Detailing a budget experiencing the strain of the coronavirus pandemic, Cook County Board President Toni Preckwinkle today released the preliminary forecast for the County’s Fiscal Year 2021 showing a projected gap of approximately $280 million for the rest of this fiscal year and $410 million the following year as the widespread financial impacts of COVID-19 are touching nearly all aspect of the County and Health Systems operations.
The preliminary forecast report presents a mid-year projection of year-end revenues and expenses for Fiscal Year 2020 and an initial forecast for Fiscal Year 2020 revenues for the General Fund and Health Enterprise Fund, the County’s two major operating funds.
“This pandemic has had an immense and undeniable negative impact on our budget,” President Preckwinkle said. “We have instilled sound fiscal discipline, reduced headcount, closed billions of dollars of budget gaps and pushed for a more efficient government, but it doesn’t make us immune to a pandemic-driven economic downturn.”
Preckwinkle announced a projected operating shortfall of nearly $220 million for the end of FY2020 driven primarily by tax and fee losses attributed to the pandemic. With stay at home orders in place and non-essential businesses closed through June, the County’s economically sensitive revenues were significantly impacted.
The County’s Sales Tax is down by over $110 million as people spend less during times of economic uncertainty; Amusement Tax is declining by almost 84% as residents stay at home due to the suspension of sporting events and concerts; Gasoline Tax is down 19% as less people are driving and the Hotel Accommodation Tax is down 60% as less people are traveling to Chicago and requiring this type of lodging. Additionally, due to operational closures of County buildings during the second quarter, the County Court system revenue is projected to decrease by approximately $16.9 million. Lower than anticipated salary and wage expenses across the County as a result of delayed hiring and expenditure control measures implemented to mitigate the projected year-end revenue shortfall will help lessen the negative impact on this year’s budget.
The FY2021 outlook includes a projected shortfall of $222.2 million in the General Fund, with revenues forecasted to be $129.3 million below the FY2020 adopted budget and expenses forecasted to be $92.9 million above FY2020 adopted budget. This projected deficit is largely a result of expected delays in economic recovery next year.
Additionally, despite operating only two of the more than 60 hospitals in Cook County, the County hospital system provides approximately 50 percent of the charity care in the County. COVID-19 caused further financial damage when the Center of Disease Control mandated all hospitals cancel non-emergency care, resulting in a projected loss of revenue of $264 million through the end of fiscal year 2020. While CCH received revenues from the CARES Act to help offset that loss, its pre-COVID-19 fiscal challenges remain. As a result, CCH expects a budget gap of $61 million for FY2020 and $187 million in FY2021.
Preckwinkle noted that while helpful, responsible fiscal practices and efforts to create structural budget savings implemented since taking office cannot offset hundreds of millions of dollars in lost revenue. These fiscally prudent practices have helped addressing growing legacy debt service costs, pension appropriations and highway infrastructure needs. Cook County has provided supplemental pension payments of more than $1.6 billion while increasing infrastructure funding and legacy debt service payments in the last four fiscal years.
“We have experienced large shortfalls in the past as well as dramatic losses of revenue, the coming months will assuredly be filled with tough decisions but we are prepared to step up to the challenge,” Preckwinkle said. “We have our work cut out for ourselves, but the forecast released today will help direct our work to develop next year’s budget. We will work with commissioners and the separately elected officials in the coming months to close these gaps like we have done every year.”
While the budget office is already exploring multiple budgetary scenarios aimed at avoiding severe cuts to critical services, Preckwinkle redoubled her support of the HEROES Act passed by the U.S. House of Representatives that would allow local governments like Cook County to help mitigate lost revenue by providing $1.1 trillion for state and local governments which includes money to help cover expenditures and lost revenue. Preckwinkle noted that CARES Act funding has been tremendously helpful to Cook County, but it is exclusively for coronavirus expenses. This means it cannot be used for the significant revenue losses experienced by governments.
“This is an issue of great interest and importance to local governments across Illinois, not just Cook County,” said Ammar Rizki, Cook County Chief Financial Officer. “Without Federal support, local governments across the country as well as Cook County, will have to examine curtailing services and making difficult cuts at a time when our residents need assistance most. This could also cause further economic contraction and only exacerbate financial difficulties throughout the country.”
A virtual public hearing on the preliminary forecast will take place at 6 p.m. on July 16. Residents will have an opportunity to provide testimony and engage directly with the President’s office on their budget priorities. The President’s office will livestream the public hearing and residents can use social media to ask questions.
Beginning today, residents can visit the County’s website at www.cookcountyil.gov/Budget to view the preliminary forecast. Residents can also now submit budget questions at https://www.cookcountyil.gov/service/submit-budget-questions.