SPRINGFIELD, Ill.–A four-year legal battle appeared near an end last week, when the administration of Gov. Rod Blagojevich agreed to give back millions of dollars it raided from segregated trust funds for credit unions, banks and thrifts, in order to be able to use as much as $50.5 million of the funds for the state’s general operating expenses.
Under a deal, detailed in legislation introduced in the state Senate last week, the governor will be able to transfer as much as 10% a year from the separate funds, but must return millions of dollars in excess transfers since 2004, which will translate into a 13.5% reduction in state operating fees assessed state chartered credit unions, banks and S&Ls.
The deal would mean as much as $6.5 million returned to the Credit Union Fund.
The legal fight began in 2004, when the then-newly elected Gov. Blagojevich moved to tap the segregated trust funds to help fill a big budget deficit.
The trust funds, more than 300 in all, where restricted by law for certain purposes. In the credit union case, it was to fund the administration of the state supervision of credit unions.
The affected parties, including the Illinois CU League, filed suit, claiming use of the funds for other purposes violated state law.
A state judge in 2005 sided with them and ordered the governor to halt the transfer of the trust funds.
The settlement comes as the governor again is calling on the General Assembly to give him the power to transfer $503 million out of the special state funds to be used to plug another gaping budget hole.
A measure allowing the governor to transfer the funds was approved in the Senate earlier this month and awaits action in the House.
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