Cook County Board President Toni Preckwinkle today released the preliminary forecast for the County's Fiscal 2016 budget, cautioning that difficult financial choices will face County decision-makers as the development of a budget proceeds over the next several months.
In an appearance before the City Club of Chicago, Preckwinkle announced a projected operating shortfall for FY 2016 of $198.75 million, driven by increasing labor costs, rising legacy debt service, increased costs of the Presidential election cycle, and reductions in court filing revenues.
In addition to the projected operating shortfall, Preckwinkle said that unfunded pension liabilities are pushing the County's Pension Fund toward a financial crisis, and when factoring in the annual actuarial deficit at the fund, and needed funding to repair and replace crumbling roads and bridges, the total projected shortfall rises to $479.3 million.
When we passed the last year's budget, I warned that fiscal year 2016 would be very challenging, Preckwinkle said. As we begin to prepare our spending plan, we are now faced with making difficult but necessary decisions to ensure a stable financial future for Cook County and its citizens.
Preckwinkle said she will propose a 1 percent increase in the County sales tax, mainly aimed at addressing the County's pension crisis, along with the rise in legacy debt service and increased funding of road and bridge infrastructure. The sales tax would be projected to raise $308 million in 2016, which would leave a residual funding shortfall of $171.3 million when all of these factors are included. Preckwinkle said her team is already targeting reductions in tax-supported expenditures in excess of $100 million for FY 16.
The Pension Fund shortfall now stands at approximately $6.5 billion. Based on the market value of the fund's assets, the shortfall increases by $30 million a month as a result of continued inaction by Springfield on the County's proposed pension reform legislation.
We worked for two years to design a pension reform package that is supported by a wide majority of our union partners and local business interests, and that we believe will survive a court test, but we have been unable to get Springfield to act on it, Preckwinkle said. I appreciate that Gov. Rauner recently expressed his willingness to support our pension plan. But that isn't a guarantee. And while I am still willing to work with the Governor and the legislative leaders to secure our pension reform, I refuse to wait and kick the can down the road to bankruptcy. The more you kick the can, the heavier and bigger it gets, until one day it kicks back.
Preckwinkle said that between FY 2011 and FY 2015, the County was able to put $1.5 billion back in the hands of taxpayers while instituting operational efficiencies. And we will continue to remake Cook County government as more efficient through smart savings and expenditure cuts, coupled with the sales tax increase to address legacy debt service costs, legacy pension liabilities, and improve our roads and infrastructure, she said.
In the event that sustainable pension reform efforts are adopted and signed into law in Springfield, Preckwinkle said she will re-evaluate the County's revenue needs and make the appropriate changes to the sales tax levy.
Since taking office in 2010, Preckwinkle has eliminated operating deficits by $1.4 billion and lowered the County's headcount by 8 percent. Outstanding bonded debt has been reduced by $236 million since 2011, and the County is engaged in ongoing steps to shrink its facilities footprint and lease excess space in its 69 West Washington building. The County has set a target of leasing an additional 75,000 square feet by 2018 at 69 West Washington as part of its ongoing initiative to reduce the real estate footprint of county government.
Taxpayer funding of operations of the Cook County Health and Hospitals System (CCHHS) has been reduced by $225 million, or 58 percent, since Preckwinkle took office in 2010, while the implementation of CountyCare, the County's managed care Medicaid program, has reduced the system's population of patients without insurance from 56 percent in 2012 to 32 percent so far this year.
The 1 percent sales tax increase would produce approximately $308 million in year one, which would be used as follows: $270 million toward pension funding, $10 million towards additional funding for highway infrastructure, and $25 million to fund rising legacy debt service payments.
In year two, the sales tax would yield $474 million and be allocated as follows: $340 million toward pension funding, $65 million towards highway infrastructure and $55 million for debt service payments
This will allow us to establish a long-term commitment to our infrastructure, Preckwinkle said. For two decades, Motor Fuel Tax (MFT) dollars have been partially diverted to support public safety. In FY2016, we will begin to decrease the diversion so that by FY 2017, all MFT funds will be allocated to the Department of Transportation and Highways for infrastructure improvement projects. In conjunction, we will soon be releasing our Long Range Transportation Plan, the first the County has produced in over 70 years, which lay out the multi-modal needs of our residents and the County's plan to address them.
Preckwinkle cautioned that while discussion has centered on the sales tax, this is not a conversation about revenue only and that expenditure cuts must be part of the solution.
Over the past five years, her administration has reduced staffing by approximately 2,000 positions, decreased taxpayer funding of the health system and worked to make County government more responsive to residents, she said.
A good example of attaining savings is found in actions involving the Department of Corrections campus. For example, Preckwinkle said, she and the Sheriff have agreed that three buildings on the DOC campus can be demolished in an action that will save $9.5 million per year in building operating costs and avoid $120 million in maintenance costs over the next decade.
Other targeted expense reductions include:
- Implementation of a Countywide time and attendance system that will automate timekeeping and reduce fraud.
An audit that will ensure only the dependents of eligible employees are on the County's benefit rolls.
Continuing to reduce the County taxpayer allocation to the CCHHS
Eliminating numerous vacant positions across the County. Reducing the County's fleet of vehicles.
Utilizing reverse auctions to obtain the best price for commodity purchases
This approach, of coupling aggressive expense reductions and efficiencies with the request for additional revenue, stands in sharp contrast to 2010 when the additional 1 percent sales tax was last in effect, she said.
This is not about a quick fix. This is not an operational stopgap. And contrary to what you may have heard, this is also not an 'I told you so', Preckwinkle said. When the sales tax was increased in 2008, it was used entirely to balance and grow daily operations, including funding health care benefits, supporting the hospital system, covering costs at the Juvenile Temporary Detention Center and replacing other declining revenues. The challenges have not changed - our approach has.
We've continued to try to increase efficiency, streamline operations and shift resources to better support our agenda.
Without the sales tax rollback at that time, she said, County government would have continued to be inefficient and ineffective for its residents, and we still would have been looking for a revenue source to fund pensions.
Revenue increases through a sales tax, coupled with significant expenditure cuts, will put the County on firm financial footing for the future and allow us to invest in much-needed road infrastructure improvements, absorb increased legacy debt service costs, and pay down all pension liabilities without further exacerbating the financial crisis for future generations.