Okay, thank you.

Good morning.

Can everyone hear me?

Good morning, Board of Commissioners.

Thank you.

It is a pleasure to be here as the CFO to provide an overview of our preliminary forecast, which is the mid-year projection of the year-in revenues and expenses for fiscal year 26 and an initial forecast of the projected FY27 revenues and expenditures for our two major operating funds, the General Fund and the Health Enterprise Fund.

We present this preliminary forecast while navigating several uncertainties.

These projections are based on what we know today.

FY26 has already been filled with several challenges with additional difficulties expected in fiscal year 27.

However, it is important to recognize that the years of discipline and financial responsibility have put the county in a strong position to address these challenges and are positioned to continue the important work and priorities of President Pret Winkel and the Board of Commissioners.

While outside factors can cause unexpected changes to the revenue and expenditure projections we are putting forward today.

This preliminary forecast is designed to provide a transparent look at the current and anticipated Cook County budgets.

We will continue to monitor the ever changing fiscal environment and provide relevant updates in the forthcoming budget recommendation.

I want to thank the entire Bureau of Finance for the work they do every day.

I have only been here about a month, and I can already see what a great team we have in place.

Our strong finance team starts with this impressive team.

Also want to thank the entire Board of Commissioners for your input and guidance.

I look forward to working with each and every one of you as we continue to put forward important initiatives while being mindful of our long-term finances.

And with that, I believe we are ready to start our presentation with CANACO.

Good.

Good morning, Commissioners.

Today's presentation begins with a review of a key economic indicators that influence financial outlook, not only for the county, but also nation as a whole.

We will then provide an overview of the preliminary year-end forecast for fiscal year 2026 and the initial projection for 2027 for the county's two largest operating funds, General Fund and the Health Enterprise Fund.

Finally will conclude with updates on our ongoing commitments.

With that, I pass to our deputy CFO, Dean Constantina.

Thank you very much, CANACO.

So, as you are all aware, the county's revenues are really closely tied to economic conditions.

So whenever we open the preliminary budget, we want to make sure we understand what is happening in the economy today and kind of what we expect in the future.

So since COVID, we have seen a real precipitous drop in the rate of inflation to a level that approached normal at the end of last year.

However, largely due to the war in Iran, we have seen some increases in the rate of inflation as higher energy prices begin to impact other commodities.

We can reasonably expect that these increases in inflation will also impact the cost of goods for the county and the members of our community.

Real gross domestic product, which is closely tied to our sales tax revenue growth, is expected to remain about the 2 percent 2 percent level across our forecasting period as kind of assumed by most of the major forecasters.

However, more recent forecasts, like those developed by Moody's and the survey of professional forecasters, are coalescing around the idea the higher energy prices at the start of this year will translate into slower growth in 2027.

In total, economic indicators are being depressed by the war in Iran and the corresponding impact on commodity prices.

These are factors that are outside of our control but have a direct impact on our revenues.

So it is very important that we keep an eye on these as we plan for the future.

What is also largely outside next slide, please.

What is also largely outside of our control is the impact of Federal legislation.

The one big beautiful bill or HR1 is expected to have a significant change on our FY 2027 revenues.

The legislation takes direct aim at Medicaid recipients, particularly the ACA adult population, which is projected to decline by about 16.2 percent at county care.

And translates to a $944 million difference if we were to compare it to what we would have expected prior to the passage of HR 1.

HR1 is also expected to decrease the patient service revenues and directed payments that Cook County Hospital system is expected to receive.

As people lose access to Medicaid, those that cannot afford insurance are forced to pay out of pocket.

These self-pay patients are much less likely to pay their bills.

And this translates into a $45.4 million reduction in patient fees and directed payments for CCH, but for the passage of HR1.

I'll now turn it over.

So these and some other external factors are really what's uh resulting in a projected preliminary gap that is really nominally the largest we've seen in nearly 16 years.

And I'll I'll turn it over to our budget director to provide us with more details about that.

Thank you, Dean.

The bar graph here illustrates county's historical budget gap.

As you can see in this graph, since President took office in 2011, the county had steadily reduced the gap until COVID pandemic hit us.

Although the budget gap increased in recent years due to unanticipated retroactive cost of living adjustments, the county's total appropriation has increased as well.

It's therefore it's really important to highlight the scale of each gap relative to annual budget.

As you can see in this line graph, in 2011, the net budget gap of 487 million dollars represented 20.9% of that year's annual appropriation.

By contrast, the $211.4 million dollar gap for 2026 accounted for less than 3% of this year's appropriation.

We believe this reflects our fiscal discipline.

We have consistently balanced the budget with a forward-looking approach and without drawing on county reserve for permanent infrastructure without a long-term solution.

In 2027, however, the projected gap rises to more than $550 million across the Health Enterprise Fund and the General Fund, driven largely by external factors beyond the county's control.

I'll walk through some of those details in the next few slides.

Next slide.