CHICAGO -- A prominent Chicago fiscal watchdog group said Monday it supports Cook County, Ill.’s proposed 2014 $3.2 billion budget but warned that growing pension obligations and budget deficits could pose “enormous” fiscal problems in the future.

The Civic Federation Monday released a 91-page analysis of the spending plan unveiled earlier this month. Budget hearings began last week. Cook, which includes Chicago, is the third largest county by population in the U.S.

“The Civic Federation commends Cook County Board President Toni Preckwinkle and her administration for continuing to identify expenditure reductions and operational efficiencies, holding the property tax levy relatively flat,” the federation said in its report.

But problems loom, including budget deficits, a climbing unfunded pension liability, and uncertainty surrounding the county’s massive public health department, the group said. The health system accounts for nearly a third of the overall budget.

The new budget relies on $468 million of revenue from an expanded Medicaid program under the new federal health care law. The federation warned that uncertainty surrounds the 2014 projection, and noted the county’s failure to reach the projected 2013 goal of $197 million. 

Last year the county requested and won a waiver from the federal government that allowed it to expand its Medicaid program, called CountyCare, a year ahead of the formal 2014 start of the new federal health care law.

Current projections for 2013 are now $122.3 million, down from $197 million. That includes a $30 million tab from the state that’s unrelated to the expansion, according to the Civic Federation. Preckwinkle has also been “less than transparent” about revising the 2013 figure downward, the federation said.

“The Civic Federation continues to support the health system’s efforts to prepare for and adapt to changes in health care,” the report said. “If the health system is able to meet revenue targets established for FY2014, the plan could help stabilize the county’s finances and improve the quality of health care for county residents.”

The county’s unfunded pension liability, meanwhile, has grown to $6.8 billion as of fiscal 2012 from $2.9 billion in 2003 with the funded ratio falling to 55% from 69%, according to the federation.

Budget deficits are projected to climb to $523 million in fiscal 2018 from $122 million in 2015 -- not including pension increases. Rising health care costs, declining revenues, increasing bond payments, and uncertainty in its health system are driving the budget shortfalls, the federation said.

“While great strides have been made, the county must address its future enormous fiscal problems by continuing to evaluate its operations, reduce costs and improve efficiencies,” the report said. “This is a multi-year process that will require the development of a publicly shared, long-term financial plan.”

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