A freshman member of Metro Council unveiled a new proposal that would attempt to plug the $35 million hole in the city’s budget next year, offering a mix of $15 million in cuts to services and over $20 million in new revenues by raising the tax rate on insurance premiums by a lower amount that Mayor Greg Fischer’s first plan unveiled last month.
Councilman Markus Winkler, D-17, explained his proposal in the Democratic Caucus meeting on Thursday, calling it a potential compromise for fellow Democrats and residents who preferred a mix of cuts and new taxes to fill the city’s projected $65 million shortfall over the next four years instead of only through tax increases, as Fischer called for.
Winkler was one of the five Democrats who sponsored a proposed ordinance to put in place the mayor’s tax plan as a way to avoid huge layoffs and cuts to government services by raising rates on insurance premiums — besides vehicle and health — from 5 percent to 12.5 percent in the next two years and eventually tripling the rate to 15 percent in four years.
The deadline for council to raise any new tax revenue for the next fiscal year beginning this summer is March 21, which is why council members in recent weeks have set up special meetings of the budget committee, public hearings and district town halls on the matter, in addition to the creation of a new ad hoc committee on the issue chaired by Councilman David Yates, D-25, and a special committee of the whole on Monday.
Winkler drafted the plan in consultation with other members over the past week who submitted ideas on where the city budget could be cut without catastrophic effects — including budget committee chairman Councilman Bill Hollander, another sponsor of the original ordinance — concluding that enough could be cut so that the full tax increase proposed by Fischer could be scaled back.
Under the proposal, the council would call for cutting $15 million from the city budget next year while raising over $20 million in new tax revenue.
Instead of raising the insurance tax rate to 12.5 percent in the next two years, Winkler’s plan would raise it to 9 percent in that period, and then to 10 percent in the following two years. That would raise $19.7 million in new revenue next year, $26.3 million the next year and $33 million in the following two years.
The proposal also calls for a new 3 percent tax on rental cars, which is estimated to bring in $1 million in revenue annually. Instead of not touching the tax rate on auto insurance over the next four years, Winkler’s proposal would leave it at 5 percent next year and then raise that incrementally to 6.5 percent within four years.
Winkler noted that even with the $15 million in cuts to address the structural deficit, the city would have to find an additional $3 million in the 2022 fiscal year and $17.9 million in 2023.
All revenue generated by the new taxes would be dedicated to filling the hole created by increased pension payments, which make up most of the projected $65 million shortfall over this four-year period. The proposal also calls for adding language asking the attorney general to launch an investigation into insurance redlining — charging more in poorer areas — lobbying the state legislature to give the city more taxing authority and pledging to revisit the insurance tax rates if additional taxing options become available.
Winkler’s plan also outlined 16 potential areas in which the council could find $15 million of cuts to services next year, though it would leave the specifics of such to the council after it decides what to do about revenue on March 21, as Fischer will propose a new budget in April and the council must approve a budget before July.
Among the 16 potential areas for cuts — some of which repeat the potential cuts outlined by Fischer if taxes weren’t increased — the proposal mentions:
- an immediate citywide hiring freeze
- salary cuts and furloughs for employees making over $90,000
- cutting council members’ discretionary funds by 27 percent
- increasing health insurance premiums for city employees
- eliminating all take-home vehicles besides police
- privatizing the Belle of Louisville
- turning Youth Detention Services over to the state
- eliminating funding for the Centerstone Living Room Project
- eliminating spending on bike lanes
- reducing management and communications positions
- eliminating suburban street sweeping
- reducing EMS services by one ambulance in suburban districts providing that service
- eliminating support for suburban fire districts
Winkler and Hollander noted that this was in no way a completed plan, welcoming other members to submit their thoughts for further amendments in the coming week.
Councilwomen Jessica Green and Barbara Shanklin both told fellow Democrats in the caucus meeting that their constituents were opposed to any tax increase, though other members expressed support for the direction that Winkler’s proposal moved in.
Green also advocated for the council identifying the specific cuts in the ordinance that could be voted on in two weeks, though others, like Councilwoman Nicole George, D-21, agreed with Winkler and Hollander that this was too monumental a task for the council to complete and find consensus on in just two weeks.
Councilman Kevin Kramer, the chair of the Republican Caucus and vice chair of the budget committee, told Insider Louisville Thursday evening that he had not yet been able to review Winkler’s proposal, but said that no member of his caucus would vote for any ordinance to increase taxes by any amount, no matter how small, because there was enough to cut from the budget to fill the hole.
Kramer and Councilman Anthony Piagentini, R-19, had both previously indicated that the Republican Caucus would release a detailed plan on what could specifically be cut in the next budget, but at the committee of the whole meeting Thursday night, Kramer said he had never indicated that he would put out a formal plan.
Speaking with Insider, Kramer said he was neither advocating for any tax increases nor any cuts to the budget, but would instead only list budget cuts first proposed by Fischer “that we can live with.” He said this was not just a matter of semantics, adding that the mayor’s intent was to trap members into taking the blame for cuts to services.
If no Republicans vote for the tax ordinance in two weeks — in whatever form that takes — then it will come down to the supermajority of 19 Democrats and what mix of tax increases and cuts to services that they can live with.