New Orleans' revenue sank $40 million in 2020, but spending cuts kept budget in the black

New Orleans officials kept City Hall's budget in the black with deep spending reductions in 2020, after projected revenue sank almost $40 million because of the coronavirus pandemic.

But the continuing drop-off in tourism, which is a major source of sales tax revenue, and uncertainty over the current surge of the virus' delta variant prompted the Revenue Estimating Conference to move cautiously Friday. The panel, which includes Mayor LaToya Cantrell and members of her administration, City Council members and an outside analyst, approved a forecast that will see the city still below its baseline budget until 2025.

The projected deficits are larger than the amount City Hall has received so far from an anticipated $388 million federal coronavirus stimulus package that Congress approved earlier this year. That leaves some officials urging caution and recommending the federal money be stretched out as long as possible.

“When you’re driving, this is when your engine warning light starts flashing,” chief administrative officer Gilbert Montaño said.

All told, City Hall collected about $687.4 million in 2020, about 5.3% below its initial budget of $725.9 million. Spending cuts, including furloughs for employees and elimination of some contracts, kept spending to $681.8 million, economist Randall McElroy said.

So far, New Orleans has received half the federal stimulus money that it is due. Along with other, smaller revenue boosts and about $10 million from reserves, that puts the 2021 forecast at $835.6 million.

But officials said they are resisting the urge to spend the windfall immediately to supplement the $633 million budget for 2021. They recommend the money be stretched out until revenue improves. That’s particularly crucial because the forecast calls for the lost revenue from 2020 to total more than $290 million by 2025 -- more than City Hall has received so far from the stimulus, codified in the American Rescue Plan.

“Even if we’re using that ARP money, we could still end up in a deficit,” City Council member Helena Moreno said.

City officials are nervously eying negotiations over President Joe Biden’s proposed infrastructure plan. While such a plan would likely mean more federal money for New Orleans, city officials worry that Congress might cancel the second stimulus payments to cities and counties to help pay for infrastructure.

Still, they plan to spend some stimulus money this year. Some was allocated to ending worker furloughs earlier than initially planned and to giving employees back pay. More money will go to pay for overtime, something that was heavily restricted in previous months. Chief Financial Officer Norman White said council members should expect to vote on some minor tweaks to this year’s spending plan to account for those costs.

That’s a more restricted set of changes than had been advocated by some council members, who have sought to use stimulus money to make significant changes to the budget. Hearings are scheduled for the first week of August, although Montaño has said he has only limited information to share with the council and discourages major changes.

A cloud of uncertainty hangs over all the fiscal decisions as officials contemplate the effects of the current fourth wave of the coronavirus.

“We don’t know what this delta variant is going to do to the revenue forecast we’re putting out there,” White said.

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