New Orleans Mayor LaToya Cantrell and city Chief Administrative Officer Gilbert Montaño testified Tuesday before the Louisiana House of Representatives Appropriations Committee, requesting that the state transfer additional money from federal stimulus funds to the city of New Orleans to help close the city’s projected budget gap.
“Those are resources we need to be made whole to residents and visitors,” Cantrell testified, referring to the 6,000 evacuees from Southwest Louisiana currently in New Orleans.
Congress allocated $1.8 billion to the state of Louisiana under the March CARES Act. Initially, Edwards planned to use more than $800 million of that for relief to local governments. However, the legislature allocated $300 million of that money to a small business relief fund.
Even with that reduction, an earlier estimate found that the city could still be eligible for about $93 million from the fund, which is significantly more than the state has committed thus far.
“We have not received what we should have received,” Cantrell said.
New Orleans is projected to run a $150 million revenue shortfall in 2020, most of which is due to losses in sales tax revenues. Cantrell administration officials have referred to this as a “structural deficit” because the revenue losses are considered “recurring funds”. That will mostly be made up with one-time money, including the money the city has gotten from the CARES Act and a judgement in a state lawsuit against Harrah’s Casino. In lieu of additional CARES Act funding, the city is trying to close the remaining $41 million gap with spending cuts.
According to Montaño, New Orleans’ qualified expenses under the CARES Act, “based on criteria from DC down to the state,” are around $200 million.
“We were expecting to receive upwards of $150 million, and we’re looking at $53 million at this time,” said Cantrell.
Agencies have already been “cut to the bone,” said Montaño. This week, the city began implementing across-the-board furlough days for employees to cut personnel expenses.
“We’ve done everything possible to prevent furloughs and layoffs, but everything has to be on the table,” said Cantrell, explaining the city’s announcement of widespread furloughs last week. Those furloughs will require that any affected employee take one furlough day for each pay period for the rest of the year, for a total of six. Montaño estimates the savings to be approximately $7 million.
Montaño testified that he anticipates similar deficits over the next year and a half. In an optimistic scenario, he said, the city might run a $120 million shortfall in 2021.
“Going into 2021,” he said, “we need to look into layoffs,” which he said would impact public safety services in the city.
Already, he said in response to a question from Rep. Gary Carter, Democrat of New Orleans, the furloughs will impact emergency medical services. “We try to have 22 to 25 ambulances a day. [This] furlough takes us to 17 to 18.”
He said that means that emergency services will have to reprioritize calls. “The reality is that there’s going to be calls that don’t get responses.”
Both Cantrell and several New Orleans representatives also emphasized the role the city has played in the statewide coronavirus response, including the use of the city’s convention center as a state-run step-down unit for recovering coronavirus patients. (Few patients were actually placed in the unit during the spring peak of the virus.)
The treatment center at the Convention Center, Cantrell said, was set up “not only because we were a hotspot,” but to serve other regions of the state as the virus spread. “We’ll continue to do what it takes, but it’s come at a real cost to the city of New Orleans.”
Legislators press Cantrell on reopening
Many legislators also used the briefing to press the mayor on New Orleans’ reopening plans.
Representative Rep. Jerome Zeringue, Republican of Houma asked “In light of other states opening up more, do you have something you can offer in terms of what is the outlook in terms of getting the economy back up and running in New Orleans?”
Throughout the crisis, the Cantrell administration has taken a slower, more cautious approach to reopening than the rest of the state. The city’s phase three plan, put into action weeks after the state entered phase three, has three subphases — phases 3.1, 3.2 and 3.3 — of which the first two are more restrictive than the state. For example, the current phase, 3.1, only allows bars to open for takeout service, while the state’s phase three plan allows them to open for on-premises consumption.
“We’re moving in the right direction,” Cantrell responded. By Friday, the city will be moving into Phase 3.2, and “bars will open outdoors only.”
She also noted that while hotels have been allowed to operate through the summer, many have remained closed because of a lack of visitors.
But other legislators continued the line of questioning, and suggested that if New Orleans were to reopen faster, it wouldn’t face such a budget shortfall.
“We want you to step up and start opening up the city,” said Representative John Illg, Republican of River Ridge. “People like black and white. They don’t like guessing what’s coming.”
The Republican-led legislature has used much of the current special session to criticize what some legislators see as a slow, overly restrictive reopening by Gov. John Bel Edwards, a Democrat. The House has advanced several measures seeking to limit or remove Edwards’ emergency powers.
“We will continue to make progress, be driven by data, and show you that the city of New Orleans is on its way back along with our economy,” said Cantrell. “But understand that we can’t do it alone. Without the resources that we [desperately] need to provide those basic city services–you need operations to make a city run.”
