(The Center Square) – New Orleans’ city leaders said Wednesday they intend to change the city’s budgeting laws in a way of adding transparency and responsibility.
City Council President J.P. Morrell said the current laws governing the city’s budgeting process have allowed for the current financial crisis.
“We got to this point because there is simply no requirement … that the budget be balanced,” Morrell told the Fiscal Review Committee. “And there is kind of an idea that’s been there for time immemorial, that the budget is kind of a giant suggestion that the mayor is in charge of reconciling at the end of the year.”
While the city charter requires a balanced budget on paper, there are a variety of loopholes that allow the city to overspend. Those loopholes allowed the Cantrell administration to rely on one-off federal aid from the COVID-19 pandemic that is now all gone.
On Wednesday, city and state officials agreed that the city’s use of federal aid during the pandemic helped create a fiscal cliff that has left the city a hole too big from which to dig with its revenues.
“We’ve been urging since Congress passed this American Rescue Plan Act money, that this presented an incredible, one-time opportunity,” Bureau of Governmental Research President and CEO Becky Mowbray told The Center Square.
Mowbray pointed to a 2021 report which urged the city to use the $388 million in federal relief for one-time projects, to rebuild chronically weak reserves and to adopt a formal, multi-year spending and reserve policy.
National best practice, she said, is for local governments to keep at least 17% of their general fund budget in reserve – more for disaster-prone communities like New Orleans. Instead of locking in those savings, Mowbray said, city officials used much of the windfall to plug operating holes and then layered on new recurring costs.
Now, the city faces a deficit crisis expected to last years and that has already forced significant cuts. On Wednesday, the city was thrown a life raft worth $125 million.
A charter amendment could prevent the sort of overspending that has allowed the city to spend without enough cash to pay their bills.
Louisiana Legislative Auditor Mike Waguespack said that kind of change can’t come fast enough, saying the city now has to “right-size” government by cutting programs that no longer have federal money behind them and cracking down on runaway overtime – one of New Orleans’ biggest budget busters.
In 2025, Waguespack said, the city budgeted about $57,000 for overtime but spent around $50 million – that’s more than 87,000%, or 877 times, above budget. In 2024, it set aside roughly $9 million to $10 million and still spent about $44 million.
Some of that was driven by extraordinary events such as a terrorist attack and an ice storm, he acknowledged, but even outside of emergencies “the overtime spend has been a bit out of control.”
Morrell told the Fiscal Review Committee that such an amendment has been “filed” and that it would be on the ballot next fall.
Morrell said his experience moving from the Legislature to City Hall exposed what he sees as a fundamental problem in how the city spends money compared to how it budgets it.
At the state level, he said, budgets are approved line by line, and the governor must go back to lawmakers to move money between items or veto specific spending. In New Orleans, by contrast, Morrell said the council can spend months negotiating a budget with the administration and the public, “but that wasn’t actually the budget” in practice.
Under his proposal, the mayor would be barred from spending on items not in the budget and would have to come back to the council for approval to shift funds, much like the governor must do with the Legislature.
Without those guardrails, Morrell said, “that is how you deficit spend.”
