One day last year, the Louisiana state government came within an hour of missing its payroll. One day in the future, economists warn, this city could be knocking on bankruptcy’s door. Its bonds are rated just one notch above junk bonds.
Times are hard in Louisiana.
Charity clinics overflow because the state can’t afford to pay enough doctors. At City Hall, cracked windows go unrepaired. Children are taught in crowded classrooms without modern aids such as computers. One town has had to turn off its street lights to save money.
“We have become a state of mediocrity instead of a state of excellence,” Commissioner of Administration Dennis Stine said. “We’ve become a welfare state instead of a wealthy state.”
Times are hard in Louisiana.
An estimated 30,000 unskilled oil workers are unemployed; some have been out of work so long that their benefits are only a distant memory. Many skilled workers have fled to healthier economies. In all, almost 100,000 jobs have been lost since the bottom dropped out of oil prices.
Laws Curb Taxes
Even worse, laws left over from the bygone oil boom hamper public officials’ efforts to attract new business and raise the money needed to improve education, public health care and the economy.
The French-Cajun optimism, that let-the-good-times-roll attitude that drank up boom after boom and thirsted through occasional busts, seems to be fading. People have been packing up and moving out. No hope for another oil boom, they say. No hope.
“We seem to find people with short fuses lately,” said Hubert Chiasson, the manager of New Orleans’ largest unemployment office. “Do I really see any signs of improvement? No, I really don’t.”
Times are hard in Louisiana.
The state was forced to borrow $1.3 billion to cover its debt, and another $1.2 billion to bail out its unemployment insurance fund. About 10% of the state’s tax collections now go to pay interest on the debt.
Sales taxes are already the highest in the nation--the rate is 9% in New Orleans. Businesses fear that they will be taxed further to bail out the state.
A Downward Spiral
“It’s a spiral. You can’t get new business, so you can’t employ all the people who need jobs,” said Tim Ryan, director of business and economic research at the University of New Orleans. “That doesn’t mean we will spiral down any further, but there will be no new growth.”
In fact, there are indicators that the economy here has bottomed out after two years of depression. There are no signs of improvement, however.
The price of oil began falling in 1984. Two years later, a leading state business organization proclaimed that Louisiana’s recession had become a depression. The unemployment rate reached 14.5% in January, 1987, and the latest figure is about 10%, or twice the national average.
Even with its abundant resources, its waterway location and its reputation for good food and good times, Louisiana was ill-prepared for the day when the oil “gravy train” stopped, economists said.
The taxing structure dates back to Huey Long, the populist governor who believed the people were entitled to a free ride at the expense of business. Most homes are exempt from property taxes and many state services are offered at unusually low rates, such as $3 a year for an automobile license plate.
Revisions Voted Down
Gov. Buddy Roemer tried to rearrange the fiscal structure, but his first attempt failed in the Legislature last fall. He says he will try again, and win, because the future of the state depends on it.
“We had a state where big money beat big ideas, and that’s a loser. We’re trying to reverse it,” Roemer said.
Of the estimated 30,000 jobless workers, most dropped out of school to make big money on the oil rigs. Now, many of them don’t even have the money to pack up and move out.
“How are we going to get our present work force into jobs?” Eugene Schreiber, director of New Orleans’ World Trade Center and chairman of a governor’s task force on labor, asked. “We have to train and develop our workers.”
New Orleans has seen its sales tax revenues fall so far that the mayor said the only services left to cut were courts and school crossing guards. The city has lost $100 million--a full third of its budget--since oil prices crashed.
“The current budget is in a crisis,” Mayor Sidney Barthelemy said in an interview before opting for an $8-per-household “public safety fee,” slashing court funds from $25 million to $15 million and announcing layoffs in the district attorney’s office.
Property Tax Rule
Louisiana law prohibits the City Council from raising property taxes without a general election, and by law, only 15% of the homeowners in New Orleans pay property taxes.
The City Council can’t raise the sales tax, by law. It can’t create an income tax, by law.
Barthelemy says all he can do is raise fees, such as a surcharge on water bills, for “public safety.”
Shreveport, in the northern part of the state, balanced its budget by laying off 115 Sanitation Department workers, abolishing back-door garbage pickups and raising water and sewer rates 25%.
In Houma, an oil town near the Gulf of Mexico, times were so hard that 3,000 street lights had to be turned off to save money.
“Business has never been as bad,” said Dan Catlett, owner of the Houma Pawn Shop. “I can’t see any improvement, and I’m usually the first to tell.”
New Orleans school Supt. Everett Williams has had to cope with all the problems of a large, urban school system on a slashed budget. The state, the federal government and the city cut school funds and he has laid off 300 employees. His pupil-to-teacher ratio has reached 29 to 1 in elementary classes and there are 450 pupils to each counselor.
Bonds Not Enough
Voters approved a bond package for the schools, but it’s not enough. This year, the schools are operating with $30 million in “bridge funding” from the state. Williams is worried that they will lose that money next year.
He said that could mean more layoffs, a shorter school year, and a budget so poor that he “really couldn’t operate the school district.”
Like Mayor Barthelemy, Gov. Roemer, economists and business leaders, Williams says the key to the future will be reshaping the tax structure to promote business growth and remove the handcuffs from local governments. They see good times ahead.
“I am optimistic, and I guess that’s how we survive,” Williams said.
The governor added: “We are going to turn this state around.”