Oil price drop works hardship on Louisiana. Diversified economy, state lottery proposed
Houma, La. — Even now, people here in the lush, swampy bayou country of south Louisiana don't know what they could have done differently. For decades, the rising price of oil has dominated the region's economy.
It put big, new, Sunbelt-suburban style houses along the bayou roads and built shopping centers. It put two cars in the garages of Cajun working men who, a generation earlier, spoke French and lived largely outside the cash economy.
Now that the price of oil has dropped to unimagined lows, Louisiana is suddenly stranded with the nation's highest unemployment rate, lowest Standard & Poor's state credit rating, and highest high school dropout rate.
This week, the state legislature opened what some are calling its most crucial session since Reconstruction. Staring the lawmakers in the face is the possible loss of about one-sixth of the state's revenues next year.
``My whole life has been in a boom,'' says engineer and entrepreneur W. Clifford Smith, whose family has lived here in Terrebonne Parish for two centuries. ``I've spent my whole life trying to hire and train people to get things done. . . .
``It's so confusing to me that everything has changed so fast.''
The conventional wisdom here for decades was that Louisiana was recession-proof. ``Everybody worked for oil in one form or another,'' says Mark Foret, archivist at Nicholls State University. Many of his family members have recently lost jobs, and now Louisianans are calling it a depression.
With Louisiana oil selling at $15 a barrel, according to Loren Scott, economics professor at Louisiana State University, the state could expect to lose 40,000 jobs in 1986. Already, the price has dropped further to around $13 per barrel.
By now it is obvious to everyone here that, as some have said for years, the state needs to diversify its industry.
But keeping up with the rising price of oil absorbed so much money and manpower for so many decades that, even in retrospect, businessmen are not sure how they could have slowed down enough to broaden their base.
Asks Clifford Smith: ``How do you get diversified when you're running at 120 percent? How do you take the time, money, and resources to do research and development?''
``I don't think we were in the driver's seat,'' says Jerome Daigle, vice-president of Terrebonne Bank.
In these coastal parishes, local businessmen now are trying to develop the seafood processing industry. Terrebonne Parish has roughly half the shrimp estuaries in the Gulf of Mexico, but most of the processing is done in other states, where wages are lower. They are trying to expand the market for crawfish, plentiful in these bayous. The region also has promise for retirement communities and for industries that need water transport for heavy goods, according to Mr. Daigle.
But none of this may happen fast enough to absorb the jobless here, says Smith. ``And if oil comes back, then we're back on the oil-drilling fast track again.''
Oil was first drilled here in the late 1920s. By the 1940s, the local economy had become dependent on oil and gas exploration. Young Cajun men left fishing and hunting to work on oil rigs and, for the first time, become part of the wage-earning world.
Oil work brought the Cajuns out of isolation, both from each other and from the mainstream of American life. Towns like Houma grew into regional centers of commerce.
The first downturn came in 1982. It was an abrupt shock here, and the steeper drop of 1986 was even more so.
Exploration here has stopped, wells are being closed off, and retail sales trends are declining in lockstep with the active rig count.
Two years ago, Louisiana collected one-third of its tax revenues from oil and gas severance taxes. The figure has fallen to a quarter now, and next year the state may face a $650 million shortfall in its $3.5 billion budget unless spending cuts or new revenues can bridge the gap.
Gov. Edwin Edwards has proposed legalizing casino gambling, starting a state lottery, and levying a new property tax to raise the money. But even by optimistic estimates, these measures could only raise half the money needed.
Most legislators are more inclined to cut spending heavily and raise taxes.
``The real problem in Louisiana is not the price of oil,'' says Clark Cosse, general counsel to the Louisiana Association of Business and Industry, ``It's that we've been spoiled.''