The Truth Behind Lexington's Financial Stability: Insights from the Latest Report

The Government maintained a positive net position in 2023, following long-term trends for LFUCG. Net position increased from $312 million in 2022 to $376 million in 2023, representing a positive increase of 20%. Historically, the 2023 net position is well above the Government's position pre-pandemic, showing a return to stability and growth. The largest portion of the Government's net position is invested in capital assets (building, land, infrastructure, etc.) that the government uses to provide services to its citizens.
-LFUCG FY23 Popular Annual Financial Report

The above paragraph from the Lexington-Fayette Urban County Government (LFUCG)'s recently released FY 2023 Popular Annual Financial Report, while seemingly informative, employs a range of obfuscatory tactics that mask the underlying realities of the government's financial situation.

($ in billions)Photo byLexington Times

The report's emphasis on the 20% increase in net position from 2022 to 2023, and its portrayal as a sign of "return to stability and growth," is particularly disingenuous. This framing disregards the significant downturn in net position observed in the preceding years, as evidenced by the data. Such a selective presentation of financial data creates a false narrative of recovery and growth, ignoring the broader context of financial decline and potential ongoing fiscal challenges.

The historical trends in the net position of the Lexington-Fayette Urban County Government (LFUCG) reveal a more nuanced narrative of fiscal resilience, challenges, and the pivotal role of external funding to LFUCG's financial health. Notably, the infusion of federal pandemic recovery funds from the American Rescue Plan Act (ARPA) has played a critical role in buoying the net position of LFUCG, a mechanism that, while effective in the short term, raises concerns about the sustainability of such financial health in the absence of continued support.

LFUCG's net position was buoyed by federal pandemic recovery funds. ($ in billions)Photo byThe Lexington Times

Prior to the receipt of ARPA funds, LFUCG, like many local governments, faced significant fiscal challenges. These were exacerbated by the economic downturn caused by the COVID-19 pandemic, which strained municipal finances across the board. The decline in revenue streams, such as taxes and fees, coupled with increased expenditure demands, notably in public health and safety, contributed to a precarious fiscal situation. The historical data leading up to 2020 illustrated a concerning trend of decreasing net positions, reflecting these broader economic and operational challenges.

The introduction of ARPA funds in 2020 marked a significant turning point for LFUCG's financial trajectory. These funds were designed to provide emergency financial support to state, local, and tribal governments in the United States, aiming to offset the fiscal impact of the pandemic and stimulate economic recovery. For LFUCG, the ARPA money served as a critical lifeline, not only preventing a potential crash in its net position but also facilitating a notable recovery. This recovery was evidenced by the improvement in the net position in the years following the receipt of ARPA funds, demonstrating the effectiveness of these funds in stabilizing and revitalizing the government's financial health.

However, the reliance on ARPA funds to achieve this financial stability brings to the forefront concerns regarding the sustainability of such improvements. As these funds are finite and intended for one-time or short-term use, their eventual depletion poses a significant challenge for LFUCG.

The critical question that emerges is how the government plans to sustain its financial health once the ARPA money runs out?