BATON ROUGE, La. -- In a place where reality often resembles bad fiction, few events in Louisiana's long-running political stage show seem as solid and predictable as the re-election of state Treasurer Mary Landrieu.

In fact, her popularity appears so secure that no challengers are on the horizon as she approaches the state's Oct. 19 election day.

Few would have predicted that four summers ago, when the New Orleans native was a 31-year-old state representative with little financial experience. Largely ignored by the business community and up against three rivals -- all men -- with established credentials, the would-be treasurer seemed a very dark horse at best.

She won by fighting a hard campaign, but also by trumpeting her distance from the financial services industry and her willingness to shake up the Treasury. Now her admirers -- and there are many in Louisiana -- say the activist treasurer's rise is a classic tale of hard work, good political instincts, and fortuitous timing.

"In a sense, Louisiana finally got a treasurer in 1987," said Lee Bressler, vice president of public finance at New Orleans-based Scharff & Jones Inc.

"Mary Landrieu was ready for the job of changing the Treasury and the Treasury was ready to be changed," says Bob Keaton, chief budget analyst for the state Senate. "Because of her commitment to the task, we are now looking at an operation that is much better organized and much more effective."

In retrospect, reform of Louisiana's Treasury was long overdue. The state's precarious finances were crumbling as a worldwide energy glut devastated its oil-based economy, triggering a cumulative general fund deficit that would approach $1 billion. Its bond rating was in free-fall, even as borrowing continued to spiral out of control. To make things worse, the state's pension liability had increased to about $6 billion.

Ms. Landrieu's predecessor, Mary Evelyn Parker, had never been an assertive treasurer, and during the last of her fiveterms suffered faltering health that left her on the sidelines. Moreover, the state's bond commission, which is staffed by the treasurer and given sweeping powers of approval over the sale of all Louisiana bonds, had largely ignored the dangerous increase in state debt.

With a crisis to tame and the backing of newly elected Gov. Buddy Roemer, Ms. Landrieu was able to begin molding a very different Treasury after she took office in November 1987.

Ms. Landrieu took over the chairmanship of the bond commission, sharply increasing its professional staff so that for the first time in memory it could closely scrutinize proposed bonds issues. The new treasurer also set up a fee subcommittee to monitor issuance costs and pushed to have underwriters and bond lawyers named to state-level bond issues chosen through a system of solicited proposals. Equally important, she prodded the commission to hire a financial adviser to provide an independent assessment of borrowing programs.

Ms. Landrieu also moved aggressively to modernize the investment of state funds.

Soon after taking office, she improved cash management and re-negotiated the state's contract for banking services, working out an agreement that saved Louisiana at least $1 million a year and permitted much greater investment return on cash balances. Ms. Landrieu has also pushed to improve returns on state pension fund holdings and encouraged the transfer of state general funds to reduce the funds' share of unfunded liabilities.

The treasurer can take at least some of the credit for the recent upgrading of the state's general obligation by Standard & Poor's Corp. to a, from BBB-plus. Moody's continues to rate Louisiana's GOs at Baal.

"Mary has made the office visible and active, and has gotten out and let everyone know it is visible and active," said Mr. Bressler of Scharff & Jones.

Dennis Stine, Gov. Roemer's commissioner of administration and finance, -- the administration official who works most closely with the treasurer -- gives Ms. Landrieu high marks.

"She has done a good job," he said, "and that has meant not only have the ideas but bringing in a group of talented folks as staff and keeping up with what other states are doing."

Broadening Reforms

If re-elected, Ms. Landrieu said she will continue to expand on reforms begun in her first term.

In particular, she said the state bond commission will continue to be strengthened as a review board that assesses the appropriateness of all debt in Louisiana. One change she is especially eager to see is a requirement that all issuers, not just those at the state level, select underwriters and lawyers through an open process.

"The primary purpose of the bond commission is to oversee the issuance of all debt, to ask questions about fees and structure that ensure each financing has a real public purpose and it is not being comptemplated just to benefit those professionals involved and spin off fees," she said.

Another reform that needs to be refined, she said, is the targeting of underwriters' allotments to encourage minority and women-owned firms.

Ms. Landrieu also said she would would like to use the treasurer's office to encourage review of state and local benefit programs.

"Every $(state and local$) government should periodically review the benefit packages we offer to make sure we can afford them, that they are really meeting employees' needs," she said.

With her first term near its end, Ms. Landrieu also seems eager to speak out on issues more tangential to her office. In a recent interview, she discussed at length topics she considers vital to Louisiana as a whole in the 1990s.

"We must continue to diversify the economy away from oil and gas and energy-based and diversify into industries that have a future," she said. "The state can encourage this through taxing policies, and through making resources available to the private secto."

Speaking of education, she said, "I believe radical reform is going to be necessary. And by that I mean a school-days policy, and allowing policy to flow more from the bottom up, rather than the top down."

And, she stressed, governments must remain accountable. "Citizens have every right to demand that their services be delivered in the most cost-efficient way possible, and with a smile."

Ms. Landrieu also expressed strong feelings about the state's tax system, arguing that the state's homestead exemption -- which shields property under $75,000 from taxation -- should be re-examined and revised along with exemptions for business.

"Ideally, there should be a tax structure that would not rely so heavily on sales tax, and that includes a fair and progressive income tax and equitable property tax system," she said.

Ms. Landrieu said she will work to further develop a network of state bond oversight agencies that she helped found earlier this year to pool expertise on debt practices. The treasurer also said she will continue to speak out against federal laws and regulations that have restricted state and local governments' access to the capital markets. Last month, for example, testifying before the U.S. House Ways and Means Committee, she urged passage of legislation to revise arbitrage rebate regulations.

Many Louisianans now assume that in 1995 the activist treasurer will try for the state's highest position, particularly if Gov. Roemer is then serving what would constitutionally be his final term.

Certainly, her political background encourages such speculation: She is the oldest child of Moon Landrieu, a former two-term mayor of New Orleans, and served two terms as a state representative from that city.

"It is no secret that I have thought about the possibility of running for governor and am open to the idea," she said. "But at this point I have made no definite plans. My first objective is to make sure the state has good leadership."

But though her future seems bright, Ms. Landrieu is not without her critics. Many in the bond community say her reforms substitute high-handedness for achievement.

"On the surface Mary Landrieu has looked good, but in my opinion she has been a shallow, marginal treasurer," said one investment banker who declined to be identified. "She has beaten up on the investment banks because she felt it was politically smart to do so."

And in asserting the role of the bond commission as an agency that actively reviews debt issues, Ms. Landrieu has crossed swords several times with state issuers, especially the powerful Louisiana Public Facilities Authority.

Perhaps Ms. Landrieu's most notable clash of wills with the authority occurred in October 1989. With her backing, the state's financial adviser called into question the authority's plans to sell $700 million of tax-exemps to refund its huge unemployment compensation issue sold in 1987. After weeks of jousting with the commission over the savings to be accomplished by the issue and its fee structure, the authority withdrew its proposal.

Smoother Relations

Ms. Landrieu said her dealings with issuers and the bond community have grown much smoother of late.

"The biggest single difference of opinion we have had with issuers and investment bankers is how professionals involved in a financing should be selected," she said. "In my opinion, public issuers cannot be sure they are getting the lowest possible price or the best proposal unless there is some competition involved."

One indication of easier relations may be her low-key approach to settling a dispute over fees with the public facilities authority. The bond commission staff, according to authority officials, had insisted that the commission's fees on an upcoming $65 million pooled issue by the authority be assessed both on the authority as issuer and on the local governments involved.

The commission quietly compromised. The authority would pay its fees but put into an escrow account the charges assessed individual issuers -- with the understanding that the commission will soon decide the policy issue.

"We have had our differences but I think things are beginning to be smoothed out between us, and the fee issue is one example," said Billy Gordon, the authority's managing director and finance.

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