President Preckwinkle Unveils FY 2018 Preliminary Forecast
Repeats commitment to three-year fiscal plan, raises concerns on ACA repeal
Continuing her efforts to promote fiscal responsibility and encourage government transparency, Cook County Board President Toni Preckwinkle today released the preliminary forecast for the County’s Fiscal Year 2018 budget that shows a gap of $97.6 million. This represents the lowest preliminary gap since President Preckwinkle took office in December 2010.
While acknowledging the prospect of tough budgeting decisions in the future due to external factors such as the lack of state budget and Republican efforts to repeal the Affordable Care Act, President Preckwinkle restated her commitment to a previously announced three-year fiscal plan that does not include raising taxes.
Preckwinkle announced a projected operating shortfall for FY2018 driven primarily by a protracted lack of state budget from Springfield, rising personnel costs, legacy debt service and increased capital equipment spending. A projected FY2017 year-end budget shortfall of $1.3 million will be closed via holdbacks and expenditure reductions by the Cook County Health and Hospitals System. The FY17 shortfall was also offset by better-than-expected amusement tax revenues of $6.2 million due to the success of local professional sports teams which in turn stimulated higher ticket prices and higher attendance.
“This preliminary forecast serves as an important tool to guide our budget process, encourage public input and ensure transparency,” Preckwinkle said. “The forecast released today will help direct the process and crafting of a balanced and responsible budget over the next few months.”
Total FY2018 expenditures in the General Fund are projected to increase by $108.7 million over the FY2017 appropriation. This increase is driven by rising personnel costs ($21.5M), higher employee health benefit costs ($4M, which are expected to rise at the rate of medical inflation) and increasing reserves for claims for expected legal settlements ($8.1M). Contributing factors also include increased capital equipment purchases, primarily technology infrastructure investments through operating finds instead of using proceeds from debt ($20M).
The preliminary estimate for revenues from non-property tax sources is $80.6 million more than prior year budgeted revenues. This increase is driven by a full year of collections of the 1 cent per ounce sweetened beverage tax, which is estimated to generate an additional $127 million compared to FY2017 for total expected revenue of $200.6 million in FY2018. This projected increase is somewhat offset by anticipated revenue losses resulting in home rule sales tax collections, which is estimated to decrease by $31 million based upon conservative preliminary assumptions of a mild recession in 2018 and zero growth in GDP. Statistical models also project a 3 percent decline in sales volumes as spending shifts toward online retailers.
Preckwinkle acknowledged that a number of outside dynamics over which the County has no control could also impact the FY2018 budget.
The state budget stalemate has already had a significant impact on Cook County’s FY2017 budget and guides decisions necessary to form the FY2018 budget. To date, the state owes Cook County and the Health and Hospitals System more than $170 million for past due rent, grants, reimbursement to the public safety system through the Administrative Office of the Illinois Courts (AOIC) and Medicaid funding. Additionally, some mandated programs that were once funded by the state will now have to be funded by Cook County.
Preckwinkle also stressed the potentially catastrophic impact repeal of the ACA could have on the County’s residents as well as its budget. The projected annual loss of revenue for care provided by the Cook County Health & Hospitals System could exceed $300 million and possibly be as high as $800 million annually.
Preckwinkle emphasized that her administration has confronted numerous difficult fiscal decisions before and made the hard choices needed to achieve balanced budgets. Noting the need for shared sacrifice and a balanced approach to closing last year’s preliminary $174.3 million budget gap, the FY2017 budget included nearly equal amounts of revenue increases and expense reductions. The County proposed $78.5 million in expenditure reductions and cuts while settling on a sweetened beverage tax that is expected to generate $73.7 million in FY2017.
“Since taking office, we’ve eliminated preliminary budget gaps of $1.75 billion, reduced the direct operating taxpayer allocation to the hospital by $300 million, saved millions through city/county collaboration, dramatically increased grant funding, consolidated real estate and leased excess space, and dramatically reduced headcount,” she said.
“While a number of factors, including the dysfunction in Springfield and Washington D.C., could impact our bottom line, we will be prepared to close these gaps in a prudent and responsible manner as we have done in the past. We will not shirk our responsibilities and we will make tough budget decisions to confront our challenges.”
In order to address the preliminary gap, the President has directed the Budget Office to look at consolidating redundant programs, services and real estate, promote contract savings, delay hiring, and establish strategies to reduce costly overtime.
A public hearing on the preliminary forecast will take place at 6 p.m. on July 12 in the Cook County Board Room on the 5th floor of 118 N. Clark St.
Residents will have an opportunity to provide testimony and engage directly with the President’s office on budget priorities. The public hearing will be live-streamed and residents can use social media to ask questions.
Beginning today, residents can visit the County’s budget website at www.cookcountyil.gov/Budget to view the preliminary forecast and access more information about how the County allocates its resources.