TRANSMITTAL LETTER FOR BOARD MEETING OF MAY 19, 2022
COMMITTEE ON BUDGET AND EMPLOYMENT
Mr. Brian A. Perkovich, Executive Director
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Report on Budgetary Revenues and Expenditures for the first quarter of 2022, ended March 31, 2022
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Dear Sir:
Attached is a report of revenues and expenditures for the first quarter of 2022, ended March 31, 2022. This report is prepared on an unaudited budgetary basis of accounting.
The 2022 first quarter Corporate Fund actual net tax revenue of $152.4 million is 54.7 percent of the budgeted tax receivable and is $41.3 million over the collections for the same period in 2021. Allocations to the Personal Property Replacement Tax (PPRT) totaled $14.0 million during the first quarter which reflects continued statewide over-performance. Corporate Fund actual non-tax revenue of $26.7 million is $10.6 million under the collections for the same period in 2021. The negative variance is driven by a $5.0 million under the collection for the same period in 2021, which was anticipated in the 2022 Budget and the timing of TIF surplus distributions, most of which happened early in the calendar year during 2021. Major components of non-tax revenue include the following: user charge income of $11.0 million, TIF surplus distributions of $8.8 million, and rental and easement income of $5.3 million.
The 2022 Corporate Fund Budget is $438.5 million, an increase of $39.2 million from the 2021 Budget, reflecting the strong revenue estimates. During 2021, the District was also successful in obtaining statutory authority to transfer lawfully available revenue to the District's Retirement Fund. Based on positive results in 2019, 2020, and projected for 2021, the District contributed $30.0 million in Corporate Fund budgetary reserves to the Retirement Fund to maintain the funded ratio.
The 2022 first quarter expenditures of $81.0 million are 18.5 percent of the $438.5 million Corporate Fund budget and are $6.6 million over the expenditures for the same period in 2021. Energy and healthcare costs, two of the primary expenditure drivers, are monitored closely throughout the year. Energy expenditures (electricity and gas) in 2022 are 25.8 percent higher than the same period in 2021.The increase in energy prices was anticipated in the budget and was expected due primarily to clean energy legislation that increased fees and an increase in the kilowatt-hour price. Healthcare costs are 15.1 percent higher than the same period in 2021. These increases were expected as health plan claims return to more normal levels post-pandemic.
The two primary economic factors driving District revenues are the real estate market and the Consumer Price Index (CPI). Through March 2022, The Illinois Association of Realtors reports that Chicago metropolitan area home sales are down 4.8 percent, while the median sales price has increased 6.3 percent compared to the same period in 2021. Home sales have started to decrease due to increases in interest rates.
According to the Bureau of Labor Statistics, over the last 12 months, CPI increased 8.5 percent before seasonal adjustment. Increases in the indexes for gasoline, shelter, and food were the largest contributors to this increase. The gasoline index rose 18.3 percent in March and accounted for over half of the monthly increase. The food index rose 1.0 percent and the food at home index rose 1.5 percent. In contrast, the index for used cars and trucks fell 3.8 percent over the month. According to Bloomberg News, the March CPI reading represents what many economists expect to be the peak of the current inflationary period, capturing the impact of soaring food and energy prices after Russia’s invasion of Ukraine. While the Fed has opened the door for a 0.5%-point increase in interest rates, inflation isn’t likely to recede to the central bank’s 2.0% goal anytime soon, especially given the war, Covid-19 lockdowns in China, and greater demand for services like travel.
Given that inflation is higher than anticipated, the Budget Office is watching expenditures, particularly in the commodity classes. Monthly expenditures are analyzed, and prices and trends are proactively reviewed. The Budget Office will continue to closely monitor economic conditions, revenues, and expenditures throughout 2022.
Respectfully Submitted, Shellie A. Riedle, Administrative Services Officer
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