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The Fiscal Impacts of Wildfires on California Municipalities

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  • Yanjun (Penny) Liao
  • Carolyn Kousky

Abstract

This paper provides some of the first empirical estimates of the impact of natural disasters on the subcomponents of municipal budgets. We combine detailed municipal financial data from 1990 to 2015 with data on historical wildfire perimeters in California. We find that wildfires increase both revenues and expenditures. Sales taxes temporarily increase. Property taxes increase to a permanently higher level; this appears due to a California law that limits reassessments of property until time of sale. Wildfires also cause a long-term increase in local spending on community development and public safety. The overall impact of wildfires on municipal budgets is negative and substantial. That said, in comparison to the spending by state and federal governments on wildfire suppression and response, municipalities are surprisingly insulated from the costs of wildfires.

Suggested Citation

  • Yanjun (Penny) Liao & Carolyn Kousky, 2022. "The Fiscal Impacts of Wildfires on California Municipalities," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 9(3), pages 455-493.
    • Handle: RePEc:ucp:jaerec:doi:10.1086/717492
    DOI: 10.1086/717492
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    Cited by:

    1. Jerch, Rhiannon & Kahn, Matthew E. & Lin, Gary C., 2023. "Local public finance dynamics and hurricane shocks," Journal of Urban Economics, Elsevier, vol. 134(C).
    2. Carla Morvan, 2022. "Municipalities' budgetary response to natural disasters," Working Papers halshs-03684732, HAL.
    3. Ferreira, Susana, 2024. "Extreme Weather Events and Climate Change: Economic Impacts and Adaptation Policies," IZA Discussion Papers 16715, Institute of Labor Economics (IZA).

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