This week, Louisville Mayor Jerry Abramson is in meetings with city department leaders. He’s looking for ways to cut $20 million out of the Metro Government budget. The mayor has put a freeze hiring and travel, but says cuts to employment and services may be coming soon.
The trouble began with what turned out to be an overly optimistic revenue prediction. The mayor anticipated 2.9% growth. It was the smallest projected growth since the 2003 merger. But income fell short in the first quarter, markets tanked in October, and now the city is scrambling to cut costs.
“The biggest expense for Metro Government, like any agency or any business, is personnel,” says Mayor’s office spokesperson Chris Poynter.
Poynter says Abramson has been meeting with his staff to determine which departments can handle cuts, and he plans to announce those cuts after Thanksgiving. He won’t be alone.
“Columbus, Ohio was looking at an $80 to $90 million shortfall,” says National League of Cities research manager Chris Hoene. “Charlotte has a $40 million shortfall. Cincinnati’s just reporting a $15 million shortfall recently.”
Hoene says struggling cities have three options: Raise taxes and fees, dig into financial reserves or make service cuts.
“The expenditure cuts we’re starting to see aren’t over with yet,” he says. “And at some point if the problem is deep enough there are going to have to be revenue-raising options pursued. Even if those are fairly politically difficult choices right now.”
With job cuts announced recently at Yum Brands and a five-week shutdown coming soon at Louisville’s Ford plants, the city is facing an additional drop in occupational tax revenue. The tax makes up 57 percent of Louisville’s budget, so Hoene says something will have to be done to raise revenues for the next fiscal year.
“You may see a move first to more fees for services trying to move more services away from taxes and over to a sort of pay as you go basis,” he says.
“Every bit of research that I’ve done, everything that I’ve ever read says that the last time in the world you want to raise taxes is during a recession,” says Metro Councilman Kevin Kramer.
Kramer says he speaks for the 11 council Republicans when he says “No” to raising taxes or cutting public safety services.
“There are other branches of government that we could talk about finding ways to reduce expenditures without starting to talk about police, fire and EMS,” he says.
“None of us wants to see Parks, but Parks aren’t as essential as police.”
But Chris Hoene with the National League of Cities says there may be a quicker fix.
“Most of the inside baseball here in Washington D.C. says that something happens with stimulus this week and or in early January,” he says.
That stimulus is a pot of money the federal government could give to cities for infrastructure improvements. Louisville has such projects planned, and Mayor’s spokesperson Chris Poynter says the stimulus package would free city dollars to be used on other expenses.
But even if that does happen, Hoene says it may not be strong enough to delay the inevitable.
“The revenue shortfalls we’re talking about now are the result of changes in the economy that happened anywhere from three months to a year and a half ago, so we know that with whatever happens to the economy in the next six to nine months, before we hit bottom, that’s probably going to be playing out for the next year and a half to three years,” he says.