First, the usual rules: LA is included in ECL when calculating XP. The catfolk druid, therefore, had at least 6,000 XP to have ECL 4th (druid 3rd +1 LA), and losses a level from reincarnate. When you lose a level, you go down to halfway between the previous level and the level lost, so 4,500 XP. His race also changed and he loses the LA +1, so 4,500 XP is enough to keep his 3rd level of druid.
Now, story-based leveling: the XP rules would have the druid about half a level behind, and he would gradually catch up as the group levels since he would get more XP than those who are higher level. To mimic that, the druid should hit 4th before the rest of the group hits 5th, but not hit 6th until some time after they do, and so on. If there are decent halfway points in the story between level-up, the druid could level-up at these, until after a few levels the druid just levels at the same time they do, and they're together thereafter.
But personally, this is not what I do. What I do is eliminate split-level situations altogether. LA is rarely used in my games; I usually try to develop an LA-less solution to letting the player play as a given thing. And resurrection abilities don't reduce anyone's level. As a result, I don't have to worry about any of this.
And I do that because I think all of these mechanics are atrocious. They result in a lot of headaches and extra work for the DM, and a lot of frustration and annoyance for the players. It makes it much more difficult for everyone to participate.
So I recommend just letting the druid level up from this, making him 4th level like the rest of the party, and never having to worry about these problems again.