Well, it may be a new year, but Cook County government has some nagging old business left to settle. There’s the not so trivial matter of passing a budget for the fiscal year that began on December 1, 2007. Being over a month into the new fiscal year without a budget is problematic, even more worrisome is the fact that negotiations appear to be at a standstill. The holdup is over how to fill a $288 million deficit—almost 10 percent of the County’s $2.9 billion operating budget.
Some critics will say so what, deriding Cook County as nothing more than a retirement home for precinct captains. Now, there’s certainly more than a little truth in that accusation. That said, the media fixation with the “friends and family” approach to patronage at the County completely obfuscates the essential services County delivers, including such basics as the criminal justice system. Then there’s healthcare. Each year more than one million patients, mostly from poor and low-income families, rely on Cook County for their healthcare needs. So, patronage or no, a solution to the County’s fiscal problems must be found.
To date, the main sticking point has been President Stroger’s insistence that County fill its deficit by increasing its sales tax levy from its current level of three-quarters of one percent, to 2.75 percent, which, over the course of a full year would raise more revenue than needed to eliminate the deficit. It would also drive the sales tax rate in Chicago up to 11 percent. On top of that, there doesn’t appear to be much in the way of cutting waste or improving billing practices for Medicaid patients in the proposal, both of which are essential to instill confidence in taxpayers. Not surprisingly, a budget proposal that on the one hand asks for more tax revenue than what’s needed, and on the other doesn’t adequately address inefficient billing nor eliminate unnecessary patronage jobs, hasn’t exactly been on the fast track for passage.
Unfortunately, the County’s fiscal problems are real and getting worse. That’s because there is a major, structural imbalance between the growth in the County’s revenue versus its costs. According to historic data, without adding a program or position, the cost of most—literally two-thirds—of the services the County provides will grow annually by 2.5 percent. Then there’s healthcare costs, which account for the other third of the County’s budget, and grow at 7.5 percent annually. Compare that to Cook County revenues, which grow at a meager one-half of one percent per year. That math simply doesn’t work. The bad news is, no amount of efficiency or cost cutting will eliminate that imbalance—revenues have to be increased. But it isn’t responsible to ask for more tax revenue unless cost savings, efficiency improvements and waste elimination are part of the deal.
What Cook County needs is a comprehensive fiscal reform package that is responsible, sustainable and politically viable. While that’s no mean feat, it’s doable. First, to be more responsible to taxpayers and efficient in its operation, patronage jobs have to be cut—not direct service employees, not prosecutors or public defenders, not corrections officers or healthcare professionals, just patronage. If 2.5 percent of the County’s operating budget is being wasted on patronage, cutting those positions would save over $72 million per year.
Next up is Medicaid billing. Every study to date has found that poor billing practices cost Cook County anywhere from $40 million to $100 million per year in lost reimbursements from the feds. That has to be fixed, ASAP. Assuming that billings increase to just the midpoint of the projected range, that’d be another $70 million annually, which isn’t bad, but still leaves a $146 million hole. Now, a sales tax rate increase of just three-tenths of one percent—.3%—generates just enough new revenue annually to eliminate the deficit completely.
But why stop the reform there? Better to sunset the sales tax rate hike—say in five years. That would give County officials time to lobby state government to fix the sales tax structure. The real problem is, the state’s sales tax (which local governments piggyback on) has an artificially narrow base. Currently, the sales tax covers the sale of goods, which account for just 13 percent of economic activity in Illinois, and for the most part excludes services, which constitute 77 percent of the state economy. By expanding the sales tax base to include consumer services, the state, Cook County and the City of Chicago, could all reduce their respective sales tax rates, while increasing their revenue in a fashion that will, for a change, actually grow with the economy.
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Ralph Martire is executive director of the Center for Tax and Budget Accountability, a bipartisan fiscal policy think tank. rmartire@ctbaonline.org