Net Profit Taxes are expected to drop in both raw number and percentage growth. FY26 is expected to bring in $70.5 million, a -1.2% drop from the $ 71.4 million FY25 is on track to bring in.

Net Profit taxes are harder to forecast for than Payroll Withholding, and do not grow consistently like Payroll Withholding grows.

At the same time that revenue has and will continue to grow more slowly, the Mayor’s Administration has taken a different approach to budgeting than in past years. In the FY25 Budget, the Administration tried to make a tighter budget that more accurately projected not just how much revenue the City would earn, but also how much it would spend.

Several post-COVID budgets ended up having large surpluses coming from not only additional revenue, but also from less money being spent than planned for in the budget. That meant there was usually a good bit of leftover money that the Administration could carry over into the next Fiscal Year.

In the FY25 Budget, though, the Administration cut operating costs for most Divisions and Departments to prevent a large surplus. The FY25 Budget has not had many large variances in revenue nor in expenses so far, meaning the tighter approach has worked in the way the Administration intended.

But that also means that the FY26 Budget will not likely have much leftover money from FY25 being brought in, and will therefore be more reliant on the Payroll Withholding and Net Profit taxes than past post-COVID budgets — and again, these taxes are growing much more slowly.

The FY26 Budget then, while likely being larger than the FY25 Budget, will probably not be much larger, and could be much less flexible with regard to how the Administration and the Council chooses to spend the money it has.

You can view the presentation slides starting on page 21 of this packet.

Curious about the city’s budget process? You can learn more about it here!

The Budget, Finance, and Economic Development Committee will meet on Tuesday, February 18th at 1pm in Council Chambers. You can attend in-person or watch live on LexTV.

Republished from CivicLex.

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