“My budgeting principles are pretty simple: cut smart, reorganize, and invest wisely for the future,” said Landrieu.

In recent weeks, Landrieu laid out the City’s precarious budget situation in which the administration inherited a 2010 budget that was both unrealistic and unmanaged.

“Just as the dramatic consequences of the BP oil spill continue to grow, so too do the dramatic consequences of this city’s budget deficit,” said Landrieu in his recent State of the City address. “Like the spill, it’s worse than we thought and there are no quick fixes. We must plug the hole.”



Landrieu explained the recurring budget problem in his State of the City address: “Two years ago, the city spent $58 million more than it took in. Last year, it spent $50 million. In 2007, we had $72 million in reserves. Today, we have zero.  We’ve tapped out our loans. We have very little one time recovery money left to get us out of the hole.”
In finding solutions, Mayor Landrieu first directed budget managers and department heads to ensure that their individual departments live within their 2010 budgets. 

“The goal for us, in a short period of time, is to ratchet down personnel spending and contracts so that departments spend what they were budgeted,” said Landrieu.


The largest projected overage in the city’s budget is personnel costs, including salaries, overtime and benefits. To address this, the Mayor has taken the following actions:

To get spending in line with budgeted amounts, many departments have already and will continue to manage overtime more effectively and leave open positions unfilled. These cost-savings measures, projected based on spending through the end of June, have already reduced the gap by the end of 2010 by $8.8 million compared to the projection at the end of May.
The Fire Department is expected to reduce its personnel budget by an additional $1.4 million by reducing workers’ compensation costs and managing other costs. Additional cost savings are expected to be produced as a result of a $8.2 million federal SAFER grant which will reduce overtime.
The New Orleans Police Department is also projected to save $2.5 million by eliminating 47 non-essential employees and police recruits and allowing another 30 expiring positions to remain unfilled, both of which were announced earlier in the month.  
The Law Department reduced personnel costs by $1.6 million by moving salaries from the general fund to federal and other funding sources, as well as by cutting contracts.
The City is expected to net $1.25 million as a result of federal health care reform legislation, which provides "rebates" to large employers who provide health benefits.
Medicare-eligible City Retirees will use Medicare as primary insurance. The City supplements Medicare with gap coverage to maintain the same benefits. This move will save $1.1 million in 2010 and approximately $3 million annually going forward.
All city employees, classified and unclassified, City Administration and Public Safety, general fund and non-general fund, will be furloughed one day per two-week pay period, 11 days total before the end of the year, to achieve an expected savings of $6.7 million. Mayor Landrieu will also participate in the furlough.  Exempted departments and agencies are the Aviation Board, the Sewerage and Water Board, the Public Library system, and all Public Benefit Corporations as they operate without city general fund revenues. The furlough will be effective from August 1, 2010 through December 31, 2010.

“No one wants to have to implement furloughs or layoffs, but we were left with no good choices,” said Landrieu. “The furlough will apply to all City Hall employees, including myself. We must also reform our civil service system so that we can be even more strategic with departmental consolidations and reorganizations, and will continue to propose and implement such changes during the remainder of 2010 and as part of our 2011 budget submission.  It’s clear that getting New Orleans to where we need be is going to require sacrifice from all of us in city government. It’s painful but necessary.”

The Mayor also addressed structural cost pressures such as hospitalization and outsourcing costs, which are crippling our ability to make forward-thinking investments in infrastructure and technology. 


Landrieu announced the city will also only be able to pay the amount budgeted by the City Council for municipal and fire pensions for 2010, which reduces the deficit $5 million each this year, for an additional $10 million. The Mayor said he will ask both pension systems to propose structural changes as part of their 2011 budget submission that will lower the city’s expected annual contributions so that they are more consistent with historic contribution levels.


Landrieu also ordered departments to reduce or cut contracts to get citizens better value for their tax dollars.  It is expected that contract renegotiations or cuts will save approximately $8.3 million this year and more in future years.  Other non-personnel operating cuts in Parks & Parkways and Safety & Permits will net approximately $350,000 in savings.  Public Works will pay for some projects from the capital budget, saving another $1.2 million. 


The administration worked with its banking partner to successfully reduce the interest rate that was being charged on the debt supporting our Pension Obligation bonds, commonly referred to as debt service. As a result the 2% interest rate reduction will save the city $1.2 million for the remainder of the year and $2.4 million annually. 


When fully implemented, these reductions in spending mean that the city will have decreased spending levels to $471 million, a level broadly consistent with the original council-passed appropriations level and our revenue forecast for 2011.  The City will have reduced expenditures consistent with the original 2010 and projected 2011 revenue forecasts.

The single largest offset of the deficit will come from one-time use of $23.2 million in Hurricane Katrina insurance settlement proceeds the City received this year. The Mayor will ask the City Council to move that settlement money into the General Fund where it can offset the one time revenue loss due to the current recession as well as the $5 million deficit from the city’s 2005 audit.

“One-time money for one-time problems makes sense in this instance,” said Landrieu.


Earlier this month, the administration also issued sweeping reforms to the city’s take-home car policies which are expected to save hundreds of thousands of dollars both in this and future years. That savings is not included in the $67.5 million deficit reduction numbers and would be used as a cushion for a fund balance.

In his first month in office, Landrieu signed an executive order which adopts national best practices to guide New Orleans’ annual budget process.  The reforms are aimed at producing a more user-friendly budget that reprioritizes how the City spends money by utilizing the citizen-driven “Budgeting for Outcomes” process.

This revamped budgeting process comes at a crucial time in the City’s financial history. Each department in city government is being asked to prepare their budget requests, including outcomes they expect to achieve from different levels of investment.

“Our job is to prioritize tax dollars to produce the outcomes citizens identified and bring additional transparency and accountability to the process,” said Landrieu.  “We want public input on this and future budgets, so I urge our citizens to send your budget cutting suggestions to mayor@cityofno.com.”

“We will finally be able to make strategic decisions about the right size of Orleans Parish government with the 2011 budget,” he said.  “Yes, there will be cuts. Yes, there will be downsizing. But there will also be smart, strategic investments.”

The Mayor and City Council will hold a series of community meetings in August, at least one in each council district, to identify the citizens’ priorities. Those meetings will commence on August 2, 2010. By October 15th of this year, Mayor Landrieu will deliver a budget to the City Council in line with those priorities. 

“Our 2011 budget will be one that is realistic and well-managed,” closed Landrieu. “I will not tolerate departments overspending and misusing tax-payer dollars.”

Office of the Mayor Press Release