Disaster Discourse: The Hagerty Blog

Major Reforms to FEMA Programs Passed into Law – Hagerty Highlights and Reactions

On October 5, 2018, the Disaster Recovery Reform Act (DRRA) was signed into law, after passing the House by a vote of 398 to 23 and the Senate 93 to 6.

As evidenced by its margin of support in Congress, the DRRA enjoys broad bipartisan backing. Likewise, the emergency management community, government officials, and proponents of disaster resilience view its provisions as a bold step forward to confront the growing risk of natural disasters.  And we at Hagerty Consulting, Inc. (Hagerty) agree. However, we need to watch how the Federal Emergency Management Agency (FEMA) implements its provisions in regulation and policy, which will still take some time.

All DRRA provisions are retroactive for disaster declared on or after August 1, 2017. Since FEMA must still decide how to implement these provisions through changes to regulation and policy, our reactions below are only preliminary. Overall, we at Hagerty see three basic goals emerge from the DRRA for how it aims to reform disaster recovery:

(1) increase federal funding for pre-disaster hazard mitigation work and post-disaster resilient reconstruction;

(2) provide further protection to individuals and communities to receive and retain federal assistance they deserve; and

(3) minimize certain funding reductions for individuals and communities receiving assistance.

Analysis of Three Core Goals of the DRRA

In the following, we highlight certain provisions to underscore each of these three goals and give our initial reaction to each.

(1) Increase federal funding for pre-disaster hazard mitigation work and post-disaster resilient reconstruction.

Restructured and expanded Pre-Disaster Mitigation (PDM) funding

  • What does it do? Historically, PDM funding was capped for each applicant and often only enough to pay for hazard mitigation planning, as opposed to major infrastructure and housing structural mitigation. The DRRA establishes a vastly expanded National Public Infrastructure Pre-Disaster Mitigation Fund to which 6 percent of all estimated FEMA recovery funding is allocated for each Presidential disaster declaration.
  • What do we think? This means increasing PDM funding by billions of dollars to support more ambitious hazard mitigation projects. It responds to recent and past research showing that hazard mitigation work pays for itself many times over by preventing disaster damage. To read more about 2018 PDM funding, check out one of our prior posts here from Amelia Muccio, our Director of Mitigation.

Expanded assistance to allow communities to rebuild based on current building codes – even if adopted after the disaster

  • What does it do? Previously, only codes and standards in place at the time of the disaster were eligible for FEMA Public Assistance (PA) funding. This rule made it difficult to rebuild as resiliently as possible. The DRRA allows PA to fund the costs of restoring damaged infrastructure based on codes and standards in place when designing and executing recovery projects.
  • What do we think?  This provides communities the opportunity to adopt updated building codes and standards after the disaster and still leverage PA funding for recovery projects designed based on these stronger standards. As such, it is a strong positive incentive for more resilient recoveries.

Increased funding under FEMA’s Hazard Mitigation Grant Program (HMGP) for wildfire prevention

  • What does it do?  HMGP funding is traditionally only available when there is a major disaster declaration.  However, the DRRA makes an exception: for areas affected by wildfires, FEMA can provide HMGP funding even if there is no major disaster declaration.
  • What do we think?  This provides greater opportunity for communities in the west to receive HMGP funding, which can be used to make public facilities less vulnerable to wildfires.

(2)  Provide further protection to individuals and communities to receive and retain federal assistance they deserve.

Shortened statute of limitations during which FEMA can recapture obligated funding

  • What does it do?  Section 705(a) of the Stafford Act holds that FEMA can recapture funding up to three years after the state-wide disaster declaration closes.  This is further interpreted in FEMA policy to mean that the three-year statute of limitations period begins for each subrecipient at the closure of the last project in its portfolio. The DRRA significantly shortens this period. It amends Section 705(a) to say that the statute of limitations is tied to each individual project, so FEMA cannot recapture funding more than three years after the closure of each project.
  • What do we think?  This provides great protection to recovering communities by shortening the time in which FEMA can recapture funds. There are examples of FEMA coming back more than a decade after a disaster to recapture funding, which can cripple local governments.

Ramped-up protections for individuals and households that receive FEMA assistance

  • What does it do?  FEMA reduces financial assistance to individuals and households if it duplicates funding provided by another source for the same purpose (donation, state program, etc.) – which is referred to as “duplication of benefits” (DOB). The DRRA clarifies that loans received by individuals and households for recovery purposes do not constitute DOB. And it stipulates that FEMA cannot take back funding if it was provided more than three years before the FEMA notice to recapture.
  • What do we think? This important protection responds to a history of FEMA reducing recovery assistance when individuals or households qualify for a loan. We agree that loans are not the same as receiving direct cash assistance, as they must be repaid plus interest. And specifying a three-year statute of limitations for Individual Assistance (IA) provides further protection.

Instituted right of arbitration by a third-party for disputes denied by FEMA on first appeal

  • What does it do?  When there is a dispute as to the eligibility of FEMA funding, applicants can appeal FEMA decisions. If FEMA denies a first appeal, the applicant can escalate to a second appeal, which is reviewed by FEMA headquarters. But the DRRA allows applicants to seek dispute resolution through arbitration rather than second appeal for disputes over $1 million, if the first appeal is denied. Arbitration cases are heard by the General Service Administration (GSA) Civilian Board of Contract Appeals (CBCA).
  • What do we think? Arbitration has historically been a fairer forum for applicants, with FEMA losing many cases associated with Hurricane Katrina and other storms. Moreover, FEMA rarely overturns decisions on second appeal, meaning applicants have little hope once disputes reach that level.  The option to seek arbitration for large disputes provides applicants critical protection.

(3)  Minimize certain funding reductions for individuals and communities receiving assistance.

Eliminated funding reduction faced by communities that would prefer to pursue Alternate Projects than restore public facilities to pre-disaster design, function, and capacity

  • What does it do?  When restoring a damaged facility is not in the best interest of a community, the PA program allows eligible repair funding to be retained for other purposes – called Alternate Projects – and applies a 10 percent reduction (25 percent for private nonprofits) to the eligible project total. The DRRA eliminates this reduction for Alternate Projects. Now, communities can retain the entire capped portion of eligible repair funding if they pursue Alternate Projects.
  • What do we think?  This incorporates a key feature of the Section 428 PA Alternative Procedures (PAAP) Pilot Program for Permanent Work into the traditional Section 406 PA program. It allows communities to retain federal funding for projects that best fits current community needs by removing a financial incentive to just rebuild what was damaged.

Identified several forms of assistance to individuals and households that do not count against the cap on federal assistance per applicant

  • What does it do?  There is a limit on total financial assistance that households can receive under the IA program. However, under the DRRA, now households can receive certain forms of assistance without it counting against this limit, such as assistance to rent alternative housing after a disaster and to repair or replace accessibility-related improvements or personal property for individuals with disabilities.
  • What do we think? Disaster-affected households are constrained historically by the limit on IA funding. As such, effectively exempting certain forms of assistance from this limit give survivors a better chance to recover more quickly.

Fewer mandatory National Flood Insurance Program (NFIP) reductions for damaged buildings on a single multi-structure campus

  • What does it do?  The Stafford Act stipulates that FEMA must reduce eligible PA funding for any damaged facility without flood insurance in a Special Flood Hazard Area (SFHA). Previously, if there were five damaged buildings on a given campus, FEMA applied five mandatory NFIP reductions.  The DRRA relaxes this mandate. For multi-structure campuses, including educational, law enforcement, fire, medical, or correctional, FEMA will now only apply one mandatory NFIP reduction. However, this reform is only in effect for disaster declared from January 1, 2016 through December 31, 2018.
  • What do we think?  This amendment provides important relief to recovering communities with public buildings in SFHAs, as mandatory NFIP reduction can sometimes eliminate all eligible PA funding. However, the benefit of this reform is limited, as it does not apply to most future disasters.

The DRRA reflects FEMA’s strategic vision to push disaster recovery responsibilities down to the state and local levels. On top of the expanded eligibility and resiliency reforms highlighted above, other provisions signal to the country that FEMA will continue to promote recovery that is “federally supported, state managed, and locally executed” – a core tenet of its 2018-2022 Strategic Plan.

As FEMA seeks public comment on draft regulation and writes new policy around the DRRA, we must all stay vigilant to ensure the intent of this Bill stays intact. We at Disaster Discourse will monitor resulting regulation and policy and inform you ask it develops.

Ari Renoni is a Deputy Director of Recovery Programs with Hagerty. He serves as the Deputy Policy Team Lead supporting clients in the New York City (NYC) Metro Area. Prior to Hagerty, Ari worked for the United Nations (UN) World Food Programme (WFP), the UN Children’s Fund (UNICEF), the Ministry of Education in Namibia, and for the Center for Policy Research at the Maxwell School of Citizenship and Public Affairs, Syracuse University.  He lives in upstate NY with his wife and two children.