The CEO of Greater Louisville Inc. and chairman of the Metro Council Republican Caucus both released statements on Thursday expressing “concern” about Mayor Greg Fischer’s new plan to dramatically increase the tax rates on insurance premiums, though they come short of outright opposing it.
In order to address a projected $65-million hole in the city’s budget over the next four years and avoid massive cuts to services and layoffs, Fischer announced a plan on Wednesday to increase the tax rate on most types of insurance premiums from 5 percent to 12.5 percent over the next two fiscal years, followed by subsequent annual increases to 13.5 and 15 percent.
Fischer said that he was only proposing such tax hikes reluctantly, but the city’s hand was forced by large increases to its annual pension obligations mandated by the Kentucky Retirement Systems in the summer of 2017. Without such increases, the mayor said that 317 city workers could be laid off next year alone, along with major service reductions and the closures of library branches, fire stations, health clinics and community centers.
In a statement released Thursday morning, GLI President and CEO Kent Oyler said that the Louisville area’s chamber of commerce was “concerned” about the possibility that Fischer’s proposed tax increases “could hurt the city’s ability to recruit and retain businesses and talented professionals.”
While recognizing the city’s budget burden imposed by the public pension system, Oyler stated that GLI officials have recently spoken with city officials about unspecified alternatives to the mayor’s proposal to raise the revenue needed to avoid painful cuts.
“We have met with city officials to discuss other potential solutions that provide resources to meet these obligations, while also ensuring that any new revenues raised in this upcoming budget cycle are dedicated to pensions,” stated Oyler. “We are talking to businesses about the impact of this proposal and intend to work closely with the Mayor and Metro Council to address the budget shortfall in a way that minimizes harm to Louisville’s economy and ensures that our city remains competitive.”
Fischer responded to GLI with a statement of his own nearly two hours later, expressing his hope that business leaders understand the city is at a crossroads, where it can choose between keeping its forward momentum or reversing course with cuts to vital services and investments.
“Our ability to recruit and retain businesses and talented professionals is contingent upon us being able to provide city services, like public safety, paved roads, accessible sidewalks, great parks, libraries, as well as the quality of life investments our competitor cities are making,” stated Fischer. “In the race for talent and business growth, we cannot let this pension obligation from the state force us to take our foot off the pedal. Devastating cuts to basic city services and amenities are NOT a path to prosperity – not for our businesses and not for our city.”
Councilman Kevin Kramer — the chair of the Republican caucus and vice chair of the council’s budget committee — also issued a statement Thursday afternoon, saying that while Fischer’s proposal “definitely caused great concern,” he would keep an open mind and listen to the administration’s case.
“While I am inclined to fight any tax increase, I also plan to listen carefully and search out answers prior to reaching a final decision on the Mayor’s tax increase proposal,” stated Kramer.
Kramer noted that Fischer’s budget director would take questions from the budget committee at 4:30 p.m. on Thursday, expressing hope “that this meeting will provide additional answers and provide some clarity on what the Mayor is proposing.”
“Let me be clear, there is a gap that must be addressed,” stated Kramer. “We must make fiscally prudent budgetary decisions, that don’t continue to create new departments or to expand their budgets. We must enter our contract negotiations with an eye toward these financial demands. Further, many of us recognize that healthcare costs are creating nearly as much stress as pension costs. We look for opportunities to control some of those costs as well.”
Kramer also asked that “those seeking to raise taxes by hundreds of dollars per household” through insurance premiums remember that the Jefferson County Board of Education and Metropolitan Sewer District have also recently considered proposals to increase others taxes on residents in Louisville.
The councilman also claimed that despite knowing for “years” that pension and health care costs would increase, “the Mayor continued spending on non-essential items without evident concern.” Kramer’s statement did not specify what non-essential items he was referring to.
At the news conference unveiling his tax proposal, Fischer warned against “political posturing” on the issue, urging those who oppose such tax increases to publicly specify what government services and employees they would advocate cutting and laying off instead.
Asked for a reaction to Kramer’s statement, mayoral spokesperson Jean Porter told Insider Louisville that Fischer and his team have been talking about the pension crisis and its potential impact with council members “for more than a year,” adding that the current budget was passed by a bipartisan 21-3 vote last year.
“The Council itself acknowledged the challenge when it passed a resolution in 2017 that called for the state legislature to separate our employees’ pension plan from the troubled (Kentucky Retirement Systems),” stated Porter in an email. “In addition, let’s not forget that the Council approved the FY19 Operating Budget by a vote of 21-3, so I’m not sure who they’re pointing out when they suggest there was ‘spending on non-essential items without concern.’ ”
Porter added that the administration has “looked at all available options” and determined that the only two viable solutions are “drastic cuts or create new revenue.”
“Anyone suggesting any other answer really needs to share that right now – how, specifically, will you cover this enormous budget gap?” asked Porter. “With no new revenue, there will be cuts. So what would you cut?”
Five Democrats — Council President David James, Budget Chairman Bill Hollander, Councilman Pat Mulvihill, Councilwoman Barbara Sexton Smith and newly elected Councilman Marcus Winkler — have agreed to sponsor an ordinance implementing Fischer’s tax plan, which will be filed on Monday.
On Wednesday, James and Hollander both urged opponents of tax increases to specify what services they would cut to fill in the projected $65 million budget hole over the next four years.
This post has been updated with Porter’s comments.