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Kentucky's 1994 constitutional amendment requires cities to adopt balanced budgets and prohibits spending beyond revenues. But balanced budgets have become mathematical shell games. Yes, this year's expenditures don't exceed this year's revenues. But what expense did you forgo? What infrastructure maintenance did you defer? What burdens did you push to future generations? A balanced budget tells you nothing about whether the city can weather economic downturns or meet long-term obligations.
Cities are sitting on infrastructure maintenance backlogs they're afraid to inventory, much less acknowledge. Roads needing resurfacing. Water mains approaching the end of useful life. Crumbling sidewalks. These don't win elections, so they're pushed aside for higher-profile spending while deferred costs compound.
Every June, Kentucky city councils approve balanced budgets. Newspapers report the achievement. Five months later, those same cities report surprising surpluses—or discover deferred maintenance costs that dwarf their pension obligations. For residents trying to make sense of city finances, these contradictions are paralyzing.
The problem isn't that Kentucky's municipal leaders lack commitment. It's that they're managing organizations that have become fundamentally amorphous by design. You cannot sustainably manage an organization without defined boundaries.
Consider the typical Kentucky city mission: provide the right public services for the community's way of life. What does that mean? The answer shifts with every election cycle, every council turnover, every new political priority. When your scope is "whatever serves the community interest," you've created a mandate for unlimited growth. Budget cycles become exercises in chasing immediate demands rather than genuine financial planning.
This matters because how cities set goals determines scope, which drives activities, which generates costs. If your implicit goal is maximizing services—and that's exactly what "community benefit" language produces—then maximizing services necessarily means maximizing taxes and fees. Under this structure, spending will always grow. It's not a flaw; it's the system working as designed.
The pattern repeats with municipal utilities. Kentucky cities took over water and wastewater systems decades ago claiming private providers wouldn't serve these areas. But that market hesitation was information; it signaled investment conditions weren't favorable. By preempting market solutions, cities locked themselves into operating complex commercial enterprises they're poorly equipped to manage.
Legislative bodies excel at certain functions: defining property rights, enforcing local laws, exercising limited taxing authority. But running monopoly utilities? Managing quasi-commercial activities? Delivering social programs? These require entirely different capabilities. When you layer Public Meetings Act requirements, Open Records obligations, and civil service-style personnel management onto utility operations, inefficiency is inevitable.
I've watched utility boards vote for rate increases they didn't need, simply because they could. I've seen well-run Kentucky cities flip councils and deteriorate within a single cycle. I've witnessed finance directors realize, mid-budget preparation, that 99 percent of revenues are already spoken for by contractual obligations—leaving zero room for actual planning.
The solution isn't more top-down mandates from Frankfort. Revenue caps might slow growth temporarily, but don't address what drives spending. What Kentucky cities need is fundamental: clearly defined and legally enforceable limits on organizational scope.
Legislation should make expanding municipal scope difficult and questioning it easy. Require supermajorities for taking on new functions. Demand rigorous justification before cities enter new lines of business. Make it acceptable—even encouraged—for councils to say "no" to activities outside core competencies.
For infrastructure cities already own, the path forward requires long-term thinking. Kentucky municipalities should inventory full maintenance obligations, establish sinking funds for replacement, and begin determining what can transition to private management. This isn't a fire sale: it's strategic divestment. Announce a 10-year timeline to exit certain operations, giving markets time to develop solutions.
None of this happens without acknowledging an uncomfortable truth: the current model is failing. Kentucky cities carry obligations they cannot meet with structures that prevent effective management and political incentives rewarding short-term thinking over fiscal sustainability. Papering over these realities with balanced-budget headlines serves no one.
For newly elected mayors and council members who genuinely want long-term fiscal health, the work starts with defining what your city actually does—not what it might do or has been asked to do, but what it's equipped to handle given its nature as a local legislative authority with enforcement powers. Everything else is scope creep.
Today's decisions about municipal scope will determine whether Kentucky cities enter the next decade as focused, well-managed organizations or sprawling, financially strained entities lurching from crisis to crisis. Drawing those lines requires saying no to constituents, resisting the urge to be all things to all people, and accepting that some problems are better solved outside city government.
But it's the only way to build organizations that function beyond the next election cycle.
