Metro Council Democrats appear to have formed a general consensus on how the city should deal with its looming budget crisis: meet somewhere in the middle between cutting $65 million in government services over the next four years and the proposal to raise that same amount in new tax revenue over the same period.
The specifics on where those two will meet have not been hammered out yet, but there is not much time, as the council has until March 21 to pass any ordinance increasing the tax rate on insurance premiums if that is to go into effect for the next fiscal year beginning July 1.
Even the five sponsors of the proposed ordinance filed last Monday that would eventually triple the tax rate on insurance premiums within four years indicated in a meeting of the Democratic Caucus on Thursday that they are encouraging amendments that would specify offsetting cuts — therefore requiring less new revenue and allowing for a tax hike that is less steep.
That tax plan detailed in the proposed ordinance was first proposed by Mayor Greg Fischer on Feb. 13, who said that it was the only option to avoid “devastating” cuts to public safety and government services that would be necessary because of rapidly increasing pension payments mandated by Frankfort and the limited ways that the city can raise tax revenue under state law.
Since that first announcement, the mayor has held a number of news conferences highlighting the specific layoffs and city services that he says would need to be cut unless Metro Council approved his plan, urging the public to contact their council member and share that message.
Fischer’s announcement and the subsequently proposed ordinance drew swift criticism not just from Republican council members — who felt ambushed by both the budget crisis presented by the mayor and the limited time in which to act — but from some Democrats who felt like they were kept in the dark and are now facing waves of negative feedback about possible cuts and tax hikes.
At the meeting last week of the council’s Democratic Caucus, Councilman David Yates characterized most of the feedback he’s received from constituents as “a lot of four-letter words.”
Other Democratic members shared that they had heard from angry constituents, with Councilwoman Cindi Fowler saying that business owners told her that they would be hurt by tax hikes on their various insurance premiums.
“People are just not having it,” said Fowler. “They’re saying cut it, cut it, just cut it all out of the budget. And now I’m wondering if we shouldn’t just do it and let them live with it for a year.”
At the Democratic Caucus meeting on Thursday, Councilman Bill Hollander — one of the sponsors of the ordinance and the chair of the budget committee — repeated his sentiment from that meeting a week earlier, saying that ultimately the council should pass a combination of service reductions and increased revenues.
“As a sponsor of the ordinance, I have always said since Day 1 that this needs to be a combination of new revenue and cuts,” said Hollander. “I don’t think it’s acceptable to the community to do this purely through cuts. I think the cuts would be on a level that would really put us on a downward spiral, but I also think that we need to make some cuts if we’re having this kind of revenue enhancement.”
Since Fischer first unveiled his tax plan, Hollander said he welcomed ideas for alternative revenue sources and areas of the city budget that could be cut. However, he and other members have noted that the city is prohibited by state law from implementing many of the revenue options suggested from the public, and they have not received any specific plans from the Republican Caucus on what nonessential departments or services should be cut.
Several more Democratic members chimed in on Thursday in support of such a hybrid approach, including Councilman Pat Mulvihill, the chairman of the caucus, who said he has learned through conversations with the ordinance’s sponsors, council colleagues and the community that people want an option somewhere between $65 million in cuts and $65 million in revenue.
“One overriding thing I keep hearing is there needs to be a balanced approach,” said Mulvihill. Not A, not Z, but something more in the middle.”
Noting both the complexity of the issue and the very limited amount of time to pass a revenue ordinance, Mulvihill suggested not just additional caucus and committee meetings over the next two weeks to discuss the issue, but the creation of a “war room” with big pads and Post-It notes, where members could write down their ideas and requests for potential cuts and revenues. Councilman Brandon Coan added the suggestion that it instead be called the “solution room.”
While no “solution” of sorts has been identified yet on how much could be cut from the city’s budgets — and what specific departments or services they would come from — another debate is over whether the council should be focused on the four-year outlook of the mayor, or just the coming fiscal year.
While Fischer has identified a $65 million budget hole over the next four years, $35 million of that is for the next fiscal year alone. While the mayor’s plan focuses on incremental increases to the insurance premium tax rate over that time, Democratic council members like Jessica Green and Brent Ackerson said their immediate focus should be on fixing the $35 million problem for next year alone.
Both Green and Councilwoman Paula McCraney added in the meeting that they would never vote for the ordinance as it is currently written, advocating an amendment to look at both new revenue and cuts for the next fiscal year.
While the city has a strict deadline in three weeks to decide on a tax revenue model for the next fiscal year, any specific cuts could likely have to wait for the official 2019-2020 budget, which the mayor is scheduled to release a proposal for in April and must be approved by the council before July 1.
Councilwoman Barbara Sexton Smith, one of the five sponsors, added that “I don’t believe I ever intended” for her ordinance to be passed without being amended, “but it needed to be put out there and filed so we can begin the public discourse.”
McCraney took issue with that, saying that “we have been inundated with phone calls, with emails, with outcries, with cries from our constituents. If that was your intent, then well done, you certainly got what you wanted.”
Councilwoman Barbara Shanklin added her frustration with the mayor over his handling of the issue, saying that Fischer’s presentation of the two options and call for the public to contact their council member “makes it look like we’re the ones who are shutting these departments down.”
“It’s really a bad situation when the mayor doesn’t step in and take some of the heat off of us and put it on himself, instead of making it look like council people were the ones that said ‘let’s get rid of the libraries, let’s get rid of this and that,’ ” said Shanklin.
Fowler also derisively referred to Mayor Fischer’s “infomercials” over the past two weeks, saying that they have failed to sway public opinion in his favor.
“I’m getting a whole lot more calls saying the mayor told me to call you,” said Fowler. “And I don’t think it’s working out for the mayor the way that he thought. I let him know that yesterday, but I’m not sure how that’s going to work.”
Meanwhile, much of the Republican Caucus has spent the past few weeks publicly laying blame at the feet of the mayor for not preparing for the “slow-moving train wreck” of the pension crisis, pointing to increased government spending over the past two years.
While several Republican members have indicated that they won’t vote for any tax increase this month, Councilman Anthony Piagentini told Insider Louisville last weekend that he expects a more bipartisan plan for potential cuts to come together in the coming weeks.
“I can tell you behind the scenes right now there’s a lot of people — bipartisan — throwing out ideas, and I think what will end up happening over the next couple of weeks is the good ones will float to the top and that’s what we will get,” said Piagentini. “I hope we get there. I would like to see us get there entirely with cuts because I think this tax increase is really going to be very, very hard on our economy… But with that said, that’s probably the realistic bipartisanship that will happen.”
Piagentini — who has cast scorn at what he calls Fischer’s deceptive “PR pitch” — suggested last week that the Metro Department of Public Health and Wellness was one of the “nonessential” city departments whose budget growth over the last two years could be cut back.
Likely referring to those comments, Fischer recently went as far as suggesting that some Republican members want to do away with the city’s health department.
At a news conference on Monday at University Hospital touting city programs aimed at preventing violence and the health department’s success at preventing a hepatitis outbreak, Fischer said that “we have some council members that are saying we don’t need a Public Health and Wellness Department.”
Pressed on that assertion by Insider, Fischer eventually conceded that “if I said that, I meant they said we need cuts,” adding “they need to be specific on what they mean.”
Responding to Fischer’s statement, Piagentini tweeted that “we have a Mayor who has the inability to be honest about his opposition. Cutting growth is not eliminating an entire department. But we can play this game… the Mayor wants to force seniors on fixed income into the street with his tax and spend policy.”
A review of the approved budget for the current fiscal year shows that general fund appropriations for the city health department actually decreased by 9 percent last year, or nearly $2 million, though much of that difference was likely caused by the Office of Safe and Health Neighborhoods becoming its own independent department.
Without new revenue, Fischer has estimated that the health department could be cut by an additional $2 million in the next fiscal year, which would lead to the closure of the city’s STD clinic and immunization program, a reduction in hours and staff of the syringe exchange, the elimination of funding for Centerstone Kentucky’s Living Room Project to divert people from jail and into addiction treatment and services, nine employees laid off at the Center for Health Equity and a total of 22 layoffs across the entire department.
Councilman Kevin Kramer — the chair of the Republican Caucus and vice chair of the budget committee — told reporters Thursday night that he would not vote for any tax increase, and the caucus would release a detailed plan soon that would explain how this could be done without damaging public safety and essential services. He also questioned the Fischer administration’s number on the budget hole for next year, asserting that it is actually $25 million, not $35 million.
At the first special public hearing on Thursday evening to hear comments from the public on the budget issue, 42 speakers gave council members their thoughts on potential tax increases or cuts to government services, which took up just over two hours.
A majority of the speakers urged the council members to avoid cuts to city services and programs — such as libraries, neighborhood places, community centers, community ministries, addiction treatment, police and fire departments — arguing that they would have a devastating effect on Louisville’s most vulnerable citizens.
However, nearly a dozen warned that tax increases would hurt citizens and businesses. Attorney Theresa Camoriano warned that such an increase to insurance premium taxes would drive businesses out of the city that are the largest contributors to the tax base, which would “drive the city down like Detroit.”
Most of those arguing against any tax increases did not identify specific city services or departments that need to be cut, instead referring to general waste, redundancies and unnamed officials in the Fischer administration whose salaries are too high. Others mentioned specific suggestions for cuts that take up a fraction of the city’s total budget, like bike lanes and the economic development departments spending on entertaining prospective business guests at the Kentucky Derby.
Kathleen Parks of the National Action Network told the council members that no one’s taxes should be raised and that the $65 million budget hole could be filled with a GoFundMe campaign.
The next public hearing on the budget issue is on Monday at 6 p.m in the Metro Council chambers.