FY 2023 Cook County and the City of Chicago Budget Proposals Breakdown
It is that time of year again when the City of Chicago and the Cook County Government release their recommended budget proposals for FY 2023. Since the Cook County budget was released only a few days after the City of Chicago, this blog post will serve to summarize some of the key points about each.
Cook County
The Cook County budget proposal for FY 2023 totals $8.7 billion, $7.23 billion of which is the County’s Operating Budget. 78% of that Operating Budget is targeted toward proposed Public Health and Public Safety expenditures.
County Growth
Core services at the County have grown steadily by a realized compound annual growth rate of 3.1% since 2011. CountyCare, the Medicaid health plan for the county, has grown from $96.2 million in 2013 to $2.65 billion in FY 2023. The County’s additional pension contributions made since 2017 amount to approximately $331 million.
General Fund
The County estimates $1.97 billion in revenue in FY 2023. This is down from $2.01 billion in revenue in FY 2022. The reason for the decrease in revenue collection is due to a change in the collection of Transportation Home Rule Taxes and Cannabis Tax revenue being collected by different funds in FY 2023.
The County Sales Tax collection is estimated to increase by $124M year-over-year and makes up 55% of the General Fund, which the County acknowledged is cognizant of the sensitive nature of sales taxes, especially during economic downturns.
Maintaining a balanced budget, Cook County expects the estimated $1.97 billion in expenditures to be split amongst Public Safety, Finance and Admin, Property and Taxation, Economic Development, and other fixed charges and costs. Public Safety makes up 54.5% of the General Fund budget for the County but is also the only expenditure category to see a decrease in recommended expenditures over the adopted FY 2022 budget.
Some of the General Fund priorities listed by Cook County include Pre-Trial Fairness Act implementation, contribution to the Land Bank, support for delivery of property tax bills, and additional support for the Equity fund.
A majority of the Cook County Operating Budget is projected to be spent from the Health Enterprise Fund. $3.99 billion of Health Enterprise funds cover the Cook County Hospitals, including $2.65 for the CountyCare Health Plan, $856M for Stroger, and the remaining expenditures split amongst Public Health services covered by the County, Correctional Health, Ambulatory Services, and Health System administration.
Sustainability and Pensions
Cook County revenue in FY 2023 is expected to keep pace with expenditures, but the County is prepared for alternate scenarios in which there are multiple best-case scenarios used for forecasting and worst-case scenarios where the Real Gross Metropolitan Product (“Real GMP”) will decline 2.6%. However, Cook County reports that it expects only a 10% likelihood that the best-case scenario of 3.9% growth in Real GMP or a 2.6% decrease in Real GMP would occur.
Additionally, Cook County implements the following policy: If the unassigned fund balance should exceed 3 months of General Fund expenditures — the “ceiling” — the County can use these funds to pay for: nonrecurring expenses, an outstanding liability, or transfer it to a committed or assigned fund balance in the following fiscal year.
The County is, therefore, able to shift $261.8 million in unassigned General Fund funds from FY 2021 to other funds, including an extra $50 million in supplemental funding, the largest one-time contribution, to be made to the Pension Stabilization Fund.
The supplemental payments made to the Cook County Pension Fund will have paid off, given that the County estimates the funded ratio with the supplemental funding increased to 70.7% in just 6 years. Without supplemental pension payments, the funding ratio would be 57.7%. the FY 2023 budget proposal for Cook County continues the recommendation to make a supplement pension payment of up to $20 million.
Overall, Cook County remains stable and prepared for a potential economic downturn. The City of Chicago, with a much larger budget and is more complicated.
City of Chicago
The total Corporate Fund budget recommendation for the City of Chicago for FY 2023 rolls in at $5.4 billion. While there is more to the city budget than just revenue from the Corporate Fund (Grant Funds, Enterprise Funds, Pension Funds, Special Revenue Funds, and Debt Service Funds), this summary will focus primarily on the Corporate Fund and Pension Funds.
The increase in the overall budget recommendation for the Corporate Fund is just over half-billion dollars, at $534 million over FY 2022. $354 million of this increase is estimated to come from local tax revenue. Local tax revenue includes utility, transaction, transportation, recreation, and business taxes. $113 million of the $534 million increase is expected from intergovernmental revenue. Intergovernmental taxes include Personal Property Replacement Tax, State Income Tax, Municipal Auto Rental Tax, and reimbursements for City services.
Local non-tax revenue hails from sources such as licenses and permits, fines and forfeitures, charges for services, municipal parking, leases and rentals, interest income, and other revenue sources.
The City of Chicago is also expecting $98.3 million in Tax Increment Financing surplus for the Corporate Fund.
Figure 1
The City of Chicago expenditures for FY 2023 are split into two categories: Personnel and non-Personnel. Personnel costs include salaries and wages, healthcare, overtime pay, and unemployment compensation, and amount to $3.2 billion, or 58.7% of the Corporate Fund expenditures. Non-personnel costs include pension contributions, transfers, reimbursements, settlements and judgments, bond proceeds, non-personnel programs, and other various expenditures. Non-personnel expenditures make up $2.2 billion of the proposed Corporate Fund.
Figure 2
By function, the proposed expenditures for FY 2023 cover Public Safety, Finance and Administration, Infrastructure, General Financing Requirements, and Community Services. Public Safety makes up 45.3% of the Corporate Fund's proposed budget.
Figure 3
City of Chicago Pensions
The City of Chicago maintains four pension funds:
1. Municipal Employees’ Annuity and Benefit Fund (MEABF)
2. Laborers and Retirement Board Employees’ Annuity and Benefit Fund (LABF)
3. Policemen’s Annuity and Benefit Fund (PABF)
4. Firemen’s Annuity and Benefit Fund (FABF)
The FY 2023 budget proposal includes $2.6 billion in pension contributions across all funds, which is an increase of $334 million over FY 2022.
The four pensions’ contributions from the City will be funded by property tax collection ($1.4 billion), the Corporate Fund ($645 million), the Water-Sewer Tax ($266 million), and the City’s Enterprise and Special Revenue Funds ($304 million).
A new addition to the City budget proposal is the inclusion of the Casino Public Safety Pension Fund. This pension fund was set up upon the agreement between the City of Chicago ad Bally’s Corporation for the creation of the casino located within the City’s limits. The upfront payments of $40 million received from Bally’s deposited into the new Casino Public Safety Pension Fund will contribute to both the FABF and the PABF based on the specific proportion of members within each fund.
The FY 2023 Chicago budget proposal imitates the County and the State of Illinois by including additional payment contributions on top of the regular actuarially-calculate contributions. The City proposes an additional $242 million in advance pension payments.
The FY 2023 City of Chicago budget proposal includes the following actuarially-calculated contributions and advance payments:
1. MEABF
· $976 million in actuarially-calculated contribution
o $168.4 million in Property Tax Revenue
o $366.3 million from the Corporate Fund
o $175.1 million from the City’s Enterprise and Special Revenue Funds
o $266.3 million from the Water and Sewer Tax
· $101.6 million in advance payment
o $70.6 million from the Corporate Fund
o $31.1 million from the City’s Enterprise and Special Revenue Funds
2. LABF
· $112 million in actuarially-calculated contribution
o $53.7 million in Property Tax Revenue
o $58.3 million from other sources
· $12.1 million in advance payment
o $7.5 million from the Corporate Fund
o $4.6 million from the City’s Enterprise and Special Revenue Funds
3. PABF and FABF
· $1.3 billion in actuarially-calculated contribution
o $1.1 billion in Property Tax Revenue
o $61.2 million from the Corporate Fund
o $85.7 million from the City’s Enterprise and Special Revenue Funds (including $40 million from Casino Public Safety Pension Fund)
· $128.3 million in advance payment
o $123.9 million from the Corporate Fund
o $4.4 million from the City’s Enterprise and Special Revenue Funds
Figure 4
The FY 2023 budget proposal for the City of Chicago set the base property tax levy at $1.73 billion, $1.4 billion of which will fund required pension contributions for the City. $128 million of the $1.73 billion in property tax levy is dedicated to the Chicago Public Libary system. Notably, the FY 2023 property tax levy does not utilize the CPI increase realized in 2022, and therefore the CPI impact realized in other aspects of the economy should not impact the taxes paid on existing properties in the City.
