CHICAGO — Cook County, Ill. Board President Toni Preckwinkle Wednesday presented a $3 billion preliminary 2013 budget for the nation’s second-largest county that projects a $267.5 million shortfall tied to falling revenue collections.
Much of the expected shortfall comes from Cook’s massive hospital system, exacerbated by a decline in sales tax revenue. Sales tax revenue, which makes up the bulk of the county’s general fund coffers, is declining due to a gradual roll-back of a hugely unpopular 1% increase implemented by former board president Todd Stroger.
Preckwinkle, who campaigned on the promise to eliminate the penny increase, has implemented a phased-in rollback, and the final quarter-cent decrease starts Jan. 1. It’s expected to mean $88 million less sales tax revenue for fiscal 2013, officials said.
The current 2012 budget featured a debt restructuring that will generate substantial relief for 2013 by pushing off $85 million of debt payments. That helps to shrink the size of the projected deficit to $267 million from $350 million. The proposed spending plan includes no new borrowing at this point, the county’s chief financial officer said.
Cook is planning to head to market in August with a roughly $100 million new-money borrowing that was part of the current 2012 budget. The bonds will be backed by the county’s sales tax and proceeds will be used for highway projects, CFO Tariq Malhance said.
The county expects to save around 30 basis points by selling revenue bonds backed by sales taxes rather than general obligation bonds, Malhance said.
Wells Fargo Securities is the senior manager on the deal. The county expects to present the transaction to commissioners in July.
Preckwinkle said the deficit has been smaller each budget since she took over the helm of a county long troubled by a reputation for corruption, patronage, and wasteful spending. Last year’s deficit totaled $315 million and the fiscal 2011 shortfall was $487 million, Preckwinkle noted.
“We’ve solved over $800 million in deficits, and now we have another $267 million,” the president said at a press conference at the county building Wednesday morning. “While [the deficit] has been falling, we’re not in situation where there is no deficit. It gets harder and harder to fill the gap when you’ve done the obvious things in the first few years.”
She said “everything is on the table” to cure the shortfall. An immediate hiring freeze will offset a $22.4 million deficit in the current-year budget, and Preckwinkle said she hopes to wring savings out of a series of service collaborations with Chicago.
“[The deficit] is 12% of our operating budget, so clearly this is a problem that affects everyone in county government,” Preckwinkle said.
Roughly $152 million of the deficit comes from the Cook County Health and Hospitals System, which makes up about one-third of the county’s overall budget.
The problem is a growing amount of self-pay patients amid a tough economy, officials said. The size of the projected 2013 deficit could vary greatly depending on the Supreme Court’s ruling on the new federal health care law, according to budget director Andrea Gibson. A Supreme Court ruling on the law was expected Thursday morning.
If upheld, the law could spell relief for the county system as it will include an expansion of Medicaid. Though the new law would not begin until 2014, it could help the county in fiscal 2013 if Cook wins a federal waiver that would allow it to start to register patients under new expanded Medicare rules right away as opposed to waiting until 2014, Gibson said.
If the Supreme Court strikes down the new law or the Medicare expansion piece of it, it will be “more problematic for us,” Preckwinkle said. “We won’t have those [Medicaid] revenues.”
The proposed budget includes a $195 million pension payment and $290 million health-care payment. The size of the payments is also uncertain, depending on Illinois’ final pension reform plan.
The administration plans to get feedback from other elected county officials, commissioners, and the public before unveiling a final spending plan in November. The county’s fiscal year begins Dec. 1.
Moody’s Investor’s Service rates the county’s $3.5 billion of outstanding general obligation bonds Aa3. Fitch Ratings rates it AA-minus. Moody’s and Fitch both downgraded the county last year due in part to revenue declines and mounting pension and OPEB liabilities.
Standard & Poor’s rates the county AA with a stable outlook.