Cantrell administration should boost transparency on $388 million in federal funds, BGR says

By Matt Sledge

Source: The Times-Picayune | The New Orleans Advocate

December 18, 2022

When the New Orleans City Council passed a massive, $262 million amendment to the 2023 budget in the waning hours before a Dec. 1 deadline, local activists were surprised.

There’d been no formal notice that Mayor LaToya Cantrell and the council had hammered out a deal to tap hundreds of millions of dollars in federal pandemic relief funds and other money, said Maxwell Ciardullo, the spokesperson for the Louisiana Fair Housing Action Center.

“Everyone was totally caught off guard,” Ciardullo said.

Now, organizers are preparing for another debate early next year over how to use the rest of the city’s one-time funds.

When that happens, the Cantrell administration should open the curtain on how it is spending American Rescue Plan Act funds and a huge general fund balance, the Bureau of Governmental Research said in a report this week.

That report faults the administration for a lack of transparency thus far. But it also notes that there is time for a course correction given the huge sums yet to be spent.

A growing surplus
When the pandemic walloped the city’s tourism industry in 2020, the Cantrell administration prepared for a downturn in sales and hotel taxes for years to come. The city planned employee furloughs in 2021 that would save $26 million, plus another $92 million in general budget cuts, according to the BGR report.

However, in March 2021, the U.S. Congress passed into law the American Rescue Plan Act, which was designed to provide a lifeline to local governments. Suddenly, New Orleans was in line to receive $388 million in federal funds in two installments.

The federal law placed some limits on how local governments could spend the money. The city plugged $187 million from the first installment into the police and fire departments, freeing up general fund dollars that would have been spent there as the city saw fit.

That didn’t violate federal law. But the fact that the city only explained how it was using the money on the front end in an online dashboard, the Bureau of Governmental Research said, “does not provide the public with the information necessary to understand ARPA’s real impact on funding for other departments or the city’s finances.”

In addition to the federal aid, another factor bulked up the city’s bank account. Hundreds of unfilled positions, many in the New Orleans Police Department, contributed to a huge balance of leftover funds at the end of 2021. In total, the city spent $532 million in 2021, $100 million short of its trimmed-down budget.

The BGR report found that even without the federal funds, last year the city would have been able to meet all of its expenses while generating a $25 million surplus. In effect, the federal relief dollars helped grow the city’s fund balance.

The Cantrell administration has portrayed its conservative budgeting as a prudent response to the uncertainty of the pandemic. Even after Congress passed ARPA it warned of budget shortfalls lasting into 2025. It has also said that the savings have allowed it to sock money into a much-needed rainy-day fund. Yet the drop in spending coincided with widespread complaints about the quality of municipal services.

Rebecca Mowbray, the president and CEO of BGR, said the group didn’t try to determine how the two factors were related.

“Our task here really was just to follow the money and see where it went. We didn’t so much make judgments about how they were spending it,” she said.

Spending the pot
This summer, the federal government sent the city its second, $194 million block of pandemic relief funds. Heading into the November budget season, Cantrell held a series of town halls.

In some settings, Cantrell didn’t typically distinguish between sources of funds and the timing of City Council votes. But administration officials also stated that the city would allocate general funds through the ordinary budget process before turning to the federal dollars.

Instead, the Cantrell administration and the City Council passed the last-minute amendments to the mayor’s proposed budget that caught organizers off-guard. Those amendments allocated $124 million in ARPA funds and $151 million in fund balance dollars, according to BGR.

“Ultimately, they went ahead and passed everything all at once, not really giving citizens the opportunity to know the details,” said Susie Dudis, a BGR research analyst.

In a statement, a city spokesperson pushed back at the idea that there wasn’t advance notice, pointing to the town halls and budget hearings. John Lawson, the spokesperson, said the amendment included priorities that had emerged as consensus priorities, like fighting crime and blight.

“The first set of appropriations invested in projects and initiatives in response to what we heard from the public as core/vital basic needs,” said Lawson.

The budget amendment, unlike previous appropriations, sends the federal relief funds to specific departments rather than flowing it through police and fire. But even with that added level of detail, BGR’s report faulted the administration for falling short on transparency.

A $5 million outlay for “unhoused populations,” for example, was described in an internal memo as going to a “full-time staff member and consulting team to develop a comprehensive program to support unhoused populations in the city.”

The BGR, Dudis said, is “hoping we will see more of the actual plan details… their time frame, what are the objectives, what is the population of people being served. That, we don’t have at this point.”

Money in the bank
District A Council member Joe Giarrusso, the chair of the City Council budget committee, agreed with the Cantrell administration that the budget amendments reflected a broad consensus. But he also agreed with BGR that the city and council could have done a better job of communicating how they planned to allocate ARPA funds.

The issues raised in the BGR report, he said, pointed to the larger problem of compressing complex budget discussions into November. He favors expanding budget season to include October.

Giarrusso said he expects to hold hearings on how to spend the remainder of one-time dollars from ARPA and the fund balance in January and February. That amounts to about $70 million in federal dollars plus at least as many fund-balance dollars, he’s said previously.

Ciardullo and other activists are pushing for the city to spend the money on a wide variety of needs. His group’s priority is up to $90 million to tackle what he called “a tremendous shortage of affordable rental housing.”

Giarrusso said that under a new approach he is pioneering next year, there will also be quarterly hearings on how the city is spending its money. The Cantrell administration said that it will also be expanding an online dashboard in early 2023 to include spending outcomes and the use of fund balance dollars.

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