Louisiana Hard Hit by Oil Woes

By , Special to The Christian Science Monitor

LOUISIANA has been reminded once again how heavily its economy depends on the energy industry. Amoco Corporation announced two weeks ago that it will transfer or lay off 80 percent of its 1,050 employees here.

The oil company's decision will cost Louisiana $40 million in jobs and boost unemployment in a state that already has the nation's highest jobless rate.

When oil prices were high, Louisiana was awash in money. But the price decline led oil companies to sharply reduce drilling activities here. That slump has rippled through the economy and left the state in hard times.

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The oil centers of Houma, Lafayette, and Lake Charles have been particularly hard hit.

The state's unemployment rate in February was 11.7 percent, more than double the national rate of 5.1 percent for that month. Louisiana slid from being 35th in 1981 among states in per capita personal income to 46th in 1987.

``Amoco's decision underscores once again the need for Louisiana to diversify its economy,'' says Timothy Ryan, an economics professor at the University of New Orleans. ``The Amoco decision tells us that even in a time of rising oil prices the company wants to transfer workers out of Louisiana. To climb out of its hole, Louisiana will have to create jobs in non-oil industries.''

That's much easier said than done, as Texas and other oil-patch states can attest to.

New Orleans has boosted tourism, thanks to promotion of the historic French Quarter and the early 1980s construction of the Riverwalk Gallery on the banks of the Mississippi. Convention traffic has also risen with the expansion of the city's convention center.

But economic activity has fallen off so much in New Orleans that the real estate market remains depressed and the decline in sales tax revenue has forced city hall to lay off dozens of employees.

Finances are so tight that the city can't hire additional policemen needed to attack the flourishing crack trade and the sharp rise in drug-related murders.

``New Orleans is becoming increasingly concentrated in tourism,'' says William Oakland, a Tulane University economist. ``We're becoming like a South Sea island. I don't know where to look for bright signs.''

Gov. Buddy Roemer, a Democrat elected in 1987, has tied Louisiana's short-term economic hopes to a complicated tax package that will go before voters statewide April 29.

The Legislature approved the proposal last month in a special session by a two-thirds vote, but state law requires voter approval as well. The measure would increase income taxes on the wealthy, raise gasoline and tobacco excises, and allow the state to begin levying a small property tax. It would cut business taxes and allow the state to begin levying a small property tax. Overall, the package would raise taxes by about $150 million a year.

As he stumps the state, Mr. Roemer has been telling voters that the reduction in business taxes would stimulate investment and that the higher taxes would create jobs by financing road projects and an expansion of the city's port and airport.

He has warned that if the measure fails, the state will have to reduce spending on public health and education. Roemer has said Louisiana needs to improve its education system - the state has the nation's highest illiteracy rate and the highest rate of high school dropouts - to attract outside investment.

Polls indicate, however, that voters oppose the tax proposal.

Louisiana voters have traditionally not paid much in taxes and are said, as a result, to be among the most antitax people in the country.

In a practice begun by the late Gov. Huey Long, the state government kept taxes low on individuals by imposing a ``severance tax'' on oil companies. Until a few years ago, the severance tax accounted for more than 50 percent of state revenue. Now it provides less than 20 percent.

``Business, quite frankly, is scared of making investments in Louisiana,'' says Mr. Ryan. ``If we take the wrong fork, then Louisiana will have a long, arduous process toward diversification of its economy.''

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