Capitol - Your Illinois News Radar » *** UPDATED x3 - Frerichs: Filing is “absurd” and a “political stunt” - Mendoza: Filing is “ridiculous” and “garbage” *** Tillman wants to blow up $14.3 billion in bond payments, Pritzker admin calls it “quixotic”
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*** UPDATED x3 - Frerichs: Filing is “absurd” and a “political stunt” - Mendoza: Filing is “ridiculous” and “garbage” *** Tillman wants to blow up $14.3 billion in bond payments, Pritzker admin calls it “quixotic”

Monday, Jul 1, 2019 - Posted by Rich Miller

* There is so much wrong with this Bloomberg story

A hedge fund run by a protege of Appaloosa Management’s David Tepper and the chief executive officer of a conservative think tank sued Illinois Governor J.B. Pritzker, saying $14.3 billion of bonds should be invalidated because their issuance violated the state constitution.

Warlander Asset Management, a New York-based hedge fund formed by Eric Cole, and John Tillman, the CEO of the Illinois Policy Institute, said the state’s record pension bond sale in 2003 and debt issued in 2017 to pay a backlog of unpaid bills were deficit financings prohibited by the constitution. The lawsuit was filed Monday in Sangamon County circuit court.

First of all, this filing isn’t actually a lawsuit. In this state, a petition to file a taxpayer lawsuit must first be approved by the court. And those approvals are exceedingly rare. From the filing

This Court is not tasked at the petition stage with determining “whether the allegations of the proposed complaint can, on hearing, be sustained,” but only with determining if Petitioner has offered “reasonable grounds for filing suit.”

* Back to Bloomberg

Article nine, section nine of the Illinois Constitution says the state may issue long-term debt only to finance “specific purposes” if approved by three-fifths of the legislature or by popular referendum.

Um, no. The Bloomberg reporter should’ve glanced at the Illinois Constitution.

From the Tillman filing

The Illinois Constitution expressly limits the State’s power to incur State debt. Article IX, section 9 permits the State to incur new long-term debt only to finance “specific purposes.” Ill. Const. art IX, section 9(b). “Specific purposes” refers to specific projects in the nature of capital improvements, including roads, buildings, and bridges. Simply obtaining cash to finance the State’s structural deficits or to speculate in the market is not a “specific purpose.”


* I’m not sure what Illinois Constitution they’re reading, but here’s what ours actually says

(a) No State debt shall be incurred except as provided in this Section. For the purpose of this Section, “State debt” means bonds or other evidences of indebtedness which are secured by the full faith and credit of the State or are required to be repaid, directly or indirectly, from tax revenue and which are incurred by the State, any department, authority, public corporation or quasi-public corporation of the State, any State college or university, or any other public agency created by the State, but not by units of local government, or school districts.

(b) State debt for specific purposes may be incurred or the payment of State or other debt guaranteed in such amounts as may be provided either in a law passed by the vote of three-fifths of the members elected to each house of the General Assembly or in a law approved by a majority of the electors voting on the question at the next general election following passage. Any law providing for the incurring or guaranteeing of debt shall set forth the specific purposes and the manner of repayment. […]

(f) The State, departments, authorities, public corporations and quasi-public corporations of the State, the State colleges and universities and other public agencies created by the State, may issue bonds or other evidences of indebtedness which are not secured by the full faith and credit or tax revenue of the State nor required to be repaid, directly or indirectly, from tax revenue, for such purposes and in such amounts as may be authorized by law.

By my reading, there is no “specific purposes” limitation in the Illinois Constitution. The language allows debt to be incurred as long as the law states what that specific purpose is and how it will be repaid. That’s it. And there is clearly no list of what is allowed and what isn’t (except for percentage limits on revenue anticipation bonds and bonds to cover fiscal emergencies). The provisions were a deliberate expansion of state authority to take on debt that were prohibited by the previous constitution. A well-written history of the 1870 vs. 1970 constitutions shows this conclusion by the Committee on Revenue and Finance of the 1970 Constitutional Convention

As to its third contention, the committee found that: [T]he existence of constitutional debt limitations has increased interest costs and has caused the expenditure of large sums of money for additional administrative and insurance costs, resulting from the use of authorities and other techniques devised to avoid state debt limits.

Yet, somehow, the pension bond in 2003 and the 2017 bonding to pay off past-due bills are unconstitutional, according to this filing.

* Bloomberg’s story is just so irresponsible

The lawsuit comes two months after the federal board overseeing Puerto Rico’s bankruptcy and a group of hedge funds sought to have more than $6 billion of the island’s bonds declared null and void and shows how the island’s effort to cut its debts is reverberating in the $3.8 trillion U.S. municipal-bond market. The Puerto Rico overseers have sought to have the debt tossed out on the grounds that it was sold after the territory breached its debt limits, a step that some analysts said could undermine confidence in a market that’s seen as a haven.

And now there’s a hedge fund and a right wing think tank coming after Illinois.

* From the governor’s office…

John Tillman and Bruce Rauner’s old buddies are back to playing dangerous games with our finances so they can keep up their quixotic quest to drive Illinois into bankruptcy.

*** UPDATE 1 *** Comptroller Susana Mendoza…

I prefer not to comment on pending litigation. But with a ridiculous-on-its-face filing like this, I’ll make an exception.

This is an extension of John Tillman’s and former Governor Bruce Rauner’s fantasy of pushing Illinois into bankruptcy so they could crush unions in Illinois. They succeeded in lowering the state’s bond ratings and forcing Illinois taxpayers to pay higher rates on bonds, but they failed in every other regard.

The media should waste no ink on a ridiculous lawsuit that misrepresents the Illinois Constitution and seeks to enjoin a state from spending money that was wisely spent years ago, approved by bond counsel. But this filing was never about the law. It was meant to generate headlines to scare investors in the bond market for political ends before the filing is laughed out of court.

With the $6 billion the state borrowed in 2017, we used federal matching funds to pay off $8.7 billion in high interest-accruing debt. Instead of paying 12 percent annual interest on that debt, the bond sale allowed us to convert that to 3.5 percent interest. Not only did that save Illinois taxpayers $4-$6 billion dollars over the life of the bonds, it saved small businesses, nursing homes, schools, medical clinics and other non-profits around the state from having to close their doors. Tillman now wants Illinois taxpayers to pay an extra $4-$6 billion for his adventures in absurdity.

Governor Pritzker and legislators of both parties are working hard and succeeding in cleaning up Governor Rauner’s and his key advisor John Tillman’s wreckage of the of the state economy. The markets should see this as nothing more than garbage that should be thrown out immediately by the courts.

*** UPDATE 2 *** Bond Buyer

The Pritzker administration dismissed the allegations and highlighted the string of legal advisors that signed off on the deals.

“This is simply a new tactic from the extreme right to interfere in capital markets. We’re done with the far right’s dangerous financial games to pull Illinois underwater. We saw this repeatedly under Bruce Rauner, who funded and executed on John Tillman’s pathological focus to drive Illinois into bankruptcy,” Pritzker spokeswoman Emily Bittner said in an emailed statement, referring to the former governor.

“Several layers of bond counsel and Attorney General Madigan were required to sign off on bond offerings, and these met those standards. This lawsuit is not worth the paper it’s written on,” Bittner added.

Several market participants said while they needed to digest the lawsuit’s arguments, the Illinois constitution grants the General Assembly broad bonding powers and they voiced skepticism that the various legal reviews conducted on the bonds would have allowed such violations to occur. They also suggested the “specific purpose” language is broad and that the bonds were issued with a GO pledge that allows for the sweeping use of the general fund for repayment purposes.

That’s probably why they leaked the lawsuit to that Bloomberg reporter and not to Yvette Shields at the Bond Buyer.

*** UPDATE 3 *** Treasurer Michael Frerichs…

Today’s legal filing is another political stunt by Mr. Tillman and the extremists at the Illinois Policy Institute.

The 2019 legislative session showed what can happen when elected officials ignore the extremists and instead focus on working together in a bi-partisan fashion to improve Illinois’ finances.

Governor Pritzker and legislators from both parties passed a budget that begins to undo the financial harm done by four years of Bruce Rauner.

I intend to let Attorney General Kwame Raoul do his job and ask the court to reject this absurd request from Mr. Tillman and the Illinois Policy Institute to have the courts entertain the extremist agenda that the legislature and the voting public have already overwhelmingly rejected.


  1. - Indebted - Monday, Jul 1, 19 @ 12:23 pm:

    Note to Bloomberg: Next time, fact check John Tillman. Shouldn’t Tillman know this stuff by now? Makes you wonder with Uline is actually paying Tillman for.

  2. - Da Big Bad Wolf - Monday, Jul 1, 19 @ 12:25 pm:

    Maybe Stephen King, author of Misery, can write a sequel and base it on Tillman. He loves Illinois so much he wants to destroy it.

  3. - Not a Billionaire - Monday, Jul 1, 19 @ 12:31 pm:

    It’s a frivolous suit and I hope the judge treats it that way…..and the media does not help itself with this sort of writing.

  4. - Token Conservative - Monday, Jul 1, 19 @ 12:31 pm:

    Tillman doesn’t need to drive Illinois into bankruptcy, Pritzker is doing a wonderful job by himself.

  5. - RNUG - Monday, Jul 1, 19 @ 12:35 pm:

    Guess the 1.4% have decided losing some bond money is worth it if they can get a State into bankruptcy.

    The real questionnaire is why are the banksters doing this?

    Putting my conspiracy hat on, their is only one pile of money the bankers haven’t been able to rip out the past 40 years: government pension funds. They busted the S&L’s, they busted the mortgage market, they busted some of the biggest banks, they busted 2 of the big 3 auto makers …

    Taking the hat back off …

    Anyway, back to the post. Like Rich, I don’t see these motions going anywhere … but they make for scary headlines and even some short-term market movements people could profit from.

  6. - Oswego Willy - Monday, Jul 1, 19 @ 12:37 pm:

    The only person more disingenuous than Ms. Garrett is the continued disingenuous Mr. Tillman.

    All ya need is Ms. Garrett, Mr. Tillman, @StatehouseChick, Dan Proft and John Kass…

    Then you’d have them all flailing about… less the fact checking, to start July off in the right (wrong) track, lol

  7. - Oswego Willy - Monday, Jul 1, 19 @ 12:41 pm:

    Ugh… c’mon.

    ===John Tillman and Bruce Rauner’s old buddies are back to playing dangerous games with our finances so they can keep up their quixotic quest to drive Illinois into bankruptcy.===

    Dear governor’s office,

    Illinois can’t go “bankrupt”.

    This was a bit lazy, and you accidentally play into the “Illinois is Greece, Illinois will go bankrupt” narrative.

    Take about 25 seconds, read, re-read, really grasp your snark and what it’s saying.

    Your pal,

    Oswego Willy


  8. - Shytown - Monday, Jul 1, 19 @ 12:47 pm:

    Whatever happened to the good ol’ days when republicans and their think tanks were against frivolous lawsuits?

  9. - a drop in - Monday, Jul 1, 19 @ 12:53 pm:

    “Makes you wonder with Uline is actually paying Tillman for”

    To ignore facts and the pesty Illinois Constitution. Tillman is doing exactly what Uline is paying him for.

  10. - TopHatMonocle - Monday, Jul 1, 19 @ 12:56 pm:

    It’s one thing to bemoan taxes and pensions or whatever IPI does. You don’t have to like what a group is advocating for.

    It’s totally another thing to team up with hedge funds who have bets that pay off when the state’s bonds rating gets downgraded, and assist them in an attempt to force that to happen. This is over the line, and if IPI hasn’t jumped the shark before then they certainly did this time. Hopefully this gets tossed out and everyone just points and laughs at them for trying this.

  11. - Grandson of Man - Monday, Jul 1, 19 @ 12:57 pm:

    “The IPI’s and Rauner’s MO is if you can’t win, blow it up.”

    The IPI has a cartoon out of a couple driving to leave Illinois. Why doesn’t the IPI practice what it preaches and leave Illinois? It’s not going to beat AFSCME and politicians like Rauner will have no power here, except to hold the state hostage and do massive damage.

  12. - Fixer - Monday, Jul 1, 19 @ 12:57 pm:

    Anyone got the heart to let Tillman know know marijuana isn’t legal for another six months and to maybe hold off on partaking a little longer?

  13. - A Jack - Monday, Jul 1, 19 @ 1:02 pm:

    It could be a simplistic attempt at market manipulation of Illinois bonds. Illinois bonds have appreciated greatly from the Rauner days. A hedge fund could make a lot of money by throwing a scare into the market and then shorting the bonds.

    One wishes that the SEC would more often look into these kinds of actions, although they have their hands full with Elon Musk.

  14. - Demoralized - Monday, Jul 1, 19 @ 1:08 pm:

    Do you want to know how you could help the state’s finances Mr. Tillman? Stop making the state waste resources defending ridiculous lawsuits from you. Tillman is a joke. His organization is a joke. People need to treat them as such.

  15. - Moe Berg - Monday, Jul 1, 19 @ 1:19 pm:

    Grifters gotta grift. The one constant about Tillman.

    The making money angle is the only one that makes sense. Those offering an attempt at market manipulation as the explanation are correct.

  16. - Michelle Flaherty - Monday, Jul 1, 19 @ 1:22 pm:

    Hope Martin Z Braun likes titl-a-whirls, because dude just got spun

  17. - VerySmallRocks - Monday, Jul 1, 19 @ 1:23 pm:

    Too bad these well-funded rampant individualists don’t devote their resources to void student loans.

  18. - btowntruth from forgottonia - Monday, Jul 1, 19 @ 2:02 pm:

    “Tillman doesn’t need to drive Illinois into bankruptcy, Pritzker is doing a wonderful job by himself.”

    Raising revenues and paying bills is bankruptcy?

  19. - oh? - Monday, Jul 1, 19 @ 2:28 pm:

    It is all about stopping the progressive income tax. Throw up anything and everthing.. no matter the damage or outrageousness see if something, anything will stick to the wall.

  20. - Whatever - Monday, Jul 1, 19 @ 2:30 pm:

    ==John Tillman and Bruce Rauner’s old buddies are back to playing dangerous games with our finances so they can keep up their quixotic quest to drive Illinois into bankruptcy.==

    Somehow, I doubt that. States are not allowed bankruptcy protection and, as others noted, an actual bankruptcy will hit the 1.4% in their pocketbooks. However, the fear that this lawsuit might succeed will drive down the price of the bonds until the market determines that the suit is frivolous, at which point the price will go back up. I would love to see if anyone involved in this suit (or any friends and family) are buying those bonds right now to make a quick, riskless killing.

  21. - Steve - Monday, Jul 1, 19 @ 2:43 pm:

    Mendoza sounds very angry. It’s almost like she knows she’ll have to waste money defending this.

  22. - My button is broke... - Monday, Jul 1, 19 @ 2:49 pm:

    Agree that it is a silly lawsuit. I wonder what the remedy would be. Deem the bond sales illegal and then would the buyers be entitled to a refund from the State? What about interest the State has already paid? Talk about a mess…

  23. - Demoralized - Monday, Jul 1, 19 @ 2:50 pm:

    ==it saved small businesses, nursing homes, schools, medical clinics and other non-profits around the state from having to close their doors.==

    Tillman and his ilk do not care about that. These are the same people who were cheering Governor Rauner on when there was no budget. They don’t care about paying bills. They care about their ideology which is to slash and burn as much of government as they can.

  24. - DuPage Bard - Monday, Jul 1, 19 @ 3:01 pm:

    Tillman’s ruse, is to make money and profit off government. He’s made a career out of harping and trying destroy and become a wealthy man because of it.
    For someone who says they hate Illinois politics and Democrats so much, he’s sure made a heck of a comfortable lifestyle for himself because of them.

  25. - Real - Monday, Jul 1, 19 @ 3:10 pm:

    This is why Pritzker should sign a map that Madigan and friends draw. Why push for a so called fair map when the republicans just want to bankrupt the state?

  26. - Steve - Monday, Jul 1, 19 @ 3:11 pm:

    In the coming years , don’t be shocked if these sorts of people file complaints with SEC to prevent Illinois bonds from being issued. I kid you not.

  27. - JB13 - Monday, Jul 1, 19 @ 3:15 pm:

    Perhaps the original story have been a little more balanced if the people paid to respond to media inquiries on behalf of these elected officials actually responded to this reporter’s requests for comment in the first place, rather than waiting before CapFax weighs in on it?

    The story says the governor’s spokesperson dis not reply, and the comptroller’s spokesperson declined comment. But after Rich writes about it, suddenly Abbudayeh has something to say and Mendoza herself weighs in with paragraphs of comment, including a sanctimonious statement about what the media should and should not write about?

  28. - Rich Miller - Monday, Jul 1, 19 @ 3:19 pm:

    ===The story says the governor’s spokesperson dis not reply, and the comptroller’s spokesperson declined comment. But after Rich writes about it, suddenly===

    We don’t know the situation here, but sometimes reporters don’t give people any time to respond.

  29. - Rich Miller - Monday, Jul 1, 19 @ 3:42 pm:

    …Also, I saw the story pop up in a Google search and then the Policy Institute sent me their filing like a minute later.

  30. - Liberty - Monday, Jul 1, 19 @ 3:43 pm:

    Are they not libertarians? Laissez-faire Let the buyer beware!

  31. - M - Monday, Jul 1, 19 @ 4:18 pm:

    DuPage Bard @ 3:01 pm, you are exactly right. “Tillman’s ruse, is to make money and profit off government.” Tillerman, Rauner, and the other corporate raiders will make money from destroying the public school teachers, state legislators and state workers’ pensions, etc..

  32. - Mama - Monday, Jul 1, 19 @ 4:21 pm:

    It sounds like far right want control over Illinois by breaking us like they did other states. How did that work out for those other states?

  33. - Nick - Monday, Jul 1, 19 @ 4:39 pm:

    Strong statement from Mendoza. Don’t mince words about this garbage.

  34. - Chicago 20 - Monday, Jul 1, 19 @ 10:43 pm:

    Another tale of incredible baseless lies from Tillman and the IPI.

    Nothing another name change will fix.

    When will the media wake up and know they are being played like a fiddle.

  35. - Hullabaloo - Tuesday, Jul 2, 19 @ 9:00 am:

    What do you expect? IPI staffers aren’t financial or legal experts: they are for the most part PR hacks with communications degrees.

    Tillman isn’t even from Illinois- he was a telemarketer in Michigan.

Sorry, comments for this post are now closed.

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