Damage from Hurricane Sandy in Mantoloking, New Jersey in 2012.

An Innovative Way to Encourage Disaster Preparedness: FEMA’s Public Assistance Deductible

, lead economist and climate policy manager | April 12, 2017, 11:01 am EST
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The Federal Emergency Management Agency (FEMA) recently outlined a new framework for encouraging states to invest in disaster resilience and thus limit the growing costs of disasters.

Today is the comment deadline for the ‘Public Assistance deductible,’ a concept that can help protect communities and ensure federal taxpayer dollars are spent wisely. The Union of Concerned Scientists is filing comments supportive of this idea, with some important recommendations for improvements.

What is the Public Assistance program?

FEMA’s Public Assistance (PA) program provides funding for local, state, and tribal governments to help communities recover from major disasters. The PA program provides funding for debris removal; life-saving emergency protective measures; and the repair, replacement, or restoration of disaster-damaged publicly owned facilities and the facilities of certain private non-profit organizations.

Federal taxpayers pay for at least 75 percent of the eligible costs, and state and local entities pay the rest. According to FEMA, on average, the Public Assistance program has provided approximately $4.6 billion in grants each year over the past decade.

Ideally, program funds would be invested in ways that ensure communities build back in a stronger, more resilient way. But in practice this is not always the case.

After disasters, there is often a strong impetus to build back the same way, right where things were before—which may not be the best long-term choice. For example, in many places sea level rise is worsening risks of coastal flooding. Storm surges, riding on higher sea levels, will be able to reach further and higher inland causing greater damage. Post-disaster recovery efforts need to take into account scientific data and projections of sea level rise, and not perpetuate risky rebuilding in harm’s way.

An innovative model: The Public Assistance Deductible

Under FEMA’s proposed design for this deductible, states would first have to meet a minimum threshold of expenditures on post-disaster recovery before FEMA would provide federal assistance through the PA program. The state-specific deductibles would be calculated using a formula that starts with a common annual national base deductible equivalent to the median average amount of Public Assistance received across all 50 states in the past 17 years. This would then be adjusted by taking into account a state’s fiscal capacity and its disaster risk relative to other states.

The truly innovative part of the proposal would be that FEMA would allow states to buy down their deductible through credits earned for state-wide measures that would help build resilience and lower the costs of future disasters.

FEMA’s framework would include $3 in deductible credit for every $1 in state spending on qualifying mitigation activities. These could include protective building codes, measures to safeguard or enhance wetlands and other nature-based flood protections, flood risk management standards (that require building at least 2-3 feet above base flood elevation), and state investments in mapping, tools, and enhanced hazard mitigation plans to help identify and reduce disaster risks.

For further details on FEMA’s PA deductible framework, including the calculation of the state-specific deductibles and credits, see the Supplemental Advanced Notice of Proposed Rulemaking (SANPRM).

Why UCS supports a well-designed Public Assistance Deductible

UCS supports the concept of a well-designed deductible for the PA program. We believe this could be an effective way of addressing a number of priorities for reform of federal disaster funding previously identified by the Government Accountability Office, Congress, and by the Department of Homeland Security’s Office of the Inspector General.

FEMA has been urged to find ways to reduce the costs of federal disasters. Rather than use blunt, inequitable methods that just transfer costs from the federal government to state, local, and tribal governments, we are encouraged that FEMA is exploring ways to help lower the costs of disasters through hazard mitigation measures. The PA deductible program would give states an incentive (through the crediting mechanism) to take pre-disaster protective actions to make communities more resilient to disasters.

With careful attention to the details of such a proposal, this type of concept could help advance community resilience and ensure that taxpayer dollars are wisely invested.

Goals of a Public Assistance Deductible

Studies show that investments in pre-disaster risk reduction measures have a payback of at least 4 to 1 and estimates of the benefits of investments in flood mitigation are higher at 5 to 1. Studies from the Wharton School at the University of Pennsylvania and Swiss Re indicate that higher design standards have a far higher payback than 4 to 1. Yet our nation continues to under-invest in sensible pre-disaster hazard mitigation measures, even as more lives are lost and the costs of weather and climate disasters grow.

In our comments, we have urged FEMA to ensure that the PA deductible program:

  • Provides a strong incentive for states to invest more in pre-disaster preparedness measures that would help limit harm to people, property, and natural functions of ecosystems over the long-term and ensure that taxpayer dollars are spent wisely. We’ve recommended that FEMA expand the list of measures that qualify for credits to include state-wide protective freeboard regulations that go above the minimum federal requirements, investments in hazard mitigation (with extra credit for nature-based, green measures such as wetlands and living shorelines and less credit for hardening measures such as levees), enhanced design standards, building codes, protective zoning standards, statewide flood mapping (e.g. North Carolina), and strategic plans and incentives for managed retreat from high-risk areas.
  • Is administered in an equitable way to help protect the most vulnerable communities, especially low-income and minority communities. We have recommended that FEMA provide extra credits for investments made to promote resilience in these disadvantaged communities.
  • Takes into account the best available science on growing climate risks including: flooding worsened by sea level rise and more frequent and heavy downpours; droughts; wildfires; and other types of impacts related to climate change. We strongly recommend that the PA deductible is designed in a way that appropriately incorporates climate projections and future risks. The hazard model (Hazus) that FEMA is proposing to use to assess state risks is not currently configured to do this, and must be appropriately updated if it is used.
  • Fairly takes into account the specific circumstances of states, so that they are able to access the much-needed aid and recovery resources that are their due in the wake of major disasters, in line with the provisions of the Robert T. Stafford Disaster Relief and Emergency Assistance Act.

A science-based, equitable approach to building resilience to disasters will go a long way toward protecting people, property and the functions of our natural ecosystems, while ensuring the best use of taxpayer dollars. UCS has developed a set of principles that can help inform this type of approach, Toward Climate Resilience: A Framework and Principles for Science-Based Adaptation.

A step toward building climate resilience

The PA deductible concept is an important step toward making our nation more resilient to disasters. We’ll be looking for expeditious action from FEMA to take our and other public comments into account and move this forward toward a rulemaking process.

Congress and the Trump administration also need to act on multiple fronts to help communities facing the impacts of climate change and other disasters. One thing they definitely shouldn’t do is make harmful cuts to FEMA’s budget.

The Public Assistance Deductible infographic provides a snapshot overview of the basic concept and an example of how one State, in this case Indiana, could earn credits toward offsetting the deductible amount.  Source: FEMA

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