Citing expected revenue shortfall of $115 million for FY20/FY21, Mayor Fischer presents continuation budget and renews call for flexible federal relief

April 23, 2020

Mayor mourns those who’ve died, urges community to keep virus from claiming more lives

Celebrates the social muscles that make this a strong community

Outlines roadmap for Louisville’s Recovery: ‘Build Back Better, Together’

Because of a massive economic downturn caused by the impact of COVID-19 virus in the city, Louisville Metro Government (LMG) is projecting a $46 million revenue decline for the current fiscal year, which ends on June 30, and another shortfall of $69 million during the next fiscal year, which starts July 1. 

Mayor Greg Fischer shared those projections during his 10th annual budget address to Metro Council today, where he also asked for a moment of silence to honor the 77 people who’ve died of COVID-19 in the city, and shared his appreciation for all the hospital workers, first responders and others helping battle the virus – as well as residents working to help slow its spread.

“Thank you to all who have accepted the need for social distancing. For staying home. For staying six feet apart. For wearing face coverings. For washing your hands.”

SEE FACTS ABOUT THE BUDGET RECOMMENDATION

WATCH THE MAYOR'S ADDRESS 

READ THE MAYOR'S REMARKS 

COVID-19 impact on the economy and city budget

In explaining the projected revenue shortfalls for FY21 and FY22, Mayor Fischer noted that the critical services that Louisvillians rely on – police, fire, 911, EMS, public health, sanitation, roads and sidewalks, parks, libraries, community centers – are funded by the taxes that businesses and their employees pay:

  • About 47 percent of the city budget comes from payroll taxes. When businesses cut jobs, as COVID-19 has forced many to do, the number of people earning a paycheck goes down, and city revenue goes down with it.
  • About 11 percent of the budget comes from taxes that businesses pay on profits. When the economy is bad and businesses see less profit, that lowers city revenue.
  • The city also gets about 10 percent of its revenue from service fees associated with EMS, the Louisville Water Company and the Louisville Zoo, among many other sources.
  • A slower economy also slows the appreciation of real estate values, thus reducing property tax revenue – about 25 percent of the city budget.

And none of that accounts for the impact on public-sector partners, like TARC, MSD, Louisville Tourism and the state, the Mayor said, adding that the city also has less cash on hand now because tax filing deadlines were extended to July 15.

Because of all those factors, he said, LMG is projecting $46 million in lost General Fund revenue for the current fiscal year, which ends just 68 days from now. And the city expects this shortfall to be followed by another General Fund shortfall of $69 million during the next budget year. 

“For context, remember the painful cuts forced by a $25 million deficit last year?” the Mayor said, “Now, we’re facing the prospect of cuts about three times that amount. There is simply no way to absorb this level of loss without considering a significant tax increase or reducing every single agency of Metro Government, including our top priority of public safety, since it makes up over 60 percent of our budget.” 

Mayor Fischer noted that budget conditions have already forced the furlough of 380 Metro public servants, and without external relief and/or stimulus, the city is looking at more furloughs and possible layoffs.

The question, he said, is if the federal government will provide the direct, flexible assistance that states and local governments desperately need to cover revenue shortfalls. LMG has been provided about $134 million in reimbursements for COVID-19 expenses through the federal CARES Act. But as the law is written, the city is not allowed to use any of that funding to cover its dramatic budget shortfalls.

“That’s why I and mayors across the country are adamantly urging Congress to give cities flexibility in how we spend those dollars, plus provide additional direct funding to address our gaps,” the Mayor said.  “American cities must receive federal relief to make sure our residents have police, fire, emergency, public health, housing, sanitation and other services needed to recover from this crisis.”  

“Think about it – we are in the middle of a pandemic unlike anything we have seen in our lifetimes. Is now the time for cities to cut public health workers? Is now the time for cities to cut police officers, paramedics or emergency management personnel? … Of course not,” he continued. “But that is what we face, right here in Louisville and in every city around the nation, if Congress and the White House do not step up.”

The Mayor urged every Louisvillian to share that message to their U.S. Senators and Representatives:

The Mayor said another challenge impacting budget planning stems from the critical steps necessary to move out of the current phase of social distancing and restart the economy:  An initiative to dramatically increase COVID-19 testing and tracing.

That essential initiative requires high-volume, quick-turnaround testing, and a significantly expanded public health department, the Mayor said, noting that the cost for this major project depends on the number of people infected, so the range is wide – anywhere from $25 million to over $100 million.

“Just this week, Congress issued $25 billion for testing,” he said. “We are still waiting on information from the federal Department of Health and Human Services to let us know what our local allocation will be.”

And, it appears LMG city will be able to tap into the federal funding provided to the city for COVID-19 expenses for this need, the Mayor said, although there remains uncertainty about which parts can and will be covered by the federal or state governments.” 

“In any event, we know that not nearly enough federal funding has been allocated for Louisville’s combined costs for the direct impact from the virus and its associated revenue shortfalls,” he said.

Those uncertainties make it “impossible – really, irresponsible – to make meaningful budget and revenue projections for the coming year,” the Mayor said, explaining the need for a “continuation budget” for FY21, which “continues the current fiscal year’s funding levels – and assumes the question about federal support is resolved in the coming month or two.” 

That move lets stand the austere city budget for Fiscal 2020, approved last summer to manage the impact of a $25 million budget deficit, driven largely by a second consecutive 12 percent increase in the city’s state pension costs.

The $621 million general fund budget is comprised of an estimated FY21 revenue estimate of $594.4 million, $7.6 million of non-recurring funding sources, and the use of $19 million in Rainy Day funds.

The $594.4 million revenue estimate is a decrease of 4.7% from last year’s original budget estimate of $623.4 million.

The Mayor noted that continuation fulfills the statutory requirement to introduce a budget, “But we make this recommendation knowing we will be revisiting this budget in the weeks and months ahead, maybe more than once, making revisions as our fiscal picture becomes clearer.”

Slowing the spread of COVID-19

The Mayor’s budget speech – his 10th – was itself impacted by the virus, as his remarks were taped and shared via WebEx to Metro Council members practicing social distancing by watching from elsewhere, in contrast to the traditional speech delivered in a crowded City Hall.

Mayor Fischer praised the community for its work to help slow the spread of COVID-19 virus in the city by adhering to guidance on hand washing and social distancing, starting with the recommendation to “stay home,” if at all possible.

He then asked for a moment of silence for those who have lost their lives to COVID-19.

“These lost Louisvillians remind us why we must keep slowing the spread of this disease and keep it from claiming even more loved ones,” the Mayor said. “

He praised careful monitoring by Louisville Metro Public Health and Wellness (LMPHW) and crisis preparedness training by LMG as a whole, saying, “Today, we’ve seen how important those preparations were, as this brutal virus struck our city and our country with breathtaking speed.”

The Mayor noted that even as LMG continues to work tirelessly to address the immediate health crisis, “We are also preparing for how to reopen our community safely, and then to create plans and policies to move into a future of opportunity and prosperity for every person in every corner of our community.”

Build Back Better, Together

The Mayor again outlined the city’s three-phase COVID-19 recovery plan:

Phase I, which began before the arrival of the virus. This involved setting up the Incident Management Team, collecting actionable data, identifying challenges, developing contingency plans and executing strategies.  
Phase II is when the city takes the first steps toward reopening, once health experts and data make clear it’s safe to gradually ease some of the social distancing restrictions.

 “We will do this in conjunction with the state,” Mayor Fischer said, “and we will not rush it.” If current trends hold, he added, Phase II may begin in in the coming weeks. “But that timetable is not guaranteed,” he said, adding that it depends on seeing a decreased percentage of new positive cases; maintaining sufficient capacity and supplies in local hospitals; and adequate testing and contact tracing capability.

Phase III involves restarting the city’s economy. Noting that the city, state and nation “must do more than restore a flawed system that benefitted too few at the expense of too many,” Mayor Fischer announced the “Build Back Better, Together” initiative, a roadmap for Louisville’s economic recovery, created in consultation with experts and community partners.

“We must create an economy that provides greater opportunity, access and security for generations to come,” he said, inviting residents to get involved. “I ask you to help us Build Back Better, Together by sharing your ideas on how to create the city, economy and future the people of Louisville want and deserve.  Go to louisvilleky.gov/government/build-back-better-together to weigh in.”

The Mayor closed his remarks by noting lessons from the 1937 flood and the Spanish Flu of 1918 – noting that Louisville’s sense of compassion, community and resilience shown through even then.

“We can’t control the global economy any more than we could control a pandemic virus,” he said. “But our collective action has protected our city and slowed the spread of the virus. And we can influence our own economic future as well, through vision, innovation, entrepreneurship, collaboration, a shared love for our hometown, and yes, compassion.

“When we lean into that work, when we lean into challenges, our city and our people can flourish.”