CHICAGO — Cook County, Ill. Board President Toni Preckwinkle has proposed a one-cent sales tax increase to shore up the county's pensions, saying it's needed to stave off insolvency in light of inaction by state lawmakers.
"We are acting today because Springfield didn't," Preckwinkle said Tuesday at a breakfast meeting of the City Club of Chicago. "I refuse to wait and kick the can down the road to bankruptcy."
The increase would raise an estimated $480 million in new money annually, according to the county. Her proposal calls for 90% of the increase to go to the county's pensions.
She is expected to introduce the legislation Wednesday.
Preckwinkle said she would reconsider the tax increase if the Legislature passes her preferred pension reform package by the end of the summer.
"This isn't posturing or political maneuvering — it's being realistic," she said.
The county, the nation's second most populous and home to Chicago, faces a $6.5 billion pension liability with a 54% funded ratio. The shortfall has prompted several downgrades, most recently from Moody's Investors Service. Moody's cut the county's general obligation rating to A2 from A1 in early June. The outlook remains negative.
Like Chicago, the country requires state approval to enact pension reform. Lawmakers have yet to grant such approval.
Five years ago, Preckwinkle won the top county seat by campaigning hard against an unpopular 2008 sales tax increase supported by then-President Todd Stroger. The increase put the county's tax rate at 1.75%, up from 0.75%, and made the Chicago area's sales tax rate among the highest in the country.
After winning the seat, Preckwinkle implemented a gradual repeal of the tax, rolling it back to 0.75% by 2013.
She sought Tuesday to distinguish her new proposal from the Stroger increase.
"In 2008, the sales tax increase went entirely to the general fund budget, to fund operations," she said, saying she has cut nearly $500 million from the county's $3 billion budget every year, and that her current budget proposal features another $100 million in cuts.
"This is not about a quick fix; this is not an 'I told you so,'" she said. "We literally can't afford to wait."
Cook has $3.6 billion of outstanding general obligation bonds. Fitch Ratings rates it A-plus with a negative outlook. Standard & Poor's rates it AA with a stable outlook.
