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5 Years Later: The Effects of Hurricane Katrina and the Recession on State Revenue

September 1st, 2010

In the last five years, the state has endured some tough challenges, including Hurricane Katrina and the recent recession. The effect of those events on state revenue has been dramatic. After Hurricane Katrina, in addition to the federal aid provided to the state, state tax revenue increased due to recovery activities.

Affected residents bought new items to replace those lost in the storm and bought construction materials for repair and rebuilding. That added up to an increase in sales tax revenue. Accordingly, the state was able to make investments in services, like education, that it had not been able to make before. The Mississippi Adequate Education Program was fully funded in 2007, for the first time since its creation in 1997. However, the recent recession has eroded those gains. The figure below shows general fund revenue collections and estimates for the last 15 years.

Click to enlarge

Mississippi General Fund Revenue Collections and Estimate, 1996-2011  

Blog Katrina effect (3)

General Fund collections peaked in Fiscal Year (FY) 2008 after Katrina and have since declined by $462 Million (9.6 percent). Tax reform is necessary to update the tax system so that the state can maintain vital investments in areas like education.

Sara Miller

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