Wednesday, January 26, 2011

Court strikes down capital bill

By Jamey Dunn

An appellate court declared Illinois’ capital construction program unconstitutional today.

The 1st District Appellate Court in Chicago ruled the legislation that created the $31 billion program did not meet the “single subject” rule in the state Constitution, which requires that one piece of legislation can only deal with one topic.

“The single subject rule is designed to prevent the passage of legislation that, if standing alone, could not muster the necessary votes for enactment,” the opinion states, citing an Illinois Supreme Court ruling on a 2005 case. “The practice of bundling less popular legislation with more palatable bills so that the well-received bills would carry the unpopular ones to passage is known as ‘logrolling.’ In addition to preventing logrolling, the single subject rule also facilitates the enactment of bills through an orderly and informed legislative process.”

The state has a history of lawsuits based on the concept that legislators must stick to one topic when drafting a bill, and today’s ruling notes that the definition of what a single subject can be and what topics relate to that subject “generally is construed liberally in favor of the legislature.”

Encompassing several loosely related concepts into one bill under a general topic is by no means a new practice in the General Assembly. Often, such bills collapse under their own weight, end up being split into several pieces of legislation or never face a court challenge.

However, the court ruled that in the case of the bill that contains the funding mechanisms for the capital plan, there are just too many provision that are not related closely enough crammed into one piece of legislation.

The law increased sales taxes on a variety of hygiene products, candy, soft drinks and alcoholic beverages. It also increased some licensing fees. The most controversial components of the bill allow video poker in bars and restaurants across the state and the leasing of the lottery to a private management firm.

“The subject of a bill may be as broad as the legislature chooses as long as the bill’s provisions have a natural and logical connection. … We find that the wide range of topics in Public Act 96-34 cannot be considered to posses a 'natural and logical connection,” the ruling stated.

Rockwell Wirtz, owner of the Chicago Blackhawks hockey team, as well as Wirtz Beverage, a liquor distribution company, filed the lawsuit against the state in the summer of 2009. At the time, Wirtz told the Chicago Tribune that he understood that the state needed revenues for capital projects, but he took issue with the way the plan was rushed through the legislature.

But a spokesperson for Wirtz plainly stated today that the motivation for the lawsuit was the increased taxes. “This lawsuit was always about how the legislature passed this bill and the discriminatory tax on wine and spirits. The decision affirms that, and we are gratified by it,” Julia Sznewajs told the Chicago Sun-Times. A message left for Wirtz’s attorney was not returned.

The court said the state’s defense — that all of the bill’s provisions related to “revenue” — did not hold up, citing a previous Illinois Supreme Court decisions (Johnson v. Edgar ). That ruling stated that allowing legislators to define the subject of a bill under a very broad topic — in the Johnson case it was “public safety” — would “‘essentially eliminate the single subject rule as a meaningful check on the legislature’s actions.’” The opinion went on to say that most proposals could be tied to revenue if they impacted the state’s economy in any way.

However, the ruling says a provision in the plan that commissions a University of Illinois study on the effects of the lottery on families and a provision that requires the governor’s office to report on capital spending fall outside of the subject of revenue.

The court’s decision applies to all parts of the legislation, whether they relate to revenue or not. The opinion again sites the Illinois Supreme Court ruling in the Johnson case: “[T]he single subject rule prohibits the enactment of bills that encompass more than one subject. Thus, a challenge that an act violates the single subject rule is by definition directed at the act in its entirety.” The court found that severability clauses — a provision sometimes inserted in legislation that states that if any part of a bill is found to be unconstitutional, the rest of the bill still stands — would not protect legislation under a single subject challenge.

The opinion goes on to say that although the entire bill would be struck down, the legislature has the power to reconsider all the components contained in it. But different issues would have to be broken up into different pieces of legislation. Since the other parts of the plan — including the spending bill that lays out the projects — are contingent on the funding sources, the court threw them out, as well.

The ruling essentially puts the brakes on capital construction and the funding mechanisms that are being used to back the borrowing for the projects. It calls into question the state’s recent contract with Northstar Group to manage the lottery for 10 years, as well as the video gaming expansion and a pilot program to sell lottery tickets online.

Kelly Kraft, a spokesperson for Gov. Pat Quinn’s Office of Management and Budget, said the state has sold $4 billion in capital bonds so far. Of that, about $2.2 billion in bonds would potentially be affected by the ruling because they are backed by the revenue streams in the bill. The other bonding is backed by other sources, such as gasoline tax revenues from the road fund. However, Kraft said the $2.2 billion is also supported by the “full faith and credit” of the state, so that means the bonds also have the safety net of the general revenue fund. However, if the revenue streams from the capital bill are not reinstated in some way, another source of cash would have to be found down the road to pay off the borrowing. It is long-term borrowing, so lawmakers would have some time to find a way to pay the debt.

When asked how the state will proceed in regard to collecting the increased sales tax, a spokesperson for the Department of Revenue referred inquiries to Gov. Quinn’s office. A spokesperson for Quinn did not answer questions but did issue a written statement from the governor saying that he plans to appeal the ruling and ask the Illinois Supreme Court to put an immediate hold on the case.

“The administration intends to appeal the Appellate Court’s decision and to seek an immediate stay from the Illinois Supreme Court. … While the administration’s request for a stay is pending with the Illinois Supreme Court, capital projects already in progress will continue as scheduled. We would expect the Supreme Court to rule on the request for a stay in the very near future,” Quinn said in a written statement.

If the court grants the hold and agrees to take the case, Quinn and the legislature would have some time to sort out possible solutions to what could be a potentially messy situation that could halt or delay hundreds of construction projects.

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