Overview of Proposed
Budget
The Finance
Committee of the Cook County Board began its meetings on the 2016 Executive
Budget proposed by President Toni Preckwinkle with the Bureau of Finance, which
provided an overview of the entire budget.
The Chief Financial Officer, Ivan Samstein, explained
that the proposed budget is $4.5 billion, up from $4 billion in
2015.
Most of the
projected revenues to cover the increase of $500 million in expenditures from
2015 come from the increase in the County’s Sales Tax to 1.75% that was passed
by the Board in July (to be effective Jan. 1, 2016) and the increase in revenues
to the Health & Hospitals System (HHS) as a result of the Affordable Care
Act and the expansion of Medicaid.
The increase in Sales Tax revenues will not be
realized, however until 4 months after the start of fiscal 2016 (which is Dec.
1, 2015).
The President is also proposing to increase revenues
by eliminating current exemptions from the County’s Amusement Tax so that
recreational activities such as golf and bowling, along with in-home paid cable
television, will now be taxed, bringing in an estimated $20 million more.
The budget proposal
is to spend the $308 million increase in Sales Tax collections in 2016 as
follows:
·
$270.5 million for additions to the Pension
Fund to start reducing the $6.5 billion unfunded liability that is growing by $1
million/day
·
$ 10.0 million for increased highway
funding
·
$ 25.0 million to cover “Legacy Debt”
service costs
·
$ 2.5 million for technology
improvements (in lieu of increasing the debt obligation through financing these
through bonds as has been done in the past)
“Legacy Debt”
service costs refers to the costs of paying interest and repaying principal on
bonds that were created prior to President Preckwinkle becoming President in
2010.
The proposed
budget also eliminates 236 Full Time Equivalent (FTE) positions that are
currently vacant across a number of County offices, and 51 currently filled positions in
the President’s and Sheriff’s offices.
STAR
Performance Management Issues
Each of the
department heads within the Bureau of Finance also presented some specifics on
each of their departments:
Revenue, Risk Management, Office of Budget and
Management Services, County Comtroller, Office of the Chief Financial Officer,
Office of Contract Compliance, Office of Enterprise Resource Planning, Office of
the Chief Procurement Officer, and the Fixed Charges and Self Insurance
Fund.
Each department had a slide presentation showing its
mission, the 2015 accomplishments, the 2016 highlights (the goals the department
for 2016), and the 2016 STAR (Set Targets Achieve Results performance management
program) Goals and Targets. These STAR goals, however, did not
encompass the 2016 “highlights,” and many of the listed targets for 2016 were
lower than the expected results for 2015, and sometimes also lower than the
actual results for 2014. The Commissioners, however, did not
question these STAR goals or targets.
To see the slides
for these presentations, go to http://cook-county.legistar.
Pension Liability and
Legality of Utilizing Sales Tax Revenues to Reduce
Liability
Most of the
questions from the Commissioners focused on the County’s unfunded pension
liability and whether the County is legally able to contribute a portion of the
Sales Tax revenue to the Pension Fund.
As explained to
this observer during a meeting with Administration staff providing an overview
of the budget to the League and other organizations, Illinois state law
currently caps the amount of money that the County can contribute to the Pension
Fund.
Cook County has always contributed the maximum
allowed (in contrast to the State of Illinois), but because the cap is too low
to cover the projected draw down by retirees, the County has the current $6.5
billion unfunded liability that is growing by $1 million a day. The
President committed to use a majority of the increase in the sales tax that was
passed this summer to start lowering that unfunded liability.
However, because
of the cap on contributions in State law, which also specifies that
contributions are to come from property tax revenues, there is a question
whether the County can legally contribute additional sums from sales taxes. The Administration
believes it has found at least a temporary solution (until such time as State
law can be changed) by having the County enter into an intergovernmental
agreement with the Pension Board to accept the money. This is
critical because the Pension Board, through the different financial investments
it can make, regularly earns a return of over 8%. The
County, through the Treasurer’s office, however, is much more limited in the
investments it can make and thus would likely earn less than a 1% return.
The legality of
this intergovernmental agreement is still in doubt, though it would make no
sense to prevent this increase in funding.
Commissioner Gainer, and others, are concerned that
no intergovernmental agreement, assuming it is legal, is yet in place with the
Pension Board.
Commissioner Gainer wants to hear from the Pension
Board as to whether that body sees any problems with entering into such an
agreement.
Proposed Tax on In-Home
Cable TV
A number of
Commissioners stated their concerns about eliminating the Amusement Tax
exemption on in-home cable television.
(It was explained that Federal law prevents the
County from taxing satellite television service.) The
Department of Revenue explained that the 3% Amusement Tax is proposed to be
applied only to the television portion of a homeowner’s cable bill, and not to
the internet or phone portions that may be part of the bill. Commissioner Boykin was told that this explains the discrepancy between
the annual household tax amount of $41.40 per year the Administration is
estimating vs. the $90 (outside Chicago) to $200 (within the City) yearly costs
Comcast is estimating (which presumably is based on the total cable
bill).
However, it was
clear that many of the Commissioners would like to look at finding the estimated
$18 million expected revenues from eliminating the cable television exemption
from other revenue sources or from reducing expenditures.
Auditor
Shelly
Banks, the County’s Auditor, similarly made a presentation of the Office’s
mission, 2015 Accomplishments, 2016 Highlights, and STAR Goals and Targets. Commissioner Suffredin did question why
the 2016 STAR target for number of audits in the audit plan was 35 vs. the 38 in
2015 and 36 in 2014. Ms. Banks
stated that the number for 35 is what is planned now, leaving room for
additional audits to be added as requested. (In other words, the target is lower
than what is expected.)
--Submitted by Priscilla Mims
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