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Fischer Warns Of 'Devastating' Cuts Due To Growing Pension Obligation

Mayor Greg Fischer discusses crime during a live news special at WFPL.
Photo by J. Tyler Franklin
Mayor Greg Fischer discusses crime during a live news special at WFPL.

For more than a year, Mayor Greg Fischer has expressed concern and frustration over the growing pension burden Louisville will continue to face in the coming years.

On Thursday, he detailed the size of the problem: $65 million over four years.

He made the case that without new sources of revenue, the city would have to enact drastic cuts to personnel and services to meet the pension obligation that could grow 12 percent each year through fiscal year 2023.

The state's severely under-funded pension system is a major factor in its being $54 billion in debt, according to a report released by state auditor Mike Harmon this week.

In 2018, Louisville offset $9.4 million in pension costs as well as increased health care costs for its employees by eliminating vacant positions.

"This list of cuts is long, and the impact would be devastating," Fischer said in a news release. "But we’re required to balance our budget, and without a major source of new revenue, this is what it will take to fill the gap created by the Frankfort-mandated pension obligation."

Fischer released a detailed document outlining services and personnel that he said would need to be slashed to pay for state pension contributions. Agencies including the police and fire departments, parks and recreation, libraries, public health and public works are among those facing cutbacks.

He did not explicitly call for a tax increase in Thursday's release, but his office pointed out that it had been decades since the last tax hike.

One option that has been proposed to Council members is an increase in the insurance premium tax, which applies to auto, home and boat insurance, is currently 5 percent in Louisville. State law requires local governments to notify them of changes to the insurance premium tax 100 days before the start of the new fiscal year, on July 1. The tax is paid by insurers, who could in turn pass on the cost to consumers.

Louisville's Chief Financial Officer Daniel Frockt last week met with Council members including Democrat Brent Ackerson of District 26 to discuss options for meeting the pension obligation. Ackerson said in an e-newsletter following that conversation that the city faces a choice between cutting services and doubling the insurance premium tax.

"There's no easy way to say this, but we are facing a financial crisis," he wrote in the email.

Councilman Bill Hollander of District 9, who is chair of the Budget Committee, said no decisions have been made regarding potential tax increases or service cuts.

Hollander said Council members would discuss the budget and outlook for the next fiscal year at the Budget Committee meeting on Feb. 14.

Any legislation related to raising the insurance premium tax would need to be voted on by March 21 in order to go into effect by the start of the fiscal year, Hollander said. The soonest any such measure could be introduced to the Council would be Feb. 21. It could then be considered by the Budget Committee on Feb. 28.

"Proposals to deal with the increased pension obligation and sponsors for any such proposals are still being discussed," Hollander said in an email.

Read Fischer's proposed cuts to city services and staff below:

[scribd id=399142754 key=key-bb1qzjNFBHWqB9xv7GJX mode=scroll]

Amina Elahi is LPM's City Editor. Email Amina at aelahi@lpm.org.

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