MICHELE NORRIS, host:
From NPR News, this is ALL THINGS CONSIDERED. I'm Michele Norris.
Today New Orleans Mayor Ray Nagin announced that the city was being forced to make some drastic cuts to stay afloat financially. Nagin said some 3,000 non-essential workers, about half the city's work force, were being laid off effective next week.
Mayor RAY NAGIN (Democrat, New Orleans): We have searched high and low. We checked with federal sources, and we've checked with state sources. We've talked to local banks and other financial institutions. And we are just not able to put together the financing necessary to continue to maintain our City Hall staffing at its current levels.
NORRIS: A dramatically smaller city work force is just one of many changes happening to New Orleans in the aftermath of Hurricane Katrina. NPR's Greg Allen is in New Orleans and joins us now.
Greg, the timing here is not great for the mayor. He's laying off city workers at the same time he's also encouraging people to return to the city.
GREG ALLEN reporting:
That's true, Michele, and he recognized that today when he announced these. They've been in the works for a while; we'd had some word they were coming. He'd been working to try to find money to keep this from happening, particularly going to the federal government, asking the Federal Emergency Management Agency to come up with some money to help the city meet its operating expenses. But he said despite what he tried to do there, FEMA came back and told him that under their legislation, they only pay for overtime of city employees, not for actual paychecks. And so unless the legislation is changed, they can't do that. And meanwhile, he met with some congressional--a congressional delegation that was here today, hoping to get the law changed. But right now they've got no option but just to go ahead and lay off those 3,000 workers.
NORRIS: Well, how does this affect police and fire departments?
ALLEN: Well, the mayor says it's only non-essential personnel, so some police and fire personnel will be laid off, but none that are out actually on the public safety end of it, out in the streets, you know, directing traffic and actually just helping to get the city back on its feet. So really it's just the non-essential city employees, but there's a lot of them.
NORRIS: And is New Orleans at this point in danger of bankruptcy? I know its bond rate was reduced.
ALLEN: Yes, and the mayor says no; he says that in addition to this action they announced today, they've also secured a $50 million line of credit from a bank. And so they say--the mayor says that will enable them to make their payroll for the next few months at least; they think they can get through the end of the year with the current financing they have. They do have some bills coming due, though, among which are pension payments. They're already a million dollars behind in their pension payments. They have a million-dollar bill due every month. So the mayor says they're trying to get the state to help them float a bond issue that will cover their debt payments over the next several month. So if they get those two things together, he thinks they can stay out of bankruptcy.
NORRIS: What about the state? Is the state's outlook shaky as well?
ALLEN: Exactly. I mean, the state, you know--Katrina and Rita together hit--something close to 40 percent of the state's tax base was affected by those two hurricanes. There's a big hole in the Louisiana budget right now. One of the state financial experts said he thought it was at least a $1 billion hole that the hurricanes left. And so the state is in no great--not great shape either. They're looking at budget cuts there. We should hear more about those in just a few weeks.
NORRIS: Just quickly, beyond finances, how is the city doing otherwise?
ALLEN: Well, you know, I think that people have been surprised that New Orleanians have not come back quicker than they have. It's been now a week since residents can return to their homes. The streets are still largely empty, not much traffic. You do see people coming and going. The mayor today said that he will actually loosen those guidelines to encourage more people to come back and really come and go as they please over the next few weeks and months.
NORRIS: NPR's Greg Allen in New Orleans.
Greg, thanks so much.
ALLEN: Thank you, Michele. Transcript provided by NPR, Copyright NPR.
