The New Orleans City Council and the Orleans Parish School Board announced on Monday that they have reached a preliminary remedy for the significant budget deficit of approximately $36 million facing the NOLA Public Schools district. The school board has decided to drop a five-year-old lawsuit against the city, and in exchange, the city is set to provide an injection of $20 million in new funds to the district.

During a press conference outlining the terms of the arrangement, New Orleans City Councilmember Joe Giarrusso, who leads the budget committee, mentioned that the initial installment of the payment will be included in the upcoming 2025 city budget, which is scheduled for approval at the council’s meeting on Thursday.

“This agreement comes from the cooperative efforts of both parties who were committed to finding immediate solutions for the benefit of New Orleans and to secure a positive future for our children,” said Giarrusso.

The School Board’s financial shortfall has primarily stemmed from a severe accounting oversight. Although the direct cause of the error remains ambiguous, it led to an inflated estimation of anticipated property and sales tax revenues for the 2024-2025 school year.

In light of this deficit, schools throughout New Orleans faced potential drastic budget reductions. While the board is currently projecting a shortfall of $36 million, OPSB Member Olin Parker, chair of the finance committee, noted that officials continue to work on verifying the exact size of the budget gap.

Adding to the upheaval caused by the financial miscalculation, NOLA Public Schools Superintendent Avis Williams announced last week her intention to resign, effective December 1, without disclosing a specific reason. During this interim period, Deputy Superintendent Fateama Fulmore will step in to serve as acting superintendent. Meanwhile, Chief Financial Officer Stuart Gay departed from his role in September, prior to the revelation of the accounting issue.

What was considered a disastrous mistake for the School Board has now opened a pathway for the New Orleans City Council to resolve a protracted lawsuit initiated by the OPSB in 2019. The legal clash revolved around the city’s practice of imposing a 2% administrative fee on taxes collected on behalf of other Orleans Parish entities. The School Board has long contended that these fees are unconstitutional and that they are owed significant sums in back taxes.

After years of legal struggle with no resolution in sight, it seems both the city officials and School Board are now ready to finalize an agreement.

OPSB President Katie Baudouin, who previously served as a staff member in Giarrusso’s office, expressed gratitude towards city representatives for their efforts in reaching a resolution. “This agreement will ensure that our schools receive the rightful tax revenue moving forward,” she stated during the conference. “I remember when Councilmember Giarrusso first brought me on board nearly eight years ago; our discussions emphasized the vital role of public education in New Orleans. I’m sincerely pleased to be standing beside him here today.”

As per the initial terms of the agreement obtained, the city’s payment of $20 million will be provided in two installments of $10 million each. The first payment is expected to be approved this Thursday and will be disbursed before the end of the current year, while the second will be delivered before April 1, 2025.

Additionally, the city has agreed to allocate funding derived from the Caesars (formerly Harrah’s) casino to support educational initiatives—amounting to just under $6 million for the 2025 fiscal year—over the next ten years. This funding will also extend to education programs addressing mental and behavioral health for students, as well as career counseling and vocational training initiatives over the decade. Collectively, this funding is projected to provide an extra $10 million annually to support NOLA Public Schools.

In summary, the school board will discontinue its lawsuit against the city, and in return, the city will cease to deduct fees from the taxes it gathers, unless prior approval is granted by the school board.