CHICAGO - After months of gridlock, theCook County, Ill., Board of Commissioners is poised today to begin voting on a series of tax increases and budget cuts in order to meet a state-imposed deadline of Friday to pass a fiscal 2008 budget and avoid a government shutdown.
The action today follows months of contentious debate as board members were deadlocked over passage of county board President Todd Stroger's $3.2 billion fiscal 2008 budget. First proposed in October, that budget called for a 2% increase in the sales tax.
The latest version of the budget closes an estimated $283 million deficit - though even that figure is the subject of dispute - with a 1.25% sales tax increase, raising Cook's portion of the sales tax to a total of 2% from 0.75%. If approved, even the scaled-down increase would put Chicago's sales tax at 10.5%, among the highest in the nation.
Stroger has three times delayed voting on a sales tax increase as he attempted to gather enough votes on the board. Now faced with a Friday deadline, the board today is expected to vote on the sales tax measure as well as a package of five smaller tax hikes and a number of budget cuts that Stroger's finance team has warned could total as high as 18% without new revenue measures.
"We have until Friday to do this," Commissioner John Daley, chairman of the board's finance committee, said after a contentious meeting Monday. "Maybe there will be some willingness by members, but I'm very concerned that it's not going to work."
Without a fiscal 2008 budget in place by Friday, the county could not levy taxes or spend any money in the remainder of the fiscal year, Daley said. The county's fiscal year began last Dec. 1, but under state law officials have until March 1 to adopt a spending plan.
Meanwhile, the county's long-planned $500 million general obligation bond issue remains on hold until a fiscal 2008 budget is in place, said chief financial officer Donna Dunnings. The government had planned to sell a $500 million mix of new-money and refunding GO bonds by the end of 2007, but has yet to even assemble its financial team for the transaction.
Even a plan floated a few months ago to refinance some of Cook's debt to help balance the budget is on hold as the county is currently unable to reach its net present savings target of 3%, according to Dunnings.
"I have various proposals from investment banks, but we don't have any proposals that display that [3%] savings," she said. "I can't [refinance] without risking our rating, and I'm not willing to do that."
The county's $3.2 billion of GOs are rated in the double-A category by Fitch Ratings, Moody's Investors Service, and Standard & Poor's.
If the board votes in favor of raising the sales tax, officials expect to enter the market with a sales tax anticipation note issue ranging from between $135 million to $180 million, depending on the size of the tax increase. The deal would provide much-needed cash until the additional sales taxes flow into county coffers.
"I will be meeting with rating agencies as soon as we can get this budget passed," Dunnings said.
As an alternative to a 1.25% sales tax hike, Commissioner Roberto Maldonado this week re-introduced a package of five new tax increases that he originally introduced late last year. The measures include expanding the existing gas tax of six cents on the gallon to include jet, train, and boat fuel; a 1% hotel tax; a 1.5% tax on alcohol consumed at taverns and restaurants; raising the use tax to 1% on big-ticket items like boats and cars; and imposing a $100 fee on certain motor vehicles.
"This is to give members a back up just in the event the sales tax fails," Maldonado told the board Monday, estimating that the five taxes totaled would raise $142 million annually.
The measures are among 87 amendments commissioners proposed to Stroger's $3.2 billion spending plan, his second since taking over the office from his long-serving father, John Stroger, who died in January following complications from a stroke.
Todd Stroger warned that the county must raise taxes in order to tackle the county's growing structural deficit. Officials estimate the structural deficit will hit $288 million in 2008 and grow to $1.5 billion within the next 10 years. The growing deficit is partly due to the county's decision to hold its property tax levy steady. That revenue stream represents 25% of the budget, according to Stroger.
"We're opposed to the unreasonable increase in the sales tax, 2% or 1.25%, because this government has failed to take seriously the need to reform," Civic Federation of Chicago president Laurence Msall said earlier this week. The federation is a business-sponsored government watchdog group. "Chicago would have the largest sales tax in the country and it would have an economic impact," he added
About one-third of Cook County's roughly $280 million deficit stems from shortfalls in its large and fiscally troubled health bureau, which operates three hospitals and 26 clinics under an $850 million budget.
After it completes budget negotiations, the board will begin debate over a measure being pushed by U.S. Sen. Richard Durbin, D-Ill., among others, to hand control of the health system over to an independent board of medical professionals.
Stroger's fiscal 2007 $3 billion budget relied on 17% across-the-board cuts to help wipe out a $500 million deficit.
If the board fails to approve new tax increases and ends up with 18% budget cuts, the county government will have been cut a total of 35% within one year, warned Commissioner Joan Murphy, the chief sponsor of Stroger's sales tax increase.
Stroger, a Democrat, has the support of a handful of commissioners, but several other Democratic members, considered advocates of reform, have joined forces with the Republican minority on the board to push for greater reforms and cuts over tax increases.