Cook County FY2020 Executive Budget Recommendation: Analysis and Recommendations

November 01, 2019

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EXECUTIVE SUMMARY

The Civic Federation supports the Cook County FY2020 Executive Budget Recommendation of $6.18 billion because it presents a reasonable budget plan that holds the line on increasing taxes or fees while continuing to make investments in communities and services.

Thanks to structural budget decisions and savings achieved over the years, Cook County is anticipating the smallest operating deficit—$18.7 million—since Cook County Board President Preckwinkle took office in 2010 when the budget deficit was $487.0 million. The County once again plans to make a supplemental contribution to the Cook County Pension Fund to make up for shortcomings of the contribution amount required by State law, which has improved the funded status of the pension fund.

Cook County Health[1] accounts for nearly half of the County’s budget at $2.7 billion and is the healthcare lynchpin for low income residents of Cook County. Therefore, the Civic Federation remains concerned about the growth in uncompensated care, which consists of charity care provided to patients with no insurance and bad debt.[2] Uncompensated care costs are expected to double from FY2014 through FY2020 to $590 million, primarily due to growth in charity care. Health system officials have said the increase is unsustainable and could jeopardize the system’s mission of serving all patients, regardless of their ability to pay.[3]

Last year the Civic Federation raised questions about Cook County Health’s decision to accept emergency visits at Provident and reopen the ICU, which deviated from health system’s strategic plan for Provident as a regional outpatient center. The Civic Federation’s concerns were renewed with the health system’s decision with little public debate to build a new, $240.9 million facility with both outpatient and inpatient services. The Federation is concerned that the plan may not meet the long-term needs of the health system and the County and comes at a time when Cook County Health is struggling to meet its expenses. The Civic Federation urges the County to reconsider its plans for a new hospital and instead direct scarce resources where they are needed most: to a comprehensive outpatient center.

Despite these concerns, the Civic Federation continues to support the Cook County Health Board and its accomplishments including the transformation of the health system from a chronic strain on taxpayer resources to the largest Medicaid managed care provider in Cook County. Despite ongoing financial challenges, the separate Health Board has proven it can manage the finances and operations of the health system in a difficult financial and political environment.

The Civic Federation commends the work done this year by the new Independent Revenue Forecasting Commission, which was established last year to provide an independent review of the County’s tax revenue projections. The Federation supports the County increasing the openness and transparency of the County’s financial information through this initiative as well as an interactive budget website that was new this year. Given the financial pressures and projected deficits facing Cook County in the Health Fund and General Fund, the Civic Federation recommends that the County Board of Commissioners expand the work of the newly created Independent Revenue Forecasting Commission to look at the County’s operating budget holistically—both revenues and expenditures—and use the forecasts as a tool to address projected shortfalls through long-term solutions.

The Civic Federation presents the following key findings from the Cook County FY2020 proposed budget:

• The County’s Executive Budget Recommendation proposes total spending of $6.2 billion, and $5.8 billion within the operating budget.
  • The $5.8 billion operating budget is an increase of $233.6 million, or 4.2%, from the FY2019 adopted budget of $5.6 billion.
  • However, this increase is inflated by an internal reimbursement of $173.1 million within the Health Fund to account for care provided to CountyCare members in health system facilities. Both revenues and expenditures within the operating budget reflect this reimbursement, which was not shown in prior budgets.
• Cook County expects to generate of $764.4 million in property tax revenue in FY2020, which is a slight increase of $6.8 million, or 0.9%, compared to the levy of $757.6 million in FY2019. While the County has held its base property tax level flat at $720.5 million since 2001, the total tax levy also includes $20.2 million in tax revenue from expiring TIF districts, $32.5 million from new property and $2.4 million from expiring incentives.
• Cook County proposes a total capital spending plan of $491.6 million in FY2020 and a ten-year capital investment of $2.1 billion through FY2029.
• General Fund appropriations, which account for public safety and administrative County functions, are proposed to increase by $42.9 million or 2.3% from the prior year to $1.9 billion in FY2020. The increase is due in part to a $29.7 million increase in negotiated cost of living increases and health benefit expenses.
• Spending at Cook County Health is expected to decrease by $39.6 million to $2.65 billion in FY2020 from $2.69 billion the prior year. This decrease is net of a $173.1 million CountyCare self-reimbursement.
• The Health System will receive a net property tax allocation from the County in the amount of $82.7 million, which is an increase of $10 million from the prior year.
  • The property tax allocation from the County to the health system had decreased annually from FY2009 through FY2019. The modest increase in FY2020 is intended to help offset significant growth of charity care provided by Cook County Health.
  • The tax allocation does not include County payments for health system-related pension contributions and debt service. Total County support on behalf of the health system in FY2020 is nearly $400 million.
• Uncompensated care is expected to double from FY2014 through FY2020 to $590 million, primarily due to growth in charity care. In FY2018 Cook County Health accounted for 54.5% of total charity care provided by all Cook County hospitals.
• Cook County proposes a total of 21,612.4 full-time equivalent (FTE) positions in FY2020, which is a net decrease of 403.0 from the adopted FY2019 budget (excluding grant funds). While the number of FTE positions in the General fund will increase by 264.8 FTEs, the Health Fund plans to close 638 vacant FTE positions.  
• The County plans to make a supplemental contribution to the pension fund of $327.0 million in FY2020. With the statutory contribution of $200.9 million, the total contribution will be $527.9 million. FY2020 will be the fifth year the County contributes a supplemental amount to the pension fund.
• The unfunded actuarial accrued liabilities for the County’s pension fund grew from $4.6 billion in FY2009 to $6.8 billion in FY2018.
• The actuarial value funded ratio for the County’s pension fund has decreased from 63.2% in FY2009 to 60.9% in FY2018. The FY2018 level is up from a low of 53.5% funded in FY2012.
• In the five-year period from FY2014 to FY2018, the County’s outstanding long-term debt decreased by 4.8% from $3.7 billion to $3.6 billion.

The Civic Federation supports the following elements of the Cook County FY2020 proposed budget:

• Cook County Health’s initiatives to attract more insured patients;
• Creating a rational basis for budgeting for Cook County Health’s direct tax allocation in future years based on anticipated increases in the cost of uncompensated care;
• Establishing the Independent Revenue Forecasting Commission;
• Continuing to make supplemental pension contributions; and
• Contributing to the Pension Stabilization Account for the second year.

The Civic Federation has concerns about the following issues:

• Growth in uncompensated care;
• Plans to build a new Provident Hospital with inpatient services rather than the previously proposed regional outpatient center; and
• Financial challenges projected in future years due to lagging revenue sources as expenditure needs rise.

The Civic Federation offers the following recommendations to Cook County:

• Recommendations for Cook County Health:
  • Reconsider the Provident Hospital Project; and
  • Improve the transparency of Cook County Health’s financial information.
• Pension Recommendations:
  • Obtain statutory authority to make supplemental pension contributions using sources outside of the property tax and personal property replacement tax; and
  • Enact a multiple year intergovernmental agreement with the pension fund for supplemental contributions in the absence of state legislation.
• Administrative Recommendations:
  • Revise the Inspector General’s ordinance or rules to require the inclusion of agency responses in program investigations;
  • Expand the scope and impact of the Independent Revenue Forecasting Commission;
  • Make public safety capital planning reports and efficiency studies publicly available;
  • Define performance based budgeting metrics; and
  • Streamline property tax functions through a unified office of property tax administration.