” Tillman wrote. “The court must follow this understanding.”

He noted the Illinois Supreme Court had already taken up a case centered on the “specific purposes” language of Section 9(b) in 1971, in the case docketed as People ex rel. Ogilvie v Lewis. In that case, centered on the issuance of bonds to fund transportation projects, justices did not just accept that lawmakers had “stated” a purpose for the bonds. Instead, Tillman said, justices analyzed the legislation authorizing the bonds to ensure it was constitutional.

“The political-question doctrine does not allow the judiciary to shirk its duty to decide the constitutionality of the legislature’s actions,” Tillman wrote.

Tillman is represented in the action by attorneys John E. Thies, Daniel R. Thies and Michael J. Brusatte, of the firm of Webber & Thies P.C., of Urbana; and Jason N. Zakia, Raoul G. Cantero III, Michael E. Garcia, Thomas E. Lauria, Laura L. Femino, Harrison L. Denman and Karen L. Eisenstadt, of the firm of White & Case LLP, with offices in Chicago, New York, Miami and Boston.

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Organizations in this Story

State of IllinoisWebber & ThiesIllinois Fourth District Appellate CourtWhite & Case