Projections Show Possible Loss of $404.7 Million to $1.1 Billion in Sales and Ad Valorem Taxes and Mineral Revenues for Local Governments

The Legislative Auditor’s office has developed projections of the potential financial impact the COVID-19 crisis will have on Louisiana’s local governing entities – municipalities, parishes, school boards, and sheriff’s offices – through the rest of this fiscal year and next fiscal year.

Using data and research from a variety of sources, auditors estimated the state’s local governments could see a total revenue loss of $404.7 million to $1.1 billion (2.3 percent to 6.9 percent) as a result of decreased sales, ad valorem, and severance tax revenues and mineral royalties, with an average total loss of $787.5 million (4.6 percent) during the fiscal years ending June 2020 and 2021.

Such losses would correspond to between 1 percent and 2.8 percent of the total of local government revenues from all sources, or to 1.4 percent to 4 percent of general revenues, excluding grants and charges for services. The report also includes estimates by parish of the projected lost revenue.

Auditors based their projections on sales tax revenues and mineral-related revenues because these two categories make up 23.6 percent of local government budgets and are more sensitive to the economic downturn caused by COVID-19 than other revenue sources, such as Minimum Foundation Program funding.

Also included were revenues from hotel occupancy taxes because of the impact lost tourism and travel will have on some local economies. In addition, auditors estimated the effect on ad valorem taxes, which account for 20 percent of local government revenues, because these taxes grow more slowly following economic downturns. Auditors estimated local government income from sales and ad valorem taxes and mineral-related revenues would decrease between $172.4 million and $305.5 million in fiscal year 2020 and between $232.3 million and $833.2 million in fiscal year 2021.

In addition, auditors projected that sales tax collections would decrease, on average, by at least 4.2 percent in fiscal year 2021 in every parish (except Cameron, which has no local sales tax). Orleans Parish would see the largest declines – 11.2 percent in fiscal year 2020 and 30.4 percent in fiscal year 2021.