Louisville officials say they’re expecting a stronger revenue outlook for this year than originally forecast, but most of the funds are yet to be collected.
Daniel Frockt, the city’s chief financial officer, addressed the Metro Council’s budget committee Thursday evening for a mid-year budget update based on data from the first six months of the fiscal year, through Dec. 31, 2020.
He said the city now estimates general fund revenue that is about $34 million, or 5.5%, higher than expected last summer. If the forecast is correct, the city’s general fund will reach $647 million this fiscal year.
But Frockt said Metro Government isn’t recommending the city allocate any of the extra funds they expect to collect this fiscal year. He said any growth would be factored into the fiscal year 2022 budget proposal that Mayor Greg Fischer will present to the council in April.
“The good news is that we continue to see a trend that’s not as negative,” he told reporters earlier Thursday. “This is absolutely not where we would be, had there not been a pandemic. We would have continued to see some of the ongoing growth, but it’s better than we had anticipated.”
He credited federal aid to businesses in 2020 for the better-than-expected outlook.
The increase is based largely on payroll taxes and corporate net profits taxes, which make up a bulk of Louisville’s revenue streams, Frockt said. With a large chunk of net profits taxes due in the last quarter of the fiscal year, it will be months before the city finds out if its projections are accurate.
Unlike property and payroll taxes, Frockt said what the city collects on companies’ profits can swing wildly — up or down — based on factors including federal tax policy.
Frockt said employee withholdings will be essentially flat compared to last year, which reflects the nature of the economy’s recovery.
“The more well-compensated jobs have had a lower unemployment rate,” he said. “Those types of positions have continued on, but we’ve certainly been hit with unemployment, especially in the hospitality, retail, restaurant, tourism sectors.”
Other industries, such as logistics, distribution and healthcare, suffered fewer job losses, Frockt said.
The Bureau of Labor Statistics (BLS) reported Louisville’s unemployment rate was 5% in December, down from a peak of nearly 17% in April, the month after Kentucky officials confirmed the first COVID-19 case in the state.
In December 2019, the city’s unemployment rate was 3.3%, according to the BLS.
Over the course of 2020, employment in Louisville’s leisure and hospitality sector, which was severely impacted by COVID-19 restrictions, contracted the most — 14.6% by December, according to the BLS. Other sectors in which work continued in-person or via telework experienced smaller losses.
For example, BLS reported the city’s trade, transportation and utilities sector grew 1.6% over the 12 months ending in December and concluded the year with about 156,000 jobs. That’s about a quarter of Louisville’s overall nonfarm employees.
After Fischer’s budget address in April, council members will have about two months to refine and finalize a budget that will go into effect in July. By then, officials are hoping for a clearer economic picture based on how successful the city and country are in pursuing recovery from the pandemic.