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
Date Written: September 24, 2021
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: Suggested Citation