Early last month I predicted that balancing the city’s budget was going to hurt. Two weeks later, Mayor-President Josh Guillory moved on his first major cuts since COVID-19 arrived on the scene, and they hurt — badly.
Guillory laid off 101 LCG employees and shuttered the Heymann Center, the Lafayette Science Museum, the Nature Station at Acadiana Park and three senior centers indefinitely. This week, he proposed trimming consolidated government 20% across the board — save for police, fire, drainage and roads — in the upcoming budget.
In the first laceration, Lafayette lost its primary venue for everything from dance recitals to touring Broadway shows, two of its best educational resources and tourist attractions, and all of the city’s public facilities for senior citizens. And further cuts in the next budget could throw more beloved institutions on the chopping block. Ouch.
Understandably, a lot of people are upset about these developments. These are valuable community assets that improve quality of life for thousands of people every year, and now they’re gone, potentially forever. Guillory has stated that they’re closed until at least November, and would only be reopened if the city’s fiscal circumstances improve dramatically or if other funding can be secured.
Many have questioned why these closures had to be made now, especially when there are other pots of money available that could keep these facilities open. And to a large degree, they’re right.
Guillory is projecting that shuttering these facilities and laying off all of these people will save the city of Lafayette $440,000 through the end of this fiscal year. But that $440,000 could have been handled in the budget any number of ways.
Despite the city general fund’s deteriorating financial position, it’s still projected to end the year with a fund balance north of $30 million, so in one sense these cuts didn’t have to be made at all.
But thinking this way ignores the reality that these cuts are only the beginning of what’s needed to right the city’s financial ship.
Was there a better approach?
The city general fund subsidizes a variety of other programs that could have hit the cutting room floor first, like the more than $600,000 that is used to subsidize the operations of the city’s three public golf courses.
The parish council is sitting on a $900,000 balance in its CREATE fund that could be used to reopen some or all of these facilities. Even though in the current budget the city covers 100% of the operating subsidies for these programs, as recently as 2016 — the last budget drafted by former Mayor-President Joey Durel — the parish chipped in almost half of the cost of these subsidies. So there’s precedent for the parish contributing, and while the parish may be broke overall, it does have this particular pot of money that could be used to support cultural programs like the ones Guillory eliminated.
Then there’s the $800 million in federal stimulus funding sitting at the state level that, pending debate between the governor and Legislature, could be distributed to Louisiana’s local governments in some form in the weeks to come. This money could boost LCG’s financial position, to the tune of tens of millions of dollars. Besides the legislative politics — Louisiana Republicans want at least some of that money to go to small businesses — it’s not clear whether the federal government will allow those to be used to fix budgets outside of paying for direct pandemic-related expenses.
Arguably, none of these cuts actually had to be made right now. And by Guillory’s own admission, they represent just a “drop in the bucket” relative to the financial challenges the city is facing. Closing the doors of these community assets hardly fills any of the gaping holes in local governments’ budgets.
It was only a matter of time
But before we get the tar and feathers ready for Guillory, there’s a deeper truth here that we can’t ignore: Cuts like these may not be technically necessary right now, but they’re arguably inevitable and represent only the tip of a much larger iceberg.
The city general fund was projected to run an $18 million operating deficit this year. Since then, the economic turmoil caused by COVID-19 has increased that projected deficit to $28 million. But that’s only the beginning of the financial pain the city faces.
Next year’s city general fund is projected to run an $11 million deficit, and that’s based on optimistic revenue growth projections. Economically speaking, these are not optimistic times, with our metro area projected to support 40,000 fewer jobs through at least the end of next year.
A 20% reduction in local payrolls will undoubtedly impact local tax collections. Property tax revenue will likely be flat rather than grow 5% next year as is currently budgeted. Sales tax revenue could easily shrink 10%, as it did during the last downturn from 2014 to 2016, rather than grow the 2% forecasts project. And even LUS’s contributions to the general fund, which have historically been a steady quarter of the city’s operating revenue, could take a hit. LUS already faces $1.2 million in bills more than 60 days past due as we enter what’s projected to be a rough hurricane season that could increase LUS’s expenses.
These significant changes in the city’s financial outlook could increase next year’s operating deficit to $20 million or higher. In that scenario, the city may be facing a two-year rolling deficit of almost $50 million. Looking out further ahead, the city is already budgeted to face another $8 million deficit the following year, and that’s assuming a complete recovery of our economy, which seems less and less likely as we enter a recession that could last for years. Even if the economy does rebound quickly, the city general fund is still facing years of operating deficits. To say that’s not sustainable is an understatement.
Here are our options
So something needs to change because the status quo doesn’t work. But there are only so many options available to the city to close its operating deficit:
- Raise taxes
- Get the parish to pay its fair share of LCG’s operations
- Experience a miraculous economic recovery
- Receive massive stimulus checks from the federal government
- Cut costs
Given recent history, the odds of passing any new taxes appear slim to none. Given that the parish is broke, it can’t really afford to pay its fair share of consolidated government’s expenses even if the parish council wanted to. And given the dire straits faced not just by the local energy and cultural economies but the national economy, it’s hard to be bullish about Lafayette’s near-term economic growth potential.
As mentioned above, there are potentially massive stimulus checks that could fill some of these budgetary holes, but that’s hardly a fix we can count on. Even if all of the $800 million currently available gets distributed to city and parish governments on a per capita basis, around $40 million would come to Lafayette. That sounds like a lot of money until you realize that even if all of it were given to the city, it would only cover this year’s operating deficit and half of next year’s. More to the point, these federal subsidies won’t last forever, and the city’s general fund faced multimillion dollar operating deficits for the foreseeable even before COVID-19 wrecked Lafayette’s economy. So the best these stimulus checks can do is delay the budgetary executioner’s axe.
What I’m saying is brace yourselves
What we need to come to grips with is that massive budget cuts like the ones Guillory just made are inevitable, and his cuts are only the beginning. In fact, just yesterday Guillory announced that he’s charged that all LCG departments besides police, fire, roads and drainage plan for a 20% reduction in next year’s budget, with the goal of saving $10 million.
Even if all of the facilities and positions Guillory cut in May remain closed next year, that will only produce a savings of around $2 million, or about 20% of what Guillory’s targeting to cut in next year’s budget. And that $10 million goal may only represent half of next year’s operating deficit, depending on how deep the economic recession is and how long it lasts.
That’s why as much as I don’t want to see these facilities closed, especially since these are exactly the kinds of services that one would expect a vibrant thriving city to have, these cuts feel inevitable. Even if we were to use CREATE’s fund balance, or redirect the subsidies we give to the golf courses, or tap into federal stimulus dollars, or just eat into the city’s reserves, that would only delay, not defeat, the need for cuts. Whether these reductions are made now or later, the city just doesn’t have enough money to do everything we want it to do.
Make no mistake, these initial cuts are only the beginning. This situation is so dire that the city’s going to have to look at ending all subsidies, reducing the availability of more services, and laying off even more employees. Like it or not, there are more programs that will have to be eliminated, programs that lots of people rely on, programs that make our community a great place to live.
Cutting budgets to the degree that’s required is going to hurt, and the pain has only just begun.