‘Everything is on the table’ as Cook County faces $410M budget gap for 2021: Preckwinkle
Friday, June 26, 2020
The Daily Line
by Alex Nitkin
Cook County is staring down a nearly $410 million budget deficit for 2021, the highest mid-year gap projected by county officials in a decade.
Compounding the headache for Cook County Board President Toni Preckwinkle’s financial team is that the Covid-19 pandemic and resulting economic shutdown have also blown open a $280 million hole in this year’s budget.
The county is legally bound to close both gaps by the end of the fiscal year in November.
Departments have already been asked to identify staff and programs to cut, and at least 70 positions were already eliminated this month from the Cook County Health and Hospital System — more than half of which were filled, Preckwinkle told reporters Thursday. Tax hikes and more layoffs may be seriously considered this year, depending on whether the pandemic resurges or Congress steps in with another aid package, Preckwinkle said.
“Everything is on the table,” Preckwinkle said. “We’re going to be looking at [department budget] hold-backs, delaying purchases, renegotiating contracts…a variety of strategies to meet the challenges that we face.”
She declined to go into detail on potential layoffs or tax increases, saying her staff has “a long time to work through that” before she is due to present a 2021 budget proposal in October.
The budget gap heading into next year represents a sharp reversal from the past decade of county budgets with Preckwinkle at the helm. The county’s budget hole was projected near $500 million in June 2010 but has steadily shrunk each year since, culminating in a preliminary gap of just $18.7 million last year.
Related: Cook County projected to start 2020 with $18.7 million budget gap, the lowest of Preckwinkle’s administration
Covid-19 revenue impacts
The county’s health system faces about a $61 million shortfall this year below its allotted 2020 budget, mostly driven by a $383 million hike in expenses due to the pandemic — but most of that gap was filled by aid from the federal CARES Act, officials said. However, county leaders do not anticipate help from Washington next year, when they expect to have to close a $187 million deficit.
The county’s general fund, which feeds into non-health offices and departments, faces projected gaps of about $220 million this year and $222 million next year. The deficits are driven by sharp declines sales taxes, amusement taxes, hotel taxes and court fees.
Cook County may take a sharper fiscal hit from the pandemic than Chicago or Illinois, because about 60 percent of its revenue is derived from “economically sensitive” sources like sales taxes and business fees, as opposed to property or income taxes, according to Cook County Chief Financial Officer Ammar Rizki.
‘A whole new ballgame for the county’
Rizki told reporters Thursday that his office forecast a wide range of budget options based on when the pandemic subsides. The preliminary forecast released on Thursday reflects a “middle-of-the-road assumption” that the state’s economy will be allowed to fully reopen by May 2021, in time for summer festivals and conventions.
The projection does not account for any additional stimulus that may rain down from the federal government this year, and Preckwinkle said she is lobbying local members of Congress for another round. And unlike the state of Illinois, which will borrow $5 billion from the U.S. Federal Reserve to make its 2021 budget, Cook County is seeking no such loans.
“We don’t budget on hope,” Rizki said, adding that the Federal Reserve “facility is only for worst-case scenarios, where a state or local government does not have any flexibility.”
Related: 4 days in Springfield: What passed, what stalled and next steps
County leaders may face another curveball in the form of higher borrowing costs if rating agencies ding the county’s credit, as S&P threatened last month when it downgraded Cook County’s credit outlook from “stable” to “negative.”
Rizki did not rule out skipping pension payments this year, but he said such a delay “would not be the first thing we’d look at.”
Related: S&P downgrades Cook County credit outlook, citing ‘stark declines in revenues’
County commissioners last year approved a balanced 2020 budget devoid of tax hikes or widespread layoffs, but the $6.2 billion plan left open questions about the future of the Cook County Health and Hospitals System, whose costs have skyrocketed due to an increased treatment of uninsured patients.
Related: Preckwinkle credits ‘hard votes’ for balanced county budget, but more tough choices lie ahead
During last week’s meeting of the Cook County Board of Commissioners, Finance Committee chair Comm. John Daley (D-11) said the board will face “uncharted territory” when his committee holds preliminary budget hearings from July 20-24.
“This budget is like no other budget before,” Daley said. “For any new programs or ideas that are going to be suggested, I would suggest you come up with a revenue source…it’s a whole new ballgame for the county.”