Natural Disasters and State and Local Finance in Louisiana: A Case Study in 2005

Hurricanes Katrina and Rita abruptly changed the economic outlook for Louisiana, altering potential revenue streams for both the state and local governments and imposing new government expenditures. This study examines the ongoing financial issues arising from the hurricanes for state and local political subdivisions in Louisiana—with state issues being uncertainty regarding tax collections, and local issues being adjustments in the local tax base, performing the basic and necessary public services of local governments, and servicing bonded indebtedness. The study divides Louisiana’s local political subdivisions into three categories: parishes that suffered severe and pervasive destruction to their economic base and residential communities, which means that the local tax base has been seriously diminished; parishes that suffered serious, but temporary, damage to their economic base and residential communities, which means that the local tax base was temporarily diminished but can recover fairly quickly in terms of generating local revenues; and parishes that received large influxes of people in a short period of time and must accommodate these people over an extended period of time, which means that the local tax base has increased, especially the sales tax base, but so has the demand for public services.