Facing renewed concerns over its ability to cover payroll, New Orleans officials are signaling that the city may soon need additional financial assistance from the state.
According to The Center Square, the city has nearly exhausted a $125 million loan it secured in November to address worsening cash flow problems. On Wednesday, the New Orleans City Council announced that the Louisiana legislative auditor approved the use of $6.8 million from the loan to pay employees, leaving only about $6 million remaining.
Chris Province, an official with the legislative auditor’s office, warned council members that the remaining funds could run out quickly.
“I anticipate that next week you’ll be out,” Province said. “There’s probably going to be an uptick in overtime due to Mardi Gras. So if there are remaining funds, it’s going to be very little.”
Once the loan is depleted, officials said the city’s general fund will be responsible for covering payroll expenses.
New Orleans ended 2025 with a $72 million deficit in personnel spending, largely driven by the New Orleans Police Department, which accounts for more than half of the projected shortfall.
The police department finished the year $37.9 million over its general fund personnel budget. Salary costs alone exceeded projections by $11.1 million, which also increased related expenses such as pensions, Medicare, Social Security taxes, workers’ compensation, and unemployment insurance, according to a filing from the city’s chief administrative officer.
Year-to-date police overtime has reached $24.5 million, along with $1.43 million in merit pay and $1.69 million in terminal leave, the filing showed.
The city’s loan from the state bond commission came with strict oversight requirements, including approval from the legislative auditor before funds could be used and regular monitoring of spending.
Because the city’s financial challenges developed over several years, both local and state officials anticipated that additional borrowing might be necessary while New Orleans rebuilds its reserves and works to control costs.
City council members questioned whether future state assistance would include similar oversight.
Judy Dettwiller, director of local government services at the legislative auditor’s office, said that decision would rest with the state bond commission.
“I can’t say how they would handle another loan,” Dettwiller told council members.
Fiscal analysts say addressing the city’s budget gap will require long-term planning rather than short-term borrowing.
The Bureau of Governmental Research told The Center Square that New Orleans should develop a five-year financial plan to achieve a structurally balanced budget.
The organization defines structural balance as having recurring revenue that meets or exceeds recurring costs without relying on reserve funds.
The bureau also urged city leaders to establish clear policies for general operating reserves, calling them the city’s financial “safety net” for emergencies.
For disaster-prone cities like New Orleans, best practices include maintaining reserves above the typical two months of spending, or roughly 17% of general fund expenditures, and using expert analysis to set long-term financial targets.
With loan funds nearly depleted and expenses continuing to rise, officials say difficult decisions lie ahead as the city works to stabilize its finances and avoid future payroll crises.
