This story was originally published by Verite News
The city of New Orleans’ budget deficit for this year will be significantly larger than estimates previously provided by the New Orleans City Council, Mike Waguespack, the top auditor for the state, told councilmembers during a Wednesday (Oct. 15) city budget hearing.
According to Waguespack, the city is staring down a $160 million deficit for the 2025 budget year. Previous estimates, from the council and the nonprofit Bureau of Governmental Research, placed the number at about $103 million.
“Because you’re in budget hearings now, we wanted to really drill down and determine where you’re at and where we expect the fund balance to be at year’s end,” he said, before bluntly stating his conclusion: “You spent more than what you collected by $160 million.”
Waguespack’s appearance at Wednesday’s hearing — the second day of hearings on Mayor LaToya Cantrell’s proposed 2026 budget — to update the council on work his office has been doing to unravel the city’s current financial position. Last month, after receiving conflicting information from the Cantrell administration about the size and cause of the deficit, the council invited the office to City Hall to take a closer look at the books.
The meeting came at a pivotal moment for city government: Council Vice President Helena Moreno was recently elected to be the next mayor of the city. Four of the current councilmembers – Eugene Green, Freddie King, JP Morrell and Lesli Harris – were also just reelected to their seats. Now, they, along with outgoing councilmembers Oliver Thomas and Joe Giarrusso, face the task of amending and passing a budget for 2026 that can address the financial headwinds that the city is facing.
According to Waguespack, the city is expected to end the year with $768 million in general fund revenues, while it is projected to spend almost $928 million, creating a $160 million shortfall.
The good news is that the budget has a cushion. The city ended last year with an approximate $206 million unspent in its reserves. Should the city use that money to make up for the deficit, it would only have $46 million remaining in reserve funds.
“That’s a good thing, but it’s a low fund balance,” Wageuspack said, noting that the city is required to sit on a “rainy day” fund of approximately $37 million. “Of course, you can do an ordinance to unlock that if needed, but $47 million [sic] on a close to a billion dollar general fund budget is really running tight.”
As to what was the cause of the shortfall, the council has previously pointed to the personnel and overtime costs associated with responding to the New Year’s terror attack on Bourbon Street and the snowstorm in January. In his presentation, Waguespack did not provide any one definitive answer. He did note that the city was probably banking on a bigger financial boost from the Super Bowl, as well as from a string of Taylor Swift concerts late last year, than what materialized.
“I think there was maybe some over-optimism in budgeting for revenues,” Waguespack said. “I’ve heard a lot of discussions about some of the big events that may not have turned into big tax collections, or as much as we would have anticipated. So, there’s going to have to be constant revisions of looking at the revenue estimates throughout the year.”
Waguespack also pointed to the fact that the council was not given monthly reports from the Cantrell administration comparing budgeted revenues and expenditures to actual ones.
“You guys need to see this on a monthly basis,” he said. “There’s some debate: They say, ‘Well, we provide this. We provide that.’ No, we need an actual report that shows that actual spend from the BRASS system [the city’s procurement and financial management system], what was supposed to be budgeted and put into the BRASS system, and just a realistic budget-to-actual so that you can address this deficit spending immediately.”
Giarrusso, who chairs the council’s budget committee, stopped Waguepsack at this point, so he could emphasize what was just said. He noted that Cantrell administration officials, and Cantrell herself, have claimed that councilmembers knew the city wasn’t bringing in enough revenue to cover the spending that the council authorized.
“I just want to make sure that, again, the Legislative Auditor is saying that the council did not receive actual monthly budget-to-actuals,” Giarrusso said.
Waguespack appeared to agree.
“I have not been provided, and no one on my staff has been provided, anything that shows that that was given,” he said.
Cantrell’s Director of Finance, Romy Samuel, pushed back on Giarrusso’s point, however, saying that her office did warn the council earlier this year that “financial instability is imminent.” That dire warning came after Mayor LaToya Cantrell backed out of a $20 million settlement with the Orleans Parish School Board, saying that the city couldn’t afford it.
But at the time, as they did today, Giarrusso and other councilmembers asked the administration to provide greater clarity on the budget to actuals. But it was not provided, they said.
“I agree that we all share responsibility in trying to put something together that serves the people of New Orleans and that we should be working constructively,” Giarrusso said. “What I 100% disagree with you about is that the amount of information [Samuel’s office] has is equal to the information of the council.”
But Samuel said that her office was not actively involved in the 2025 budgeting process, which was led by Chief Administrative Officer Gilbert Montaño and Giarrusso and ultimately passed by the council.
“If we are at the table, we can certainly participate,” Samuel said.
The budget has been a persistent point of conversation through the year, from a recent slate of legal settlements proposed by the council to millions of dollars in overtime pay for the New Orleans Police Department to Cantrell’s frequent travel.
It now appears that the majority of the deficit, approximately $70 million, is due to personnel costs, particularly overtime pay related to high security needed following the New Year’s Day attack. Another $30 million can be attributed to a loss in revenue. It is not yet clear what the remaining $60 million in deficit can be attributed to.
One key change looming over the conversation was the impact of changes in federal funding. According to interim Chief Administrative Officer Joe Threat, though the federal government designated New Orleans as being under a high-level threat — known as a SEAR 1-level threat — after the New Year’s attack, the city did not receive any reimbursement for its security costs – despite the fact that such designation typically comes with federal funding and support.
“When you’re SEAR 1 with the Department of Homeland Security, DHS can come into town with a lot of advice and recommendations, but there’s supposed to be a purse string that comes with that,” Threat said. “We did not get reimbursed for any of those SEAR 1 events.”
Threat also said that the city did not get a federal emergency or disaster declaration for the late January snowstorm, which brought nearly a foot of snow to the city, meaning that it also did not qualify for reimbursements by FEMA. According to Threat, that federal funding would have to be pursued by state leaders – as opposed to city leaders.
Budget hearings will continue over the next six weeks, where the City Council – which includes the mayor-elect– will have to weigh campaign promises to improve city services with the reality of the city’s financial situation. The council is required by law to pass a final budget by Dec. 1.