Issues of Pension Liability, Legality of Using Sales Tax Revenues and Tax on Cable TV Dominate

2016 Cook County Proposed Budget:  Bureau of Finance and Auditor, Oct. 21,2015

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.com and click on “Meeting Details” for the Oct. 21 9 am Finance Committee meeting, Bureau of Finance presentation.

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

Cook County Health and Hospital Services Board Meeting June 27, 2014

After the public speakers, Chairman David Carvalho adjourned to closed session for discussion to secure a vote to approve the appointment of  Dr. Jay Shannon as the new CEO of CCHHS.  The vote was unanimous, with applause from attendees.

Committee Reports: Dr. Munoz, reporting on the Audit and Compliance committee meeting, noted that audit firm McGladrey noted a weakness in the CCHHS audit due to difficulties in financial reporting on CountyCare.  Dr. Munoz said processes are being put in place to correct this problem.   

Director Wayne Lerner asked whether the full board might be able to meet directly with the auditor, and Carvalho agreed to arrange that.  Lerner requested that hard copies of the audit be distributed to the full board, and this request was also approved.  Lerner also asked whether, by approving the minutes of the meeting, the board was also approving the audit itself.  General Counsel Elizabeth Reedy said that according to the bylaws, if you approve the minutes, you're also approving the report.  Munoz said there has been no practice previously of the full board reviewing the audit.  The County board is the entity that actually approves the financial statement. In this situation the CCHHS board approved the minutes of the meeting, but made it clear that they were not, by so doing, approving the audit report.  

Director Lewis Collens reported that in the Quality and Patient Safety Committee meeting, Dr. Das said that the Stroger Hospital ER average wait time dropped from 140 to 82 minutes.  The CORE Center reports HIV suppression at 59% compared with a 25% national average.

Carvalho commended the Commercial Club, where he spoke yesterday, for having adopted the transformation of CCHHS, encouraging more than 70 entities to donate pro bono time.  Vice Chair Jorge Ramirez commended Carvalho for preparing the public for the budget's shrinking in one area, while possibly expanding in another.

Dr. Shannon, commended the second cohort of 11 CCHHS employees' having graduated from the 12-week "Cook County University" training program. With respect to the Cook County budget, FY2015 projects a $168 million shortfall. The 2014 budget shortfall will be $86 million, with $67 million of that related to the health fund. An improvement plan is in place to reduce costs. In June, a 3-year record 113 vacancies were filled, including 26 nurses.  Dr. Shannon recognized Dr. Robert Weinstein, departing head of the Department of Medicine. Finally, Dr. Shannon acknowledged both Dr. Raju and Toni Preckwinkle for their guidance during his period as interim CEO.

Carvalho noted that new committee appointments are made in July; board members should communicate their preferences.

The board adjourned to closed session at 9:35.

submitted by Linda Christianson

Department Review Meetings for 2014 Budget: Thursday afternoon, October 17, 2013

Offices under the President, Auditor, Bureau of Administrative

Hearings, & Department of Facilities Management

Kimberly Fox, who previously headed up the Commission on Women and is now President Preckwinkle’s  Deputy Chief of Staff, presented the budget for the Offices under the President.  The 27 positions and $3.2 million proposed budget include the following departments: Public Affairs, Legal & Legislative Affairs, and the Justice Advisory Council.  The Commission on Women’s Issues, which has no separate positions or budget for 2014, now falls under the Office of the President.  The Justice Advisory Council, headed by Juliana Stratton, is to work collaboratively with those primarily responsible to safely reduce the population of the Cook County Jail and the Juvenile Temporary Detention Center.  President Preckwinkle has also given the group the mandate to improve the efficiency and fairness of the criminal justice system by fostering collaboration. 

Chief Auditor Shelly Banks said that following the county-wide risk assessment program that has been completed, the Audit Department has developed an audit plan based on this which is expected to entail 24 audits for 2014.  She confirmed that she has the authority to audit County contractors. The Health & Hospitals System has its own internal audit department.

John Allen, who heads the Bureau of Administrative Hearings, talked about the improvements in this area.  To catch up on a backlog, the administrative judges are currently holding hearings 2 days a month, and the case load has increased to 500/day.  The morning docket is set aside for arraignments, and the afternoon for trials.  This division means that people no longer have to be there all day waiting for their case to be called. This Bureau has absorbed hearings for the Department of Human Rights.  The costs per hearing are averaging just $17.  Commissioner Suffredin raised a concern about the Assessor, under new state legislation, now being able to appoint hearing officers, but the Assessor’s budget reflects a higher cost for such hearing officers.  Mr. Allen said that he had offered to handle the Assessor’s hearings, but the Assessor turned him down.*  

James D’Amico heads up the Department of Facilities Management, and he talked about the STAR Performance Management program has assisted the department in speeding up and improving their processes in maintaining the County’s many buildings.  The average costs for the County are far less than those reported by the Building Owners and Managers Association for privately owned buildings in Chicago.  There has been a $2 million reduction in costs to the County as a result of transferring the custodial work under the Sheriff to his department. 

* Note:  when Assessor Joseph Berrios subsequently appeared on Oct. 21, he stated that volume of cases is relatively small and the salaries of his two hearing officers reflect the fact that they have other duties.

-- Priscilla Mims, Observer

More Cook County Budget Hearings

Bureau of Technology - Feb. 3 Hearing

Greg Wass, the newly appointed Chief of Technology, provided a handout to the Commissioners and reviewed his vision for changes needed to streamline the organizational structure of technology within the county. At the present time 20% of IT spending is within the Bureau. He stated that while there may be enough money allocated for IT it is not well managed since central oversight for spending or coordination of IT services is lacking. Purchase of the county's main frame computer from IBM (for $400,000) was listed as one of his initiatives with the long term goal of getting off the main frame. He would like 2011 to be focused on the planning phase for IT across the county with execution of their plan following in 2012 and beyond.

Commissioners raised concerns about the amount of money that they have approved for technology over the years. Contractual issues of changing vendors were raised. A big concern was expressed by several commissioners about cell phone use - who gets cell phones paid for by the county and who pays the bills for those phones. Department Heads make the determination of who gets phones and who pays for them but there does not seem to be a consistent policy. Some phones are paid for from a central account but Comm. Gainer questioned why cell phone bills were not allocated to the departments. Sharing of IT systems and having separate IT systems in different departments that don't communicate were also raised as issues as they are every year. Comm. Daley stated that they may need an ordinance that would require the elected officials to participate in whatever system changes are made. He further stated that savings can only come from the cooperation among all elected officials and departments.

Public Administrator - Feb. 3 Hearing

Nicholas Crapsas serves as the Public Administrator for Cook County. He is appointed by the state to provide services to those persons who die in Illinois without a will or have no one to administer their estate. His $56,000 part time salary is paid by the state and his office has a budget request for $1.172m. Revenue generated by this office was $4.2m this past year. This hearing was brief with few questions asked. Comm. Gainer did ask how the law firms were chosen with which the office contracts for services and Mr. Crapsas stated that a request for qualifications had been issued and the office selects from those firms that have met the qualifications.

Auditor - Feb. 3 Hearing

Laura Burman is the head of the Internal Audit Dept. of Cook County. She stated she has complied with the requested budget cuts but instead of doing lay offs she will use furlough days (19 for each FTE) in her department. She stated that future audits will focus on revenue generating departments and they are doing a more risk based approach in their audits. Comm. Gainer stated that making cuts in this department could reduce their ability to catch problems. This also was a brief hearing with few questions asked.

States Attorney - Feb. 8 Hearing

Anita Alvarez came into the hearing after holding a press conference in the hall outside the President's office. In her prepared statements she discussed what a difficult year 2010 had been for law enforcement citing the challenges presented by increased gun violence. She stated that she had negotiated with President Preckwinkle about the cuts to her budget and if she made the requested 10% cuts she would have to cut 58 states attorney positions and 100 support staff and such cuts would greatly impact the services her office would be able to provide.

In discussion with the commissioners it was revealed that the President had requested the 16% cut and the States Attorney had submitted a budget with a 5.5% cut. Further discussion between the President and SA had resulted in a compromise cut of about 10% but there still seemed to be some unresolved issues. Comm. Suffredin asked about whether she was able to use any Special Purpose Funds that were collected by the courts and she said that those belonged to the Chief Judge and her office did not share in any of those funds. She stated that she needs to be fully staffed on the criminal side which is not where her office can generate income. Thus if cuts are made to her civil case staffing her ability to generate increased revenue will be compromised. Comm. Beavers asked his usual question about minority representation on the staff in her office. Ms. Alvarez was prepared for the question and provided the following statistics: her professional staff is 9.62% African American, 7.24% Hispanic, and 4% Asian with 43% of the staff being women. Observer left before the hearing was over.

CC Finance Committee Meeting on Proposed 2010 Budget, October 28, 2009: Auditor

The Office of the Auditor proposed budget has a 5% reduction and a reduction of 1 FTE from 2009 to 12. Upon questioning, the Auditor stated that 22 positions would be optimal. While the office has focused primarily on County departments involved with fee collection, the Auditor said that there might be even more benefit if her office was authorized to look at payroll and grants, and she was asked to submit her recommendations for staffing and responsibilities.

Commissioner Peraica stated that he supported giving this office, along with the Office of the Independent Inspector General, more funds.

--Submitted by Observer Pris Mims