HB5040 104TH GENERAL ASSEMBLY

LRB104 15537 WRO 28702 b

104TH GENERAL ASSEMBLY
State of Illinois
2025 and 2026
HB5040

Introduced 2/10/2026, by Rep. Anthony DeLuca

SYNOPSIS AS INTRODUCED:

15 ILCS 405/21.5 new
735 ILCS 5/12-701.5 new

Amends the State Comptroller Act. Prohibits the State Comptroller from withholding, offsetting, or otherwise applying against any debt any funds payable to a unit of local government if those funds are restricted for a specific purpose by federal or State law, county ordinance, or grant agreement. Amends the Code of Civil Procedure. Exempts all funds, revenues, or accounts that are restricted by federal law, State, law, county ordinance, or grant agreement for a specific public purpose from garnishment, attachment, or any other legal process to satisfy a judgment or debt. Effective immediately.

A BILL FOR

AN ACT concerning local government.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. Legislative findings and policy.

(a) The General Assembly finds that the financial stability and operational capacity of units of local government are critical to the public welfare.

(b) The General Assembly further finds that certain funds received by local governments are restricted for specific purposes by federal law, State law, county ordinance, or grant agreement. These include tax revenues, that are statutorily earmarked for particular uses, such as motor fuel taxes, dedicated State or federal tax dollars, and county-imposed tax revenues. Garnishment, attachment, or offset of these restricted funds for unrelated debts undermines the public purposes for which they were intended, disrupts essential services, and may jeopardize a local government's eligibility to receive future grants and funding.

(c) It is, therefore, declared to be the policy of the State of Illinois to protect restricted local government funds from garnishment, attachment, or offset, except where expressly required by federal law, to ensure their use for their intended public purposes.

Section 10. The State Comptroller Act is amended by adding Section 21.5 as follows:

(15 ILCS 405/21.5 new)

Sec. 21.5. Protection of restricted local government funds.

(a) Notwithstanding any other provision of law, the Comptroller shall not withhold, offset, or otherwise apply against any debt any funds payable to a unit of local government if those funds are restricted funds.

(b) For the purposes of this Section, "restricted funds" means funds restricted for a specific purpose by federal or State law, county ordinance, or grant agreement, including, but not limited to:

(1) Motor Fuel Tax funds disbursed under the Illinois Highway Code.

(2) State, county, or federal tax revenues distributed to local governments that are statutorily earmarked for a specific purpose.

(3) Tax Increment Financing revenues collected and distributed under the Tax Increment Allocation Redevelopment Act.

(4) Grants or awards received from the federal government, another state, or private foundations that are contractually or statutorily restricted for a specific purpose.

(5) State grants and distributions allocated to a specific fund or purpose by law.

(6) Any other funds designated as restricted under federal or State law or held in trust for a specified public purpose.

(c) The Comptroller shall, on an annual basis, publish and maintain a list of categories of funds deemed restricted under this Section.

(d) Nothing in this Section shall impair the Comptroller's authority to withhold or offset non-restricted funds, nor shall it limit the enforcement of debts owed to the federal government as required by federal law.

Section 15. The Code of Civil Procedure is amended by adding Section 12-701.5 as follows:

(735 ILCS 5/12-701.5 new)

Sec. 12-701.5. Exemption of restricted local government funds from garnishment.

(a) All funds, revenues, or accounts of a unit of local government that are restricted for a specific public purpose by federal law, State law, county ordinance, or grant agreement are exempt from garnishment, attachment, or any other legal process to satisfy a judgment or debt.

(b) A court of competent jurisdiction shall not issue a garnishment order against restricted funds as defined in subsection (a) or as identified in Section 21.5 of the State Comptroller Act.

(c) This Section does not apply to any collection action undertaken by the federal government pursuant to federal law.

Section 99. Effective date. This Act takes effect upon becoming law.