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Pay As You Go

One-time funds should be lagniappe, not bedrock, to any fiscally responsible city budget


Mayor Mitch Landrieu presented his proposed 2012 budget Oct. 17, and it looked very much like the 2011 version. This spending plan is about $40 million less than the city's 2009 budget, which relied heavily on one-time funds. A budget such as the one adopted three years ago is not sustainable; one-time funds should be lagniappe, not bedrock, to any fiscally responsible city budget. Landrieu came into office in May 2010, almost halfway through the fiscal year, and found a huge deficit, which his administration initially estimated at $67 million to $70 million. As the year wore on and auditors finally got a thorough look at all of the previous years' expenditures, that estimate grew to more than $100 million.

  Much of that deficit was "structural," in the mayor's words, because it reflected ongoing commitments that were not supported by sufficient revenues, such as the sanitation service fee on monthly water bills. That fee had been set at $12 a month for years, even though the actual cost of providing sanitation services had grown closer to $22 a month per household. Last year, the mayor proposed an increase in the fee, and the City Council agreed, voting unanimously to raise the household fee to $24 per month. Raising the fee, which — let's face it — is a tax, was a gamble in this "all taxes are bad" era, but neither the mayor nor the council have seen any significant blowback.

  For the second year in a row, Landrieu also proposed rolling forward the city's property millage rate to provide adequate revenues to the city. This is the other portion of the city's structural or ongoing deficit, which in prior years was covered by one-time funds from the state and/or federal government. Such one-time funds are unreliable, and building a budget on them is both fiscally irresponsible and dangerous. Last year's budget came closer than any in memory to reflecting a spending plan based on actual annual revenues. With his 2012 budget, the mayor says he's trying to stick to that principle.

  Revenues for 2012 are projected to be slightly higher than this year — $494 million compared to $483 million in the current year — but the mayor's proposed budget nonetheless includes across-the-board cuts to most departments and agencies. The exceptions are those dealing with public safety (police, fire, EMS), as well as the New Orleans Recreation Department (NORD) and JOB 1, the city's office of workforce development, which also provides much-needed job placement assistance to the city's young people. This reflects the mayor's vision of "cutting and investing" at the same time — cutting where economies can be realized and investing in the priorities identified by citizens in town hall meetings. "It's not a standstill budget," the mayor says, "but it comes as close to any budget that I know of to being a standstill budget."

  Landrieu's surgical, department-by-department reductions stand in contrast to the budgeting philosophy of Gov. Bobby Jindal, who believes in cutting without regard to consequences. For example, Jindal last week declined even to seek $100 million in federal "Race to the Top" education funds for early childhood education programs. In other words, despite his touting of education as the long-term solution to many of Louisiana's problems, Jindal doesn't think it wise to invest in children today. He couldn't be more wrong. Landrieu, by contrast, continues to invest in NORD and public safety while cutting elsewhere. In our view, this is responsible budgeting. It's not perfect by any stretch, and the City Council will rightly review the mayor's spending plan during budget hearings and make revisions, but it does "stay the course," as the mayor noted in his budget address.

  Above all, Landrieu is charting a fiscally responsible plan in trying to wipe out the cumulative deficit he inherited from former Mayor Ray Nagin and in fashioning a budget that relies as little as possible on nonrecurring revenues. In adopting a "pay as you go" philosophy, Landrieu in fact is charting a new and more responsible course for New Orleans. While other cities and states are forced to take a cleaver to their budgets, New Orleans, for the second year in a row, is attempting a realistic approach to budgeting with a minimum of bluster.

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