LEXINGTON, KY - Lexington Mayor Jim Newberry today announced significant spending reductions to counter a major budget shortfall. The cuts will impact many departments in the Lexington Fayette Urban County Government and Council as well as county officials, social services and partner agencies. This announcement comes at the midpoint of a tumultuous fiscal year that began with a $280 million general fund budget and has since seen reductions in revenues for the city shrink to a projected $267.5 million, leaving Lexington facing a grim debt load of $12.5 million and a precarious financial situation.
Reductions totaling $7.6 million have been made to departments of the Lexington Fayette Urban County Government, and an additional $332,000 will come from the Lexington Fayette Urban County Council, county officials and partner agencies. Operating savings of $2 million - garnered primarily from attrition and vacancies - is anticipated, and Newberry further stated that he will discuss with council the possibility of utilizing a $2 million carryover surplus from fiscal year 2008 to improve the city's financial situation. Even with the cuts, nearly $2 million remains as a shortfall to the current budget.
"We have approximately 200 fewer employees now than we did in January of 2007," Newberry said. "The estimated annual savings associated with that is approximately $12 million annually, so we have found the attrition process to be a far more effective way to reduce the size of the Urban County Government, and we will continue down that path."
Though Newberry noted that the budget reductions were made without layoffs or tax increases, he allows that the adjustment will not be without pain.
"I wanted to propose a broad-based expense reduction plan so that the burden of reducing expenses would be shared to the fullest extent possible across everyone in Urban County Government," said Newberry. " We are anticipating that we will have somewhere in the neighborhood of $267 to $268 million of revenue this year, and we will be required to live within those means."
The economic troubles that have been stalking the private sector are now necessarily impacting the public sector for Lexington, since 83 percent of the city's general fund budget is tied to the success of the local economy through payroll taxes, which fall as unemployment rises.
Departments such as CIO, social service and finance can all expect cuts in the neighborhood of $400,000. The mayor's office will cut its budget by enforcing 10-day furloughs for the staff as well as a $100,000 reduction in administration costs and the removal of $34,500 from the mayor's special events and special projects budget. The proposed adjustment for the city's department of public works, which includes traffic engineering, is $743,000 - and may have the greatest immediate impact on citizens.
"When you get down to the particular cuts that have been made, it is not an across-the-board five percent or four percent or six percent. What we started out doing was asking those divisions that are funded by the general fund to give us some proposed expense reduction plans based upon a targeted dollar amount that we gave them back in November," said Newberry. "When in December we received their proposals, there were some of those divisions, most notably those in public safety, that simply could not achieve those targeted levels without substantial layoffs of our public safety personnel, and that didn't make much sense to me for a whole variety of reasons."
Public Safety will still feel the pinch, however, with fire and police overtime reduced by $800,000 and $500,000 respectively.
"I'm confident that the chief and his command staff can effectively assess whether we have an adequate number of firefighters available to meet the public safety needs of this community, and if he concludes we don't, we'll make the hirings necessary to make sure we do," said Newberry.
Despite the seemingly dire financial situation, no money from the rainy day fund was withdrawn to balance the budget, though Newberry seemed unsure about whether that position would stand in coming years and budgets.
"I'm very pleased we didn't tap into our rainy day fund at this point, because we may well need to do that next year," he said. "I hope that we will get to the end of this year with some money that we can carry into fiscal year 2011, because I think all indications are now that our revenue will continue to be less than what we would hope in fiscal year '11, and so whatever savings we can achieve this year that we can take forward into fiscal year '11 will be good."
In the meantime, the city will have to make some adjustments to live within its means.
"I'm hopeful we'll see an improvement in our revenue sooner rather than later," said Newberry. "But if not, we have an expense reduction plan that will be in place that will enable us to manage our way through the end of this fiscal year, and then we'll work with the council to prepare a budget for fiscal year 2011 that will reflect the economic realities for fiscal year 2011."