Faced with falling oil revenue, Louisiana tries to close budget gap

Louisiana Gov. Edwin Edwards is trying to pull his financially troubled state out of one of the worst fiscal crises in its history. The rambling, gambling Southern governor has proposed the legalization of casino gambling in the New Orleans area as well as a statewide lottery to offset Louisiana's budget deficit of approximately $150 million for fiscal 1986.

Falling oil prices are a chief reason for the state's budget woes. Its severance tax on the oil and gas industry is based on a price of $26 a barrel. For every $1-a-barrel drop in oil prices, the state loses about $50 million in taxes. Oil prices have plummeted to as low as $15 per barrel, theoretically costing the state $550 million.

In addition, the federal Gramm-Rudman deficit-reduction law is expected to cost Louisiana $250 million in federal aid for health care, education, transportation, and other programs, if the federal spending cuts are enacted next fall.

According to Fiscal Planning Services, a Washington consulting company, on a per capita basis Louisiana would rank 17th among states in overall federal-aid reductions if Congress fails to meet the law's deficit target. According to the study, Louisiana stands to see a larger per capita cut in education programs than any other state. For example, instead of $91 million next year for educationally deprived children, the state share would be $65.6 million.

Budget Director Ralph Perlman has state agency heads reeling over projected 22 percent budget cuts, which would mean ``catastrophe'' for the Department of Health and Human Resources and severe problems in other segments of the welfare system.

The governor had hoped to persuade state lawmakers to go along with his plan to legalize gambling in a special session that was to have begun Feb. 3. But he cancelled it Jan. 27 when polls indicated little legislative support for his proposal.

Last Thursday he began a statewide speaking tour, taking the controversial issues to a more receptive public and announcing ``drastic cuts'' in state spending for social services as an alternative.

Edwards's message to the Louisiana lawmakers now is this: If you won't vote for gambling, let the people vote on it by placing the issue on the ballot in a public referendum. Recent polls have indicated strong public support for a lottery and only slightly less support for casino gambling. In April, when the regular legislative session begins, lawmakers will decide whether to act on the governor's referendum request.

The governor's ability to influence events is complicated by the fact that he faces retrial March 24 on fraud and racketeering charges involving a state-wide hospital scandal. His substantial gambling debts were an issue in the first trial, which ended in a mistrial, and were introduced by the prosecution as a motive for accepting about $2 million for his role in the hospital deal.

Some legislators say the new trial, which will overlap with the upcoming legislative session, will effectively tie the governor's hands. In addition, recent polls indicate a 50 percent drop in Edwards's popularity, to the lowest point since he took office. This has led other lawmakers to conclude that the governor may be losing some of his long-held political power.

With Edwards's gambling plan on the shelf, more state lawmakers say they are willing to get their fiscal house in order without relying on gambling revenues.

If enacted, alternatives such as raising property taxes, taxing food, and deep spending cuts, will represent a dramatic about-face in Louisiana. The state has virtually no property tax and for years has relied on a prosperous oil and gas economy.

Substantial cuts in the $7 billion state operating budget, the largest in the South, are being carefully examined. Local municipalities would become more responsible for raising revenues, if lawmakers opt to eliminate programs the state can no longer afford.