Soda tax repeal spurs Cook County cuts and layoffs

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CHICAGO — Cook County would lay off 425 employees and cut 762 vacant jobs under an amended fiscal 2018 budget submitted Friday that addresses a $200 million gap left by the repeal of a sweetened beverage tax.

The vacancy cuts are on top of 254 already planned in the original budget submitted by board President Toni Preckwinkle.

“The amendment will have bipartisan support from commissioners,” Preckwinkle said in a statement thanking the board and other elected county officers for their work. The amended package has 15 co-sponsors from among the board’s 17 commissioners. The budget also reduces some general fund spending on capital equipment purchases.

The board will vote Tuesday on the budget that relies mostly on general spending cuts in various departments and elected officer’s budgets for the fiscal year that begins Dec. 1.

County commissioners held hearings on how to close the gap left after they repealed the tax last month after just a couple months of collections.

Preckwinkle had billed the tax as a good revenue source to avoid public health and safety cuts and as a means to reduce consumption of drinks many believe lead to obesity and diabetes.

But the county faced intense public and industry pushback. The tax faced a lawsuit from the beverage industry, consumer complaints, and warnings that many were flocking to neighboring counties to make their purchases damaging local businesses.

The region also faces tax fatigue due to a series of tax hikes levied by the county, Chicago, Chicago Public Schools, and the state.

The repeal represented “a credit negative because the county loses revenue and it reflects practical constraints on revenue raising,” Moody’s Investors Service wrote in a commentary after the board voted in October to repeal the tax.

Moody's rates the county's general obligation bonds A2. They carry a AA-minus rating from S&P Global Ratings and an A-plus rating from Fitch Ratings. All three agencies assign a stable outlook.

The county projects a $115.5 million unassigned general fund balance but the Chicago Civic Federation had warned against its use because it would “put the county at risk in the event of a future economic downturn or unexpected expense” and “could also result in a downgrade.”

The county also should not reverse course on pension funding, the group said. Preckwinkle’s proposed budget allocates additional funding beyond the statutorily required pension amount for a third year.

The county had previously raised the sales tax to funnel more money into its weak pension system and that allowed for a supplemental contribution of $270.5 million in fiscal 2016 and $353.8 million in fiscal 2017 with the proposed $4.9 billion 2018 budget allocating an additional $353.4 million.

The Center for Tax and Budget Accountability warned earlier this week that Cook County’s woes are far from over.

“Cook County's budget shortfall is not merely a product of the short-term decision to repeal the sweetened beverage tax without revenue to replace it,” the report read. “The county has an ongoing structural deficit driven by the fact that 43 % of the county's revenues come from sources that are growing slower than inflation.”

The county has also opted against increasing its base property tax levy since 1996. If it had adjusted it for inflation the beverage tax would not have been needed. “Cook County must address the long-term unsustainability of its revenue system if it is to avoid enacting further harsh cuts to core services,” the report recommended.

The original $5.4 billion budget included an operating fund of $4.9 billion, an increase of $512 million or 11.6% from fiscal 2017, and the capital portion totaled $476.5 million.

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Budgets Cook County Illinois