Louisville Finance Chief Offers Justification For Mayor's Tax Hike
This story has been corrected.
A day after Louisville Mayor Greg Fischer pitched a tax hike as a solution for the looming pension burden increase, his chief financial officer updated the Metro Council's budget committee on the city's financial health.
Daniel Frockt said the city is facing a general fund revenue shortfall of $6 million this fiscal year. In the new fiscal year, starting on July 1, expenses related to pension contributions and employee healthcare would contribute to a gap of $35 million.
Frockt added that Louisville Metro's current pension liability is $1.3 billion, which does not include police and firefighters' pensions.
The city has about 5,500 to 5,600 employees. Louisville's annual pension payment will need to increase in the coming years before plateauing at a higher level than the city paid in the past, Frockt said.
"It will go up and stay up for decades. It's more of a generational level of funding. We're not going to fill a $1.3 billion hole over five years," he said.
Frockt said funding the pension liability to at least 80 percent would be healthy in order to invest money that can grow before more people retire. Louisville's pension liability is currently about 52 percent funded, he said.
The city is not at risk of running out of funds to pay the pensions of current or near-future retirees. Rather, the issue is ensuring that the system will have adequate funding for pension-drawers down the line, Frockt said.
Frockt's testimony came as Metro Council members consider the possibility of raising the tax on certain insurance premiums. The Fischer administration hopes to raise enough revenue to offset most of the anticipated $65 million budget gap rising pension and healthcare costs would create over the next four years.
Metro Council members must pass the tax hike ordinance, set to be filed next week, by March 21. That would allow enough time for the increase to go into effect July 1, as state law mandates.
Budget chair Bill Hollander, of District 9, said he plans to hold public meetings before a final vote.
Correction: This post originally misstated this fiscal year's pension shortfall as $6 million; that number is actually the year's anticipated general fund revenue shortfall. It also incorrectly stated that the $1.3 pension liability includes police and firefighter pensions; it does not.