FY19 year-end update anticipates revenues and expenses within 1% of budget as audit is finalized
Louisville Metro Government ended the 2019 fiscal year with $4 million more in operations than budgeted, a one-time overage that Mayor Greg Fischer proposes using to accelerate the timing of a new police recruit class, to boost the city’s unassigned fund balance (or Rainy Day Fund), and offset the city’s growing pension obligation through fiscal year 2023.
Daniel Frockt, the city’s Chief Financial Officer, shared the information today with Metro Council, noting that the difference between the FY19 budget of $621.4 million and actual revenue of $626 million is a very slight 0.7 percent. “Our city’s budget team is regularly on point at forecasting, and this small difference is clearly evidence of that,” he said.
By comparison, the state’s FY19 budget and actual revenue differed by $194.5 million, or 1.7 percent.
The overage, Frockt said, was largely due to one-time factors such as higher-than-expected public service corporation property taxes and non-recurring capital gains, coupled with lower-than-forecasted spending in some departments. The lower expenditures stem in part from such actions as a hiring frost implemented in the spring, as work was under way on an FY20 budget that included $25 million in cuts. (FY19 ended on June 30, and FY20 began on July 1.)
The year-end update showed some departments were under budget in FY19, including LMPD (by 1.4%, due in part to the cancellation of a June 2019 recruit class) and Emergency Services (by 6.3%, due to increased vacancies).
And some were over budget, including Parks (by 5.7% due primarily to golf), the Louisville Zoo (by 7.2% due to poor weather conditions), and Louisville Fire (by 2.5% due to a delayed start to the recruit class that drove more overtime than budgeted).
The fluctuations stemming from golf and the Zoo illustrate the budget challenges the city is trying to address with recent Requests for Proposals seeking alternative operating ideas.
Mayor Fischer praised his team as sound stewards of residents’ tax dollars, noting that besides the hiring frost, his team eliminated 49 positions in FY19 and adopted new fees, while also cutting spending on travel, training, technology, office supplies, subscriptions and assigned vehicles.
“This growing budget obligation was an enormous challenge for us in 2019 and 2020, and it continues to grow, eating up a greater portion of our revenues every year through at least 2023,” he said. “Our residents should take heart in the fact that Metro leaders are working as hard as they can to minimize the impact of cuts on our most vulnerable. But without a source of new revenue, that will become increasingly more difficult.”
The Mayor proposes using about $300,000 of the FY19 funds to move a planned 2020 Louisville Metro Police recruit class from June to May, which is the earliest that recruits can be hired and trained after a February class completes its training.
In earmarking $2.7 million to use toward future pension obligations -- in increments of $900,000 each in FY21-23 -- the city provides itself some flexibility in addressing annual pension growth, which is expected to take up a greater percentage of the budget in coming years, Frockt said.
And putting $1 million toward the Rainy Day Fund is prudent, Frockt said, noting that national credit rating agencies have cited that as an area of concern. The city’s goal is to have a Rainy Day Fund that’s 8-17 percent of general fund revenues, but it’s currently at 10.7 percent.
“Maintaining good credit ratings is key to saving on future borrowing costs,” Frockt said, “by reducing the interest we have to pay and providing us greater resources to manage our cash flow.”
Bill Hollander, chairman of the Metro Council budget committee, said it’s important to remember that “while it’s nice to have a small amount of funding from FY19, the funds are dwarfed by a pension obligation that’s expected to grow by well over ten million dollars annually.”
Mayor Fischer’s administration will introduce a year-end ordinance on Monday, Nov. 18, to balance all FY19 accounts, with an expected adoption by the Metro Council on Dec. 1