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Cook County FY2021 Executive Budget Recommendation: Analysis and Recommendations

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November 19, 2020

Click here to read the full report.
Click here to read a press release for this analysis.

EXECUTIVE SUMMARY

The Civic Federation supports the Cook County FY2021 Executive Budget Recommendation of $6.92 billion because it reflects the foresighted work Cook County has done over the past several years to establish a structurally balanced budget, which has positioned the County well to endure the financial crisis caused by the COVID-19 pandemic. The County has built up its general operating reserves consistently since FY2014, primarily by revenues outpacing expenditures annually. At the end of FY2020, the County projects it will have $552.9 million in General Fund reserves, which is nearly four months of operating expenditures—well above the Government Finance Officers Association best practice guidance of two months’ worth of reserves.

The FY2021 budget proposal closes a total budget deficit of $409.2 million. The $222 million General Fund budget gap, caused by revenue losses in economically sensitive revenue sources related to the pandemic, will be closed through the elimination of 659 vacant positions, the one-time use of General Fund reserves, federal coronavirus funding, higher than anticipated tax increment financing (TIF) surplus revenue from the City of Chicago and higher than anticipated sales tax revenue. The $187 million Health Fund budget gap will be closed through a combination of expenditure reductions, including 130 layoffs, and new revenue, including an increase in the property tax allocation from the County.

The FY2021 proposed budget represents an 11.6% increase over the 2020 adopted budget, primarily due to growth in the Cook County Health budget. Cook County Health’s proposed budget for FY2021 of $3.4 billion is an increase of $563.4 million, or 19.9%, from the $2.8 billion budget adopted for FY2020. The increase mainly reflects a projected increase in CountyCare membership to 356,343 from the budgeted level of 326,034 in FY2020 and the associated increase in medical claims from healthcare providers in the plan’s network, as well as higher personnel expenses due partly to the proposed addition of 141.5 full-time equivalent positions (FTEs). The Federation supports Cook County Health’s proposed staffing level changes to match personnel to patient activity and medical needs

The Civic Federation commends Cook County in its handling of the COVID-19 pandemic. However, the Federation is concerned about the financial impact of the pandemic and the possibility that a significant portion of the federal support received by the health system in FY2020 might have to be repaid due to a revised interpretation of federal law. Also of concern is the threat of repeal of the Affordable Care Act, which would impact Medicaid coverage of about 300,000 County residents and put even more pressure on Cook County Health.

The Civic Federation applauds the County for continuing to allocate a supplemental payment to the Cook County Pension Fund on top of the statutorily required amount. The additional pension contributions—$312.0 million in FY2021, for a total contribution of $543.9 million—have reversed the downward trajectory of the pension fund and put it on a path to reach 100% funded by 2047.

The Federation also supports the continued work of the Independent Revenue Forecasting Commission. Going forward, the Federation recommends that the Commission or a similar body examine the revenue forecasts of Cook County Health. A third-party review is warranted given the size and complexity of the health system’s finances.

Several recommendations are made related to continued improvements in transparency including holding hearings on the operations and budget of the Cook County Sheriff’s Office, continuing to livestream Cook County Health Board meetings after the pandemic ends and clarifying information in the budget book. The Civic Federation also offers several recommendations related to pensions, including providing pension funding support to the Forest Preserve District of Cook County, and recommendations to the new Clerk of the Circuit Court.

The Federation remains concerned about Cook County Health’s plan to build a new $240.9 million Provident Hospital because the County has not made an adequate public case for the need for more hospital beds. The Civic Federation continues to urge the County to reconsider its plans and focus instead on providing outpatient services, an area where Provident’ ability to serve patients has been well demonstrated.

Finally, the pandemic has highlighted distressing health disparities across the region. The Civic Federation calls on the Cook County Board to create a regional commission to study Cook County healthcare needs and charity care issues, with a focus on the known disparities affecting residents of Chicago’s West and South Sides and the south suburbs. The commission should include representatives of the State, County and City of Chicago, public and private healthcare providers, labor organizations and academic experts.

The Civic Federation presents the following key findings from the Cook County FY2021 proposed budget:

  • The County’s Executive Budget Recommendation proposes total spending of $6.9 billion, which includes an operating budget of $6.6 billion. The $6.6 billion operating budget is an increase of $736.7 million, or 12.6%, from the FY2020 adopted budget of $5.9 billion.
  • Cook County expects to generate $773.1 million in property tax revenue in FY2021, which is a slight increase of $8.7 million, or 1.1%, compared to the levy of $764.4 million in FY2020. While the County has held its base property tax level flat at $720.5 million since 2001, the total tax levy also includes $63.7 million in additional property tax revenue due to $22.6 million from expiring TIF districts, $38.1 million from new property and $3.0 million from expiring incentives.
  • Cook County proposes a total capital spending plan of $517.1 million in FY2021 and a ten-year capital investment of $2.1 billion through FY2030.
  • General Fund appropriations of $1.89 billion, which account for public safety and administrative County functions, represent a proposed decrease of $24.7 million, or 1.3%, from the FY2020 adopted budget of $1.92 billion. The decrease in the General Fund is primarily due to the elimination of 659 full-time equivalent positions.
  • Cook County Health appropriations are expected to increase by $563.4 million, or 19.9%, to $3.4 billion from $2.8 billion in the FY2020 budget. The increase mainly reflects the projected rise in CountyCare memberships to 356,343 from the budgeted level of 326,034 in FY2020 and the associated increase in medical claims from healthcare providers in the plan’s network. Personnel expenses also increase due to the proposed addition of 141.5 full-time equivalent positions (FTEs), contractual wage increases and other factors.
  • The Health System will receive a net property tax allocation from the County in the amount of $123.7 million, which is an increase of $40 million from $82.7 billion in FY2020.
    • The property tax allocation from the County to the health system had decreased annually from FY2009 through FY2019. In FY2020 the health system received a modest increase of $10 million. The additional $40 million increase in FY2021 is intended to help Cook County Health close its FY2021 budget deficit and provide additional services.
    • The County also contributes to health system-related pension contributions and debt service. Total County support on behalf of the health system in FY2021 is $421.7 million.
  • The cost of uncompensated care is projected to remain high at $487 million in FY2021. Uncompensated care rose slightly to $510 million in FY2019, then fell to a projected cost of $418 million in FY2020.
  • The County proposes a total of 21,106.1 budgeted full-time equivalent (FTE) positions in FY2021 across the General Fund, Health Fund and special purpose funds (excluding grant funds). This is a net decrease of 543.1 FTEs, or 2.5%, from the adopted FY2020 budget.
    • FTE positions in the General fund are proposed to decrease by 659.2, through the elimination of vacant positions.
    • The Health Fund proposes a net increase by 141.5 FTEs, involving a combination of position decreases and increases across various service areas.  This includes 130 layoffs.
  • The County plans to make a supplemental contribution to the pension fund of in FY2021 of $312.0 million above the statutory multiple contribution of approximately $201.9 million, for a total contribution of $513.9 million. FY2021 will be the sixth year the County contributes a supplemental amount to the pension fund.
  • The unfunded actuarial accrued liabilities for the County’s pension fund grew from $5.2 billion in FY2010 to $7.0 billion in FY2019.
  • The actuarial value funded ratio for the County’s pension fund has increased slightly from 60.7% funded in FY2010 to 61.2% in FY2019. The FY2019 level is up from a low of 53.5% funded in FY2012.
  • In the five-year period from FY2015 to FY2019, the County’s outstanding long-term debt decreased by 6.4%, or $232.2 million, from $3.6 billion to $3.4 billion.

The Civic Federation supports the following elements of the Cook County FY2021 proposed budget:

  • Steps taken over the past several years that position the County to withstand the economic crisis caused by COVID-19;
  • Matching staffing levels within Cook County Health to patient volume and medical needs;
  • Improved transparency with Cook County Health financial information;
  • An amendment made to the Inspector General’s ordinance requiring the inclusion of agency responses in program investigations;
  • Finalization of the County Clerk’s assumption of the Recorder of Deeds office;
  • Improved revenue transparency through the work of the Independent Revenue Forecasting Commission; and
  • Increased cost sharing in the Retiree Health Plan.

The Civic Federation has concerns about the following issues:

  • Financial risks presented by the COVID-19 pandemic;
  • Potential loss of federal pandemic-related assistance to Cook County Health;
  • Uncertainty related to repeal of the Affordable Care Act; and
  • Plans to build a new Provident Hospital with inpatient services rather than the previously proposed regional outpatient center.

The Civic Federation offers the following recommendations to Cook County:

  • The Civic Federation calls on the Cook County Board to create a regional commission to study Cook County healthcare needs and charity care issues, with a focus on the known disparities affecting residents of Chicago’s West and South Sides and the south suburbs. The commission should include representatives of the State, County and City of Chicago, public and private healthcare providers, labor organizations and academic experts;
  • Reconsider the inpatient aspects of the Provident Hospital project;
  • Equip the Independent Revenue Forecasting Commission or a similar body to conduct reviews of Cook County Health revenue projections;
  • Continue to livestream Cook County Health Board meetings after the pandemic and post recordings of past meetings;
  • Move forward on holding meetings about the Sheriff’s Office operations;
  • Clarify year-end estimates in the budget book;
  • Reclassify Health Fund revenue sources in the budget book to align with Cook County Health operations;
  • Obtain statutory authority for supplemental pension contributions;
  • Enact a multi-year intergovernmental agreement with the Cook County Pension Fund for supplemental contributions in the absence of State legislation;
  • Provide pension funding support to the Cook County Forest Preserve District; and
  • Work with the new Clerk of the Circuit Court to take several steps to improve budget transparency, efficiency and accountability.

Click here to read the full report.
Click here to read a press release for this analysis.