Cook County, Illinois’ proposed $6.9 billion 2021 budget relies on reserves, existing federal relief funds, and job cuts to close a $400 million shortfall due to rising expenses and COVID-19 fiscal wounds.
The budget does not cut critical services or raise taxes, although there are some fee increases. New revenue from legalized cannabis sales, online sales tax collections, and sports wagering will generate a combined $98 million for the general fund, helping offset pandemic revenue hits.
Despite the pandemic having “dealt Cook County and its residents a catastrophic blow … this 2021 budget is balanced with no tax increases or the need for immediate federal help,” County Board President Toni Preckwinkle said Thursday in an address presenting the budget to the board. “We hoped a rainy day would never come,” but structural budget fixes in past years “place us in a better position to weather the crisis.”
The county has seen 157,000 positive COVID-19 cases and 5,300 deaths, Preckwinkle said.
The county pieced together a fix for the estimated $400 million shortfall for the next fiscal 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 more than 600 positions with only limited actual layoffs, revenue from an expected Chicago-declared tax-increment financing surplus, $50 million in available 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.
Chicago Mayor Lori Lightfoot will unveil her 2021 budget proposal Wednesday, revealing the TIF surplus figure and her plan for closing the city’s $1.2 billion gap. Lightfoot has warned of layoffs and tax hikes without additional federal help to offset revenue losses.
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 county is budgeting for $312 million of uncompensated care in 2021.
Moody’s Investors Service warned this week in a report —“Public Hospitals Are Compounding Coronavirus Budget Risks for America’s Largest Urban Counties” — that large public hospitals are likely to incur greater operating losses than normal, consistent with weaker operating performance in the not-for-profit hospital industry.
“Counties and hospitals are both dealing with revenue and expenditure disruptions from the coronavirus, increasing the risk that large public hospitals will call on county governments to provide increased support just as counties are facing their own budget strains,” said analyst Ben VanMetre.
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 proposed budget is up from the 2020 plan of $6.2 billion, due primarily to an expected increase in the county’s Medicaid program, known as CountyCare.
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 in a budget briefing.
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. Rizki said the county hopes to move forward with state legislation next year to cement the intergovernmental agreement so it can be reflected in actuarial calculations.
The county has so made $1.6 billion in supplemental contributions since 2016 with revenues collected from a sales tax hike.
Uncertainty abounds as the course of the pandemic, potential treatments, and a vaccine remain unclear, he warned. 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.
If COVID-19 follows a worst-case scenario with no widespread use of vaccine in 2022, the county anticipates it could see its fund balance fall by $328 million. “Things could go better or a lot worse,” Rizki said. “We are not holding our breath” for more federal relief.
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 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.