A Conversation With…

The Government Finance Research Center works with researchers from a variety of backgrounds to analyze the role that public finance plays in our lives. In the interviews below, we talk with experts to dig deeper into pertinent topics and get their perspective on the past, present, and future of government finance.

“Disasters are becoming more frequent, expensive, and severe. But cost-saving strategies like mitigation are stymied by a lack of data about how much states are spending on these events.” – Colin Foard, Associate Manager, Fiscal Federalism Initiative at The Pew Charitable Trusts

Colin Foard

What is happening at the federal level around disaster spending and how does that affect states?

Federal spending on natural disasters is on the rise. Since 2005, the federal government has spent $460 billion on these events. As a result, there have been federal initiatives in recent years that seek to control that growing spending.

That’s an important issue for states, since spending on disaster assistance is highly intertwined across all levels of government: federal, state, and local. That means any change in disaster assistance policy at the federal level will affect state and local budgets. Our research has focused on the fact that the spending debate is happening without a clear idea of how much state and local governments actually contribute due to a lack of comprehensive tracking of disaster spending. That risks shifting costs from one level of government to another—instead of reducing overall spending.

Is this an issue that’s becoming more important over the years?

Yes, absolutely. In the last year, we have seen record setting wildfires in western states, hurricanes in eastern states, and flooding in the Midwest. Every single state has had a federal disaster declaration–the mechanism through which states become eligible for federal aid–since 2015.  

And, as more levels of government become involved in paying for a disaster, the more complicated it gets. Although FEMA leads these activities, altogether 17 federal agencies spend money on disaster assistance. Others include Housing and Urban Development and the Department of Agriculture. It’s a similar situation at the state level, with over a dozen different agencies and departments involved. 

That makes comprehensive tracking of that spending a challenge, but one worth surmounting, since governments can’t make strategic decisions about that spending. For example, with more information on what each state and local government is spending on each of phase and type of disaster, officials would be able to consider cost-saving initiatives like investing in mitigation before a disaster strikes

Have any states taken the lead in this important area?

When we first started our research in this area, 23 of the 50 states were able to provide some data about their disaster assistance spending—none of it comprehensive. Since then, several states have implemented policies to capture their total spending on these events.  

The first was Ohio, which established a system through its Office of Budget and Management and Emergency Management Agency to capture cross-agency disaster costs every time the State Emergency Operations Center is activated. Agency officials collect expenditures on personnel, equipment, state-owed infrastructure damage, and grants and loans to local governments for response and repair costs. Then, they send this information to the state’s Emergency Management Agency.

Virginia took a different approach. Its legislature passed legislation mandating more regular reporting of disaster expenditures by state agencies from the state’s Disaster Recovery Fund as well as contracts executed for disaster needs, to make sure that the lawmakers were kept well aware of what was happening with disaster relief around the state. 

What has your research shown about what states are doing in terms of paying for disasters?

While we don’t have a clear idea of how much states spend on disaster assistance, we do know that they use five common budgeting tools to fund that work. There are preemptive mechanisms that allow states to put money aside for future disasters; these include statewide disaster accounts and rainy day funds. State also employ responsive budgeting tools, which allow them to move money around during and after a disaster; these include supplemental appropriations and transfer authority. Another mechanism—state agency budgets—can be used either way. 

While most states use a combination of these budgeting tools—all 50 states use at least three of them—they do so in different ways. We believe that understanding those differences can help state governments assess if their current budgeting approaches are able to meet future needs. 

What should states be doing in light of the challenges of paying for disaster costs?

We have three primary recommendations for state officials to better manage their spending on natural disasters. First, states should track how much they are spending on disaster assistance—ideally broken down by type of disaster and phase of disaster (mitigation, preparation, response, and recovery). You can’t manage what you don’t track, and this is the clear first step for states to start tackling this problem.

Second, officials should examine how they pay for disasters, compare those strategies to what other states are doing, and then decide if they need to make any changes to be better prepared for future budgeting challenges. Disasters are becoming more frequent, expensive, and severe, and now is the time for government leaders to plan for how they will cover these costs in the years to come.

And third, states should consider cost-saving strategies like mitigation projects, such as elevating buildings or retrofitting infrastructure to reduce the impact of future events. Research from the National Institute of Building Sciences has shown that every federal grant dollar invested in these efforts saves $6 on average in post disaster recovery costs. We expanded on that work to show that this savings varies by state and type of disaster, from $7.33 in savings for high wind projects in New Hampshire to $2 for earthquake projects in Idaho and Indiana as well as fire projects in Arizona and New Jersey. Although the savings varied, mitigation activities in every state for every type of disaster saved at least double per dollar invested.

Can you help us understand the benefits of mitigation with a concrete example?

One example is performing earthquake retrofits of infrastructure. Another is elevating or acquiring flood-prone buildings. For example, North Dakota spent $226 million on flood control in state funds on flood control projects from state fiscal year 2012 to 2016. These activities are all about making investments on the front end to minimize future risk and save on future recovery costs.

Are there any states in particular that don’t need to consider disaster preparedness?

Not at all. Although people often associate disasters with hurricanes in Florida or wildfires in California, this is a 50-state issue. As I mentioned, since 2015, all 50 states have received a federal disaster declaration, the mechanism through which they are able to get federal aid.

And as every state faces the fiscal impacts of the COVID-19 pandemic, understanding the full impact of disaster costs—and how to manage them—is more important than ever.

Are any states acting on Pew’s recommendations related to disaster spending?

Yes, in addition to Ohio and Virginia, North Carolina is another example. After a devastating series of hurricanes officials in that state formed the North Carolina Office of Recovery and Resiliency to coordinate the recovery. Part of their mandate is to provide statewide reporting on how dollars are being spent and report on those expenditures. These are all important steps toward closing the data gap related to what we’re spending on disasters, which is critical to creating forward thinking solutions to manage rising costs.

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