Still working to close a COVID-19 pandemic driven fiscal 2021 budget hole, Illinois’ largest county is projecting a $410 million gap heading into the next budget with tax hikes, job cuts, furloughs, reserve use and pension contributions all on the table to fill it.
Cook County’s fiscal 2021 budget projection released Friday warns of a $222 million gap in the general fund and a $187 million shortfall in the health system fund. The county operates on a $6.2 billion budget with the fiscal year beginning Dec. 1.
The gap forecast comes as a the county is still working to fully close a $280 million combined general and health system fund deficit for the current fiscal year that’s due to COVID-19.
“Everything is on the table,” County board President Toni Preckwinkle said during a conference call with reporters when asked how the county would address the deficit.
Chief financial officer Ammar Rizki and budget director Annette Guzman laid out the numbers during the call.
The fiscal 2020 general fund gap of nearly $220 million is due to a $297 million or 15% cut in tax, fee, and license collections but expenses are down by $77.4 million or 4%. The county can use $102 million in federal emergency funds for some expenses and has already implemented job cuts and other expense reductions to further reduce the gap by $94.5 million.
That leaves a $100 million hole to still fill before the end of the fiscal year. About 65% of general fund revenues are economically sensitive, Rizki said.
The health system fund has a separate $61 million gap to close for fiscal 2020 as revenues are up $322 million or 11% above budget while expenses are up $383 million or 14% above the adopted budget. Membership in the county’s managed program is rising as county residents lose their jobs and insurance but expenses are also rising along with uncompensated care which was already pressuring the $2.8 health budget.
The county is closing the gap with job cuts and contract changes.
County officials are projecting a $222 million general fund gap next year due to a now projected 7% cut or $129 million loss in revenues from the fiscal 2020 adopted budget and a 5% hike in expenses of $92.9 million.
Sales taxes are expected to fall 4%, amusement taxes 39% and the county’s use tax 18% while county treasurer revenues will drop 25% and circuit court fees 15%. Taxes on legalized cannabis will generate $13.9 million, up from $2.3 million this year, and online sales taxes will generate a new source of revenue totaling $53.7 million.
The separate, projected $187 hole to plug in the health system’s 2021 budget stems from the failure of a 14% increase of $405 million in additional revenues to offset a 21% hike of $592 million in expenses due to salaries, overtimes, equipment needed, and increases in managed care claims.
The combined gap heading into 2021 of $410 million is the highest since the projected 2011 shortfall of $487 million. Preckwinkle took office in 2010. The figure also marks a sharp contrast from the $18.7 million predicted a year ago this time and is due to economic shutdown ordered by Gov. J.B. Pritzker to combat the spread of COVID-19.
County officials cautioned that the 2021 figure is preliminary and projections into the fiscal year are treacherous with the $410 figure representing a “middle of the road” forecast. While the state has entered phase four of a reopening plan that allows restaurants to reopen and larger gatherings, backtracking in the event the disease spikes as it had recently in other states could drive the deficit up by $25 to $30 million for each month that economically sensitive sales and other taxes falter.
The county is building into its 2021 budget models the potential of a resurgence of the virus at various points in fiscal 2020 and 2021, Guzman said.
“It’s making our jobs as forecasters much more difficult,” Rizki said.
While Preckwinkle is among local government leaders backing the House’s Democratic HEROES Act that provides direct local and state government relief, the forecast does not assume federal help to make up for tax losses. The county received $429 million from the CARES Act signed March 27 to help cover expenses. “All of us desperately need help with lost revenue,” Preckwinkle said of local and state governments.
The county’s reserve likely will be tapped, but Rizki said with uncertainty ahead the county will need a buffer and so would not drain it. He also said pulling back on supplemental pension contributions would “not be the first thing I would look at” but it’s on the table along with debt management initiatives.
“We have to take a look at all of these options,” Rizki said stressing that his goal is keep the county’s fiscal house in order without sacrifice gains in areas such as pension funding. The county is not planning to use the Federal Reserve’s Municipal Liquidity Facility at this time.
The county this year is making a $327 million supplemental pension payment on top of its $200 million statutory payment continuing a trend it began several years ago. The unfunded actuarial accrued liabilities are $6.8 billion for a funded ratio of 60.9%. The county carried a roughly $300 million balance into the new fiscal year. It has a $100 million credit line with BMO Harris Bank.
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 Investors Service 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.
Preckwinkle will present her fiscal 2021 budget county commissioners Oct. 8 and after hearings and possible amendments a vote is expected Nov. 19.