How States Can Ease the Financial Burden of Disasters on Local Communities

Providing a Helping Hand: How States Can Ease the Financial Burden of Disasters on Local Communities

FEMA, when authorized by federal disaster declarations, provides enormous financial support to local recovery efforts.  However, this support requires affected communities to share the financial burden of recovery.  And this burden can seriously harm the financial health of recovering communities.

From October 1 through October 23, 2015, the State of South Carolina experienced massive flooding due to storms related to Hurricane Joaquin off the state’s Atlantic coast. A Presidential disaster declaration (DR-4241) was issued on October 5th, with 35 counties eventually being added to the declaration for Public Assistance (PA). In total, the estimated statewide damage total neared $275 million. As a result, on June 2, 2016, the South Carolina General Assembly ratified their 2016-2017 General Appropriations Bill, which included $72 million in aid to cover the local cost share for FEMA-eligible PA projects.

FEMA’s Public Assistance Program and Local Cost Share for Public Assistance

While the FEMA PA program is designed to assist local governments and eligible private non-profits pay for their disaster-related emergency response, debris removal, and permanent repair costs by providing supplemental assistance on a reimbursement basis (similar to other state/federal partnership programs such as Medicaid), FEMA does not pay for 100 percent of these costs. Typically, FEMA will only cover 75 percent of the cost, but that can increase to up to 90 percent in the case of a disaster that causes extraordinary damage. The activation of PA after a disaster is based on estimates of per capita damage. PA will be activated for a state when statewide damage exceeds $1.41 per person and for a county when countywide damage exceeds $3.57 per capita. For disasters declared in 2016, the threshold that triggers a federal cost share increase from 75 percent to 90 percent is $137 in per capita damage for the affected state’s population.

States Step Up

Recognizing this risk to local communities, states will sometimes step in to help municipalities pay all or part of their local share. While the 75-90 percent of FEMA assistance can be a boon after a major disaster, that still leaves 10-25 percent of the cost of eligible damage for the local applicant to cover. For example, the City of New York’s 10 percent local cost share for eligible Hurricane Sandy damages will end up being over $1 billion by the end of the disaster. And this does not take into account damages ineligible for FEMA PA funding such as damage to landscaping. For some smaller cash-strapped communities, finding the $250,000 necessary to cover the local cost share of a $1 million bridge repair could delay other important projects that were planned or even cripple a small town financially for years to come.

Some states like South Carolina will provide assistance on a case-by-case basis related to the size and severity of the disaster, while others have developed a uniform policy for all declared disasters. Nationwide, 23 states or territories^[i] cover at least a portion of the local share for PA costs, with six covering 100% of the cost share^[ii].

In addition to assisting with Public Assistance costs, 11 states also assist with the required local cost share with projects approved as part of FEMA’s Hazard Mitigation Grant Program (HMGP), which will pay for hazard mitigation measures for facilities that weren’t directly damaged in the declared disaster.

In the six states that have a set policies to pay 100 percent of both PA and HMGP costs, local leaders have strong state-level partners looking out for them in case of a disaster.  This support is significant.  In disaster recovery, it means that local leaders can cross off financial uncertainty from the long list of things to worry about.^[iii]

Know Your State’s Policy and Have a Plan

Knowing your state’s policy on covering the local cost share can help reduce one area of uncertainty in a disaster recovery.  That said, knowing how and when the state will offer additional financial assistance is not enough to guarantee a successful recovery. Federal programs that fund disaster recovery are complex, and there is an added compliance burden that accepting federal funding places on grantees and sub-grantees.  To meet these challenges head on, it is critical that you have a detailed disaster cost recovery plan in place in advance of any potential disaster.

Such a plan should at a minimum address:

• Proper procurement to comply with all applicable federal programs
• The use of budgeting mechanisms to identify disaster costs
• Policies and procedures for effective grants management after a disaster

By investing in a plan, you can help your jurisdiction avoid the loss of funding after a disaster while making the recovery process less administratively burdensome.

[i] Includes Puerto Rico, Guam, and the District of Columbia

[ii] National Emergency Management Association.  2016 Biennial Report.  Available for purchase here.

[iii] Ibid.