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How Cook dug itself into a hole.

Sunday, October 07, 2007
Chicago Tribune
by Mickey Ciokajlo

Medicaid cuts, rising payroll lead to Stroger's call for higher sales tax
Cook County came within a vote or two last week of slapping shoppers with one of the heftiest sales
taxes in the country.

Though the drive to raise the tax failed, it certainly wasn't killed. Some board members will try again
next week.

The push for the tax came in a rush, an idea that was introduced, debated and temporarily set aside in
less than two weeks.

But the problem has been brewing for almost a decade.

Not enough money is coming in. Property tax revenue has been flat since the 1990s, the federal
government has cut millions of Medicaid dollars, and the taxes and fees that have patched the hole
aren't making up the difference.

And too much money is going out. Even though thousands of county positions have been cut, payroll keeps
going up.

Critics have long charged that Cook County government is inefficient and bloated with political hires.
But before you get to the stickier question of whether all the expenses are justified, a glance at the
balance sheet will show how out of whack the county's finances have become.

How did we get into this mess?

Where the money goes

First, it's important to understand what Cook County government does with its $3 billion and 23,706

The biggest -- and by far the most expensive -- jobs that fall to the county are providing hospitals
and health clinics for the poor, running a 10,000-inmate jail and operating courthouses at the center
of the state legal system.

Its prosecutors put people behind bars, its public defenders try to keep them free and its public
guardians look after the elderly, the young and the indigent.

Former Board President John Stroger, the current executive's father, often called it "the government of
last resort." You don't realize you need it until you need it.

Where the money comes from

You may be surprised to learn that Cook County has kept its property tax levy essentially flat for the
last decade. After he took office in 1994, John Stroger decided to try to raise other taxes and fees,
knowing full well that property taxes are politically perilous.

So, yes, your property tax bill has climbed because of other agencies, such as schools and municipal
government, and skyrocketing residential real-estate values. But don't blame us, we're just 9 percent
of your bill, county officials say.

Cook County reduced its reliance on local property taxes thanks, in large part, to its ability to
secure more federal Medicaid funds for its health system.

Between 1998 and 2005, the county more than quadrupled -- to $259 million -- its yearly take from a
certain pot of Medicaid money. The county and the state were taking advantage of a federal loophole to
begin pulling in the extra dollars in the early 1990s.

The windfall helped the county expand its health system from a handful of neighborhood clinics to 30
and build the West Side public hospital named for John Stroger.

But even as the revenue was spiking for Cook County, the federal government had already taken action to
begin ratcheting down the payments. Between 2005 and 2007, the county's take dropped by $108 million
and is expected to be lowered by an additional $13 million next year, with an uncertain future after

That reduction, coupled with flat property tax revenues, has put incredible pressure on the county to
finally begin doing what most hospitals do as a matter of course: send bills to patients, insurance
companies and the government's Medicaid and Medicare programs.

But the county isn't very good at collecting those bills. A recent study determined that Cook County is
losing at least $40 million a year for its failure to adequately bill patients.
How much fat?

County Commissioner Forrest Claypool (D-Chicago), who unsuccessfully ran for board president last year
and is widely viewed as a potential candidate again in 2010, said the extra Medicaid funds let the
county continue to operate without becoming more efficient and businesslike.

Claypool said the funding "masked for many years the underlying dysfunction of the health-care system
and the huge waste and bloat and patronage at the top of the system. And the incompetence in billings
and collections."

"Once that revenue stream began to return to its normal levels, when the federal government began
cutting it back, it exposed the underlying dysfunction," he added.

Claypool and other board members who turned back Stroger's first attempt to raise the sales tax last
week say Stroger needs to do more to show that he's trying to reform a government that critics for
years have labeled wasteful and inefficient.

Stroger said he cut spending in this year's budget and laid off workers. He said he doesn't intend to
let more workers go as he looks to close a projected deficit of $307 million for 2008.

Stroger acknowledged there is some fat, but not as much as Claypool sees.

"Do I think there could be fat somewhere? I think in a government this large there's probably always
going to be some fat. Do I think we have $307 million worth of fat? No. There could be up to a million
dollars worth of fat, maybe."

He added that even if all of the so-called fat were cut it still wouldn't fix the county's structural
problem: Revenues no longer support its expenditures year after year.

The sales-tax fix

The 2-cent sales tax increase would have brought in $750 million annually, far more than what the
county needs to fill its hole for 2008. But Stroger said he was hoping to make his government
self-sufficient for years to come now that it is clear Cook County can no longer rely on outside help.
Claypool said the county may be able to make an argument for a tax increase in the future, but only
after it has streamlined its operations, gotten rid of politically connected workers and fixed its
hospital billing system.

He dismissed changes Stroger has made so far as "nipping at the edges" and said they haven't made
progress in fixing the chronic budget deficits.

"There's clearly an imbalance, but there's an assumption by the Stroger administration that the
existing cost structure is somehow lean and mean and justified, and clearly it is not," Claypool said.

Costs keep climbing

Beyond argument is the fact that the county's payroll costs have continued to climb even as the number
of jobs has fallen. The number of budgeted positions, 23,706, is 3,330 fewer than in 1998.

More than 80 percent of the county's operating budget consists of personnel costs, and those are
largely driven by union contracts that mandate generous health-care and old-fashioned pension packages
on top of annual cost-of-living raises and, frequently, "step" increases that raise wages even higher.

Last summer, the County Board gave retroactive pay raises to the non-union workers, which put more
pressure on the bottom line. All board members, including Claypool, voted for that one.

So where do they go from here?

The sponsor of the sales tax increase, Commissioner Joan Murphy (D-Crestwood), vowed to bring it back
to the board on Oct. 16.

She said she will probably scale back her ambitions for the sales tax and couple it with other new
taxes, perhaps on telephones.

The board has up to five months to pass a budget, so the debate won't end anytime soon.
But when it does, many expect a tax increase of one kind or another.

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