Kane County needs to raise revenue or cut expenses by 2027

Kane County needs to significantly increase its revenue or cut expenses by 2027 to avoid dipping into the cash reserves needed to balance the budget, the county’s finance director said.

Kane County Finance Director Kathleen Hopkinson told the Kane County Board of Directors Executive Committee on Wednesday that it is Kane County policy to have enough money to operate without any revenue coming in for at least 90 days. He said the county has built up its reserves above the required amount during the COVID-19 pandemic, using federal relief funds to help pay salaries and benefits.

But since those relief funds have now been exhausted, the district is spending its reserves to balance the budget.

“Assuming nothing changes and very modest increases in our revenue and expenses, we will not have much reserves by 2027 and will actually have reduced our 90-day reserves,” Hopkinson said at the meeting.

For the 2025 budget, Hopkinson recommended that county offices limit the number of vacancies they budget to fill and keep overhead expenses within 3% of last year’s budget.

Committee members at Wednesday’s meeting generally agreed with his recommendations.

Even with those concessions, the province would likely need to spend about $11 million from its reserves to balance its 2025 budget if no other source of revenue is found, Hopkinson said. He predicted the county would generate about $114 million in revenue and spend about $125 million in 2025.

“I think we have absolutely no choice but to use the fund balance for this year,” said District 24 County Board and Executive Committee member Jarett Sanchez. “This really raises the question of what do we do with this looming fiscal cliff?”

The county used about $5.5 million from its reserves to balance the 2023 budget and plans to use about $9.6 million to balance the 2024 budget, according to Hopkinson’s presentation.

In a similar presentation to the Kane County Finance and Budget Committee on Feb. 28, he said the gap between revenue and expenses will continue to widen unless the county can increase its revenues or reduce its spending.

If more money is not available by 2028, the county’s credit rating will be affected and some county positions will have to be eliminated to significantly cut spending, Hopkinson said.

Kane County said it has created $98 million in reserves through the end of 2022, using the federal government’s pandemic relief funds to pay staff salaries.

According to his presentation, these reserves are expected to drop to almost $77 million by the end of 2024. Approximately $32 million of this amount must be kept as the district’s 90-day reserve.

The official suggested that some of the district’s reserves should also be transferred to the capital project fund starting in 2026. Money in this fund is used to build or renovate buildings, improve parking lots and similar projects.

“This fund is almost entirely funded by money transferred over the years,” Hopkinson said. “If the Building Management Department does all their projects, they will spend that capital project funding and they won’t have any more money to do any of the facility maintenance work that needs to be done throughout the county.”

The 2028 budget estimates were made by Hopkinson to get a head start on the 2025 budget process. Last year, during the 2024 budget planning process, the county board waited until the end of the year to balance the budget; Hopkinson has previously said he hopes to avoid this in the 2025 budget process.

By deciding on revenue amounts and sources in advance, Hopkinson said he hopes county offices and departments will base their budgets on expected revenue rather than just requesting whatever they want.

At the Finance and Budget Committee meeting on Feb. 28, committee members briefly discussed ways to increase revenue, such as increasing property, gas or sales taxes, and ways to reduce spending by making the county more efficient, but did not make a formal decision.

At Wednesday’s Executive Committee meeting, District 22 Board member Vern Tepe said his board’s Finance Committee will recommend specific ways to increase revenue and cut expenses at its March meeting.

The county hasn’t raised property taxes in 14 years, even though wages and the price of contracted services have increased, Hopkinson said recently. He said only 4 percent of Kane County residents’ tax bill goes to the county itself, while the rest goes to other local governments such as school boards, municipalities, counties and more.

rsmith@chicagotribune.com