CHICAGO – With her commissioners poised to repeal a controversial sweetened beverage tax, Cook County, Illinois board president Toni Preckwinkle is sounding alarms over the budget cuts that will be needed to offset the loss of $200 million in revenue.
The repeal measure is up for debate and a vote in the county’s Finance Committee Tuesday and final action would come during a board meeting Wednesday. Preckwinkle broke a tie last year to enact the tax that took effect in August after a brief court-imposed delay.
A majority of commissioners have now signed on to the repeal with enough votes listed Friday to override a veto, barring a last minute change of heart by commissioners that recently flipped sides.
“Taking away this revenue could result in a reversal in the government efficiencies we have championed over the past seven years,” Preckwinkle warned in Thursday as she unveiled a nearly $5.4 billion budget for fiscal 2018 which begins Dec. 1. The operating portion of the budget totals $4.9 billion, an increase of $512 million or 11.6% from fiscal 2017, and the capital portion totals $476.5 million.
The latest version of the repeal measure would push back the effective date to the new fiscal year. Preckwinkle said there’s little “fat” still to cut after shrinking the workforce by more than 10%, closing budget gaps of $1.8 billion, and reducing debt by 11% since she took office in 2010.
“A vote to repeal is a vote against promoting better health outcomes for people in communities across the county, especially our most vulnerable,” she said warning of the possible closure of community healthcare centers, hospital cuts, and a possible 11% across-the-board cut that would harm the state’s attorney and public defender’s offices.
Preckwinkle has said she expects commissioners who support the repeal to identify programs and service cuts to make up the $200 million annual revenue loss to the county of more than 5.2 million people.
The county turned to the soda tax last year as a means to tackle $174 million of red ink without cutting deeply into healthcare and public safety services. It followed the earlier passage of a sales tax hike to bolster pension fund contributions. County residents who live in Chicago have also been hit with property tax hikes and the state recently raised the income tax.
Public debate has been growing over the tax with opponents – led by beverage and merchants groups – financing television and radio advertisements slamming the tax as too costly to both the public and businesses as residents flee county lines to make their purchases.
The advertisements accuse supporters of falsely portraying the tax as a health-related endeavor aimed to reducing consumption of beverages that health experts warn contribute to obesity and diseases such as diabetes. Health advocates and organizations have defended the tax in ads financed by former New York Mayor Michael Bloomberg.
The tax covers most sweetened beverages and sports drinks, even those with non-caloric artificial sweeteners, while leaving out 100% fruit juices, milk and infant formula.
The county's general obligation bonds are rated A2 by Moody's Investors Service, AA-minus by S&P Global Services, and A-plus by Fitch Ratings. Ahead of a refunding last year, Moody's and Fitch revised the county's outlook to stable from negative while S&P downgraded it one notch. S&P assigns a stable outlook.
The county is tapping the 1% sales tax hike to cover supplemental payments to its pension fund to bring the system to a 90% funded ratio in 2046. The county's system carries $5.9 billion of unfunded obligation that are 60% funded. The county needs state approval, however, for changes to take effect.