An alternative proposal has been offered to deal with the $35 million projected deficit in the coming Metro Government budget due to pension obligations, increased health care costs and revenue shortfalls.
It calls for raising the insurance tax rate on all forms of insurance, other than health, in a more conservative manner and raising the car rental fee. It also calls for cuts or policy changes in Metro Government departments and all levels of management.
“Over the past several weeks, we have heard from constituents and agencies and have been working together to find an alternative solution that represents an appropriate balance of cuts with new revenue. We believe this proposal represents that balance,” says Councilman Markus Winkler (D-17).
“From the beginning, I have said that solving this problem will require both new revenue and an acceleration of the cuts we started last year. While there is no consensus on all cuts, which will ultimately be determined as part of the budget process, it’s clear the public and Council members want a balanced approach. I have been working with Councilman Winkler on this proposal and applaud his efforts,” said Councilman Bill Hollander (D-9), who chairs the Council’s Budget Committee.
“I think it is vitally important to ensure for at least the next four years with this increased pension obligation that our employees, community partners and constituents know fully what they can expect from their government. That’s the least we can do and that’s what this proposal does,” says Councilman Pat Mulvihill (D-10), who Chairs the Majority Caucus.
The insurance tax rate will be increased to 9% for the next two fiscal years, then increase to 10% in the following two years. Auto insurance would be slowly phased in beginning in FY 2021 and increase from 5% to just 6.5% by FY 2023. The rental car tax would increase to generate up to $1 million per year.
The plan estimates these increases would generate as much as $50 million in new revenue within four years.
To balance these increases, there is a call for cuts or policy changes in departments of Metro Government. The administration is being asked to consider some of the following areas to determine potential impact and feasibility:
“These potential cuts are significant and will be felt across all districts and areas of service but will address the structural deficit. Additional work will be needed to address the full balance of the pension obligation in FY23 and beyond. We are hopeful that the work of the Ad Hoc Committee on Efficiencies announced today by President James will help develop these long-term solutions,” says Winkler.
The alternative plan calls for asking the Kentucky Attorney General to launch an investigation on insurance red-lining. It asks for an increased effort to lobby the Kentucky General Assembly for additional taxing authority, includes a pledge to revisit insurance rates if additional options become available and includes language that all new insurance premium tax revenue shall be used only for pension cost increases after FY 18.