Mayor Fischer presents austere budget that manages impact of growing state pension obligation while minimizing cuts on most vulnerable

April 25, 2019
  • Brings businessman’s approach to addressing $35 million deficit after Metro Council rejects revenue proposal
  • Vows to work for additional revenue to prevent worsening cuts as pension tab increases in coming years

Mayor Greg Fischer today proposed an austere 2019-2020 city budget that manages the impact of a $35 million budget deficit, driven largely by a 12 percent increase in the city’s state pension costs, while working to minimize the impact on Louisville’s most vulnerable.

The $623 million general fund budget anticipates a revenue growth rate of 2.9 percent, which is dwarfed by the size of the increased pension cost – $20 million higher than in 2018.

The Mayor had previously warned that despite a growing economy, the pension challenge would, without new revenue, result in $35 million in devastating cuts in the fiscal year that starts July 1. Metro Council in March rejected a proposal to create the revenue necessary to avoid the cuts.

“It’s no secret that I strongly disagree with the choice (Council) made,” the Mayor told the Council today. But “my responsibility is to translate your vote into a budget.”

The Mayor said every department will see cuts, including his office and Metro Council. 

Public safety took a smaller percentage cut than most, the Mayor said, while noting that given the size of the budget shortfall and the fact that public safety makes up about 60 percent of the budget, it was impossible to exempt them as some had suggested.

KEY POINTS

The city had previously announced that it would cancel the LMPD recruit class that was to start in June, because of uncertainty over the budget. Today, the Mayor announced that there would be two recruit classes in the fiscal year that begins July 1, and 17 School Resource Officers will be moved out of Jefferson County Public Schools and put back on the street. Still, there will be a net reduction of about 40 uniformed officers. 

The plan also calls for closing the Engine 1 firehouse on Grade Lane, and taking one ambulance off the street.

In his remarks, the Mayor reminded Council that public safety goes beyond LMPD, Fire, EMS and Corrections.

“Our resources in public health, safe and healthy neighborhoods, libraries, parks, and community centers also make essential contributions to public safety by making sure kids have a place to go to and trusted adults to help them stay on the right path,” he said.

MAYOR FISCHER'S REMARKS

He also noted that his budget plan continues funding (though at an 18 percent reduction) for the Office for Safe & Healthy Neighborhoods, which coordinates outreach programs like Reimage, Cure Violence and Pivot to Peace, which work to stop violence before it begins.

The Mayor added that since being established in 2013, the office has helped generate nearly $7 million in grants for the city, including, most recently, a $5 million federal grant to help Louisville families and young people most affected by trauma, inequity, and violence. 

LEARN MORE ABOUT THE BUDGET

Minimizing the pain

The Mayor said his budget plan is based on data and a commitment to equity, and a priority was minimizing the pain on the city’s most vulnerable.

The budget includes $1 million for homeless services, and $1.1 million for community ministries. And while the investment in affordable housing is $7 million less than last year, the budget earmarks $5 million for that need.

“We have to make these investments because we know that if we want to help people be productive, they have to have enough food to eat, and a stable and affordable place to call home,” he said. 

The budget keeps open all of the city’s community centers for the coming year but closes the Charmoli Neighborhood Place in Middletown. The budget also calls for closing the Middletown Library, which is located in the same leased space as Charmoli, as well as the Fern Creek Library, also in leased space.

“However, later this spring we will be opening the new Northeast Regional Library, completing a key component of the library Master Plan,” the Mayor said, adding that Northeast is about four miles from Middletown, which will ease the inconvenience of that closure, and that Fern Creek is less than five miles from the Jeffersontown Library and less than six from South Central Regional Library.

The budget reduces hours at library branches but maintains Sunday hours.

The budget also:

  • Funds Tech Talent and SummerWorks programs, though it reduces overall funding for economic development and agencies that keep the city clean and green.
  • Reduces the paving budget from $18.2 million to $15.2 million.
  • Includes the smallest capital budget proposed in six years, mainly focused on maintenance. “While we are making some targeted investments, we will be stretched to keep up with all the potholes, broken sidewalks and basic paving projects that need to be addressed,” the Mayor said.

The budget proposal includes an assumption that Metro Council will increase property tax revenue by the allowable 4 percent.

For a $100,000 home in the county this would increase the tax from $123.50 to $125.30 or $1.80 per $100,000 of value.  For a $100,000 home in the Urban Services District, the increase would be from $353.80 to $356.90 or $3.10 per $100,000 of value, in addition to the $1.80 paid for the county rate.

But that will generate only about $1.2 million, and the city still will be forced to eliminate as many as 312 Metro Government positions, including about 100 layoffs. This includes full time, part time and seasonal workers; union and non-union.

“Government is a service business; about 70 percent of our costs are people. So there is no avoiding layoffs,” the Mayor said, adding that his budget plan includes funding for outplacement and other services to help those workers transition to other employment.

In addition, most health insurance policies for Metro employees will see an increase of 3 percent on premiums and an increase on deductibles and other out-of-pocket expenses. And the Mayor proposes a tiered approach to scaling back the cost of living adjustments to non-union employees’ salaries.

While state law forbids elected officials from taking a pay cut, Mayor Fischer said he would invest in our city’s youth by donating 20 percent of his salary in the coming fiscal year to SummerWorks.

The Mayor noted that the budget cuts the city faces now are all the more difficult to absorb because the city is already very lean and efficient.

Evidence of the city’s outstanding financial stewardship can be seen, he said, in outside entities seeking to invest here. In the last week alone, he noted, the city has announced a $4.6 million federal Healthy Start grant; and $3 million from JP Morgan Chase & Co. for career and financial training.

And just yesterday, Louisville was nationally recognized for its use of data and innovation to create efficiencies and improve services, with a Gold Certification from Bloomberg Philanthropies’ What Works Cities program.

The Mayor described that as “a strong validation of our work and our stewardship of tax dollars.”

Looking ahead

The Mayor also reminded Council that the pension obligation is growing.

“Initially, we expected our pension bill to increase by about $10 million a year until 2023, when it would stabilize, meaning at least another $30 million in the three years after FY20,” he said. “But just last week, KRS adjusted its predictions again. It now appears we can expect the rate of increase to continue even beyond 2023.”

So barring a significant source of new revenue, he warned, more cuts are unavoidable.

During his presentation, the Mayor also noted that despite the pension challenge, the city today has great momentum, evidenced by 80,000 new private sector jobs and2,700 new businesses since 2011, and more than $13 billion in capital investment happening throughout the city since 2014, including a record investment of nearly $1 billion in west Louisville.

“We’re creating a more equitable city where everyone shares in our prosperity,” he said, adding that while there is still much work to do, 20,000 Louisvillians have lifted themselves out of poverty over the past four years, and 17,000 families have joined the middle class.

“We’ve transformed our skyline with new bridges and landmarks. We renovated the gorgeous Kentucky International Convention Center, built two dozen new hotels. We’ve developed Bourbonism, our city’s first 365-day-a-year tourism opportunity … (which is) helping us attract 16 million visitors a year,” he said, and, “Last year, we were named one of the top 15 cities in the country for millennial growth.”

“And the endorsement of so many national foundations, corporations and federal agencies - and the millions of dollars they’re investing in Louisville reminds us that we are poised – still – to become America’s next breakout city.”

 He urged the Council to support new sources of revenue in the fiscal year ahead, “mindful that while we deal with this pension-driven budget challenge, our peer cities – Nashville, Indianapolis, Cincinnati - are investing in themselves, in their infrastructure, transportation and quality of life.”

In closing, he said, “The question now is, how hard are we going to make it for ourselves to move forward? To create a city of equity and opportunity?  To make the investments necessary to sustain a thriving city that competes and wins in the global marketplace and whose reputation for compassion, innovation and opportunity continues to grow on the world stage?

“A city where every person has the chance to reach their full human potential?”