Lexington Faces Painful Budget Adjustments

DEM Blogger

April 20, 2020

Mayor Linda Gorton said today the budget she will present to the Council and the public on April 28 will project a decrease of almost $40 million in revenue for the FY 20-21 budget year, beginning July 1.

“This kind of drop is unprecedented in the 46-year history of the Urban-County Government,” Gorton said. “It represents a decrease of over 10% in our General Fund revenues. This will be painful.”

“This is not the kind of budget I want to propose, but it is the kind of budget that is fiscally responsible for the times,” Gorton said. “The economic impact of the pandemic is sudden and deep. We have no experience with anything like this. Even so, I have confidence Lexington will adjust to this uncertainty. The government will weather this event and be ready to help rebuild our economy.”

Lexington is more fortunate than many cities, Gorton said. “We will not have to claim bankruptcy. We will manage our cash to stay afloat. We will be able to keep our city on a sustainable path financially. And we will emerge from this pandemic in a position of strength, as we get everyone back to work.”

Lexington’s General Fund budget is heavily dependent on the occupational license fee, or payroll tax, and the net profits tax on businesses. Since early March we have seen a sudden end to most economic activity. In that time, over 18% of our local citizens have filed for unemployment, as businesses have closed temporarily.

The impact on city revenue has been immediate, with the downturn affecting both the last quarter of the current budget year with a projected shortfall of $9 million and the 20-21 budget year, with a projected loss of $40 million. Beyond that, losses are expected to continue for several years. “We have to reset our economy,” Gorton said.
The city consulted economic forecasting experts at the local, state and national levels in putting together her budget proposal.