CHICAGO — An Illinois judge on Thursday ruled that a petition by taxpayers aiming to challenge the constitutionality of $16 billion of the state's general obligation bonds was political in nature and cannot proceed in court.
Sangamon County Circuit Court Associate Judge Jack Davis II denied the petition filed in July by the head of an Illinois-based conservative think tank, along with an investment firm.
“Indeed, it resembles far more of a political stump speech than it does a legal pleading,” the ruling stated. It added that allowing a complaint to be filed “would result in an unjustified interference with the application of public funds.”
John Tillman, CEO of the Illinois Policy Institute and New York-based investment firm Warlander Asset Management, which owns $25 million of unchallenged Illinois bonds, had sought the court's permission to file a taxpayer lawsuit against state officials to stop billions of dollars in future payments on the approximately $14.35 billion of bonds that remain outstanding.
There was no immediate comment on the ruling from the plaintiffs.
Their petition claimed bonds Illinois sold in 2003 and 2017 violated the state constitution because the proceeds were not used to fund “specific purposes” like capital improvements.
Illinois used proceeds from 2003's $10 billion bond sale for its underfunded employees retirement system. Money from $6 billion of bonds sold in 2017 was used to pay overdue bills that had reached a record-high $16.67 billion as a result of a two-year state budget impasse.
News of the litigation pushed yields on the state's bonds higher in the U.S. municipal market, where Illinois already pays the biggest yield penalty among states due to its deep financial woes and low credit ratings.