The Fiscal Impacts of Wildfires on California Municipalities

Liao, Y., & Kousky, C. (2022). The fiscal impacts of wildfires on california municipalities. Journal of the Association of Environmental and Resource Economists, 9(3), 455-493.

56 Pages Posted: 5 Jun 2020 Last revised: 11 Apr 2022

See all articles by Yanjun Liao

Yanjun Liao

Resources for the Future; Wharton Risk Center

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 Kousky, Carolyn, The Fiscal Impacts of Wildfires on California Municipalities (September 24, 2021). Liao, Y., & Kousky, C. (2022). The fiscal impacts of wildfires on california municipalities. Journal of the Association of Environmental and Resource Economists, 9(3), 455-493., 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 )

1616 P Street, NW
Washington, DC 20036
United States

Wharton Risk Center ( email )

3819 Chestnut Street
Suite 130
Philadelphia, PA Pennsylvania 19104
United States
19104 (Fax)

Carolyn Kousky

University of Pennsylvania ( email )

Philadelphia, PA 19104
United States

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