How an 11th hour change to KY state budget cost cash-strapped Lexington nearly $200,000
When the Kentucky General Assembly passed its $11.4 billion one-year budget on April 1, no lobbyists and members of the general public were present due to restrictions put in place to stop the spread of the coronavirus outbreak.
Tucked in both the House and Senate budgets was a little-noticed provision that increased the amount of local funding to the Fayette County Property Valuation Administrators office from $250,000 to a little more than $500,000.
For two months the provision went unnoticed.
It wasn’t until this week that Lexington officials were told by the state that the city’s proposed $372 million budget must increase funding to the PVA’s office by more than $186,000. The proposed budget had more than $320,000 for the office that conducts property value assessments used to generate property tax bills.
The issue came up Thursday as the Lexington-Fayette Urban County Council continued deliberations on changes to Mayor Linda Gorton’s proposed budget for the fiscal year that begins July 1.
Chief Administrative Officer Sally Hamilton said city leaders were not aware of the language change in the state budget until state Department of Revenue officials contacted them late Tuesday.
Councilwoman Susan Lamb questioned why no one knew about the change or alerted the city until late in the budget process. Gorton unveiled her budget April 28.
Kevin Atkins, the city’s chief development officer, said typically a change that would have resulted in additional costs to the city would have been flagged by the city’s lobbyists.
But lobbyists weren’t there at the time the budget was passed, he reminded council.
“The session was closed at the end,” Atkins said.
Councilman Richard Moloney, miffed that the increase was approved by the state without the city’s knowledge, said Fayette County PVA David O’Neill “should pledge not to increase taxes.”
The language in the budget bill also upped the local appropriation to the Jefferson County PVA office.
O’Neill said Thursday inserting the funding increase in the state budget bill was not meant to circumvent local authorities or public scrutiny.
Property valuation administrators receive money from both state and local governments. State money pays for salaries and benefits for the office’s workers while local contributions cover expenses of operating the office.
Funding is determined by a formula. But because of poorly worded language in state statute, larger counties, particularly merged governments such as Jefferson and Fayette counties, receive less per capita than smaller counties.
For example, Fayette County’s PVA office receives less per capita than any other PVA office in the state. It’s local appropriation is $320,000. That’s roughly 98 cents per capita. In comparison, the Scott County PVA’s office per capita funding is $4.16.
The Kentucky PVA Association, which lobbies on behalf of PVAs, had successfully convinced the legislature two years ago to increase the funding formula for larger counties to bring those offices’ funding in line with smaller counties.
Jefferson and Fayette counties were inadvertently left out of that budget bill two years ago, O’Neill said. This year that was corrected.
“I am not aware of there being a ‘last minute’ aspect to them.,” O’Neill said of the change. “However, given how the legislature wrapped up amid COVID-19, it probably didn’t get as thorough a discussion as it might have, but it has been out there and discussed for a long time.”
O’Neill said he agrees that a funding increase at a time when the city is looking at a dramatic decline in revenues is unfortunate.
“But this is something that has been worked by various folks off and on for years, it did not happen post-crisis,” O’Neill said. “And I would love if the state could provide LFUCG some relief.”
Because the office receives both state and local funding, the PVA’s office is bracing for cuts to its state funding as the state is eyeing a more than $600 million shortfall in the current-year budget. That means the PVA’s office will likely not see any additional money for office operations despite the increase in local funding, he said.
On Thursday, the city ultimately was able to find more than $186,000 for the PVA budget increase and not tap its general fund, the city’s main spending account.
This story was originally published May 29, 2020 at 1:30 PM.
