SPRINGFIELD - The cash-strapped state could get an infusion of $50.5 million as part of a proposed settlement between Illinois banks and the Blagojevich administration.

The litigation dates to 2004 when banks took the governor to court after he successfully raised fees on financial institutions in order to help pay for general state costs.

Banks argued the increases were too high and that the money they pay in fees should be used for regulating banks, not regular state expenses.

The settlement, if approved by lawmakers and a judge, could pump $50.5 million of the higher fees back into the state treasury, as well as lower fees for banks, credit unions and other financial institutions by an average of 13.5 percent.

Details of a 24-page agreement are outlined in legislation filed in the Illinois Senate on Thursday. The settlement must be ratified by the General Assembly and a judge.

Neither side was commenting Friday.

"The settlement agreement has not yet been executed and no order has been entered by the court. We can't comment while we're still in litigation," said Sue Hofer, spokeswoman for the Illinois Department of Financial and Professional Regulation.

In addition to lowering fees and releasing money collected since the lawsuit began, the agreement would cap the amount of banking fee money that could be tapped by the governor for general state spending.

The legal action comes as Gov. Rod Blagojevich is again calling on the General Assembly to give him the power to transfer money out of similar special state funds to be used to plug a growing budget hole.

A measure allowing the governor to transfer up to $530 million in special funds was approved in the Senate earlier this month. It now awaits action in the House.

State Sen. Dan Rutherford, R-Chenoa, who monitored talks between the banks and the administration, said the settlement shows that using special funds to pay for general state costs is "inappropriate."

"The irony is, four years later, they are trying to do it again," Rutherford said.

The legislation containing details of the settlement is Senate Bill 2513.