The Cook County, Illinois, board of commissioners unanimously approved a $6.94 billion 2021 budget that filled a $400 million hole in the general and health system funds through cuts, federal funds, a draw on reserves and other measures.
The deficit stemmed from both
Higher than expected revenues from recreational cannabis, gaming, and online taxes also helped close the gap and the county funneled an additional $40 million to the health system and renegotiated health reimbursement rates.
“This budget builds on years of hard work, hard votes and fiscally responsible steps taken to reshape Cook County,” board President Toni Preckwinkle said after the vote Tuesday.
The 17-0 vote marked a stark contrast from the 29-21 vote Tuesday on Chicago Mayor Lori Lightfoot’s 2021 budget on the other side of the City Hall-County Building in downtown Chicago. The county did not raise any taxes but did raise some fees. The city’s budget relies on a property tax increase and a cloud computing tax hike and motor fuel increase. Neither budget relies on future federal relief to make up for tax losses.
The county pieced together a fix for the estimated $400 million shortfall in the budget year that begins Dec. 1 — $222 million in a $1.89 billion general fund and $187 million in the $3.39 billion health fund.
The general fund hole was closed through a mix of one-time and structural fixes, including curbs on spending that includes the elimination of vacant positions, revenue from a Chicago-declared tax-increment financing surplus, $50 million in available federal CARES Act funds, and $77 million from the county’s $400 million in available reserves.
About half the gap is due to COVID-19 wounds and the other half from rising costs. The reserve draw will leave the county with recommended levels of cash covering at least two months of operations.
The health fund deficit will be closed through job cuts, negotiated rate increases, expected new Medicaid patient revenues, and an additional $40 million in the county’s direct tax allocation, bringing that figure to $123 million. Rising uncompensated care — that includes both bad debt and charity cases — has risen $136 million between 2017 and 2019 and threatens future stability.
The 2021 strains followed a $297 million general fund tax blow in the current fiscal year. Lower expenses helped offset the losses by $77 million. Overall, the county dealt with a $280 million general fund and healthcare shortfall this year, closing it through job cuts, expense reductions, and emergency federal funds for eligible expenses.
The county expects to take advantage of low market interest rates with refundings during fiscal 2021, but has no plans to tap the Federal Reserve’s Municipal Liquidity Facility, Ammar Rizki, the county’s chief financial officer, said.
The county stays on course with supplemental pension contributions under an intergovernmental agreement with its pension funds. The county will make a $342 million supplemental payment into the system above the $200 million scheduled payment based on a statutory formula in 2021. The county has made $1.6 billion in supplemental contributions since 2016 with revenues collected from a sales tax hike.
The Chicago Civic Federation recently endorsed the budget plan praising the county for its “foresighted” work in recent years – building reserves and enacting structural reforms -- that helped soften the solutions needed to close the gap.
“The prudent efforts and sometimes-difficult decisions made by President Preckwinkle, her staff and the Board of Commissioners over the last several years to stabilize Cook County’s finances have prepared the County for a scenario exactly like the one facing us at this very moment,” Civic Federation President Laurence Msall said in a statement.
The federation’s analysis warns that the county is far from out of difficulty and its healthcare system remains strained and faces uncertain prospects tied to the Affordable Care Act’s fate. The federation also raised concerns over county plans to build a new $241 million Provident Hospital without more evidence of the need.
County officials agree that uncertainty abounds with the course of the pandemic, potential treatments, and a vaccine impacting the region’s economy. The county is projecting a fiscal 2022 gap of $86.7 million including $42.1 million in the general fund and $44.6 million in the health fund.
S&P Global Ratings lowered the county’s general obligation rating on $2.8 billion of debt to A-plus from AA-minus in January. The outlook was revised to negative from stable May 1.
Fitch Ratings rates Cook County A-plus with a stable outlook. Moody’s rates the county A2 with a stable outlook. The county also has about $400 million of sales tax bonds that are rated AAA and stable by Kroll Bond Rating Agency and AA-minus and stable by S&P.
Fitch recently affirmed the A-plus rating saying it’s supported by the “county's broad revenue raising capacity and high reserves, which translate to a strong capacity to address fiscal pressures related to the coronavirus pandemic and future cyclical stresses.”
“Should the revenue impact be materially larger or if the county is unable to offset the revenue loss without reducing reserves substantially, negative rating pressure could materialize,” Fitch warned.
Cook is the second largest county in the nation with 5.2 million residents, about 40% of Illinois’ total population.
