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Preliminary Economic and Fiscal Impacts of the April 27, 2011 Tornadoes on Alabama

June 29, 2011 Comments off

Preliminary Economic and Fiscal Impacts of the April 27, 2011 Tornadoes on Alabama (PDF)
Source: Center for Business and Economic Research, Culverhouse College of Commerce and Business Administration, The University of Alabama

Summary

  • Preliminary macroeconomic impact estimates of the April 27, 2011 tornadoes that hit Alabama are reductions of (i) 0.2-0.5 percent in employment or 5,600-13,200 jobs, (ii) 0.2-0.5 percent in state tax collections or $19.1-44.5 million, (iii) 0.5-0.7 percent in Alabama Gross Domestic Product (GDP) or $835 million to $1.3 billion, and (iv) $4.4-10.2 million in local sales tax collections. These loss effects are expected to be experienced in 2011 only.
  • Recovery activities involving cleanup, assistance, and rebuilding should pump $2.6 billion into the state economy in 2011, with the state spending about $80-100 million for cleanup. The funds influx will be mainly from federal sources and insurance claim payments. These activities will create impacts that exceed the damage effects and include gains of $2.9 billion in GDP or 1.6 percent, 51,700 jobs with $1.5 billion in earnings for an average of nearly $29,800 per worker, $83.1 million in state income and sales taxes, and $31.0 million in local sales tax collections.
  • Cleanup and assistance should be completed in 2011, but rebuilding will continue into 2012 with the injection of $1.6-3.2 billion into the state economy that year. The resulting impacts include about 36,900-73,800 jobs with $1.2-2.3 billion in earnings for an average of $31,741 per worker, $1.9-3.9 billion in GDP, $63.2-126.5 million in state income and sales taxes, and $23.6-47.2 million in local sales tax receipts.
  • Over the expected 2011-2012 period, the recovery activities will generate enough revenue to cover damage-induced losses to state finances as well as the state spending for cleanup if assumptions on losses and spending hold. While the tornadoes’ damages are largely localized, the economic impacts of the ensuing recovery activities will be more widespread. Some areas were so devastated that it is nearby communities that will benefit from the recovery spending.
  • This report focuses only on the identified economic effects, and not on other quality of life factors such as lives lost, displacement, and mental and physical health issues that are also very important. Incorporating these other factors and the opportunity cost of recovery spending leads to the conclusion that the tornadoes had a net negative effect. Overcoming this negative effect will require going beyond rebuilding to reinventing and reinvesting.
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