Report highlights effect of Covid-19 on local government revenues

The Louisiana Legislative Auditor has estimated the impact on Louisiana local government revenues from sales taxes, ad valorem taxes, severance taxes, and mineral royalties due to social distancing and falling energy prices stemming from COVID-19. This work was performed to enable federal, state, and local officials to anticipate budget adjustments that local governments will need to make and to develop plans to balance local budgets by spending cuts, tax increases, loans, and disaster grants.

It’s estimated that parish governing authorities, municipalities, school boards, and sheriffs will collectively experience revenue losses in sales, ad valorem, and severance taxes and mineral royalties ranging from $404.7 million to $1.1 billion (2.3% to 6.9%) during fiscal years 2020 and 2021, with an average total loss of $787.5 million (4.6%).

These losses would be between 1.0% to 2.8% of total local government revenues from all sources, or 1.4% to 4.0% of general revenues (which excludes grants and charges for services). These estimates are based on assumptions that the number of people employed in Louisiana will decrease by 197,000 to 317,000 (as distinguished from unemployment claims) and will take two to five years to recover, along with other specific assumptions about different sectors of the state’s economy, as explained in Appendix A of the report.

Exhibit 1 shows our forecast for tax collections under the baseline scenario, as well as our forecast under the average, pessimistic, and optimistic scenarios. Exhibit 2 shows the impact in percentage terms by parish for fiscal year 2021, and Appendices B and C to the report show the effects for all scenarios by parish and local government entity type.

View the full report at www.lla.la.gov.


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