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Committee: Two-month fiscal shortfall of $17.1 million reflects expected seasonal pattern, officials say
Summary
At the Sept. 16 Budget, Finance and Economic Development Committee meeting, staff reported that expenditures exceeded revenue by $17.1 million for the two months ended Aug. 31 and described the variance as a seasonal pattern tied to timing of receipts and large contract transitions.
The Budget, Finance and Economic Development Committee heard a monthly financial update Sept. 16 showing expenditures exceeded revenues by $17,100,000 for the two months ended Aug. 31.
Commissioner Hensley and Director Holbrook told the committee that the shortfall is consistent with the early fiscal-year pattern when few large revenue collections have occurred and that staff typically evaluates revenue and expenses on a quarterly basis. Director Holbrook said accounting adjustments and accruals related to closing the prior fiscal year and starting FY 2026 are producing month-to-month variation.
The presentation noted several specific drivers: lagging recognition of prior-year EMS (emergency medical services) billings that are accrued into the current year, timing on large professional-service contracts (staff cited a $10,000,000 contract with YesCare for Community Corrections), higher personnel costs associated with newly onboarded employees and the recently implemented 3% pay increase, and earlier-than-expected payments to partner agencies such as the Lexington Children’s Museum and Casa.
Officials said payroll withholding and net profits are near prior-year levels, though payroll withholding was slightly below budget. Overall, the city is roughly 3% below budget year to date, or within about $2,000,000, but staff pointed to year-over-year growth in several categories as reason not to “flip the panic button.” Personnel costs are running about $3,500,000 higher than at the same point last year, and operating expenses are about $1,000,000 above last year’s level.
Director Holbrook and Commissioner Hensley highlighted that some items — notably capital projects and large contracts — are driven by timing: capital is “running a little behind” budgeted schedules, while some contracts closed early and appear as front-loaded expenditures. ARPA materials were available to the committee and the public, staff said.
Votes at a glance
• Motion to approve the Aug. 19 committee summary: passed by voice vote (aye recorded; no opposition recorded).
Committee members asked clarifying questions but raised no motions on the monthly financial report. Staff said they will continue monthly reporting to help newer council members become familiar with the budget flow and will continue monitoring whether the early-year variances resolve as accruals and tax deadlines occur.
Ending
Staff offered to provide detailed follow-up information and to answer specific line-item questions by email. The committee moved on to annual updates from economic development and workforce partners.
