This week, Louisville Mayor Jerry Abramson announced $20 million in budget cuts. But with unemployment rising, markets fluctuating and millions in pension payments due next year, more cuts may be necessary.
The twenty-million dollars in cuts came from work furloughs, hiring freezes and capital project delays, among other savings. Mayor Abramson says the reductions can stay in place into the next fiscal year.
“There is about 75% of the money that we are saving in this budget that will carry forward into the next budget,” says Abramson.
The new city budget begins in July, but until then, the current cuts may not be enough.
“It’s certainly possible that they’ll have to do further adjustment of their budget,” says Economic Policy Institute vice president Ross Eisenbrey. “It’s not clear that the only solution is cutting budgets.”
Eisenbrey says budgets cuts are not a long term solution for the long term problem that is the national economy.
“From all of the economic indicators, it looks like unemployment will be rising all throughout 2009 and into 2010,” he says.
If more people aren’t working the, occupational tax revenue drops. That tax is the city’s main source of income. And to make things worse…Louisville will take a $13 million hit next year to cover employee pensions.
Add that to the 5 million Abramson says won’t roll over from the current cuts. And that leaves the mayor with almost $20 million to cut again next year.
“Just looking at cuts will probably not be enough,” says Eisenbrey. “Where there are revenues to be had, I think mayors and county governments need to be looking for them.”
“Lots of other regulations, laws statutes that the Kentucky Legislature has passed put a severe limitation on the ability of municipalities to come up with their own revenue sources and their own solutions to their own problems,” says Ken Troskey.
Troske is director of the Center for Business and Economic Research at the University of Kentucky. He says the best way for cash-strapped cities to make money is through tax increases. Several other states offer local options to raise money. Kentucky doesn’t. Kentucky is also facing a $456 million deficit. It’s up to state legislators to find ways to make money for themselves, and for cities.
“The situation in the state clearly has a pretty significant impact for local areas because again, we get a lot of our revenue from the state and the state’s going to have less revenue to give us,” he says.
Governor Steve Beshear has suggested ways to raise revenue, including a higher cigarette tax. But a similar effort failed earlier this year.
So unless legislators approve more options for cities or a higher tax on cigarettes, revenue won’t increase and cuts will have to be made on the state and city levels. It leaves Louisville millions of dollars behind with few ways to catch up.