Lexington government making contingency plans for budget cuts

reductions of up to 10 percent being sought as part of contingency plan

bfortune@herald-leader.comSeptember 2, 2011 

Urban County Government division directors and commissioners are being asked to recommend where they could make additional cuts of 5 percent to 10 percent in their 2012 budgets if necessary.

Commissioner of Finance and Administration Jane Driskell told the Urban County Council's budget and finance committee earlier this week to draw up the contingency plans.

Divisions already have made cuts in the 2012 budget, adopted by the council in June.

On Thursday, Bill O'Mara, the city's director of revenue, said making contingency plans for more cuts was simply good financial management. "This is part of the budget planning process. You ask for plans, evaluate them. It's good financial discipline ... to identify ahead of time the best strategic decision for you and your organization."

It's not an unheard-of step to take, he said. "The state asks its agencies to include what a 5 percent reduction would look like. They do it every year. It is part of their budget planning process," O'Mara said.

Asked what precipitated the request, O'Mara said, "If the (economic) winds start to blow the wrong way, what do we need to do. This puts us in a good position for planning."

Since taking office in January, Mayor Jim Gray has cautioned repeatedly that the city faces serious financial problems, including its fourth consecutive year of flat or declining revenue.

In July, Gray used his line-item veto to cut $889,612 from the fiscal 2012 budget approved by the council. His vetoes were the first successful vetoes of line items in the 37-year history of merged government.

In addition, the council adopted a $274 million budget for 2012 with $9 million in savings — $5.6 million in collective bargaining with police, fire and corrections, $3.5 million in health benefits and $250,000 in operational efficiencies.

"Nine million dollars — that's big for us," O'Mara said. "If we fall short of these projections, we would need a contingency plan."

For the past three or four years, the city has made similar requests of division directors, but usually not until January or February. "This time we're doing it earlier, so if more reductions are required, plans will already be in place," he said.

The city's four main sources of revenue are employee withholding fees, net profit tax, insurance fees and franchise fees. One month into fiscal year 2012, the city has made its revenue projections, but those were conservative projections. And O'Mara cautioned, "What we projected came in, but that is only one month. One month does not a trend make. We don't know what tomorrow will bring."

O'Mara said he was very attentive to national economic indicators such as the unemployment rate, jobs created, home sales and foreclosures. "We are watching the national economy and wondering if and when it will be reflected in Lexington," he said.

Reach Beverly Fortune at (859) 231-3251 or 1-800-950-6397, Ext. 3251.

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