Civic Federation Rejects Cook County Borrowing Plans, Opposes Unstable Budget
December 19, 2008
CHICAGO—Calling the proposed FY2009 Cook County budget an exceptionally bad deal for taxpayers during extraordinarily difficult economic times, the Civic Federation’s analysis of the spending plan calls on the Board of Commissioners to reject plans to borrow any funds for County operations. The Federation opposes the $2.9 billion budget as the result of an extraordinary and irresponsible failure of County government to consider the long-term implications of its fiscal actions. The 45-page report will be released today on www.civicfed.org.
The proposed budget is built on an unstable foundation of $364.0 million in borrowed funds to pay for operating expenses and $376.0 million for capital projects less than one year after a massive one percentage point sales tax increase. The Civic Federation categorically rejects all of the Stroger administration’s arguments in favor of borrowing. Borrowing funds for operations is a poor deal for taxpayers because it adds hundreds of millions of dollars in interest costs that must be paid over a decade or more into the future. The Board should seek alternative means to pay for the County’s operational expenses, including personnel reductions. “Cook County is not immune from the economic pressures that have forced other governments and many businesses in the region to tighten their belts and cut spending,” said Laurence Msall, president of The Civic Federation.
President Stroger and the Board of Commissioners are in such a precarious budgetary position because they approved $410.0 million in personnel spending commitments before confirming, or even considering, whether the County had revenues sufficient to pay for them. This is a stunning failure that highlights the resistance of County government to performing even basic planning to guide its operations. If the County had a fully-developed performance measurement system, it would have the ability to make spending adjustments in this budget based on a careful assessment of program and service performance. Instead, the County will likely be forced again to perform inefficient across-the-board spending cuts if borrowing is not approved. “This is a government that is ill-prepared for the economic storm ahead,” said Msall. “With no reserve funds and a lack of prioritization of spending, Cook County is set to continue its history of stumbling from one fiscal crisis to the next.”
The Federation’s analysis provides recommendations to reform the County’s financial management grouped into three categories: cost reductions, management reforms and pension reforms. Cost reduction recommendations include implementing long-discussed privatization and outsourcing opportunities. Additional management reforms should include implementing a long-term financial planning process and establishing a formal budget reserve or “rainy day” fund. Pension reforms should include instituting a two-tiered pension system with reduced benefits for new employees and limiting annual cost of living increases—which often exceed the rate of inflation.
One of the few bright spots the Federation sees at the County is the beginning steps of the restructuring of the Health and Hospitals System. The System is taking modest steps to increase its revenue by redesigning its patient billing, an area in which it has been deficient for many years. It has made praiseworthy moves to identify its core mission and emphasize efficient delivery of services. The Civic Federation is also pleased with the public nature of the restructuring process at the System. However, these improvements still do not justify the recent one percentage point sales tax increase the County promoted last year as essential to avoid the failure of the County health system. Curiously, although the hike will generate $380.0 million for the County this fiscal year, the System will only receive $46.8 million in new resources in this budget. While problems still remain within the System, especially with regard to the transparency of the budget process, on the whole the Federation applauds the work of the new Health and Hospital Board.