Reductions to Department Budgets, Settlement from Insight Helps Balance City Budget
Mayor Fischer also makes progress toward addressing structural imbalance
LOUISVILLE, Ky. (Feb. 10, 2012) – Louisville Metro Government will balance its current fiscal year budget thanks to $6.8 million in savings across city departments and a $3.5 million settlement from Insight Communications for its cable franchise, Mayor Greg Fischer announced today.
The city, facing a $12 million deficit, will offset half of the shortfall with dollars derived from city departments, some of which have been restricting spending and operating below budget. Those restrictions were placed on departments and on capital projects following last year’s budget process because the mayor was concerned that revenues wouldn’t grow as anticipated.
The Insight agreement was reached Thursday night after months of engagement, and the Mayor immediately directed the money to be applied to the city’s deficit.
“The timing of this settlement is fortunate, keeping the city from having to take significant measures to reduce services to close the deficit,” Fischer said. “However, it’s only one-time money, and we still must address our long-term structural imbalance in which expenses are far outpacing revenues.”
The Insight agreement ends negotiations over the expired franchise, allowing the cable franchise to be transferred to Time Warner (see related release for details).
The mayor’s budget-reduction plan avoids employee layoffs, but eliminates nine positions which are vacant. Fischer said he will now move forward on approved capital projects, because of the Insight settlement.
Final revenues for the current fiscal year are expected to be $496 million versus the original projection of $504 million. The primary cause for the shortfall is the occupational tax revenue.
“Our occupational tax revenue is growing from the prior year, but not as fast as anticipated. There are clear signs that we are coming out of the recession, but the growth in revenues is not keeping pace with expenses,” Rowland said.
Some departments, including Police and Public Works, have saved money this fiscal year in part due to a mild winter (and thus no need for snow removal) and the cheaper price of gas earlier this year.
“We have been concerned about the degree of economic recovery through the fiscal year, and I congratulate our managers who have been frugally spending their budgets,” Fischer said. “Through sound fiscal management by department directors, we were able to overcome the deficit without directly affecting people or services. Nearly every agency helped share the pain, and we were able to make reductions without mandating across-the-board cuts.”
About half of the $6 million from city departments —from Metro Parks to the Mayor’s Office to Metro Corrections — has the added benefit of helping partially offset next year’s deficit. That’s because the cuts are structural in nature, meaning some department’s new fiscal year budget, which starts July 1, will be based on the reduced budget from this year.
For example, the Mayor’s Office will contribute $72,000 to close this fiscal year and its new base budget for fiscal year 2013, which starts July 1, also will be reduced by the same amount. This represents a 2.5 percent annual cut.
In addition, the mayor announced that he would give up his $41,000 annual discretionary account in the current year and next fiscal year.
The mayor’s budget reduction plan asks the Louisville Metro Council to also contribute, by reducing its budget by $142,000 this year and the about same next year. This represents a 2.5 percent annual cut.
The nearly $3 million in structural cuts “means we are taking steps in the right direction,” Fischer said. “Those cuts will allow the city to close roughly 15 percent of our structural deficit.”
The structural cuts will be difficult, forcing department directors to make critical decisions in the coming months as they prepare their fiscal year 2013 budget, which the Mayor will present to the Metro Council in late May.
The budget reductions announced today also apply to related agencies which receive city dollars. Greater Louisville Inc. will see its contribution cut by $50,000 this year and the Waterfront Development Corp by $24,000.
The budget plan also includes:
• Taking $1.6 million from the city’s Vehicle Replacement Fund, a savings account used to purchase police cars, fire trucks and other vehicles;
• Delaying the March police recruit class until late June. That saves about $688,000 in the current fiscal year, but will have little or no impact on public safety.
Next year’s budget was projected to have a shortfall of $20 to $30 million. However, a payment of $10.8 million announced earlier this week to settle the firefighter pension case in the current fiscal year means the deficit will be about $20 million.
The mayor said he is approaching next year’s deficit with numerous ideas to reduce expenses including cutting overtime, in co-operation with the city’s unions, and implementing LouieStat, a data tool to help directors better manage their departments. He also said he will further consider some of the budget ideas presented to him in a letter by the Metro Council.
“I also want to thank our citizens for their more than 300 budget ideas which we received via Facebook and Twitter,” Fischer said. “The community is aware that next year’s fiscal budget will be a challenge. We are already hard at work on it.”