News & Events

Hagerty Opinion: The Hill

Hagerty’s Brock Long penned an opinion piece for The Hill on the current state of federal disaster response and recovery spending in the United States.

Why will FEMA spend as much in past 2 years as the previous 37? Here’s how disaster aid works

When the average citizen hears about the political debate on the Hill surrounding the disaster aid package, it is important to keep in mind that disaster relief funding is very complex. It can come from 20 different federal government agencies to implement approximately 90 different programs. Unfortunately, many citizens and politicians are unaware of how disaster funding works, which often leads to unwarranted criticism of FEMA and unnecessary political fodder regarding disasters.

In 2017 and 2018, more than 200 disasters and wildfires were declared. In the aftermath of these events, FEMA’s Disaster Relief Fund is only one major source of funding that was made available to state and local governments. As a result of the magnitude of disasters over the past two years, it is estimated that FEMA will administer the same amount of recovery funding that the agency distributed between 1979 (the year FEMA was created) to 2016. That’s the equivalent of 37 years — in just two.

FEMA works tirelessly to properly administer funds in a timely manner; however, disaster recovery must be supported by all levels of government funding and a host of other agencies that are largely out of FEMA’s control. Federal partners such as HUD, Small Business Administration and the Federal Highway Administration will also distribute an unprecedented amount of funds due to the sheer magnitude of the events experienced since 2017. Additionally, state and local governments should establish robust pre-event cost recovery plans that help them understand how to utilize all funding mechanisms to recover in a more resilient fashion.

The federal government has collectively committed more than $120 billion since 2017 to support ongoing disasters. A large majority of this funding will repair infrastructure problems associated with negative deferred maintenance practices in Puerto Rico that occurred over several decades. It should be noted that deferred maintenance increases recovery costs exponentially and the impacts a disaster can have upon a community’s infrastructure. FEMA had to ask for special authorities to overcome deferred maintenance issues in the aftermath of Maria.

Putting recovery money to work and rebuilding communities in a more resilient manner is a difficult process that cannot be rushed. While disaster aid packages are often politicized, it may surprise people to hear that FEMA’s Disaster Relief Fund currently has a balance of $28 billion dollars. This is a massive amount of money that will not run out overnight, nor should it.

This balance is methodically drawn down by FEMA and awarded to state and local grantees through a necessary series of checks and balances. FEMA also provides quarterly updates to Congress and regularly voices concerns when relief funds are running low. FEMA carefully estimates and projects anticipated future disaster costs so that it can accurately convey to Congress what communities will most likely need to recover. The current disaster aid package on the Hill will simply provide additional funding to multiple agencies and programs. FEMA does not ask for arbitrary funding amounts from Congress.

Regardless of the current debate, this is a teachable moment for our country. Recovery funding is not haphazardly sent to states by FEMA. Legislation typically requires grantees to execute sound cost estimates, and to design project worksheets that are jointly approved at all levels of government before money is provided to a community.

If it were not for this process, relief funds would be wasted along with an opportunity to rebuild communities in a mitigated manner. Long-term recovery funds designed to rebuild public infrastructure should not be rushed, but money to support individual citizens and help them get back on their feet should be expedited.

I hope Congress will work with FEMA to reduce disaster costs in the future. FEMA has innovative ideas and examples to share with Congress if the Hill is willing to listen and consider a new path forward. One such idea is to engage the private reinsurance industry to explore new ways to create more budget stability at all levels of government.

The last two years have proven that state and local rainy-day funds are woefully inadequate and reinsurance concepts can be part of the solution. During my time as administrator, FEMA secured reinsurance to bolster the National Flood Insurance Program. This saved taxpayers nearly $1 billion dollars during Hurricane Harvey. As a result, FEMA progressively continues to investigate capital markets to offset disaster costs and this practice should be highlighted by Congress as a pragmatic solution.

Finally, FEMA’s most expensive recovery cost historically is paying for uninsured public infrastructure. In other words, FEMA is left to serve as the backstop for self-insured communities (cities that do not insure their public buildings). Congress needs to incentivize disaster funding to cities that do their due diligence to insure their public buildings and increase the disaster fund cost for communities that don’t. Doing so would save billions of dollars over the next decade, and if the private insurance industry is viewed as a partner by government going forward, I believe it will help to offset the cost to the taxpayer.

It’s time to think differently about funding disasters and to stop politicizing them. The dedicated public servants inside FEMA know how to reduce costs and mitigate disasters, but they need Congress to listen to them and act. Doing so will reduce the complexity of future disasters. Reinsurance and catastrophic bond concepts, coupled with pre-disaster mitigation dollars, will ultimately reduce disaster costs in the future. Until then, costs will continue to rise in the future and unnecessary disaster politics will reign.