(The Center Square) − New Orleans continues to carry a heavy debt load, with the city $1.8 billion short of the funds needed to pay its bills, according to the latest Financial State of the Cities report from Truth in Accounting.
The 2024 report, which uses data from the city’s 2022 Annual Comprehensive Financial Report, found that New Orleans had $1.9 billion available to cover $3.7 billion in obligations, leaving a funding gap that translates into a taxpayer of $18,200 per resident.
The state auditor is much more optimistic about the Crescent City’s finances.
Judy Detwiller, a CPA with the Louisiana Legislative Auditor’s Office, says the city has been “building up that fund balance” and taking care of its actuarial valuations.
“I would not be concerned at this point,” Detwiller said. “Most pension plans are not fully funded. Governments are now starting to get the funding where it needs to be per actuarial valuations, but they still have the capacity to pay as they go.”
According to the report, while that burden decreased slightly – by about $200 – from the prior year thanks to strong financial markets, COVID-19 relief funding, and improved tax collections, the city still earned a “D” grade for fiscal health and ranked 70th out of 75 large U.S. cities studied.
Sheila A. Weinberg, CPA and founder of Truth in Accounting, said her group focuses on the city’s consolidated statement of net position – which includes all city funds and legally connected entities known as discretely presented component units – rather than the general fund balance.
“We include assets that are not restricted by law or contract, and we exclude capital assets,’ Weinberg explained. “You shouldn’t be selling your streets or buildings to pay your bills.’
Weinberg said New Orleans shows a negative unrestricted net position, which means it does not have enough assets available to cover its obligations.
“If it’s negative, they’re in the hole,” Weinberg said. “They will have to charge future taxpayers to cover bills they’ve already incurred. Most of those obligations are probably pension debt and retiree health care debt.”
New Orleans’ largest long-term liabilities remain its employee pensions, which are just 53.3% funded heading into 2025, according to the Reason Foundation’s latest pension solvency report.
The city’s unfunded accrued liability – the gap between assets on hand and promised benefits – is roughly $394 million. TIA warns that market downturns could further widen that gap, forcing higher contributions or benefit changes.
The city has also set aside no funds for retiree health care benefits, which adds to its long-term fiscal pressure.
But Detwiller questioned Truth In Accounting’s $1.9 billion shortfall estimate, saying it relied on a methodology that doesn’t reflect the city’s full resources.
“When I looked at the fiscal year 2023 audit report, the numbers showed a better financial picture than what they presented,” Detwiller said.
She noted that the city’s financial statements list around $3.5 billion in assets, including several hundred million in cash and cash equivalents.
And while Truth In Accounting excludes restricted funds from its calculation, Detwiller said many of those restrictions are self-imposed and could be lifted by the city council if needed.
Detwiller said the city has around $430 million restricted for capital improvements, but “all of that money can be used for something other than just the stated purpose, if the city council chooses to.”
“If TIA is going to remove capital assets, a lot of times, people would also remove their long term debt payments as well,” Detwiller continued. “Because debt payments are what’s funding the capital assets.”
Ultimately, the disagreement comes down to which accounting lens to use.
“When we look at the city’s audit report, we don’t see major financial red flags,” Detwiller said. “They get a clean opinion from the auditors.”
For now, both analysts agree that pensions and retiree health care remain the city’s biggest fiscal challenge – but they disagree on the scope of that challenge.
