The Fiscal Impacts of Wildfires on California Municipalities

56 Pages Posted: 5 Jun 2020 Last revised: 26 Sep 2021

See all articles by Yanjun Liao

Yanjun Liao

Resources for the Future; University of Pennsylvania - The Wharton School

Carolyn Kousky

University of Pennsylvania

Date Written: September 24, 2021

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 1990-2015 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 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.

Keywords: wildfires, natural disaster policy, municipal budgets, Proposition 13

JEL Classification: H71, H72, Q54, R51

Suggested Citation

Liao, Yanjun and Liao, Yanjun and Kousky, Carolyn, The Fiscal Impacts of Wildfires on California Municipalities (September 24, 2021). Available at SSRN: https://ssrn.com/abstract=3612311 or http://dx.doi.org/10.2139/ssrn.3612311

Yanjun Liao (Contact Author)

Resources for the Future ( email )

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University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States
19104 (Fax)

Carolyn Kousky

University of Pennsylvania ( email )

Philadelphia, PA 19104
United States

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