Background
Cook County, Illinois, is one of the biggest counties in the U.S. The County is located in northeastern Illinois, with Chicago as its county seat. It is one of the counties with the highest population in the entire country and the most populous in Illinois. The latest population reports, released in 2020, show that the County has approximately 5.17 million residents. The County exhibits significant population diversity, comprising 42% White (Non-Hispanic), 5.9% Latino, 12.4% White (Hispanic), 22.9% African American, 7.39% Asian, and 9.34% other ethnic groups (Data USA, n.d.).
The County has a total area of approximately 4,235 km2 (Data USA, n.d.). Cook County also exhibits a diverse economic base, with a considerable portion of the workforce engaged in service-related work, including food services, healthcare, and retail. This paper examines Cook County’s budget, focusing on expenditures and revenues for the General Fund, the primary source of both, as well as the capital improvement program, budgetary issues, the pension system, and the County’s financial strengths and weaknesses.
Budget Overview
A budget is a central document that illustrates how funds will be allocated in a given fiscal year. It is also a key tool for executing a fiscal plan, hence, impacting the entire economy (Bland, 2020). Moreover, the budget represents a contract between the County and its citizens, detailing how resources are allocated to implement various public services (Bland, 2020). Therefore, a budget should be credible and transparent if it is to wield trust and serve as an instrument of accountability.
Cook County’s budget development aligns with established standards, including the preparation of the annual fiscal policy document that outlines the plan for annual spending for the upcoming financial year. The County prepares a comprehensive budget, as outlined in the Illinois Counties Code, to show estimated revenues and planned expenditures (Cook County, 2021). Cook County prepares and presents its annual budget based on cash and encumbrances, except for property taxes, which are budgeted on an accrual basis.
General Fund
The public safety and corporate funds constitute the General Fund for Cook County. The Public Safety Fund encompasses the County’s criminal justice system, including courts, prisons, and associated programs (Cook County, 2021). Moreover, other authorities that fall within this category of funds include the Clerk of the Circuit Court, the Public Defender’s Office, the State’s Attorney’s Office, and the Sheriff’s Office.
It also encompasses the Chief Judge’s office, which includes the Juvenile Temporary Detention Center (Cook County, 2021). The Corporate Fund incorporates most of the County’s property tax-related roles on behalf of other primary jurisdictions, as well as the County’s overall managerial obligations.
Cook County has seen significant increases in budgetary estimates over the last few years. For fiscal year 2023, the County has adopted a budget totaling $8.79 billion, including grant and capital funds. Its General Fund, which encompasses the administration’s daily operational costs, accounts for approximately $7.25 billion of the entire adopted budget (Cook County, 2021). A critical analysis of the County’s budget estimate depicts that the main sources of revenue are fees and taxes.
The budget assessment also shows that the major sources of revenue for operating expenses are sales taxes, property taxes, and income taxes. For instance, Figure 1 shows that the County raises the highest taxes from sales-related transactions, making it one of the biggest contributors to the General Fund, while property taxes are also considerably high. Cook County’s main expenditure areas within the General Fund encompass public works, public health, and public safety.
Primary Sources of Revenue
The County generates revenue from numerous sources, including home-rule taxes such as sales tax, property taxes, fees, and funds received through the Cook County Health Care System (CCH). Additional income sources include intergovernmental revenues, grants, dedicated special-purpose fees, and miscellaneous revenue. The approved budget estimate for the latest financial year is $8.79 billion. Figure 2 shows that, out of the total expected revenue, health enterprise revenue accounts for approximately $3.82 billion, representing about 43.4% (Cook County, 2021).
Intergovernmental and grant revenue stands at approximately $586.6 million, representing a 6.7% increase (Cook County, 2021). Property tax, along with related transactions such as the individual property replacement levy, amounts to $948.8 million, representing approximately 10.8% of total revenue. Other fees and taxes generate approximately $2.02 billion, accounting for about 22.9% of the total revenue (Cook County, 2021). Moreover, proceeds from debt amount to $344 million, approximately 3.9% of total revenue. Meanwhile, miscellaneous and other sources of revenue contribute around $1.08 billion, representing 12.3% of the County’s public funds.
Cook County’s total revenue from the Health and General Enterprise Funds, the major operating funds, shows a significant increase. In FY2023, it is about $5.97 billion, representing a significant increase of $98.3 million from the previous year’s fiscal estimates. Moreover, the total revenue surge for CCH of about 133.4 million was primarily driven by expansion in over-patient service revenue of about $139.3 million, following increases in base rates (Cook County, 2021). The growth of the Medicaid-eligible patient population also prompted the increase. Apart from these operational influences, funding from the County to CCH is also anticipated to grow with property tax distribution expanding by significant margins.
According to the Cook County (2021) report, General Fund revenue decreased by approximately $35.2 million, about 1.7% below the previous year’s appropriation. Such reduction is partially offset by the surge in sales tax, budgeted at $1.09 billion, and by the general fund provision of the property tax levy, planned at $293.5 million (Cook County, 2021). However, the overall decrease is linked to the change in collecting transport-based home rule fees as a special-purpose revenue.
Primary Uses of Revenue/Expenditure
Cook County allocates its budget revenue across five main areas: public safety, healthcare, economic development, finance and administration, and property and taxation. Moreover, operating costs, such as technical maintenance and utility payments for the building, are classified as administrative overhead. Figure 3 shows that public safety and healthcare consume a considerable share of the operating budget, excluding debt service, capital, and pension payments. The other expenditure areas encompass economic development, finance and administration, administrative overhead, and property and taxation, which account for approximately $1.59 billion of the entire revenue usage (Cook County, 2021).
The remaining outlay components include debt service payments on outstanding bonds, as shown in the table below.
Primary Financial/Budgetary Issues
Resilient Economy
The CEO’s address focused on economic resilience and the need for enhanced fiscal responsibility, despite numerous challenges. In recent years, Cook County has faced numerous challenges, including the disruptive pandemic, managing the global financial recession, and other obstacles. However, these barriers have not been a setback for the County, as the administration has ensured a progressive fiscal position in the wake of the ravaging challenges. The County has made magnificent strides in addressing the various challenges it has faced over recent years. Specifically, the County managed to weather storms by confronting the impediments, enhancing equity, and converting adversity into opportunities. The County invested in numerous programs, including establishing the largest publicly backed income initiatives, allocating millions of dollars to support economic growth.
Remarkably, the County achieved these developments without imposing tax increments on residents. The County has had its bond rating upgraded and continues to make supplemental pension remittances to strengthen the fund’s sustainability. While utilizing the equity fund, the County seeks to invest more than $70 million in the financial year to establish safe, thriving, and healthy communities (Cook County, 2021). This approach will help transform and reimagine systems around justice and health. It also promotes economic opportunities, public safety, community development, housing, and social services.
Promise for Fiscal Responsibility
The need to establish thriving, safe, and vigorous communities through enhanced investments in the equity fund. Through thoughtful budgeting, Cook County is restoring its economic situation to its pre-pandemic state by matching resources to needs, thereby establishing better outcomes for the public through important and innovative programs. In the years ahead, the County promises to practice fiscal responsibility and continue investing in programs that directly impact the lives of citizens (Cook County, 2021). Therefore, it can be seen that the CEO’s message focused on the need for continued investment in the future and on prudent financial expenditure to enhance economic recovery and service excellence.
Capital Improvement Program
The County’s Bureau of Asset Management is responsible for drafting a capital improvement program (CIP) and collaborating with other authorities, such as the Bureau of Finance, to secure resources and estimate cash flow requirements. The CIP encompasses a long-standing estimate of debt service levels, as well as funding consequences for the county program over a 10-year cycle. The expenses associated with CIP are not only measured by first cost but also by the lasting fiscal implications for the County’s operating budget (Cook County, 2021). The individual CIP programs adhere to priorities that conform to President Preckwinkle’s guidelines. The County runs various CIPs that will go a long way toward ensuring cost reductions and improving service delivery to citizens.
Capital Renovations and Consolidations
As part of efforts to lower operational costs, the County prioritizes consolidating underutilized facilities and disposing of obsolete, unserviceable, or redundant assets that burden the administration. The County also plans to conduct capital renovations at the Provident Hospital campus. The onset of the pandemic temporarily halted the work, but reviving it would help establish a facility that helps the majority of the town’s population and the adjacent catchment area.
The CIP plan will also include demolishing certain buildings on the Providence campus that are deemed to incur high maintenance costs with little return. The County is also planning to construct the Dunne building with multiple floors as part of its strategy to put underutilized spaces to use. The significance of this project lies in consolidating numerous county functions, which will help re-stack workspaces across various buildings, thereby freeing up floors in the Dunne building for leasing.
Transport and Highways Programs
Cook County expresses its commitment to improving existing infrastructure. The County’s Department of Transportation and Highways (DOTH) allocation for the current fiscal year totals $1.32 billion, with approximately $355.4 million budgeted for construction, planning, acquisitions, engineering, and maintenance contracts (Cook County, 2021). Part of the transport and highways programs are funded using motor fuel tax (MFT) revenues and are supplemented by state and federal grants, state bond proceeds, local reimbursements, interest earnings, and township MFT funds.
The DOTH continues to explore additional funding options for transportation. The department receives project-specific funding from local, state, and federal governments through reimbursements and grants. The various transport and highway projects managed by the DOTH are significant because they ensure a balance between preserving and maintaining existing infrastructure and expanding and modernizing the system to address current transportation requirements.
Debt Position and Credit Rating
The country’s credit ratings and debt position have remained positive and stable in recent years. The budgeting process has considered available resources while allocating funding for various projects. The department, through the County, also receives grants from various levels of government, including local, state, and federal, to fund capital improvement projects. The external support has helped to close any budgetary deficit and reduce debt involvement. Moreover, Cook County’s direct debt per capita has remained lower than that of other larger counties in the U.S., currently standing at $550 per capita, with a maximum estimated value of $1,000, as shown in Figure 4. The internal commitment and external support have contributed to debt stabilization.
Pension System
Cook County is committed to making additional contributions to its pension fund. The latest estimations show that the County has about a $311,7 million budget line to fix the outstanding unfunded pension liability (Cook County, 2021). The funds will be channeled to the County’s employees’ annuity and benefits fund, which is referred to as the pension fund. Moreover, more resources will be accredited to the pension fund, subject to the pending intergovernmental agreement, and this will go a long way in ensuring continuous rebuilding (The Civic Federation, 2020).
From 2016, the jurisdiction transferred $2.27 billion in terms of supplemental pension payments, as shown in Figure 5. The increase has led to the growth of the pension fund’s ratio to about 71% in the last six years, returning it to margins of sustainability (The Civic Federation, 2020). The total pension remittances and the operating costs of the general fund stand at about $1.66 billion, with workforce expenditures estimated at $1.42 billion, while non-personnel expenses are budgeted for $238.6 million (Cook County, 2021). Therefore, these supplementary contributions by the County have helped reverse the previously observed downward trajectory in the pension fund.
The huge figures represent substantial financial problems for the County. The jurisdiction shows huge underfunding and struggles to meet the budgetary needs of the fund, as illustrated in Figure 6. In an effort to contain ballooning costs, the County has implemented several measures, including improving employee contributions, introducing a new tier of benefits for new employees, and allocating pension bonds. Despite these significant efforts, the methods have not been wholly successful in addressing the underfunded liability of the pension system, making the County dedicated to managing the runaway debts.
Despite significant challenges, the County enjoys a stable credit rating, representing a positive indicator. With a positive credit rating, the County can borrow money from external financial institutions without any obstacles, as it demonstrates the capability to repay. The County can also borrow funds at low interest rates, as the risks involved are extremely minimal. Such funds can be utilized to help meet budgetary deficits (Bland, 2020). Moreover, stable credit ratings from various agencies, Moody’s, S&P Global, and Fitch Ratings, also reflect the region’s robust financial management practices. A poor credit rating would otherwise put the County at risk of jeopardy, as it signifies a low probability of meeting loan obligations. Therefore, it could easily be denied a loan.
Diverse Economic Base
Cook County has a vast and diverse economic base, encompassing several major industries, including finance, professional services, and manufacturing, which provide a solid foundation for the jurisdiction’s revenue stream. The County can also tap into its diverse economic base to offer multiple sources of income and ensure consistency in revenue collection (Bland, 2020). The diverse economic base also contributes to job opportunities for the citizens, hence effectively lowering unemployment.
Low Debt Per Capita
Low debt per capita is a crucial aspect of securing the County’s economic future. A state, country, County, or any jurisdiction saddled with high debts will have no funds to scale up any public investment programs to withstand debt vulnerabilities and meet ambitious development goals (International Monetary Fund, 2020). Low debt indicates a thriving economy, while rising debt suggests reduced economic opportunities for citizens (Salmon, 2021). With a low debt-to-capita ratio, Cook County attracts more business investment opportunities and spurs economic development. The County also has more flexibility to manage a crisis or unexpected events.
Financial Weakness
Despite its solid financial strength, Cook County also faces numerous financial weaknesses, including an underfunded liability in its pension system and an overreliance on property taxes as its primary source of income. Depending solely on property tax as the primary source of income can be extremely vulnerable, as it can be impacted by external forces such as economic recessions and even changes in property values. The reduced sales and hotel tax income following COVID-19 has considerably lowered the County’s net earnings.
Conclusion
In conclusion, the budget analysis reveals huge potential and challenges that Cook County faces in implementing the fiscal policy document. As one of the largest jurisdictions in the state of Illinois, the County has a diverse economic base and population that generates multiple sources of revenue and contributes significantly to regional economic development.
Despite its immense strengths, the County faces significant challenges, including an underfunded pension system and its overdependence on property taxes as the primary source of income. The CEO’s messaging emphasized economic resilience and the need for increased fiscal accountability, despite numerous challenges. The paper makes the following recommendation to the Cook FY2023 budget. The current administration needs to explore statutory approval for additional pension fund contributions in the bid to address the runaway liability.
References
Bland, R. L. (2020). A budgeting guide for local government. International City/County Management Association Press.
Cook County. (2021). FY2023 Cook County Annual Appropriation Bill.
Data USA. (n.d.). Cook County, IL.
International Monetary Fund. (2020). The evolution of public debt vulnerabilities in lower income economies.
Salmon, J. (2021). The impact of public debt on economic growth. Cato Journal, 41(1), 487-509.
The Civic Federation. (2022). Cook County FY2023 proposed budget: Analysis and recommendations.