Metro Council Members File Ordinance To Deal With Pension Situation By Raising The Insurance Tax

Facing a $65 million-dollar budget gap over the next four years due to increased pension payments, Metro Council President David James along with Caucus Chair Pat Mulvihill, Budget Chair Bill Hollander, and Budget members Barbara Sexton Smith and Markus Winkler are sponsoring an ordinance to increase the city’s tax rates on home, life, marine and miscellaneous insurances. 

These rates would increase from their current five percent to 12.5 percent in Fiscal Years (FY) 2020 and 2021, 13.5 percent in 2022 and 15 percent in 2023.

Auto insurance would be excluded from this increase, which overall generates approximately $63 million by Fiscal Year 2023.

“Our city’s revenue growth is strong and meets our year-over-year inflationary needs but does not meet the increased pension requirements from the state,” said President David James (D-6). “The impact of unfunded pension obligations is expected to grow 12 percent each year through 2023.

That amounts to the following yearly increases: $77 million in 2018, $86 million in FY 2019, $97 million in FY 2020, $136 million in FY 2023. 

Last week the Mayor outlined potential cuts ranging from staffing reductions in nearly every Louisville Metro Government department, including police, fire, and ambulance services, as well as closing library branches, fire stations, health clinics, community centers, pools, and city golf courses.  The potential cuts amount to 317 layoffs in FY 2020 alone.

The ordinance proposes to increase the average family’s home insurance by about $12-$13 a month, or around 40 cents per day.

“While I have no desire to raise taxes, I also have no desire to let our great city be pushed backwards and see essential city services eroded and our citizens’ safety be put at risk,” said the President.  “That’s why I’m a sponsor of this ordinance to raise revenue, and I look forward to working together to find efficiencies in our government to balance our budget.”

 “This increased pension cost is far too much to deal with solely by expense reductions.  The level of service cuts we would need to implement would ripple throughout the community and seriously set us back for many years, as the downward spiral builds on itself,” Budget Chairman Bill Hollander (D-9) said. “That is not good policy and not acceptable for the people we serve.”

Councilmember Markus Winkler (D-17) agreed, “The budgetary challenges our city faces are significant, and there is no easy fix.  The only way that we can meet our pension obligations without draconian cuts to services and reduction or elimination of economy-building programs is through this revenue measure.  Though not an easy decision, it is necessary if we want to live in a strong, vibrant Louisville, the kind of place where skilled labor and employers want to move.  We cannot achieve that by cuts alone.  Investments in services like worker retraining, policing, infrastructure and parks are key to winning the competition with cities like Nashville, Columbus, and Indianapolis.”

Caucus Chair Pat Mulvihill (D-10) said: “It’s unfortunate that we are in this place needing to raise revenue due to the lack of funding of pensions for the last 20 years by Frankfort, but we can’t risk losing 250 police officers and having fire stations shuttered and leaving our most vulnerable residents without the necessary social services to immediately help them and get on a path to improve their lives,” said Democratic Caucus Chair Pat Mulvihill (D-10). “We need to ensure that all our children have the opportunity for bright futures, and that is not possible if we close libraries, parks, and community centers.  Lastly, we need to protect our seniors, and closing senior centers and failing to provide programming for them is simply untenable.”

Councilwoman Barbara Sexton Smith (D-4) said: “Our top priority is public safety and our number one responsibility is financial management. We ask the men and women of LMPD, Louisville Fire & Rescue, and EMS to put their lives in danger every day to keep us safe. It is our responsibility to make sure they have what they need to do so. We must invest in them and balance our budget at the same time. This is the first time in the history of our merged government that we have asked to increase our taxes. It’s time to invest.”

“Louisville is facing a serious budget challenge and difficult choices because of our increased state pension obligation, a challenge we’ve been discussing for over a year. I appreciate the sponsors of this measure for their focus on the problem at hand and their willingness to act decisively to address the problem. Our ability to build on our economic momentum is contingent upon 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. We cannot let this pension obligation from the Kentucky Retirement System slow our momentum. As the Council now weighs this measure, I encourage all citizens to reach out to their Council representatives and urge them to prevent drastic cuts to city services and approve this revenue option. Our city’s continued momentum depends on it!” said Mayor Greg Fischer.

To be effective for FY20, the Council must approve the change and the city must file its intent to raise the tax by March 22.