Louisville Faces Devastating Budget Shortfall

THE CHALLENGE

  • Louisville Metro Government continues to face significant budget challenges, caused largely by pension obligation increases from the state.
  • Louisville Metro Government employees participate in the County Employee Retirement System, which is a part of the Kentucky Retirement Systems.  The city’s obligation is determined by the state and has always been paid in full.
  • Louisville Metro Government absorbed the first of at least five years of 12% annual increases in its state pension obligation in FY19 through efficiencies and other cost-cutting measures.
  • FY20 is the second year of the 12% phased-in increases. The state pension costs have now grown to a point where the city can no longer cover them without new revenue or drastic cuts to services.

 

 

  • On March 21, 2019, the Metro Council voted against a plan proposed by Mayor Greg Fischer to fully address the budget challenge without devastating cuts through an increase in the insurance premium tax. 
  • On April 25, 2019, Mayor Fischer presented a budget to the Metro Council that includes the cuts to every Louisville Metro Government department. The city is legally obligated to balance its budget.

LEARN MORE ABOUT THE BUDGET PROPOSAL 

KEY POINTS

SEE DETAILS OF THE BUDGET PROPOSAL 

BUDGET DOCUMENT

Why not trim ‘fat?’

Why not raise taxes?

What will cuts means for residents?

What has already been done?

Other frequent questions

 

 

Why not trim ‘fat?’

  • We’re recognized among the best in good governance. Louisville Metro Government was awarded in April 2019 with Bloomberg Philanthropies’ What Works Cities Gold Certification, a national standard of excellence in good governance which evaluates how well cities are managed by measuring the extent to which city leaders incorporate data and evidence in their decision-making. Louisville Metro Government is among only four cities nationwide to achieve Gold Certification. LEARN MORE.
  • We’re already doing more with less. Louisville Metro Government is recognized nationally for its efforts to become leaner and more efficient. Under Mayor Fischer, the number of employees outside of LMPD has declined by 2%  – from 4,017 to 3,939 – while services have been enhanced to meet citizen demand. For example, calls for service have increased significantly during the Fischer Administration, including calls to 911 increasing from 1,273,661 in 2011 to 1,361,987 in 2018.  SEE THE DETAILS
  • We’re good at attracting outside funding. The Fischer administration works tirelessly to seek outside sources of revenue in order to tackle some of Louisville’s biggest challenges and relieve pressure on the budget. SEE THE DETAILS.
  • We’ve already ‘tightened our belt.’ Since 2011, Louisville Metro Government has collected $23 million by selling surplus property, increased overdue fee collection, and taken other steps to make itself leaner and more efficient. SEE THE DETAILS. 
  • And we’ve still been able to address major challenges. Louisville Metro Police, the Office for Safe & Healthy Neighborhoods and many partners addressed a spike in violent crime; Louisville Metro Public Health & Wellness was recognized by the Centers for Disease Control for its leadership in combatting a sudden Hepatitis A epidemic. SEE THE DETAILS. 

 

 

 

Why not raise taxes?

The Commonwealth of Kentucky limits the options for counties and cities to raise new revenue. You can see details of Louisville Metro Government’s limited options here. In March, the Metro Council rejected an increase in the insurance premium tax that would have addressed the state pension-driven budget shortfall without cuts.

 

 

 

Actions already taken to address the shortfall

In FY19, Louisville Metro Government:

  • Eliminated 49 positions and adopted new fees in the FY19 budget.
  • Began only approving vacant positions and reclassifications if certain essential function criteria are met, including whether the vacancy would require overtime or is mandated.
  • Put a freeze on discretionary spending on travel, training, technology, office supplies, subscriptions & assigned vehicles.
  • Implemented an EMS cost recovery fee increase to generate $1.9M annually and bring our fees into greater alignment with similar services.
  • On April 4, 2019, Mayor Fischer announced additional steps that had to be taken prior to the budget address because of notifications required under contracts and leases:
    • The June LMPD recruit class is canceled, because offers would have to have been made before the Mayor presented the 2019-2020 budget on April 25, and before the Council votes on June 25. “It’s just financially unwise to hire people without knowing you have the budget to pay them,” the Mayor said. The city has informed employees of changes to their health insurance benefits. Most policies for Metro employees will see an increase of 3 percent on premiums, and most plans will see an increase on deductibles and other out-of-pocket expenses.
    • The city is examining leases and contracts, including LMPD’s contract with ShotSpotter, that may need to be altered or canceled before July 1 in order to meet the budget gap for fiscal year 2020.
    • Parks & Recreation will not open its four outdoor swimming pools this summer and is increasing fees at the Mary T. Meagher Aquatic Center. The decision not to open the pools is being made now because this is the time the process of hiring lifeguards would begin.

 

What cuts mean

 

 

 

Other questions

  • Why not use the city’s Rainy Day Fund? This money is for one-time, unanticipated emergencies. The budget challenge is on-going and, without new revenue, will need to be dealt with year after year. If we spend our Rainy Day Fund on this year’s budget, next year we’ll have the same challenge, compounded by $10 million more in pension obligations — and a Rainy Day Fund will be less than half its current, fiscally responsible size. We’d need a plan to replenish the Rainy Day Fund. Also, our credit rating is partly determined by the size of our Rainy Day Fund. LEARN MORE. 
  • Why not use money designated for the KFC Yum! Center? We made a financial commitment and the KFC Yum! Center has provided an obvious major boost to Louisville’s economy. And the city would likely face lawsuits and lose its AAA bond rating if it does not abide by its agreement. LEARN MORE. 
  • Why fund capital projects? Louisville Metro Government has economic momentum unseen in decades. One-time investments are essential to keeping that momentum going.
  • Why not enter into a public-private partnership for PARC? We’d pay for it in the long run. Other cities have regretted taking similar steps. LEARN MORE. 
  • Why not cut overtime? Louisville Metro Government has worked to better manage overtime and continues to do so. And there are many valid reasons for overtime, such as emergencies, increases in Corrections and Youth Detention Services populations in which the inmate-to-staff ratio is set by law, severe weather, and more. In other instances, overtime is funded by grants. LEARN MORE. 
  • Why can’t we just not pay the state pension obligation? That’s illegal.
  • Why didn’t the Mayor say something about this earlier? He did. OftenIn July 2017, the Kentucky Retirement System changed its assumptions about the return on investment on all state pension funds. The Mayor has discussed this challenge since July 2017, and CFO Daniel Frockt has briefed the Council on the potential budget impact numerous times starting in November 2017. This includes an orientation for recently elected Council members last December. See timeline here. For years, tremendous uncertainty has surrounded the pensions, the actions Frankfort might take, and the impact they might have on our future. That continues with the Kentucky Retirement System’s announcement of its revised mortality assumptions in mid-April 2019.  

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