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Mayor Greg Fischer Newsroom

Mayor Orders Spending Restrictions To Manage $20 Million Budget Shortfall

Monday November 17, 2008

Mayor Jerry Abramson today announced an immediate hiring freeze and restrictions on travel and discretionary spending as the first steps to manage an expected $20 million budget shortfall for the fiscal year.

More spending restrictions will be required to balance the budget, and employee layoffs and unpaid furloughs are among the options being considered, Abramson said.

“The global economic downturn is hitting Louisville and city government,” Abramson said. “You cannot have a breath-taking decline on Wall Street without it affecting Main streets across America — and Louisville is no exception.”

The $20 million shortfall represents 4 percent of the General Fund budget – and Abramson warned that amount could increase if the economic situation does not improve.

“To put it in perspective, this estimated $20 million shortfall is bigger than the entire General Fund budget for Metro Parks and twice as large as the budget for our Health and Wellness department,” Abramson said. “We face serious challenges, and we will have to make serious cuts.”

Abramson will be meeting with city department directors in the coming days and weeks to examine other ways to cut expenses. Abramson said he expects to announce additional spending restrictions next month.

“Over the next few weeks, we will make decisions about additional cost-cutting measures — just like our citizens and families are doing — to ensure that we live within our budget,” Abramson said. “I will put the priority on public safety and basic services. But a spending reduction of this magnitude will require a united effort and shared sacrifice across all our government agencies.”

Trends across the country are contributing to the shortfall in Louisville, Abramson said.

Since the city’s budget was proposed in May, the stock market has dropped 4,000 points – losing one-third of its value. Over the same period, the unemployment rate in Louisville has risen significantly and now stands at 7 percent.

The Commonwealth of Kentucky is projecting a $300 million shortfall. And all five of the state’s economic indicators are trending down.

Louisville is better prepared than many communities to weather the economic storm because of the diversity of the local economy, Abramson said. And city government is better positioned than most because we have built a more efficient, well-run government in the past six years.

However, decisions in Washington, Frankfort and corporate board rooms will have additional impacts on Louisville Metro Government. Abramson said he will focus closely on issues that could impact the level of Louisville’s shortfall, including:

· the on-going debate in Washington over financial help for the automotive industry;

· the Commonwealth of Kentucky’s plans for handling an expected $300 million state budget shortfall;

· and the state retirement board’s decision later this week on the pension contribution rate that local governments pay for public employees.

This morning, Abramson briefed Metro Council President Jim King and Budget Committee leaders on the situation, and he invited their input as he makes decisions on budget cuts. The administration will also talk with union leaders and seek employee suggestions for cost reductions, Abramson said.

“Now is the time to work together for the good of our community,” he said. “It’s not the time to divide along personal, partisan or parochial lines.”

How Other Cities Are Dealing with Economic Downturn

Cities of all sizes are suffering as the financial crisis seeps into municipal budgets, reducing revenues and forcing spending restrictions. Here’s a look at how some other cities are handling major shortfalls:

New York City expects a $4 billion shortfall over the next two years. They’ll reduce their workforce by 3,000, cancel a police training class for 1,100 cadets, lay off 500 workers and eliminate 2,500 open positions. NYC will also reduce nighttime operations for fire stations.

Philadelphia faces a $108 million shortfall and will make up the difference with severe measures: they’ll close 11 libraries, 62 pools and 3 ice rinks; lay off 220 workers and close 600 unfilled positions; and cancel hiring 200 police officers.

Washington, D.C. is using employee furloughs to help cut $130 million from their city budget. Twelve furlough days over the next year will close schools, day care centers, garbage collection and other non-essential public services. City officials have also cut millions from capital projects, subsidies for the poor and budgets for libraries and parks.

Chicago will utilize a limited employee furlough to make up a $469 million deficit. Cuts include laying off 900 workers, eliminating 1,350 open positions and increasing fees on everything from parking to sports tickets.

Cincinnati / Hamilton County will eliminate 532 county positions – or 18 percent of the county’s general fund positions – by the end of February. The county will close a 800-bed jail facility by March and eliminate sheriff’s patrols in the county’s three largest townships.

Indianapolis terminated city funding for the arts, phasing out the annual $1.5 million payout over the next three years. All city agencies are instructed to look for ways to cut spending. Parks and Recreation is being asked to cut $2.3 million, or 13 percent, of its $17 million budget.

Lexington built its budget expecting 170 jobs vacated by retirees wouldn’t be replaced – but only 40 of those jobs have been closed so far because far fewer people retired. Occupational taxes are down 4 percent. The city is considering a new storm-water tax, expected to generate $16 million annually.

Nashville instituted a hiring freeze (with the exception of public safety workers) and asked departments to submit plans to cut 3 percent from their 2008-09 operating budgets.