Covington’s second largest employer, the Internal Revenue Service, has cut 750 positions as of the end of June, according to an internal city email obtained by LINK nky.
The email was sent by City Manager Ken Smith on Wednesday, June 25, a day after the Covington Board of Commissioners voted to pass its budget for the upcoming fiscal year. It warns city staff members of “financial challenges ahead,” as one subheading put it, as the city considers how to deal with an estimated $1.5 million loss in tax revenue arising from the job cuts. The city has confirmed the email’s authenticity and said the 750 “figure was recently confirmed by the IRS.”
The IRS employed about 2,600 people out of its Covington office as of June 30, 2024, the last day of the 2024 fiscal year, according to the city’s annual financial report, making it second to only Fidelity in terms of number of employees.
A former employee who worked at the IRS, who asked not to be named so as not to jeopardize the worker’s retirement benefits but who was familiar with the workings of the local office, confirmed cuts had occurred in June. The employee could not verify the number of positions cut but described a situation similar to what has occurred at other federal agencies, wherein workers receive an offer to resign before actual terminations of lower-seniority staff begin.
LINK nky has also reached out to the IRS media relations department for confirmation and comment, but they had not responded by the time this story was published. We will update this story once they respond.
An advocacy organization within the IRS called the National Taxpayer Advocacy Service recently reported that nationwide the IRS workforce had declined by about 26% as of June 4, equivalent to 26,411 positions.
The ramifications of the cuts extend to the lives of the workers themselves as well as the overall financial health of the city. Smith had intimated in budget and commission meetings leading up June 24’s vote that the city ought to be “cautious,” especially given that it was already reeling from financial problems prior to knowing the depth of the cuts.
A shortfall within the general fund emerged during the pandemic, and although the city’s most recent financial audit indicated the deficit was closing, the city is still largely reliant on reallocated COVID-19 emergency funding to fill the gap. The city’s other funds, which are not paid for with tax revenue, were not affected by the decline in payroll tax revenue that struck the general fund.
The city has about a year and a half’s worth of COVID funding remaining and is banking on the city’s economic development, particularly the Central Riverfront Development (which in a twist of fate is located on the site of the old IRS building) to solve the problem long-term. Smith stated earlier in June that there is still about a $4 million gap in the general fund, but the June 25 email suggests the city will have to dig even deeper into its pockets to guarantee services.
“We’ve used American Rescue Plan Act (ARPA) funds to avoid service cuts in recent years,” Smith writes. “The [fiscal year 2026] budget includes $6 million in ARPA support, which may need to increase to $8 million due to the recent job losses. However, these funds must be spent by December 2026 and will not be available for the full [fiscal year 2027] budget.”
In other words, come the end of December of 2026, the city, regardless of it spends the money or not, will lose the primary source of funding for closing the gap in the general fund.
It’s not clear at this time what this will mean concretely for basic city services, but in a statement to LINK nky, the city said it was “committed to being fiscally responsible while maintaining the high level of services our residents expect. We recognize the challenges ahead and remain open to creative, collaborative solutions, including sharing responsibilities and services where appropriate, to ensure the long-term financial health and vitality of our community.”
LINK nky will report more on this situation as it develops.
