Between Hurricane Laura and the coronavirus pandemic, times are tough for many families in Louisiana.
But these disasters, coming on top of each other, are going to create a hard road ahead for recovery, in part by sharply limiting the capacity of local governments to help.
The old phrase “canary in the mine” relates to birdcages in coal mines, killing the birds when noxious gases were present. There are few things more noxious to recovery than major shortfalls in local governments’ revenue.
In a normal year, the state Legislative Auditor’s Office will receive requests for extra time to complete their annual financial reports. This year, there are some 700 asking for extensions.
That’s one dead canary right there.
The state auditor’s staff is a sort of clearinghouse for local government finances. It’s played a key role in shaping a response to the serious financial problems faced by small towns and villages, many of whom are shrinking in population — to the point that a few have had state financial overseers appointed to balance the books and keep essential services going. More may be coming.
But it’s not just the rural population problems now: With many cities and towns dependent on sales tax revenues, the coronavirus shutdowns are having a serious impact. Gambling revenues, of course, were also seeing a significant decline during shutdowns of casinos and restaurants where video poker machines are located.
A new estimate from the auditors is that serious shortfalls are in view, lasting several years.
The good news is that the latest estimate is a bit more optimistic than a few months ago, but the auditors still see parishes will receive about $1.1 billion, or 7.5%, less than what would have been collected over the next five years.
The economic front is not promising right now: Louisiana’s gross domestic product, a measurement of economic activity, has plunged 6.2%, according to the U.S. Commerce Department. Hospitality businesses, which fuel a lot of this state’s economy, declined 26.8% as part of the COVID-19 pandemic that brought the national economy to a standstill, the Commerce Department calculated.
The issue of hotel employment collapsing is particularly damaging in metro New Orleans, a world attraction for tourism. But we love our nightlife everywhere in Louisiana and our food.
As the economy “re-opens,” or at least comes closer to normality because people have taken precautions with masks and other measures in our daily lives, the financial picture for all — families and local government — is likely to get better. But whether there is officially an end to restrictions on seating or opening bars and restaurants, consumers are going to be cautious for a while.
That has a serious impact when local government, as in Louisiana, is heavily dependent on sales tax revenues.