Louisiana needs to ensure that local governments and parishes do not face financial troubles in the short-term as a result of the oil spill disaster. One of the biggest financial threats to local governments right now is lower tax revenues. Local officials may be seeing lower sales taxes because of people out of work and residents postponing major purchases.
Local officials in areas impacted by the disaster were already working with tight budgets and strapped resources before this disaster. Now they may be forced to spend money that is not in their budgets to deal with cleanup and other related costs of the oil spill.
The worst case scenario would be if local governments get into a cash flow crunch and run into problems with the capital markets or Rating Agencies. Only one day after Hurricane Katrina hit our state, Louisiana’s bond rating was downgraded. The Rating Agencies are working with us much better this time around, but they want to come to the state to personally assess the damage from the spill. The financial stability of our local governments is important to maintaining solid bond ratings.
I have met with the House Appropriations Committee to discuss several options to help local governments with cash flow problems. The House has passed an amendment to the Supplemental Appropriations Bill that would take $24.9 million from the Oil Spill Contingency Fund and allocate it to local governments.
A proposal has also been discussed that would put BP monies into a fund that local governments could access to help pay for oil spill recovery efforts. Another possible solution is a loan program similar to the one Congress passed in the aftermath of Katrina that provided emergency funding to local governments affected by the hurricane.
These are just some of the options out there to help local governments and parishes make a full recovery. The state must work with local officials so they have the necessary tools to move past this disaster and continue to provide much-needed services to the public.