Illinois Governor Temporarily Halts Fund Sweeps

SPRINGFIELD, Ill. – In motions filed with a state court judge here, Illinois Governor Rod Blagojevich has agreed to temporarily halt fund “sweeps” from credit union and bank supervisory agencies while a lawsuit brought by the Illinois Credit Union League and financial trade groups moves forward. That was the word last week from parties to a suit brought last year in Sangamon County Circuit Court to block the so-called “raid” on departmental funds to ease a 2004 budget crisis. The Blagojevich administration had threatened to siphon funds-principally examiner fees-dedicated to financial supervision and regulation into a state general fund. The Illinois League joined by the Illinois League of Financial Institutions, and the Community Bankers Association of Illinois filed suit Dec. 14 before Judge Leo Zappa asking for a declaratory judgment to stop the practice. The state maintained it was justified in raiding a $6 million CU fund for general operating expenses based on enabling bills in the legislature last spring by which 300 different funds dedicated to single purposes were utilized. Illinois CUs complained that the loss of the funds would force a further spike in examiner fees – already increased 27.5% in 2004 – and would threaten safety and soundness. Banks also complained about a diminished supervisory force in the Illinois Department of Financial and Professional and Financial Regulation. At a Feb. 28 hearing, the Blagojevich administration accepted the delay in any fund “sweeps” until the case is heard on its merits. While the court action was pending, the state had previously agreed to an “informal” arrangement to stop any sweep moves, said League attorneys. Judge Zappa also took under advisement a petition by the plaintiff League and bank associations for a temporary injunction as well as a petition by the defendant for dismissal of the suit. The Springfield judge was expected to act on the latest petitions within a week, said League officials.