IPI head files 'garbage' suit on bonds
‘This lawsuit is not worth the paper it’s written on,’ says Pritzker spokeswoman
By Ted Cox
The head of the “extreme right” Illinois Policy Institute has filed a suit seeking to throw the state’s finances into chaos by scrapping $14 billion in bonds — some issued 16 years ago.
John Tillman, IPI chief executive officer, filed the suit in Sangamon County Circuit Court, joined by the Warlander Asset Management hedge fund. According to a Bloomberg News story, they’re borrowing a tactic recently used in an attempt to nullify Puerto Rican bonds.
But leading state officials — including those named in the suit, Gov. J.B. Pritzker, Treasurer Michael Frerichs, and Comptroller Susana Mendoza — see the case as an extension of an old Tillman tactic embraced by former Gov. Bruce Rauner: an attempt to drive the state into bankruptcy to force concessions on unions.
“This is simply a new tactic from the extreme right to interfere in capital markets,” said Pritzker spokeswoman Emily Bittner in a statement. “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.”
According to Bloomberg, the suit cites pension bonds issued in 2003 and other bonds in 2017 used to reduce the state’s debt on unpaid bills, and suggests they somehow violated the state constitution. Bittner and Mendoza both insisted the bonds were fully vetted, above board, and useful.
“Several layers of bond counsel and Attorney General Lisa Madigan were required to sign off on bond offerings, and these met those standards,” Bittner said. “This lawsuit is not worth the paper it’s written on.”
Prefacing her statement, “I prefer not to comment on pending litigation,” Mendoza quickly added, “But with a ridiculous-on-its-face filing like this, I’ll make an exception” and went on to offer a blistering response to the suit.
“The markets should see this as nothing more than garbage that should be thrown out immediately by the courts.”
Comptroller Susana Mendoza (One Illinois/Ted Cox)
“This is an extension of John Tillman’s and former Gov. Bruce Rauner’s fantasy of pushing Illinois into bankruptcy so they could crush unions in Illinois,” Mendoza said. “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 IPI is vociferously opposed to taxes, to the point where it dropped support for Rauner after he was forced to accept concessions on a school funding formula for public education two years ago and a state budget last year. The IPI also backed former state employee Mark Janus in his suit against paying union fees, trumpeted by Rauner after Janus won the case last year in the U.S. Supreme Court. Although by that time they were no longer politically aligned, both Rauner and the IPI used the Janus decision to stage attacks on union membership.
Mendoza said the bonds issued two years ago were critical to undoing some of the fiscal chaos Rauner brought upon the state. “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,” she said. “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 nonprofits around the state from having to close their doors.”
Mendoza summed it up by saying, “Tillman now wants Illinois taxpayers to pay an extra $4-$6 billion for his adventures in absurdity.”
Mendoza joined Bittner in stating that the suit was little more than a publicity stunt. “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,” Mendoza said. “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.”
It should be noted that, while Bloomberg wrote up the suit on Monday, it was ignored by the state’s two largest newspapers, the Chicago Tribune and the Chicago Sun-Times.
“Gov. Pritzker and legislators of both parties are working hard and succeeding in cleaning up Gov. Rauner’s and his key adviser John Tillman’s wreckage of the of the state economy,” Mendoza said. “The markets should see this as nothing more than garbage that should be thrown out immediately by the courts.”