CHICAGO — Allowing a lower court ruling invalidating Illinois’ $31 billion capital budget to take effect would “wreak havoc” on state operations and finances, the attorney general’s office warned Friday in its request that the state Supreme Court stay the decision.

The Illinois Appellate Court struck down the 2009 law Wednesday that established the funding streams to repay borrowing for the public works program. That action, in turn, voided other pieces of legislation related to the capital program including one that appropriated the actual funding for projects.

In a unanimous opinion, the three-member panel ruled that the law violated the state constitution’s single subject clause. The panel’s action reversed a lower court’s dismissal of the lawsuit filed by Rocky Wirtz and Wirtz Beverage Illinois LLC in August 2009 shortly after Gov. Pat Quinn signed the law.

The attorney general asked the Supreme Court to stay enforcement of the appellate ruling as it prepares its request for the court to review the case.

“Giving immediate effect of the appellate court’s decision in this case … would wreak havoc on critical state operations and finances,” Attorney General Lisa Madigan’s filing says.

The state could be forced to suspend projects now underway and halt collection of various taxes and fees established in the overturned law, “risking an irretrievable loss of tens of millions of dollars in state revenues,” the filing says. “Debt service for the bonds already issued under the authority of the capital projects act would have to be paid from a different revenue source, putting a further strain on state finances.”

The state would continue to set aside the revenues in question, so no harm would be imposed on the plaintiffs, the filing argues. The attorney general intends to file a petition by Feb. 14 asking the state’s high court to review the case.

The General Assembly could wait for a high court decision or act now to revamp the overturned laws. While the capital budget passed with strong bipartisan support, revised legislation could face a tougher road.

Republicans are still angry over the move by the General Assembly’s Democratic majority to push through an income-tax increase earlier this month, which has come under sharp criticism.

The overturned law legalized video gaming in various establishments; set up a capital spending accountability law requiring quarterly reports on spending; amended riverboat gaming rules to include oversight of video gaming; and halted further diversion of state road funds.

The bill amended the state’s use tax, raising it to 6.25% on candy, certain beverages, grooming and hygiene products; amended the lottery laws to allow for a private management contract to raise additional revenue; raised taxes on various liquors; and established a capital projects fund to capture revenue generated by the various taxes to repay borrowing. It also required a state university study on the impact of lottery-ticket purchases on families.

The appellate panel rejected the state’s argument that the various subjects all fit into a broad category related to revenue.

“We find that the wide range of topics … cannot be considered to possess a natural and logical connection,” the opinion says.

The state sold more than $3 billion of taxable general obligation Build America Bonds to support its capital budget last year and planned to sell about $1.5 billion of debt for capital projects this spring. Another $2.5 billion of bonding was planned for fiscal 2012 depending on the availability of revenues that flow to the capital projects fund.

Under the capital bill financing scheme, the state anticipates covering its $14.6 billion share of the $33 billion through GO and sales tax-backed borrowing over the length of the program.

Local and federal matching dollars cover the remainder.

The state would repay borrowing with $150 million annually taken from the road fund, $122 million generated from a hike in the motor vehicle title fees, and $180 million from an increase in licenses plate fees.

Another $300 million would come from expanded gaming, $109 million from the liquor tax hike, and $53 million from increased taxes on candy, sweet tea, coffee, and personal hygiene items.

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