CHICAGO – Cook County, Illinois board President Toni Preckwinkle defended its newly approved $4.5 billion 2016 budget, which relies on several tax hikes, as a "responsible" plan to meet county's pension and budget needs without harming services.
"This is not an easy budget," Preckwinkle said after the board of commissioners approved the budget in an 11-5 vote late Wednesday. "But it is a responsible budget that tackles our needs head-on, without dodging tough decisions or kicking the can down the road."
The county's finance team trimmed a nearly $200 million preliminary gap through efficiencies and cuts, bringing it down to $20 million. The nation's second most-populous county, which includes Chicago and its neighboring suburbs, will save on its tax allocation to the health system and employee healthcare.
To fully erase the red ink, Preckwinkle initially proposed broadening an amusement tax hike but dropped it in favor of a 1% tax on hotels and motels to generate $15.4 million in annual revenue for the next budget. The tax doesn't take effect until May. When collected for a full year it's expected to generate $31 million.
The county made further cuts of $4.1 million and will raise $750,000 tax from a tax on ticket resellers. The county also will tax e-cigarettes and e-vapor products to generate $1.5 million for the budget.
Its workforce will be cut by 1.2% through the elimination of vacant positions and some layoffs. The budget also relies on $44 million from higher tax collections through enforcement, natural tax growth, state funds, and the county's piece of a surplus in tax-increment financing districts freed to go to local governments.
The tax and fee hikes come on top of a 1 cent increase in the sales tax approved over the summer. Most of the $308 million expected from the tax increase in fiscal 2016 will cover a supplemental $270 million contribution to pensions over and above the county's statutory payment. The remainder will fund transportation infrastructure needs and pay debt service. Collections will rise to total $474 million in 2017. The county is carrying a $6.5 billion unfunded pension tab.
Preckwinkle warned that, despite the new revenue, challenges lie ahead in balancing future budgets.
Concerns over the size of sales tax hike prompted Civic Federation of Chicago to oppose the budget.
"The Civic Federation is disappointed not to be able to support this budget, which includes many praiseworthy initiatives and is not balanced through gimmicks," federation president Laurence Msall said in the group's report. The report did praise Preckwinkle for moving to tackle the county's pension mess in the absence of state action.
"Where the federation takes issue with President Preckwinkle's plan is with the revenue source and the process the county chose to implement the plan," Msall said. "The Civic Federation calls on the county to roll back the proposed sales tax rate and instead implement a mix of additional cuts and increased revenues to fund its proposed pension payment."
The sales tax increase will boost the rate imposed within Cook to 10.25%.
Other concerns raised by the federation in its analysis include projected gaps in the future. The report also notes the potential for a legal challenge against the increased pension contributions absent a change in state statutes which currently specify that contributions must come from property tax revenues with the amount tied to a percentage of employee contributions.
Standard & Poor's recently revised its outlook on Cook County's AA rating to negative from stable amid the county's many financial headaches.
Moody's Investors Service, which called the sales tax hike a credit positive, dropped Cook one notch to A2 from A1 in June, largely due to its pension liabilities. Fitch Ratings rates the county A-plus after downgrading it in July 2014, also due to the pension burdens. It assigns a negative outlook. Cook has $3.6 billion of bond debt.