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By: Mark Glennon*

Guess what was hidden in the 756-page Budget Implementation Bill that just became law in Illinois?

It’s roughly the same as the “bill that must be stopped,” as we called it earlier. That was Senate Bill 10, the bill about which I wrote this:

When I practiced law I taught secured lending and bankruptcy as an adjunct at the University of Texas Law School. I can imagine giving an assignment like this: “Draft a bill to make bondholders supreme by stiffing the public and taxpayers.” If somebody handed in Senate Bill 10, they’d get an A+.

It’s a naked asset grab at the expense of citizens designed  to allow municipalities to kick the can by borrowing more and giving first dibs to municipal bondholders on public assets.

It’s the ticket to an assetless bankruptcy, which is the worst of all conceivable outcomes for broke Illinois towns and cities, including Chicago.

It’s Section 8-13-10, “Assignment of receipts,” in the implementation bill.  It is intended to eliminate the risk of mortgages being undone and assure that bondholders come first, hell or high water, regardless of the need for essential government service. It would do that by forcing (not just authorizing) municipalities that want to use, as collateral, funds that come to them from the state to transfer complete ownership of that money to a new, separate entity created solely to pay bondholders.

By doing that, the bill would create a form of mortgage that would be bulletproof even in bankruptcy. The bill would apply to all home rule muncipalities (which are all towns and cities with more than 25,000 residents plus those that have voted to become home rule).

Worse, it binds the state itself to “non-impairment.” That means the state would be required by statute to refrain from doing the very things it should already be doing — working to undo mortgages that prioritize bondholders over the public. And it prohibits municipalities from mortgaging their state money in any way other than the bulletproof manner created by the bill.

We’ll no doubt be finding more bombshells in the hundreds and hundreds of budget and tax bills dumped on the General Assembly just prior to their vote, which few members ever reviewed and the public doesn’t know about.

The muni bond industry is going all out to keep raising the credit card limit and sucking every ounce of blood out to ensure it gets repaid.

*Mark Glennon is founder of Wirepoints. Opinions expressed are his own.

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Does Madigan or any other lawmaker own muni bonds directly or indirectly


What is needed is a new federal bankruptcy law that, that allows States to file bankruptcy;still;even more is required. The Democrats will still be in-control of the administration of the Bankruptcy….so we also need the ability WITHIN the new federal bankruptcy law/amendment TO REMOVE THE SOVEREIGN GOVERNING ABILITY of the State of Illinois. Michigan and Detroit had thier EMERGENCY MANAGERS superceeding local sovereignty. This would be needed to stop Madigan and the Dems from controlling the Bankruptcy process. Yes…..we would revert to a territory…..with citizens without a vote…..the emergency manager appointed by the Feds(I guess and not Madigan) would then… Read more »


So SB 42 / PA 100-0023 allows (but does not require) a home rule municipality issuing bonds (called a “transferring unit”) to create an “assignment agreement” with the “issuing entity” to “convey” all or a portion of the revenues or taxes the municipality receives from the state, to an escrow account (called a “deposit account”) at a trust company or bank holding trust powers, at which point said revenues or taxes are labeled as “transferred receipts.” The transferred receipts would be off limits to pensioners, for instance, police, fire, and IMRF. That does not seem to violate the pension sentence… Read more »

Fresno Bob

The bondholders should be afforded every possible level of protection. Muni bonds are the grease that the machine needs to operate. Protect those who purchased them.


Someone please help me out. I’m not an attorney. If a federal court through bankruptcy proceedings can supersede the Illinois constitution and Illinois law generally, how can a clause in this recent “budget” which protects bond holders survive the bankruptcy proceedings. I thought bankruptcy wiped out any and all previous contracts or agreements made by the state. I don’t understand the mechanism by which the bondholders would escape unscathed. On a different note, I find it ironic that the public sector unions, which worked extremely hard to keep Madigan and his cronies in office, were just sold down the river… Read more »

j.a. herzrent

I think a bankruptcy specialist would have to answer this. However, there are different levels of priority in who gets paid from the debtor’s assets when a debtor goes bankrupt. Debtors who have liens on property are generally in a higher priority category. A lot of claims, however, are settled through negotiation and people who are owed money put their cards on the table during negotiations. I am told that a significant factor in the Detroit bankruptcy was the threat (and corresponding fear) that public safety officers would suffer from blue flu and other lack of motivation … with the… Read more »


Wow, incredibly frightening. maybe this sounds crazy but one cane only wonder if this is part of a more insidious strategy by Madigan type Dems in Ill and other debit ridden states who realize with a changing supreme court, some type of ruling on allowing states and municipalities to declare bankruptcy is inevitable. And if bankrucy was ever pressed on Ill the home owner wold be held hostage–and would pay thru the nose to save his home.


So, what would this do to public sector pensioners? Would this put them behind bond holders in line? Is this in any way the bond market learning its lesson from bankruptcies like San Bernadino, or totally unrelated and just another of Illinois invention? Just curious.


It is Senate Bill 42 (SB 42) which became Public Act 100-0023 (PA 100-0023) on July 6, 2017 per the General Assembly override of Governor Rauner’s veto.

65 ILCS 5/8-13-10 new

65 ILCS 5 is the Illinois Municipal Code.

Article 8 is the Finance Section.

Division 13 (Assignment of Receipts) is entirely new.

Search on “DIVISION 13. ASSIGNMENT OF RECEIPTS” and begin there for context.


Politicians have too much power when they are allowed to pass such huge bills on such short notice.


The Democrats, Madigan, and the likes of Steve Andersson are doing this not the bondholders. No one would lend their own money to Illinois now without such clauses, the Dems are doing it anyway.


The muni bond industry couldn’t do this without the help from the demo(c)rats and the surrender (Prime Minister Chamberlain appeasement) republicans. It becomes even more difficult and messy to correct.


The criminal intent is clear. When a Federal Bankruptcy Judge gets involved as in Detroit, he / she may see the situation much as we do and declare it invalid. Who knows what will happen? We know what is going to occur and may happen much sooner than we expect. As in the Wizard of Oz, head for the cellar when the tornados come. I’ve never seen any fiction written this way.