A decline in the price of oil, in concert with other factors like sluggish individual income tax collections and the use of one-time money, has already prompted midyear budget cuts in Louisiana and pushed next year’s anticipated budget shortfall to $1.4 billion.
As oil prices continue to plummet, state officials are preparing for yet another round of reductions in early 2015 that will only exacerbate a sliding revenue picture.
In the meantime, the Bayou State’s oil and gas industry is already seeing signs of a minor curtailment. While production should remain high over the next quarter, the tamping down of exploration and drilling will soon begin, as landmen lay off employees and companies pull back on their spending plans for the next 12 months.
The pinch is being more immediately felt on the state side, where the Louisiana government loses $12 million for every $1 decrease from the annual average price of oil, according to Greg Albrecht, the state’s chief economist.
Albrecht said it could have been worse for Louisiana had the state not diversified its revenue sources over the past three decades.
“We’re not talking about a collapse in oil like we saw in the 1980s, when we lost half of the industry,” Albrecht said during a recent legislative committee meeting.
The storied oil bust of the early 1980s created one of the most severe reversals of fortunes in recent Louisiana history. At the time, 45 percent of the state budget was linked to oil and gas revenue. Today, only 13 percent of the overall state budget is reliant on sources of energy.
“It’s a major difference, between now and then,” said Dr. Jim Richardson, an LSU economist who serves on the state’s Revenue Estimating Committee. “The margins are smaller. It’s only a couple hundred million right now. But in a budget that is already very tight, it’s difficult to go out and make that up from some other area.”
Still, Louisiana has a greater sense of vulnerability, Richardson said, when compared to other energy-producing states like Alaska, Texas and North Dakota. “Texas is a bigger state and more diversified,” he said. “Alaska has its permanent endowment fund that buffers the downturn, though they will feel it eventually. In North Dakota, they’re just beginning down the road and they may feel some pressure with a reduction in activity, but it’s not really going to show up for them right off the bat. It depends how far prices are going to go down.”
Gifford Briggs, vice president of the Louisiana Oil and Gas Assoc., which represents independents and majors in the state, said retrenchment on the part of industry will become more noticeable at the end of the first quarter of 2015 if prices continue to drop.
“I would not expect there to be a significant drop in the barrel production tomorrow,” he said. “Wells have already been drilled and production is already happening or about to happen, and it just needs to be brought online. So you may see an increase in production in the short term. It’s the exploration and land side that are dropping off already.”
“Cash flow” and “cost management” are the buzz phrases among Louisiana’s oil executives these days, Briggs said, as they wait out the decline. “You are seeing retraction in drilling and exploration activity all over the country,” said Briggs. “From what I understand, a lot of companies have obligations through March. But they are deciding now on how to treat the 2015 cycle, and that’s where you’re seeing the reduction. So it may not be until March or April that you see a decline in production.”
Vitter Empties Campaign Fund Into Super PAC
In October and November, U.S. Sen. David Vitter was the single largest donor to the independent super PAC that is supporting his run for governor in 2015.
It’s an unmistakable signal that next year’s race for governor could very well shatter previous money records. It’s also a sign that the new financial landscape in Louisiana politics will be confusing at times.
Super PACs are political action committees that can raise unlimited amounts of money, as opposed to regular PACs that face strict contribution limits. They are allowed to spend money on behalf of candidates. But the candidates who benefit from the spending are not allowed to coordinate on any level with the super PACs.
The Fund for Louisiana’s Future, the super PAC in question, reported having $2.7 million in the bank as of the first week of December, based on its latest filing with the Federal Election Commission. It is supporting Vitter and others. Earlier this year, the super PAC sponsored a web-based ad buy on behalf of Insurance Commissioner Jim Donelon, praising his work on federal flood insurance policy.
The super PAC raised $985,000 in a 40-day period from Oct. 16 to Nov. 24, with most of it coming directly from Vitter’s federal Senate campaign account. A single donation of $740,000 on Nov. 12 took the honor of being the biggest.
Recent court decisions seem to have paved the way for Vitter’s donations to a super PAC that he cannot legally coordinate with. It’s unknown how much further he will push the practice. As of Oct. 17, Vitter had $792,000 remaining in his federal campaign account.
The question is whether Vitter will continue to raise money through his Senate account, only to move it to the unaffiliated super PAC. He can’t use his federal Senate campaign account to run for state office. He can only use it to seek re-election to the U.S. Senate.
Vitter hasn’t filed an updated campaign finance report on the state level since 2004 — a holdover from when he served in the state Legislature. But the deadline for his next state report is approaching in early 2015.
Vitter’s emptying of his federal account should help extinguish rumors that top-level donors are trying to persuade him to stay in the Senate to leverage his seniority.
No Fast Transition Of Party Leadership
Party diehards on both sides of the fence are asking very different questions with similar angles.
After dominating statewide elections, supporters wonder what else Roger Villere, chairman of the Louisiana Republican Party, can accomplish. And after being on the losing end of that success, blame is lightly and quietly being tossed around for state Sen. Karen Carter Peterson, chairwoman of the Louisiana Democratic Party.
Villere tells LaPolitics that the 2015 statewide and legislative races will be his swan song. “About a year and a half or so,” he said. “I’m done after that.”
Following a recent speech to the Baton Rouge Press Club, Peterson was cornered with a question by a reporter about finishing her term or stepping down. Peterson sounded as if she has the job she wants. “Why wouldn’t I?” she responded, her voice reaching a crescendo. “I was elected for four years.”
Key Seats Still Not Filled
Three important positions in the House are vacant. They include a chairmanship and seats on the budget-writing and education committees.
Rep. Herbert Dixon, D-Alexandria, resigned from House District 26 earlier this month, leaving the gavel for the House Labor and Industrial Relations Committee up for grabs. Currently, Rep. Chris Broadwater, R-Hammond is the vice chairman.
The recent resignation of Rep. Simone Champagne, R-Erath, also left vacancies on the House Appropriations Committee and the House Education Committee.
House Speaker Chuck Kleckley, R-Lake Charles, said he’s close to selecting someone for the Appropriations Committee, which is the first panel to get its hands on the budget.
“Appropriations isn’t as coveted as it used to be with all of the problems with the budget, but several lawmakers are very interested and have contacted me,” said the speaker, adding he’ll consult with Appropriations Chair Jim Fannin, R-Jonesboro, on the appointment.
With full budget hearings beginning as early as March, Kleckley said he’ll make his appointment sometime in early January. The new chairmanship of the House Labor and Industrial Relations Committee should be decided sooner rather than later as well.
As for the seat on the House Education Committee, Kleckley said he’ll likely wait until the Feb. 21 special legislative elections are decided in House Districts 8, 26, 49 and 66.
Business Group Could Double Donations
The Louisiana Association of Business and Industry is expected to achieve “big PAC” status by the end of the year for its four political action committees, which will allow the group to double the amount of money it gives to candidates.
Right now, as “small PACs,” LABI’s NorthPAC, SouthPAC, WestPAC and EastPAC can individually provide candidates with a maximum contribution of $2,500. If all four PACs get behind a single candidate, that politico can capture $10,000.
Moving into the 2015 statewide and legislative cycle, a $5,000 or $20,000 donation must sound tempting to campaigns, and will be a big carrot during the regular session.
The PACs started accepting online donations earlier last fall. The goal is to boost the membership of all four, separately, to 250 donors, with each giving a minimum of $50. That threshold must be achieved for big PAC status.
Brian Landry, LABI’s vice president of political action, said most of the PACs are just a few members away from that threshold, with NorthPAC needing the most — 10 new $50 members.
“With that said, we are not going to stop fundraising for a minute,” said Landry. “It’s full steam ahead for 2015. This is a critical election cycle, and we want to be fully prepared to support highly qualified pro-business candidates.”
That may or may not include the governor’s race. When asked about the top of the ballot, LABI’s decision-makers have said it’s still up in the air.
Involvement of this type is relatively rare. By most accounts, only three governors have received the backing of the PACs in recent memory: Dave Treen; Mike Foster, who actually turned it down after seeking the group’s support; and Bobby Jindal, back when he had his re-election in the bag.
“Our PACs will be vetting all candidates and looking at this race very closely,” said Landry.
Campbell Hits Redial On Phone Debate
Barely a month after being re-elected, Public Service Commissioner Foster Campbell was saying he planned to reignite one of the hottest regulatory issues of recent years in his next term.
He wants to complete the PSC’s reform of the inmate telephone industry.
“The PSC cut rates for calls from jail by 25 percent in December, 2012, and banned all added fees, but the fee ban was rolled back four months later,” he said. “During an 18-month PSC investigation, our staff found that inmate families pay an average of 30 times more per minute to speak to their loved ones behind bars than we do on the outside, not including outrageous fees added to bills such as $10 to buy $50 worth of talk time and $10 to get a refund.
“We also found that inmate telephone providers pay steep commissions to jails to obtain contracts for handling these calls.”
While that will put Campbell at odds with law enforcement officials again, since they rely on the revenue, he has national news at his back. A proposal by the Federal Communications Commission to ban such commissions grabbed big headlines recently. It comes on the heels of a recent FCC decision lowering the cost of inmate calls that cross state lines.
B.R. Throws Electoral Weight Around
With the 2014 U.S. Senate race, East Baton Rouge Parish reinforced its status as a leading force in statewide Louisiana elections.
East Baton Rouge voters cast 131,389 ballots in the Dec. 6 runoff — more than the other most active parish, Jefferson, which accounted for 109,672 votes.
Here’s how the next three parishes stacked up in the runoff:
— Orleans: 102,983 votes
— St. Tammany: 76,509 votes
— Caddo: 69,755 votes
U.S. Sen. Mary Landrieu, a New Orleans Democrat, carried East Baton Rouge in the runoff, besting Congressman Bill Cassidy, R-Baton Rouge, by six points, down from her 16-point advantage in the parish in 2008.
It’s a clear sign that Baton Rouge has become a voter-rich hub for statewide politicos. As such, it should start receiving special attention in coming elections.
State Treasurer Considers Leap To A.G.
As speculation about a possible campaign for governor grew over the past few months, Treasurer John Kennedy was actually, very quietly, paving a path to run for attorney general, sources tell LaPolitics. But he hasn’t yet decided if the race is right for him.
One longtime donor said the treasurer “sounded serious from the first phone call” and throughout their recent meeting, adding that Kennedy has polled the developing race for attorney general.
Another source, a regular influencer around the Capitol, said Kennedy has not only been seeking advice, but has also asked for opinions about the vulnerability of incumbent Attorney General Buddy Caldwell.
When asked to comment, Kennedy spoke through his political consultant, Jason Redmond, who confirmed there’s some movement on the AG front. “The treasurer has been approached by members of the business community about possibly running for attorney general, and he has listened,” said Redmond. “He’s made no decisions about next year’s elections, but expects that he will make an announcement soon after the first of the year.”
That’s a mouthful more than Kennedy has said about his supposed aspirations to become governor.
It would be familiar territory. Kennedy ran for attorney general as a Democrat in 1991 and carried 20 percent of the vote. He was pushed out of the runoff by Ben Bagert by roughly 24,000 votes, which led to the election of former AG Richard Ieyoub. Kennedy also considered running for the AG position in 2007, but backed away and switched to the Republican Party the same year.
Attorney general has always been the “prize denied” for Kennedy, said a close ally, and speculation of a run started earlier this year, as reported by LaPolitics in February.
Should he make the leap, money will not be a problem for Kennedy. He started the year with $3 million in his campaign kitty. Redmond said he’ll report close to $3.5 million at the beginning of 2015.
The question is whether former Congressman Jeff Landry can match Kennedy’s financial flex. Odds are he’ll at least post a respectable number, with sources citing a few six-figure fundraisers held already this year. Kennedy’s entrance into the race would certainly push Landry further to the right, not that the former congressman has to inch over much more.
Fundraising may be a challenge for Caldwell, as he showed only $410,000 in the bank as of Sept. 2. Unless he’s cranked up his machine, which any sitting attorney general should be able to do, it’ll be a long election season for Caldwell in 2015. Republican Marty Maley, a private attorney with experience as a prosecutor, will have to amp up his game as well.
While a source close to Kennedy wouldn’t share polling results, they did say Caldwell’s re-elect stats are less than impressive. The source made a note that former Treasurer Ken Duncan in 1999 and former Attorney General Charlie Foti in 2007 both had re-elect numbers in the mid-20s. Duncan and Foti also started their failed re-election years with small banks, about $200,000 and right at $1 million respectively.
When asked about the survey and talking points, Redmond wouldn’t talk polling, but acknowledged the comparison. “They both got caught napping,” he said.
The unknown factor is a Democrat, and the party has yet to field a formidable name. One poll has shown a generic Democrat climbing as high as 33 percent in a primary field, although some politicos claim somewhere in the 20s is more likely.
Kennedy’s political brand is that of a public watchdog, which, if history is any indication, will be played to the hilt during next year’s regular session. It’s also a good fit for attorney general, and a role Landry filled this election season as the voter integrity chair for the Louisiana Republican Party.
Which brings up another question or two: What will the state GOP do with Landry and Kennedy on the ballot? Moreover, what will U.S. Sen. David Vitter, who is running for governor, do?
Vitter has offered encouraging words for Landry’s bid already and has had a good working relationship with Kennedy in the past. The truth may be that Kennedy isn’t as closely tied to Vitter as some may have thought.
At any rate, this independent move toward AG is a new chapter in his long, storied political career.
It’s becoming clear that the race for governor won’t be the only barnburner atop the 2015 ballot.
Who Might Run For Treasurer?
It’s difficult to handicap a post that may not open up or, as in this case, most people don’t know about yet. But there have been possible candidacies floated over the years to either take on Treasurer John Kennedy, elected in 1999, or to replace him while he is considering other opportunities.
The most recent name to surface is that of state Rep. John Schroder, R-Covington, who earned a hard-working reputation in the lower chamber as a member of the conservative fiscal hawks. He’s heavily involved in the budget process and has a deep knowledge of the state’s financials.
Right now, Schroder says he’s focused on seeking re-election.
There was a time not long ago when former state House Speaker Jim Tucker was considering a run for treasurer. Tucker, who recently started a new job, couldn’t be reached for comment.
Other Republicans to express interest in the past include former lawmaker and Family Research Council president Tony Perkins and Dan Kyle, at one time the state’s legislative auditor.
When Kennedy flirted with running for governor in 2003, Jude Melville, a Republican who serves as president of Business First Bank, launched an exploratory effort and raised a small amount of money before the tide turned. He’s the nephew of former Gov. Buddy Roemer. Should he show interest again, Melville might be able to tap into what’s left of Roemer’s donor network.
For more Louisiana political news, visit www.LaPolitics.com or follow Jeremy Alford on Twitter @LaPoliticsNow.