CHICAGO — New Cook County, Ill., Commission President Toni Preckwinkle unveiled her first budget Tuesday, a $3 billion spending plan for fiscal 2011 that she said would restore fiscal stability to the nation’s second-largest county.
The budget eliminates a record $487 million deficit through cuts, a handful of one-time revenue measures, and pushing off near-term debt-service payments.
Though debt restructuring and one-shots are typically frowned upon by fiscal analysts, the county believes their limited use, in combination with spending cuts, will put it on the path toward structural balance.
“We must break the bad habits that got us here,” Preckwinkle told county commissioners. “I realize this is a challenging situation, but we cannot continue this spending without control, managing without measure.”
Chicago, the nation’s third-largest city, is the Cook County seat.
Preckwinkle, a longtime Chicago alderman, took over as president in December after 16 years of rule by Todd Stroger and his late father, John Stroger. Under their successive tenures, the county developed a heightened reputation for inefficiency, patronage, and corruption.
A key part of Preckwinkle’s deficit-elimination plan is the move to push off scheduled increases in debt-service payments over the next three years.
The county has $3.8 billion of outstanding bonds and plans to restructure $271 million as soon as April. Preckwinkle’s 2011 budget relies on pushing off $87 million of debt-service payments due in 2011, reducing debt payments to $126 million from $213 million. The county also plans to restructure $92 million of payments scheduled for both 2012 and 2013, according to chief financial officer Tariq Malhance.
“This will give us much relief in the budget because that money can be used in the general fund,” said Malhance, who took the position two weeks ago.
The refunded bonds will likely include a mix of tax-exempt bonds and taxable pension bonds that were sold in 2010. The restructuring will increase the county’s debt-service payments from 2014 through 2031, Malhance said.
“You have to make tough decisions, and it’s better than raising the property tax,” he said of the plan. “That’s the only other option.”
Officials expect the refunding to generate $60 million in net present-value savings, which will be used to cut the deficit.
Cook hopes to enter the market with the refunding in April or May. A request for proposals for underwriters and bond counsel could be sent out as early as March.
The budget includes a request for a $45 million line of credit that would allow Cook to quickly settle lawsuits related to strip searches in the county’s jail system.
Preckwinkle’s budget relies on cuts that average about 17% in all agencies, including a 21% reduction for the county’s massive health and hospital system. The health care system makes up one-third of the overall budget.
Preckwinkle said the budget cuts could mean laying off up to 2,000 employees, or 8% of Cook’s 24,000 employees.
The budget won praise from Lawrence Msall, the head of the the Civic Federation, a fiscal watchdog group. He said the cuts are painful but essential.
“Our initial reaction is very positive,” Msall said. “It’s very important that she stepped up and seemed to match expenditures with a reasonable forecast of revenues.”
Preckwinkle said the budget sets the stage for a rollback of an unpopular sales tax hike, which will be repealed in phases in 2012 and 2013. She said the administration plans to try to offset the loss of that revenue — up to $400 million — by making the government more efficient.
The county board needs to approve a final budget by Feb. 28.
Fitch Ratings, Standard & Poor’s and Moody’s Investors Service rate Cook double-A with stable outlooks.