Down the Drain With Oil Prices : Louisiana Forced to Juggle Bills to Ease Money Pinch

Sandra Kees listened to the voice on the other end of the telephone and fumed.

No, the child support payment was not in the mail. Yes, her former husband had written the check. But the money had been waylaid in the Treasury of the State of Louisiana, which is the conduit for the money from her “ex.” Kees would get her money eventually, the case worker explained, but she would have to wait.

“I exploded,” Kees said. “I was furious. I didn’t know what to do.”

What she did was call her lawyer, who filed suit, which got the state into gear and the check in the mail. And it did something else--it helped to underscore the news that the Bayou State is barely scraping by these days, not knowing from one day to the next whether it can pay its bills, and using funds it collects for one purpose to keep the wolf away from the door elsewhere.

“It seems to me there are a lot of other places you can cut before you go to people’s money that pays for food and utility bills,” said Keith Nordyke, Kees’ lawyer, who added that he has fielded dozens of calls from other women in similar straits since the suit was filed.

Louisiana’s money pinch does not show up only in slowed child support payments. State income tax refunds, which in good times took 10 days to process, are now being delayed by as much as six weeks while the Treasury waits for other anticipated revenues to roll in. Democratic Gov. Edwin W. Edwards is faced with a multimillion-dollar juggling act just to keep the budget in precarious balance.

Stephanie Alexander, the Louisiana commissioner of administration, has said that the state has a “cash-flow problem,” a euphemism that generally means “out of money.” She said Louisiana is something like the man who gets paid at the end of the month and cannot pay his bills that are stacking up until then.

“Most everything has been delayed some,” Alexander said. “The crisis ebbs and flows. For the last week or two, we’ve been paying bills on the same day they arrive. This week and next will be pretty tight.”

Bad as things are, they will probably get worse. Oil is the main source of Louisiana’s revenue, and soaring oil prices in the 1970s caused Louisiana to make its plans on the expectation of rapid growth. Then, when the price plunged, Louisiana’s hopes went down the drain. Now, even if the price rebounds, Alexander predicts that the economic slump here will go on for some time.

“It takes longer to climb out of a hole than to fall in it,” she said.

System of Populism

Louisiana now leads the nation in unemployment, with 13.7%, well ahead of the perennial leader, West Virginia. But what makes the situation worse for Louisiana than for other oil-dependent states in the Southwest is its system of populism, which has made state government the sugar daddy for smaller units of government in almost every facet of life, from schools to police protection to hospitals to welfare.

Since Gov. Huey Long brought vast wealth to the state by levying taxes on oil and gas exploration, power and money has flowed almost exclusively from one place--Baton Rouge, the state capital.

Pork-barrel politics is a way of life here. When local governments needed something, they went to the state. When they could not come up with adequate salaries for police officers and firefighters, they went to the state.

Few Pay Property Tax

While most local governments in other states depend on property taxes to finance local programs, only an estimated 15% of Louisiana’s homeowners pay anything at all. Half of the Louisiana parishes (or counties) have no property tax, and in those that do, houses can be taxed only for the appraised value above $75,000. Politicians, fearful for their jobs, are loathe to tax the voters. And voters, in turn, are quite content with that arrangement.

Louisiana subsidizes the largest charity hospital system in the United States and the cost of financing its retirement benefits program is one of the costliest in the country.

So when state government starts hurting, everybody starts hurting.

“State and local governments have been sucking at the teat for the past 50 years on an increasing basis,” said Mark Carleton, a Louisiana State University history professor and former economic adviser to the governor. “It’s sort of like a spoiled adult child who has been getting money from a rich uncle. Now the uncle is bankrupt and the kid doesn’t know what to do.”

State Payroll Grows

Some Louisianians warn that state government can no longer be all things to all people. They point out that the state payroll grew by 1,700 over the last five years while the public sector was losing 95,000 jobs.

Carleton calls oil revenues “tooth fairy money,” and says he believes that state government has to recognize that that source of funds is gone for now.

Ed Stiemel, director of the Louisiana Assn. of Business and Industry, a privately funded economic and political research group, said flatly that “Louisiana’s 50 years of socialism is over. We have been living off the fat of natural resources for 50 or 60 years and there seemed to be no end of bailing us out. It was a dream world.”

Long on Bureaucracy

The problems of the Louisiana system are perhaps best illustrated in the realm of education, which is long on bureaucracy and short on results in the classroom. According to Ralph Perlman, the state’s budget director, Louisiana consistently ranks near the top in the amount of money spent per pupil. But Louisiana now leads the nation in the percentage of high school dropouts and regularly trades off with neighboring Mississippi as the most illiterate state in the nation.

Critics say that because of the layers of employees and special programs, too little of the education money actually makes it into the classroom. One study by Stiemel’s organization showed that only 52 cents of each dollar spent on education is actually used for student classroom work, and only 2% of that is used for instructional materials and supplies.

“It is beyond reform,” Stiemel said.

“We have the best-transported, best-fed, dumbest kids in the nation,” is the oft-quoted remark state Rep. Kevin Reilly made in summing up the state’s educational system three years ago. He said last week that things had not changed.

Lottery Proposed

In an effort to pull out of the state’s economic tailspin, Edwards has proposed a lottery and casino gambling.

John Maginnis, whose book, “The Last Hayride,” painted a critical picture of the Edwards Administration, said the mood is to distrust the state with that kind of enterprise.

“People just don’t think it will be run honestly and efficiently under Edwin Edwards,” he said.

But Maginnis does see some hope for a solution to Louisiana’s problems. He said he believes the time is right for steering the state away from the old ways. “There’s not a feeling of hopelessness here,” he said. “People think it’s time to do something about it.”

Officials Jailed

To him, that means not just reform of the bureaucracy but also a cleaning up of state government. In the last five years, six public employees, including a former state Senate president and a commissioner of agriculture, have gone to jail on a variety of charges and the Speaker pro tem of the Louisiana House and the chairman of the pardons board have been indicted in a pardons selling scandal. Edwards himself was acquitted by a jury on racketeering and conspiracy charges.

Stiemel contends that the answer to Louisiana’s economic problems is to give overtaxed businesses a break to lure more industry into the state, and to reduce unemployment costs to employers and other such items.

Perlman, the budget director, said the picture is not as gloomy as all that. “Despite all reports to the contrary, the patient is alive and well,” he said. But he also said that it will take a major act of courage on the part of the Legislature to whittle away at Louisiana’s bloated bureaucracy, risking the votes of people whose livelihood depends on it.

And, Perlman said, there are bright spots in the economy. Aquaculture, particularly the raising of shrimp and oysters, will become a booming business over the next few years, he said, and personal income should go up, along with the price of oil.

Super Spud Coming

Then too, there is the coming of the super spud, which Perlman said will not save the state, but will help some.

Super spud?

“We have developed a potato called the “super spud” that will revolutionize the potato industry. It’s bigger and more nutritious than anything on the market,” he said seriously.

Carleton, the history professor, is not so sure things will turn out right. “We have so many problems that are so serious they have to be addressed now. But no one seems to be doing that,” he said.

Jim Hughes, the executive editor of the Baton Rouge Morning Advocate, was musing in his office the other day about Louisiana’s ills and the state’s seeming inability to correct everything from the pork barrel to corruption. His view was not a good one. “The bottom line is that Louisiana is not mature enough for self-government,” he said.