Lexington city officials warned the Urban County Council Tuesday that an increase in salaries, overtime and medical expenses is straining the city’s checkbook.
But the city believes that any shortfall in its personnel budget can be covered by a projected $7 million savings in the city’s operations budget. Operations includes almost all non-personnel costs.
About six months into the current fiscal year, the city’s personnel budget is running 3 percent in the red, said Bill O’Mara, the city’s finance commissioner.
“We are now over budget by about $3.9 million,” O’Mara told the council’s Budget, Finance and Economic Development Committee on Tuesday.
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The larger-than-expected growth in the city’s personnel budget is not just salaries and new hires. Overtime has also crept up. Vacancies for corrections officers at the Fayette County Detention Center typically run at 50 or so a year. This year, turnover at the jail is down. That means fewer vacancies but more money spent on salaries, O’Mara said. Health insurance costs are also included in personnel. Those costs also went up in December.
The surplus in the operations budget is because of a light winter and less money spent on professional contracts, such as hiring lawyers or engineers.
The overall budget for the fiscal year that ends June 30 is more than $345 million.
The city will look at how it budgets for personnel before it proposes the budget for the next fiscal year. Mayor Jim Gray typically proposes his budget in early April.
While the city does not plan a hiring freeze, some on council expressed reservations about not slowing hiring until things improve. Next year, the city is looking at a new collective bargaining agreement with the police, as well as building a new government center.
“We should put a freeze on some of this stuff,” said At-Large Councilman Richard Moloney. “I don’t think you should buy something you can’t afford.”
Councilwoman Angela Evans questioned why the city doesn’t dip into a $3.5 million health insurance reserve fund rather than take from the city’s operating budget to cover personnel.
O’Mara said city staff thinks it is more responsible to balance the budget using savings in other areas rather than dipping into reserves.
Overall, the city is tracking a projected surplus of about $5.4 million.