CHICAGO - The Cook County, Ill., Board of Commissioners on Friday overcame months of bitter quarreling - and barely avoided a government shutdown - to pass a $3.2 billion fiscal 2008 budget that will boost Chicago's sales tax to among the highest in the nation.

As part of a budget deal, the county also will surrender control over its massive public health system to an independent board.

The budget approval means Cook likely will move ahead with its long-stalled borrowing plans. The county also expects to come to market this year with a roughly $160 million sales tax anticipation note issue to provide much-needed cash until the additional sales tax flows into the government's coffers.

The $3.2 billion budget relies on a 1% sales tax increase - down from the 2% figure first proposed in October by board president Todd Stroger - to plug an estimated $283 million deficit in 2008 and to close a growing structural deficit that had been expected in future years. The tax hike will push the county tax up to 1.75% from 0.75% and is expected to generate $426 million annually.

"By passing this budget, the board has breathed life into this county government," Stroger said early Saturday morning after the board action.

The sales tax hike has drawn strong criticism from commissioners and local business leaders, who note that Chicago will now carry a 10.25% sales tax, the highest of any major U.S. city. Stroger maintained that the increase is necessary to address what he called "the elephant in the room" - Cook's growing structural deficit, which he said is on track to swell to $1.5 billion within the next 10 years.

Under the 2008 budget, the county will hire 1,100 new employees, including 690 new jobs at the financially strapped Bureau of Health Services. The budget includes no new borrowing, but the county plans to move forward with a $500 million general obligation issue that was part of the fiscal 2007 budget.

Officials are also considering refinancing some of Cook's outstanding debt in order to save money, but has so far been unable to meet its target of 3% net present-value savings, said Donna Dunnings, the county's chief financial officer.

Cook's $3.2 billion of outstanding GOs are rated in the double-A category by Fitch Ratings, Moody's Investors Service, and Standard & Poor's.

"The county passed a budget within the parameters of the law - and it's a balanced budget, which is one of the key things we look for," said Standard & Poor's analyst John Kenward.

Under the final budget compromise, Stroger agreed to surrender control of the county's public health system, which has been at the center of the long debate over how to fix the budget.

The health system includes three hospitals and 26 clinics, with an $850 million budget that makes up about a third of the county's total budget. The system faced a $70 million shortfall in fiscal 2007, largely due to weak patient collections and an ongoing decline in federal matching dollars.

Last May, Stroger appointed a blue-ribbon committee to review the system. The panel returned to the board in October with a highly critical 40-page report that ultimately recommended that an independent board take over the system. On Friday, Stroger agreed to the formation of a 20-member hospital governing board with total control over clinical and financial moves, though the board will likely retain the authority to vote on its budget.

The county's fiscal year began Dec. 1, but under state law the board does not have to pass a budget until the end of February. Stroger, a Democrat, carried the support of a handful of Democratic commissioners, but several other Democratic members, considered advocates of reform, joined forces with the three Republican members to push for greater cuts and block the tax increases.

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