CHICAGO – Cook County Ill. Board President Toni Preckwinkle, saying a recent 1-cent sales tax hike isn’t enough to deal with the county's budget and pension problems, proposed a 2016 budget that relies on a mix of spending cuts and new tax revenue to close a $199 million gap.
The proposed $4 billion budget would trim $108 million through savings on personnel, management initiatives that include the demolition of three divisional jail buildings, savings squeezed from employee health benefits, and other consolidations and program eliminations.
Another $44 million would come from higher tax collections through enforcement, natural tax growth, its share of state funds, and its piece of a surplus in tax-increment financing districts freed to go to local governments.
The county would extend a 3% amusement tax to cover ticket resellers, cable TV, and golf and impose a tax on e-cigarettes to raise $21.8 million. The budget would eliminate 1.2% of staff positions mostly by eliminating vacant jobs, though there would be some layoffs.
The sales tax hike approved in July will generate an estimated $308 million in new revenue for the next budget. It takes effect in January. Collections are expected to total $474 million in 2017. The county is carrying a $6.5 billion unfunded pension tab.
The county will use $270 million for pension funding next year. The remainder will fund transportation infrastructure needs and pay debt service.
“We’ve had no shortage of difficult decisions to make, but this budget will help stabilize our financial position and fiscal structure by tackling our problems head-on,” Preckwinkle said in her budget address Wednesday.
Preckwinkle said Cook County’s uninsured population has dropped to the lowest level on record, declining to 32% this year from 56 % in 2012 allowing for the operating tax allocation to the Health System to be reduced by $39 million to $125 million in the next budget cycle that begins Dec. 1. Costs actually will rise but that’s being covered through CountyCare, funded by the Medicaid expansion permitted by federal healthcare reform.
“This has been a difficult budget but the end result will be a more streamlined and efficient government in the years to come,” Preckwinkle added. “This budget provides a sensible path to long-term stability and a more effective Cook County government.”
Standard & Poor's recently revised its outlook on Cook to negative from stable amid the county's many financial headaches. It also affirmed its AA rating on the nation's second-most populous county, which is home to Chicago.
"The negative outlook reflects our view of the county's challenges in rebuilding its general fund available reserves in 2015," Helen Samuelson said in a press release. "Further pressuring the rating is the task of maintaining similar reserve levels in 2016 while successfully controlling rising fixed budgetary costs, including its rising pension obligations, public safety, jail, court and enterprise health system."
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 the pensions. 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.
The county has received conflicting legal opinions on whether it can use non-property tax revenue for the pensions. A pension reform package crafted by the board and Preckwinkle would lift that restriction but the state Legislature needs to approve the package, and has twice failed to do so.