Lexington’s current-year budget shortfall grows to $11.5 million as revenues plummet
The city of Lexington’s projected shortfall has jumped from $9 million to $11.5 million for the fiscal year that ends June 30, city officials said Tuesday.
Mayor Linda Gorton announced April 20 the city was predicting a current-year shortfall of $9 million due to COVID-19 related job losses and business closures. More than half of Lexington’s revenue comes from occupational taxes, or a tax on wages.
The city’s jobless rate has exploded from a little more than 3.1 percent in early February to a projected 25 percent by late April. More than 44,000 Fayette County residents have filed for unemployment since March, city officials have said.
Those job-related tax losses coupled with other revenue shortfalls in recent months means the current-year budget shortfall has grown by $2.5 million to $11.5 million, said Lexington Finance Commissioner Bill O’Mara.
O’Mara updated the Lexington-Fayette Urban County Council about the revised budget shortfall during a Tuesday council meeting about Gorton’s proposed $372 million budget for the fiscal year that begins July 1.
O’Mara said the city has shaved expenses by clamping down on spending and cut its personnel costs by freezing 47 open positions. The city should have enough savings to cover the $11.5 million shortfall when the books close sometime after June 30.
“We are on track to save $12.5 million. We are hoping those savings will cover those losses,” O’Mara said. If revenues continue to drop and the shortfall exceeds those projected savings, the city will use up to $2 million from one of the city’s savings accounts to balance its books come the end of the fiscal year, he said.
Council members said Tuesday they supported the administration’s plan to address the current-year shortfall.
How much to take from the city’s savings accounts has been a key area of debate as the council mulls whether to restore funding to some programs cut from Gorton’s $372 million proposed budget for the fiscal year that begins July 1. City officials are projecting a more than $40 million revenue shortfall next fiscal year. To make up for those revenue losses, Gorton has proposed more than $12.5 million in cuts across city government and $6 million in cuts to outside agencies and groups.
Gorton’s proposed budget uses more than $30 million from various savings accounts to balance next year’s budget. Some council members have said they want to take more money from the city’s reserves to restore possibly up to $2.1 million in funding to social service groups cut from Gorton’s spending plan. Those social service agencies axed from the budget include shelters for domestic violence victims and homeless shelters for women and children. Gorton has tried to offset those cuts by spearheading private fundraising efforts for some nonprofits.
The council made no final decisions Tuesday on possible tweaks to Gorton’s $372 million budget. The council will meet May 28 for further discussion and to make possible changes. The first reading on the budget is scheduled for June 9.
This story was originally published May 20, 2020 at 7:22 AM.
