New Orleans announces layoffs as part of austerity

Layoff notices were sent to high-ranking professionals in the New Orleans government as part of the incoming mayor's plans to impose austerity to address the government's financial shortfall.

Mayor-elect Helena Moreno currently plans to cut 36 "unclassified positions," which are high-level, appointed ones.

Her advisors also seek to cut 62 probationary employees, who have been with the city for less than a year. They haven't identified all of the employees who will be cut.

"The mayor-elect is between a rock and a hard place when it comes to managing the budget," said Muni Credit News Publisher Joseph Krist. "She has to please the state while running a city with poor services. The layoffs are a clear signal of 'doing something,' in the face of less than strong support in the aftermath of the election. They are not surprising since almost every government turnaround plan cuts staff."

The mayor-elect, who takes office Monday, expects the staff reductions will save the city $27 million of the $77 million in reductions in expenditures needed. Also planned is a hiring freeze and the furloughing of more than 700 "nonessential" city workers one day every two-week pay period.

The city is also trying to recover $76 million in funds from various sources.

In mid-December Mayor LaToya Cantrell vetoed the city council's budget. Later that month, the council unanimously overrode the veto.

The city government realized in the fall it couldn't make payroll through the rest of the calendar year, which serves as its fiscal year. It reached a deal with top state officials to borrow $125 million from JP Morgan with Louisiana Legislative Auditor Michael Waguespack's approval needed for any disbursements.

The city's senior bonds are rated A3 with a negative outlook by Moody's Ratings, A-minus with a negative outlook by S&P Global Ratings, and A-minus on negative watch by Fitch Ratings.

After the city council overrode the mayor, S&P wrote, "We understand that the budget could be further amended this coming January when the new mayor is sworn in and might offer other solutions for the city's budget crisis. The contentious budget process and variation between the mayor's proposed and final enacted budget packages highlight uncertainty as to how the city will operate and address budgetary challenges in 2026."

S&P said future rating actions "will be contingent on audited financial statements demonstrating balanced performance."