(The Center Square) − Facing another round of uncertainty over being able to cover future payroll expenses, New Orleans leaders signaled a need to ask the state for more assistance.
The city has used most of the $125 million loan it secured in November to bridge a cash shortfall that grew as its finances worsened last year. On Wednesday, the city council said the Louisiana legislative auditor approved its request to use $6.8 million to pay employees. Officials said that after the latest draw, only about $6 million remains.
“I anticipate that next week you’ll be out. There’s probably going to be an uptick in overtime due to Mardi Gras,” Chris Province, an official with the legislative auditor’s office, told the council at a meeting to discuss the spending. “So if there are remaining funds, it’s going to be very little. After that, the general fund will start to pay for payroll.”
The city finished 2025 with a $72 million deficit in personnel spending, driven primarily by the New Orleans Police Department, which accounts for more than half of the projected shortfall.
The police department ended the year $37.9 million over its adopted general fund personnel budget. Included in that number are salary costs, which ran $11.1 million over budget, a surge that “also increases associated benefit obligations such as pension, Medicare, Social Security taxes, workers’ compensation, and unemployment insurance,” according to a filing from the city’s chief administrative officer.
The city’s year-to-date police overtime total sits at $24.5 million, the filing says, alongside $1.43 million in merit pay and $1.69 million in terminal leave.
New Orleans’ loan from the state bond commission came with strict conditions, including sign-off from the legislative auditor before the city can tap the money and regular check-ins on spending.
Because the financial hole was dug over multiple years, city and state officials had anticipated the need for additional borrowing while New Orleans rebuilds its reserves and reins in spending.
City councilmembers wondered if the same oversight would be a condition of the next round of state funding.
“That would be up to the state bond commission,” Judy Dettwiller, director of local government services at the legislative auditor’s office, told the council. “I can’t say to how they would handle another (loan).”
Closing New Orleans’ budget gap is a top priority, but it needs to be done in a way that is sustainable, the Bureau of Governmental Research told The Center Square.
The New Orleans-based research organization “recommends that the city develop a five-year financial plan to achieve a structurally balanced budget for its general fund, the primary operating fund. A structural balance means recurring revenue equals or exceeds recurring costs of maintaining services and infrastructure, without using reserves.”
It also urged the city to set a clear policy for general operating reserves, calling them the city’s financial “safety net” that should be protected for emergencies.
Procedures considered the most effective for disaster-prone cities like New Orleans include keeping reserves above the typical minimum of two months’ spending, or about 17% of general fund expenditures, and using expert analysis to set a target and a plan to reach it, the organization said.
