Mayor LaToya Cantrell announced Monday that all city employees, herself included, will be furloughed in response to the fiscal crisis created by the COVID-19 pandemic.
Cantrell described the upcoming budget and fiscal year as unlike any the city has ever seen. The city expects to lose $150 million in anticipated revenues for 2020 or more than 20 percent of their anticipated income.
“Unfortunately, the impact of the COVID-19 pandemic has been severe and devastating — the bottom has dropped, and we must manage our financial status accordingly,” Cantrell wrote in a letter to the city’s director of personnel formally requesting the furloughs. “The economic structure of New Orleans, particularly its reliance on the tourism and hospitality industries, positions New Orleans to have a steeper and longer recovery than most other cities.”
In the letter, Cantrel wrote that the furlough request was “being made to avoid layoffs in 2020.”
Businesses have lost upwards of $2.67 billion since the city and state instituted operating restrictions meant to slow the spread of the coronavirus. Cantrell said at a press conference Monday that the lost revenue was almost exclusively tied to two streams: sales tax and fines and forfeitures.
All city employees will be required to take six furlough days between Oct. 11 and the end of the year. Employees who are not funded by the city’s general fund revenues or are financed solely by federal, state, local or foundation grants are exempt.
The city has already implemented other cost reduction measures, including instituting a hiring and spending freeze. They’ve also mandated that all city departments cut their budgets by 20 percent for the 2021 fiscal year. Even after obtaining $100 million in one-time money to supplement losses, Cantrell said they’re still staring down a budget deficit.
“These efforts still leave us with a projected funding gap of millions of dollars,” Cantrell wrote.
The city had hoped to close the gap with funding from the CARES Act, according to Cantrell, but will now receive less than half of what they were expecting.
“Based upon the initial allocation to the State of Louisiana, we anticipated receiving approximately $150M in CARES Act funding this year,” Cantrell wrote. “However, the State Legislature has repurposed much of this funding and we now expect to receive only $60M or about 40% of what was intended for our City.”
The CARES Act allocates federal relief funds directly to local governments with more than 500,000 residents, but relies on state governments to distribute relief to smaller entities.
Cantrell wrote that the city has had “extensive conversations” with legislators and the state regarding CARES Act funding. But with the end of the fiscal year approaching they “can no longer afford to hold out hope for funding that may never come.”
In a letter to the Civil Service Commission, Cantrell asked that mandatory waiting periods associated with furlough requests be waived so that they can begin as soon as possible, allowing employees to spread them over this year’s six remaining pay periods. Before furloughs can begin, the Civil Service Commission must approve Cantrell’s request.
“I appreciate that this request will have significant consequences for our many dedicated and hard working city employees, and I do not make it lightly,” Cantrell wrote. “Unfortunately, I anticipate that I may need to make additional requests of the Commission in the coming months.”
The city expects budget shortfalls to continue into the new year, without any guarantee that one-time relief funds or federal assistance will be available. The furloughs are the first step in a series of actions the city plans to take to protect its financial health.
“We will only be able to reduce personnel expenditures enough to fill this funding gap through some combination of furloughs, pay reductions, and or layoffs,” Cantrell wrote. “When we introduce the 2021 budget at the end of this month, that budget will necessarily include personnel spending cuts.”
