The Federal Emergency Management Agency (FEMA) is considering a move to require states to put up something like an insurance deductible before seeking disaster relief. The burden-sharing proposal aims to reduce federal taxes and strain on the agency. FEMA is saddled with an antiquated financial arrangement while contending with more floods, fires, and wind damage than ever before.
FEMA posted a notice of proposed rulemaking in the Federal Register last week, requesting public comment. “This would be a dramatic change from how our Public Assistance Program to states and local governments has worked in the past,” said Joshua Batkin, FEMA's Director of External Affairs.
Instead, he argues, a deductible would give states an incentive to prepare for the worst, financially or materially. The deductible in its simplest form would be a rainy day fund or self-insurance plan, but states might also earn credits toward a predetermined obligation by adopting stricter training standards, building codes and zoning rules, or by building more resilient infrastructure. Batkin emphasized that relief to individuals wouldn’t be affected should the reforms under discussion be adopted.
While a simple fund might seem easier to evaluate by insurers, bond analysts and fiscal watchdogs, there are vulnerabilities in that approach, according to economist Robert Hartwig, president of the Insurance Information Institute. “You want to ensure that funds are allocated year in and year out, or roll over, and are kept at 200% of anticipated costs, or some factor like that," he said. "The funds have to be safeguarded so they aren’t used for other purposes. We need legislation to prohibit raiding.” Hartwig cited New Jersey’s pension fund operations as a cautionary example. He also noted that states like Utah and Wyoming, which experience few disasters, might be better served than others by a simple rainy day fund.
Harvard Kennedy School lecturer in public policy Juliette Kayyem more saltily said the reforms should end the “thank you ma’am, may I please have another philosophy” of rebuilding in the same way and in the same place. Kayyem, who served President Obama as Assistant Secretary for Intergovernmental Affairs at the Department of Homeland Security and was Massachusetts Governor Deval Patrick’s homeland security advisor, outlined her reform ideas in the current issue of the journal Democracy. In it, she argues, “It is time to rescind or fundamentally revise the Stafford Act.” That 1988 legislation was lambasted in the wake of Hurricane Katrina for hamstringing attempts to build back smarter.
“Our response system is based on the concept that disasters are rare and random, and that we’d all want to benefit from federal help if it was us," Kayyem said. "That thinking is just not accurate anymore. Look at the number of disasters in recent years. The system is set up in a way that does not promote good behavior and in some ways promotes bad behavior. We’re telling people, ‘We’re going to help you get back to making things normal,’ and we make it hard to build better. We need to get out of this idea of getting back to normal as a philosophy.”
FEMA is part of the Department of Homeland Security. A disaster can be declared by the President after receiving a plea from a state governor or tribal leader. FEMA’s calculations weigh heavily in that decision, but in the end, it’s a matter of the President’s discretion. Before 1950, federal funds to afflicted states had to pass through Congress. FEMA was created through executive orders by President Jimmy Carter in 1979 and folded into the Department of Homeland Security by President George W. Bush in 2003.
Though the number of disaster declarations has lowered a bit in recent years, declarations in this new century have far outstripped those in the latter part of the 20th. TheStreet reviewed federally declared disasters and found that the average annual caseload between 1976 and 1995 was 39, but between 1996 and 2015 it was 121.
On January 15, 2015, Congressman Lou Barletta (R-Penn.), Chair of the Transportation and Infrastructure subcommittee on Economic Development, Public Buildings, and Emergency Management, tasked FEMA Administrator W. Craig Fugate with exploring ways to reduce claims on federal disaster funds.
The rise in declared disasters reflects a combination of the increasing frequency of extreme weather events and a peculiarly rigid fiscal method FEMA uses to reach a recommendation to assist.