Show Summary Details

Page of

PRINTED FROM the OXFORD RESEARCH ENCYCLOPEDIA, NATURAL HAZARD SCIENCE (naturalhazardscience.oxfordre.com). (c) Oxford University Press USA, 2016. All Rights Reserved. Personal use only; commercial use is strictly prohibited (for details see Privacy Policy and Legal Notice).

date: 16 October 2018

Financing Community Resilience Before Disaster Strikes: Lessons From the United States

Summary and Keywords

As more and more of the population moves to areas prone to natural hazards, the costs of disasters are on the rise. Given that these events are an eventuality, governments must aid their communities in promoting disaster resilience, enabling their communities to reduce their susceptibility to natural hazards, and adapting to and recovering from disasters when they occur.

The federal system in the United States divides these responsibilities among national, state, and local governments. Local and state governments are largely responsible for the direct provision of services to their communities, and the Stafford Act of 1988 provides that the federal government will pay at least 75% of all eligible expenses once a presidential major disaster declaration has been made. As a result, state and local governments have become largely reliant on transfers from the federal government to pay for disaster relief and recovery efforts. This system encourages state and local governments to ignore the risks they face and turn to the federal government for aid after a disaster.

This system also seems to underemphasize an important mechanism that can bolster disaster resilience: financing the costs of disasters in advance through ex ante budgeting. Four tools for budgeting ex ante—intergovernmental grants, disaster stabilization funds, the municipal bond market, and hazard insurance—are described and examples of their use provided. Despite limited use by state governments, these tools provide governments the opportunity to build community resilience to disasters by budgeting ex ante for them.

Keywords: public budgeting, community resilience, disasters, state and local public finance, mitigation, insurance, capital markets and municipal bonds, budget stabilization funds

Introduction

The United States is hazard prone, and the cost of disasters is on the rise. According to the U.S. National Oceanic and Atmospheric Administration, there were 16 climate and weather events in 2017 that cost $1 billion or more (NOAA, 2018), and it is unlikely that 2017 was an anomaly. Gall, Borden, Emrich, and Cutter’s (2011) examination of direct losses from natural hazards in the United States between 1960 and 2009 finds a rising trend in both total costs and per capita costs, regardless of changes in population or wealth levels. Furthermore, the Fourth National Climate Assessment suggests that these historical trends will continue, with extreme weather events increasing in both frequency and intensity as the global climate becomes warmer (Wuebbles et al., 2017). In short, it is not a question of if the next crisis will occur, but rather when and where.

Given the inevitability of these events, it is critical to consider what can be done to prepare for them. Boin notes that “a disaster is a crisis with a bad ending” (2005, p. 163), implying that not all crises will become disasters. According to the International Federation of Red Cross and Red Crescent Societies “[a] disaster is a sudden, calamitous event that seriously disrupts the functioning of a community or society and causes human, material, and economic or environmental losses that exceed the community’s or society’s ability to cope using its own resources.”1 Disasters impact individuals and communities. They have local, national, and international implications. Disasters demonstrate the interconnectedness of society’s systems, how quickly they can become unraveled, and the strengths and weaknesses of those connections (Cutter et al., 2012). One of the things that makes the difference between a hazard resulting in an emergency or a disaster is resilience, or “the ability to prepare and plan for, absorb, recover from, and more successfully adapt to adverse events” (Cutter et al., 2012).

While determining which communities will be resilient in advance of a disaster is still a challenge, hindsight allows identification of resilient communities at least at the extremes. The level of resilience in New Orleans in the aftermath of Hurricane Katrina was remarkably low compared to that in London in the aftermath of the 2005 Underground bombings (Alexander, 2010; Boin, 2010). Scholars have described resilient communities in many ways: communities that are “able to ‘fail gracefully’ or as having ‘rebound capacity’ ” (Birkland, 2010, pp. 107–108); those that are able to rapidly recombine available resources in creative and flexible ways (Boin, 2010); and communities that are able to share and create knowledge in a rapidly changing environment, that have the capacity to detect and correct errors, that are able to measure and monitor levels of risk, and have “the sociotechnical infrastructure to facilitate these processes” (Comfort, Boin, & Demchak, 2010, p. 279). In communities large and small, building resilience is a long-term process that requires permeating the principles of resilience into the culture and into the routine functions of the government (Comfort et al., 2010; Cutter et al., 2012). There are few functions of government more routine than budget and finance; therefore, this article focuses on the public financing of disaster-related community resilience in the United States.

Whether natural or human made, disasters create additional burdens on government finances. State and local governments not only incur expenditures because of the extra aid they provide to their residents, such as evacuations, firefighting, and hazardous material cleanup, they also may lose portions of critical revenue streams (e.g., sales taxes, property taxes) as tax bases are eroded by citizen displacement or destruction of property. Government buildings and property may also be damaged during a disaster. Additionally, much of the loss for a state or local government relates to infrastructure such as roads, bridges, and highways (Hochrainer, 2006).

Governments may consider some of these expenses during their regular budget cycle either as operating or capital expenditures. There is an expectation that governments in many states will need to plow snow each winter, so state and local transportation departments have snow removal, gravel, and salt included in their normal operating budgets. Many states can anticipate some average expense associated with extinguishing wildland fires, thus equipment, personnel and other supplies are included in the appropriate firefighting operating budgets. Additionally, some disaster-prevention measures are included in budgets each year: repairs to dams and levees, storm drain repairs, infrastructure maintenance, and the creation of emergency preparedness plans. However, the very definition of a disaster reminds us that government resources are overwhelmed.

The federal system in the United States divides emergency management responsibilities among the national, state, and local governments. Local and state governments are largely responsible for the direct provision of services to their communities, and federal law provides that the national government will pay a large majority of all eligible expenses once a presidential major disaster declaration has been made. As a result, state and local governments have become largely reliant on transfers from the federal government to pay for disaster relief and recovery efforts. This system encourages state and local governments to ignore the risks they face and turn to the federal government for aid after a disaster.

While ex post budgeting for disasters is the norm in the United States, there are disadvantages to doing so. Perhaps the greatest disadvantage is that when citizens expect a certain level of service from the government post-disaster, they are less likely to change their own behavior. Personal incentives for precautionary savings, investing in mitigation, or reducing risky choices are diminished when government financing of disasters focuses on relief and recovery (Phaup & Kirschner, 2010).

Ex ante budgeting, on the other hand, can minimize the costs of disasters through mitigation and preparedness efforts and by creating reserves in the present to finance the costs of disaster in some uncertain future point in time. The major challenge to ex ante budgeting for disasters is political. Elected officials have short-term time horizons and are rarely incentivized to raise taxes in the present to pay for future benefits (Phaup & Kirschner, 2010). However, if the political hurdle is passed, it is critical to understand the mechanisms, or tools, governments have to finance disasters ex ante.

To provide context, this article will next explore how the U.S. federal government spends money on disaster response and recovery and provides resources to state and local governments. It will then explore four common tools for budgeting for disasters used in the United States: (1) the U.S. federal government’s use of intergovernmental grants to provide financial assistance to state and local governments for hazard mitigation and preparedness activities; (2) U.S. state governments’ use of disaster stabilization funds to create financial reserves for when disasters strike; (3) the use of municipal bonds as a mechanism for financing disaster stabilization funds; and (4) the use of hazard insurance for disasters.

U.S. Federal Spending on Disaster Response and Recovery

Between 1953 and 2016, the United States has experienced more than 1,950 major disaster declarations (Federal Emergency Management Agency [FEMA], 2017a). From hurricanes to earthquakes, floods to terrorist attacks, few state and local governments in the United States are exempt from experiencing a disaster of one type or another. Although we cannot predict with precision when or where disasters will occur, it is reasonable to expect them to continue to happen.

Financing Community Resilience Before Disaster Strikes: Lessons From the United StatesClick to view larger

Figure 1. Number of disasters per year and expenditures allocated by FEMA in those years (1989–2015).

Sources: FEMA (2016, December 19), FEMA Disaster Declarations; Federal Emergency Management Agency (2015, November), FEMA Disaster Fund Status Report.

Figure 1 displays the number of major disaster declarations in each year between 1989 and 2015, along with the amount of money allocated from the U.S. Federal Emergency Management Agency (FEMA) to disasters that occurred in those years. During this time frame, the number of disasters ranged from 32 in 1989 to 242 in 2011. Not surprisingly, the years associated with the highest dollar allocations are the years in which catastrophic storms occurred, for example, “Superstorm” Sandy in 2013 and Hurricanes Katrina and Rita in 2005. The year 2005 was the most expensive year during this time frame because of the two catastrophic storms, and it is the year with the second highest number of declarations. It should be noted that, although the U.S. government provided over $7 billion of relief to the victims of the September 11, 2001, attacks, this money was distributed through the 9/11 Victim’s Compensation Fund rather than through FEMA and is, therefore, not accounted for here.

The Stafford Act

In 1988, President Reagan signed the Robert T. Stafford Disaster Relief and Emergency Assistance Act (hereinafter the Stafford Act) into law. The passage of the Stafford Act symbolizes the beginning of modern-day disaster management in the United States as the act provides statutory authority for most federal disaster response. Among other things, the Act lays out the process for states to request a presidential disaster declaration and the shared financing that is available to states once the declaration has been made.

For a state or local government to receive federal funds for assistance after a disaster, the governor of the state makes a request through one of the 10 FEMA regional offices. State and officials from FEMA conduct a preliminary damage assessment to estimate the impacts of the disaster on both public facilities and individuals and to demonstrate that the response and recovery efforts are beyond the state and local government’s capabilities. The governor’s request must specify an estimate of the type and amount of federal assistance needed under the Stafford Act. Based on the governor’s request, the president may declare a major disaster or an emergency (FEMA, 2017b). Between May 1953 and January 2013, the rate at which presidents turned down requests for major disaster or emergency declarations was 25%. However, between the Stafford Act’s passage in 1989 and 2013, only 17% of requests were turned down (Sylves, 2015).

Once the governor’s request has been approved, three general types of assistance become available depending on the specific type of declaration. The first type, individual assistance, provides assistance directly to individuals, households, and businesses that sustained property damage as a result of the disaster that was not covered by insurance. This relief can come in the form of grants, loans, special tax considerations, or the direct provision of services like legal advice or crisis counseling (FEMA, 2014). The next type of assistance is public assistance, which provides aid to state and local governments, and some eligible private nonprofit organizations, to “fund the repair, restoration, reconstruction, or replacement of a public facility or infrastructure, which is damaged or destroyed by a disaster” (FEMA, 2014, p. 4). In this case, the federal government pays not less than 75% of the eligible costs, with the state governments responsible for the remaining share. However, at the president’s discretion, some or all of the state’s share of relief may be waived (Sylves, 2015). Finally, the third general type of assistance, hazard mitigation, provides additional funding for enacting sustained measures to reduce or eliminate long-term risk from the effects of natural hazards (FEMA, 2014). These grants will be discussed further in the section on intergovernmental grants.

Each year, the U.S. Congress appropriates money into the Disaster Relief Fund (DRF), through which FEMA can fund eligible response and recovery activities pursuant to the Stafford Act. Along with providing relief to eligible applicants through individual assistance, public assistance, and hazard mitigation, the DRF also pays for the federal government’s direct provision of services for disaster-related support activities. While at first blush it may appear that the federal government is budgeting ex ante for disasters, the regular annual appropriation into the fund is much smaller than is needed. Between federal fiscal year (FY) 2002 and 2011, the average administration’s request for appropriations into the fund was $1.9 billion. However, the average expenditure was $4.2 billion per year. When the DRF nears a shortfall, Congress typically passes a supplemental appropriation to provide additional funds. In fact, supplemental appropriations were necessary in 13 of the 20 years between federal FY 1996 and FY 2015. While the amount of regular appropriations to the DRF increased after the Budget Control Act of 2011,2 it is too soon to tell whether this will reduce the reliance on supplemental appropriations (Lindsay, Painter, & McCarthy, 2016).

This two-step process of providing an annual appropriation to the DRF and then providing supplemental appropriations as needed when money runs out wreaks havoc on good budgetary practice. Donahue and Joyce note that “[i]n our view, the most significant ramification of the emergency designation for federal disaster policy is the added incentive that it creates to fund disaster assistance after the fact, rather than at the point where a disaster might be prevented” (2001, p. 735). It is only when the true costs of disaster response and recovery are recognized, by budgeting for them in advance, that elected officials will be more likely to consider a better balance of mitigation and preparedness, compared to response and recovery spending.

Tools for Governments to Budget in Advance for Disaster

The federal government’s budget process creates an incentive to budget for disasters after they occur; however, both the federal government and some state and local governments use a variety of mechanisms to finance their efforts in hazard risk reduction, which also builds community resilience. This section explores these tools—intergovernmental grants, disaster stabilization funds, municipal bonds, and hazard insurance—in detail.

Intergovernmental Grants

Within the federalist context of the United States, intergovernmental grants are a frequently used mechanism for financing disaster mitigation and preparedness. Beam and Conlan (2002) provide a framework for differentiating intergovernmental grants. They indicate that the scope of purpose, method of allocation, and degree of grantor control are the important features of a grant and suggest that different outcomes may result from different types of grants.

With regard to the scope of purpose, grants can be categorical, block, or general purpose assistance grants. The latter are also referred to as unrestricted or general revenue sharing grants and are only used within the United States between states and their local governments. Categorical grants are narrow in scope and must be used for a particular objective. Block grants, on the other hand, provide assistance for a broad purpose, leaving discretion to the grant recipient on how to meet the broad goals and objectives of both governments (Beam & Conlan, 2002). Block grants are useful within the disaster management context to allow recipients to take individualized approaches to becoming more prepared. Categorical grants are a strategic choice when the donor government wants to support a specific aspect of preparedness (e.g., interoperability of communications) and focus on recipients that need to improve in the specific area.

The method of allocation allows grants to be distinguished from one another by how the grant money is divided among eligible recipients. Beam and Conlan (2002) characterize grants as either formula or project grants. Formula grants allocate money to all eligible recipients according to a formula specified in statute or administrative regulation. This politically viable solution works well when the donor government wants to spread available funds across all jurisdictions. Conversely, project grants are awarded to recipients through a competitive application process (Beam & Conlan, 2002). Project grants work well when the donor is trying to target specific jurisdictions for aid because of a need in that jurisdiction.

Finally, the degree of grantor control refers to a collection of mechanisms by which the donor government is able to assure that the recipient government actually performs the expected tasks. One of the more common mechanisms used for donor control in the United States is to require matching contributions. A matching grant requires the recipient to dedicate its own funds to “match” some percentage of the donor funds. Alternatively, grants can be a lump sum, where the donor government simply provides a sum of money to the recipient, regardless of the recipient’s spending levels (Beam & Conlan, 2002). In essence, matching grants reduce the price of the granted good compared to other services provided by the recipient government. Oates (1972) suggests that non-matching grants are useful when the donor government is trying to raise all recipient governments up to a minimum threshold of public goods. For example, the federal government should consider non-matching grants if it were aiming to have all state or local governments reach a certain minimum level of preparedness, whereas matching grants should be used to correct for externalities in the provision of public goods. For example, the federal government might consider matching grants when it wants to reduce the cost to localities for flood mitigation activities.

Four of the grant programs that the federal government uses to increase levels of mitigation and preparedness are the Hazard Mitigation Grant Program (HMGP), the Pre-Disaster Mitigation Grant Program (PDM), the State Homeland Security Program (SHSP), and the Urban Area Security Initiative (UASI). In combination, these grants provide examples of these various characteristics. Table 1 summarizes the features of these four grant programs.

Table 1. Features of Major U.S. Federal Grants Financing Disaster Mitigation and Preparedness

Grant

Eligible Applicants

Scope

Method of Allocation

Federal Match Rate

Allocations FY 2005–FY 2016

Hazard Mitigation Grants

States, territories, and federally recognized tribes

Categorical

Project

Up to 75% of eligible costs

$12.25 billion

Pre-Disaster Mitigation Grants

States, territories, and federally recognized tribes

Categorical

Project

Minimum of 75% of eligible costs

$1.2 billion

State Homeland Security Grant Program

States and territories

Block

Formula

No

$7.04 billion

Urban Area Security Initiative

Designated, high risk urban areas

Block

Formula

No

$7.87 billion

Hazard Mitigation Grant Program

Funded through the Stafford Act, the goal of the HMGP is to assist communities in implementing hazard mitigation measures during the reconstruction phase after a presidential disaster declaration. States and local government must prepare and FEMA must approve a five-year hazard mitigation plan prior to receiving funds. These are categorical, project grants that can be used to reduce future risk (e.g., elevation of buildings, purchasing property to convert the property to open space). The HMGP is financed as part of the state’s allocations received from the federal government through the Stafford Act subsequent to a presidential major disaster declaration (FEMA, 2017c). Between federal FY 2005 and FY 2016, the HMGP allocated $12.2 billion of response and recovery dollars to enhance mitigation in areas already struck by disaster. A benefit-cost analysis conducted by Rose et al. (2007) found that the overall benefit-cost ratio for the HMGP is approximately four to one; however, these estimates vary depending on the type of hazard mitigated (for earthquakes the ratio was one and a half to one, for floods it was approximately five to one). Even at its lowest ratio for earthquakes, it is clear that mitigation activities save taxpayers’ money down the road.

Pre-Disaster Mitigation Grants

Also authorized by the Stafford Act, the PDM program funds state, local, territorial, and tribal governments to reduce their overall risk from future hazard events and their reliance on federal funding when a disaster occurs. State and local governments are required to develop their applications in conjunction with their FEMA-approved hazard mitigation plan. If a hazard mitigation plan is not already in place, state and local governments can apply through the PDM program for planning funds to develop this plan. These project grants are funded by annual congressional appropriations and are awarded on a competitive basis. Between federal FY 2005 and FY 2016, approximately $1.2 billion was allocated through this grant program. The federal government provides 75% of funds of project costs completed under this grant program, with recipients financing the other 25%. In some cases, small or impoverished jurisdictions may be eligible for 90% federal funding (CFDA, 2017; FEMA, 2017d).

State Homeland Security Grant Program

Initially created in 1998 as a result of the 1995 Oklahoma City bombing, the SHSP is a lump-sum block grant designed to broadly support state homeland security strategies to prevent, protect against, mitigate, respond to, and recover from catastrophic events. Allocation of funds through the SHSP program is formula based, and a minimum percentage of funds is available to each state as required in the Implementing Recommendations of the 9/11 Commission Act of 2007. The remainder of the funds is allocated to states based on the Department of Homeland Security (DHS)’s risk methodology. Between FY 2005 and FY 2016, the SHSP program allocated approximately $7 billion to states and territories, who are then required to pass through at least 80% of funds to local governments. These block grants often require specific activities, like training and exercising, but allow states to take an approach distinct to their needs.

Urban Area Security Initiative

While similar in scope to the SHSP, the UASI is targeted toward managing the unique risks and need for increased capabilities of high-threat, high-density urban areas. The goal is to increase the capacity to prevent, protect against, mitigate, respond to, and recover from catastrophic events. This non-matching, block grant allocates funds through the states to urban areas using DHS’s risk methodology. Like SHSP, states must pass through at least 80% of funds to the urban area; however, the remaining 20% of funds must be spent on state-provided services within the designated urban area. Between FY 2005 and FY 2016 more than $7.8 billion have been allocated to governments through the UASI program (FEMA, 2016).

Disaster Stabilization Funds

This section examines another tool available to governments—disaster stabilization funds (DSFs). A DSF is a subset of a general budget stabilization fund (BSF). BSFs, or rainy day funds, are established by state governments to serve several purposes including the continuity of governmental services through economic cycles (provide revenue during recessions) and to spur on the local economy in economic downturns (Hou, 2013). They are maintained to mitigate any risk such as reduced revenues or unexpected expenditures. Most states have a budget stabilization or rainy day fund (National Association of State Budget Officers [NASBO], 2015). This is because states provide a necessary and vital set of services to their residents as well as being the primary link between the federal government and local governments. The state’s ability to maintain a level, continuous, and appropriate group of services relies on having fiscal stability. The state cannot control the fiscal environment such as the general economy, interest rates, or commercial and personal saving and spending. Without control of this environment, the state must plan for the ebbs and flows of the economic cycles, and most utilize a BSF. Theoretically, states should increase the BSF balance when they are experiencing an upturn in the economy and then utilize the fund’s balance during years when the state experiences revenue shortfalls. In this way the state can meet the needs of their residents, avoid reducing services in poor economic times, and enhance any counter-cyclical economic efforts pushed to local governments from the federal government (Hou, 2013). Hou’s (2013) in-depth studies of BSFs found that states with formalized procedures for creating, funding, and reducing BSF balances tend to utilize the BSF during economic downturns. States without BSFs rely on general fund surpluses to survive the downward portion of the economic cycles.

A disaster stabilization fund serves a similar purpose to a BSF, though more specific in scope, as it is focused on mitigating the risks associated with a disaster. The creation of a DSF relies upon an assessment of the likelihood of an event like a disaster occurring and the potential costs associated with that event. The government then develops and executes a savings plan to accommodate the anticipated expenditures associated with the expected risk, with the DSF serving as the mechanism for the plan. Though a general budget stabilization fund could provide funds in the event of a disaster, many states have both a budget and a disaster stabilization fund (NASBO, 2015). The DSF provides one mechanism for states to fund disaster and public safety needs at the time of a disaster rather than waiting for federal funding to funnel into the coffers.

Similarly, states cannot control their physical environment, which includes weather, fires, accidents, and terrorism. The state’s ability to maintain services in these situations is also dependent on its ability to fund and mobilize the necessary forces to combat, rescue, and rebuild. While a fair amount of research has been conducted on BSFs, very little exists on disaster stabilization funds. The 2015 National Association of State Budget Officers (NASBO) Budget Process in the States report delineated each state’s DSF name and purpose. The results from the disaster fund table are summarized in Figure 2. They provide an overview and establish that more than half of the states have a fund designated for disasters. However, this report does not provide a deep understanding of the details of the funds and their uses. We contend that the states’ mechanism of funding the DSF, the authority required to utilize the funding, and the additional means states may be using to fund both disasters and their portion of the match for federal aid are all crucial pieces of information for understanding how states use DSFs to budget ex ante for disasters. Springing from NASBO’s initial research, we conducted a study of the state’s statutes and methods to understand how states are using DSFs and, if they do not have a DSF, how they deliver services in times of disaster. Understanding the practices in the states not only fills a significant gap in current U.S. public adminsitration literature but also provides valuable information to states as they define and refine their own policies with regards to DSFs.

Financing Community Resilience Before Disaster Strikes: Lessons From the United StatesClick to view larger

Figure 2. U.S. states with disaster stabilization funds, by use.

Source: NASBO (2015), Budget process in the states.

We surveyed chief financial officers in each of the 50 states to understand more about the specific DSF practices in each of the states. Specifically, we sought to verify the data provided to the NASBO organization regarding the disaster stabilization funds and their purpose and wanted to understand the origins from which these funds arose. In addition to the formal disaster stabilization or contingency funds, we asked if there were any additional funds or line items that carried a designation for disaster funding. We also asked for more descriptive information, including if the fund had minimum balance requirements or if there was a maximum or cap for the fund. If the total appropriation or funds were expended in a fiscal year, could the funds be carried over to the next fiscal year and, if not, where did the funds go? Then with regard to the FEMA Stafford Act monies that come to the state after a presidential disaster declaration, we questioned how the state financed its portion of the required match.

A written request for this information was distributed electronically to each chief financial officer, comptroller, or their equivalent. We received responses from half of the states, with at least one response from a state in each of FEMA’s 10 regions. Regions for FEMA tend to experience similar disasters and have similarities in geography and risks. Therefore, we believe that our study of state DSFs provides value, even if it does not have information from all 50 states.

In analyzing DSF data, we wanted to understand if state behaviors were similar or different in these regions as the anticipated disasters may be similar. The state responses are summarized by FEMA region in Table 2. There appears to be some relationship between states within FEMA regions according to whether the state has a DSF, the funding mechanism for the DSF, and whether there is a minimum or maximum balance requirement. However, the method by which states fianance their portion of the federal disaster monies provided by FEMA seems to vary as much within regions as among them.

Table 2. Disaster Stablilization Fund Survey Response Summary (N = 25)

FEMA Region

State

Funding Mechanism

Minimum Balance Required?

Maximum Balance or Cap?

Financing of FEMA Match

Region 1

Massachusetts

No DSF

No DSF

No DSF

Appropriation

Rhode Island

No DSF

No DSF

No DSF

Appropriation

Region 2

New Jersey

Appropriated

No

No

Agencies/Local Gov't must match

Region 3

Maryland

Appropriated

No

No

Agencies/Local Gov't must match

Pennsylvania

No DSF

No DSF

No DSF

Agencies/Local Gov't must match

Region 4

Alabama

Appropriated

No

No

GF

Florida

Appropriated

No

$17 Billion

NR

Georgia

Appropriated

No

No

DSF

Kentucky

Approval

No

No

GF

North Carolina

Appropriated

No

No

DSF

South Carolina

GF Surplus

No

No

Appropriation

Region 5

Michigan

Appropriated

$1 Million

$10 Million

NR

Region 6

New Mexico

Appropriated

No

No

Appropriation

Oklahoma

Appropriated

No

No

DSF

Texas

Appropriated

No

No

Agencies/Local Gov't must match

Region 7

Iowa

No DSF

No DSF

No DSF

Appropriation

Missouri

Appropriated

NR

NR

NR

Nebraska

Appropriated

No

No

DSF

Region 8

North Dakota

Oil Revenue

No

$25 Million

DSF

South Dakota

Reimbursement

No

No

GF

Utah

GF Surplus

$3 Million

No

NR

Wyoming

Appropriated

No

No

NR

Region 9

Arizona

Appropriated

No

No

DSF/Agency split

Nevada

Reimbursement

No

No

NR

Region 10

Washington

Appropriated

No

No

GF

GF = general fund;

NR = no response.

Among the responses, 4 of the 25 states (Massachusetts, Rhode Island, Pennsylvania, and Iowa) do not utilize a disaster stabilization fund. In these states, if additional funds are required for a disaster or emergency situation, the money is allocated from funds already in place, such as the general fund. As shown in Figure 3, the majority of states, however, required an appropriation from either the legistlative body, the executive authority, or both. Almost all of the states with a DSF did not have other funds or lines to provide for disaster response or recovery, indicating that they do not budget ex ante elsewhere within the state. Interestingly, North Dakota dedicates funds from oil revenues into its DSF, while two other states dedicate end-of- year surpluses from the general fund to the DSF. Figure 3 provides additional details on the funding mechanisms of DSFs.

These findings suggest that the DSF is the primary ex ante financing mechanism in the budget. The majority of states that utilize a DSF have established a process to finance the state’s costs of future disasters. However, two of the DSFs were replenished via reimbursements. Based on the larger BSF literature (Hou, 2013), for instance, we expect that DSFs that are replenished by reimbursement only are less likely to be flexible in handling the need for funding during a disaster, as this is really ex post budgeting. It is interesting that the two reimbursement states are South Dakota and Nevada. These two states experiencd different types of hazards but similar numbers of disater declarations across time. Between 1953 and 2016, South Dakota has been the location for 59 major disaster declarations, almost half of which were severe storms. Nevada, on the other hand, has had 67 major disaster declarations in that time frame, the vast majority of which where related to wildland fires but also included one earthquake (FEMA, 2017e). In both cases, however, the states could have anticipated some risk of their most common hazards and might have saved in advance for these costs.

Financing Community Resilience Before Disaster Strikes: Lessons From the United StatesClick to view larger

Figure 3. Financing mechanisms for disaster stabilization funds (N = 25).

A critical follow-up question, however, is whether state DSFs are being allocated enough money in advance to provide meaningful relief in the event of a disaster. Is there a minimum amount needed to fund a disaster? Likewise, is there too much funding for a disaster stabilization fund? NASBO’s 2015 Budget Process in the States report listed the FY 2014 disaster fund totals for each state. Because most of the states are represented in their report, their data are summarized below (see Figure 4) showing the number of states in each category of fund balances. Of those states for which fund balance data were available, there are two peaks, with eight states having fund balances over $1 million and another nine states with FY 2014 fund balances over $20 million. However, the balance itself does not tell the whole story.

Financing Community Resilience Before Disaster Strikes: Lessons From the United StatesClick to view larger

Figure 4. State FY 2014 disaster fund totals.

Source: NASBO (2015), Budget process in the states.

Our research focused on the requirements for DSF balances. Was there a required minimum or maximum restriction? Only four of the states had either a minimum required balance or a maximum allowable balance. Michigan was the only state that had both—a $1 million minimum and $10 million maximum. Florida had the highest maximum limit at $17 billion, followed by North Dakota at $25 million (the only state with a designated revenue source for the DSF). Utah had a minimum balance requirement of $3 million. The remaining 21 states indicated there was no cap or maximum amount to which the fund could grow.

These findings indicate that states in general are not utilizing DSFs to set aside meaningful amounts of money for disaster-specific expenses. One potential explanation for this is that states have yet to determine their risk and needed fund availability to mitigate the financial risks of disasters. To this end, further research needs to be done with the states that have state minimum and maximum requirements to determine why these balances are designated. Florida has experienced a number of disasters and has several mechanisms to financially manage disasters which would make it appear the maximum limit has meaning in their disaster recovery portfolio. North Dakota has a designated maximum balance and a designated revenue source, which would lead us to believe the oil revenues are utilized for a number of purposes and the state needed to ensure there was disaster funding available, but that the revenue was distributed to its various purposes. The most critical finding in the balances is that most states do not have a maximum or a minimum, which requires a further inquiry into their practices. This may suggest that while the process for ex ante budgeting via DSFs exists, the formal mechanisms required to encourage politicans to actually set aside money are not yet in place. Put another way, while DSFs exist, it does not seem like the majority of states are inclined to use them as ex ante budgeting tools.

An alternative explanation for our findings is the combined federal–state role in disaster financing. Specifically, states may not have an incentive to use DSF to set aside money when they know that the federal government will provide funds in the event of a disaster. The DSF may instead be used as a designated fund to meet the the Stafford Act and FEMA-required matching. Our research revealed that while states do use DSFs for this purpose, they have a variety of ways of meeting the matching requirements of federal monies. Nineteen states provided a response as to how they handle the matching requirement of federal funds (see Figure 5). Five of them require the agency and/or local government to come up with the match. Another four expensed the cost or paid for it directly through the general fund. The next five states fund the match with their disaster stabilization funds. And finally, the last five accommodate the match through an appopriation action.

Financing Community Resilience Before Disaster Strikes: Lessons From the United StatesClick to view larger

Figure 5. Number of states using each financing method for FEMA Stafford Act match (N = 19).

The Role of Municipal Bonds in Ex Ante Budgeting for Disasters

State and local governments in the United States rely heavily on capital markets to finance large expenditures such as roads, bridges, buildings, public works, and other infrastructure projects. The most common mechanism to access these markets—bonds—are a hugely important tool in service provision at the state and local levels, as they allow governments to begin projects with large upfront costs that would otherwise take years to fund. The interplay between capital markets and disaster finance has been studied largely in terms of the use of bonds to pay for rebuilding in the wake of disasters and the effects of disasters on the ability of governments to make debt service payments on their existing bonds (Denison, 2006). However, there are other aspects of capital market finance that can and do play a role in ex ante disaster finance at the state level.

Specifically, state governments can leverage their borrowing power to serve as insurance or reinsurance in the event of a disaster (Hildreth, Sewordor, & Miller, 2011). To understand this tool, it is important to understand two state actions: the ability to levy taxes and the ability to issue tax-exempt debt. The former is important because it allows state governments to pool risk across private property holders who are in high-risk areas by forcing them to pay a tax—potentially an excise tax on property insurance—that can be used to fund insurance or reinsurance. This is critical, as prior research has shown that individuals are unlikely to believe a disaster will harm them or their individual property, so they are unlikely to purchase optimal levels of insurance on their own (Kunreuther & Pauly, 2006). By taxing residents and using the revenues to finance disaster relief, governments are effectively creating risk pools.

Beyond simply pooling risk via taxation, governments can also securitize these funds via capital markets. As indicated earlier, governments can borrow from investors via bonds in order to finance a variety of projects. Interest on municipal bonds—bonds issued by state and local governments—is not usually subject to the federal income tax, resulting in lower borrowing costs for state and local governments. Further, they are usually classified as general obligation or revenue. General obligation bonds are repaid based on the general taxing authority of a government, and revenue bonds are repaid based on specific revenue streams (O’Hara, 2012). In the past few decades, some state governments have passed legislation allowing for tax-exempt borrowing backed by taxes on property or insurance. In Florida, for instance, after Hurricane Andrew in 1993, the state legislature passed legislation allowing local governments to issue revenue bonds backed by a 2% tax on property insurance (Hildreth et al., 2011). The proceeds from these bonds were used to aid insolvent insurers, thereby providing ex post disaster funding. However, these same mechanisms are used in Florida in concert with a disaster stabilization fund to budget in an ex ante fashion.

The Florida Hurricane Catastrophe Fund

The Florida Hurricane Catastrophe Fund (FHCF) is a state DSF that is used to provide a form of reinsurance in the event of a hurricane causing more than $7 billion in damage. This means that the fund pays insurers to ensure that homeowners and other property owners are covered in the event of a hurricane. In addition to our research on state DSFs broadly, we also conducted informational interviews with state staff about this particular fund, as it serves as a powerful case study in the use of municipal market to finance ex ante disaster mitigation. We supplement the interviews with information taken from the FHCF’s audited financial statements.

According to FHCF staff, the fund’s primary revenue source is a surcharge on insurance premiums; any residential insurance company in the State of Florida is obligated to pay into the fund, with their payment to the state based on the risk profile of the company’s insurance portfolio. Companies are allowed to pass the surcharge onto policy holders, meaning that the surcharge is effectively a tax on property insurance policies. The fund generated about $1.1 billion from these premiums in 2016. Figure 6 shows that this revenue source has decreased moderately over time, though it remained between $1.1 and $1.3 billion. In addition, the fund maintains a large asset portfolio of mostly liquid assets. Table 3 shows this balance over time.

Financing Community Resilience Before Disaster Strikes: Lessons From the United StatesClick to view larger

Figure 6. Trends in Florida hurricane catastrophe fund insurance premium revenue.

Table 3. Assets of Florida Hurricane Catastrophe Fund Over Time

2011

2012

2013

2014

2015

2016

Current Assets

9,340,514

10,925,733

10,218,231

11,957,961

6,140,297

11,000,423

Long-Term Assets

1,509,580

1,072,747

1,844,325

1,412,556

7,524,464

5,086,247

Total Assets

10,850,094

11,998,480

12,062,556

13,370,517

13,664,761

16,086,670

Current Assets

86.09%

91.06%

84.71%

89.44%

44.94%

68.38%

Long-Term Assets

13.91%

8.94%

15.29%

10.56%

55.06%

31.62%

Total Assets

100.00%

100.00%

100.00%

100.00%

100.00%

100.00%

FHCF staff suggest that one of the fund’s primary objectives is to have enough liquid assets to make quick payments to insurers in the event of a hurricane. Despite annual revenue of more than $1 billion, the fund has a maximum annual obligation of $17 billion in the event of a disaster. As a result, it cannot simply rely on annual revenues to fund operations. Instead, it uses the municipal bond market to engage in both ex post and ex ante disaster financing. In either case, the revenue from the surcharge on insurance premiums is securitized in the transaction. Ex post disaster financing involves issuing revenue bonds to meet the obligations to insurers in the event of a disaster. If the revenue from premiums does not provide enough liquidity, the fund can also issue emergency assessments on top of the annual charge and securitize that revenue stream via capital markets.

Ex ante budgeting occurs within the fund when the fund’s managers believe it needs more liquid assets on hand to meet potential obligations in the event of a hurricane. This reflects two priorities: the desire to be able to make payments quickly in the event of a disaster and the desire to avoid being reliant on capital markets post-disaster, when credit may be impaired and investors weary of lending at lower rates. In 2013, the fund issued $2 billion of pre-event revenue bonds, and in 2016 it issued $1.2 billion in pre-event revenue bonds. Unlike most municipal bonds, these securities have short maturities (e.g., 7 years) and usually receive lower interest rates than most municipal bonds with longer maturities (e.g., 30 years). Nevertheless, in both instances, the bonds have had the effect of increasing the asset base of the fund, particularly in liquid assets like short-term investments. In 2015, for instance, the fund had $6.1 billion in short-term investments and $13.7 billion in total assets; after issuing the bond in 2016, the fund’s short-term investments went up to $10.8 billion, and total assets increased to $16.1 billion.

Government’s Role With Hazard Insurance

Governments can increase community resilience and reduce the impact of hazards by providing hazard insurance or regulating the existing private market for hazard insurance. Insurance allows individuals to shift the risks of the hazard from the individual to a larger risk pool; however, standard homeowner’s policies in the United States typically exclude damages from floods, hurricanes, or earthquakes. Whether provided by the private market or the government, hazard insurers pool similar risks and determine the average probability of a hazard occuring. The insurer then collects an annual payment, or premium, from risk-averse property owners and promises to pay a pre-arranged amount if the hazard occurs. The insurer should set the indivudal premiums at a rate that reflects the risk and covers the insurer’s administration costs and likely payouts (United Nations, 2010). However, there are trade-offs with insurance that require careful design of any hazard insurance program, namely adverse selection and moral hazard. Adverse selection occurs when only those at high risk purchase insurance for the hazard, which raises the total risk within the pool and increases premiums beyond what they would be if the risk pool was more diverse. Moral hazard occurs when individuals who are insured take additional risks, or fail to mitigate their risks, because they are insured. Co-payments and deductibles that increase the insured’s buy-in or tying a premium reduction to mitigation activities may reduce these risks (United Nations, 2010). While private markets are willing to insure ordinary, predictable property losses (e.g., theft, fire), their willingness to provide catastrophic hazard insurance at affordable prices is often negligble, resulting in governments entering the insurance market.

In the United States, the National Flood Insurance Program (NFIP) was created in 1968 after several major Midwest floods resulted in private insurers leaving the market, making floods an uninsurable event. Refusing to leave citizens at risk, the federal government stepped in by providing access to flood insurance. Premiums were set low to encourage property owners to puchase the insurance, but few people signed up. To increase participation, and therefore diversify the risk pool, the federal government required flood insurance as a condition of all federally backed mortgages. However, the mandate was not well enforced, and property owners often canceled their policies after several years (United Nations, 2010). In fact, estimates suggest that only about 50% of property owners in flood-prone areas have purchased and retained insurance through the NFIP (Michel-Kerjan & Kunreuther, 2011). Low premiums that do not accurately reflect the risk of flooding resulted in the NFIP taking loans from the U.S. Department of Treasury to cover claims from the numerous storms in 2005 and 2012, which it has yet to repay. The U.S. Congress took legislative action in 2012 to raise premiums and strengthen the solvency of the NFIP. However, to address concerns of affordability to citizens, additional legislation was passed in 2014, which reinstated the federal subsidies for the flood insurance premiums and slowed the rate of other premium increases, returning the NFIP back to its previously poor fiscal standing (Government Accountability Office [GAO], 2017).

Like the NFIP in the United States, many other governments provide or regulate hazard insurance, often with premiums that do not reflect actual risk. In France, catastrophe insurance is compulsory with the sale of comprehensive homeowner’s insurance, and the Caisse Centrale de Réassurance provides access to reinsurance for private market insurers. Likewise, the Earthquake Commission in New Zealand provides first-loss coverage from a variety of natural hazards for all purchases of residential fire insurance. In both of these cases, the additional premium for the hazard insurance is imposed at a flat rate regardless of risk posed to the insured property. Therefore, the low-risk members of the pool are subsidizing the high-risk members of the pool (McAneney, McAneney, Musulin, Walker, & Crompton, 2016).

However, it is possible to provide insurance with risk-based premiums. In Japan, purchasing earthquake insurance by property owners is not compulsory, but private insurers are required to offer it. Risk-based premiums are then used to cover costs. In this case, risk-adjusted premiums are based on whether the structure is wooden or not, the proximity to seismically active areas, and the degree to which the building is earthquake resistant. The Japanese Earthquake Reinsurance Company then provides reinsurance for the privately owned insurance companies (Phaup & Kirschner, 2010). Likewise, after devastating earthquakes in 1999, the Turkish government made earthquake insurance compulsory for all residential buildings within a municipality, and the insurance is administered through the Turkish Catastrophe Insurance Pool. Premium prices are risk-based and vary depending on the amount of seismic risk, the size of the building, and the type of construction (Phaup & Kirschner, 2010).

Another mechanism for reducing the effects of moral hazard is for governments to encourage mitigation activities through their insurance programs. The NFIP encourages mitigation by reducing rates for property owners who reside in communities that participate in programs in which local government officials commit to flood management standards and mitigation activities (McAneney et al., 2016). The risk-based premiums in Japan and Turkey also encourage mitigation activities by reducing prices for stronger construction (Phaup & Kirschner, 2010). However, most hazard insurance policies do little to encourage additional mitigation.

When private citizens are insured against disasters, the need for government aid after disaster strikes is reduced. Of course, providing or compelling the purchase of hazard insurance provides another advantage to ex ante disater relief. Kunreuther (2006) describes a version of the Samaritan's dilemma where the precense of ex post disaster relief reduces the incentive for potential disaster victims to purchase insurance prior to a disaster, and as a result, the need for disaster relief and recovery spending is heightened. However, insurance is a “potentially valuable tool for encouraging loss reduction measures against natrual hazards” (Kunreuther, 1996, p. 184) when it includes incentives that encourage cost-effective mitigation measures. Likewise, citizens might be more likely to purchase hazard insurance if they were provided better information about their probability of experiencing the hazard and how insurance pricing decisions were made (Kunreuther & Pauly, 2004). In other words, with some policy changes, using insurance as a tool for ex ante fianncing of disasters may have both direct and indirect effects on the total costs of future disasters in the United States.

Conclusion

Governments must understand their risk exposure as well as their capacity within operating and capital budgets to accommodate disaster relief and recovery. In considering how to increase government’s capacity for communtiy resilience, we reviewed four tools for financing the disasters ex ante: intergovernmental grants, disaster stabilization funds, municipal bonds, and hazard insurance. However, it is evident that, at least in the United States, the vast majority of financing of disasters occurs ex post. Billions of dollars are spent on relief and recovery each year, but the federally appropriated amount put in reserves for these activities pales in comparison to need. Likewise, appropriations for mitigation and preparedness are only in the millions of dollars, and the NFIP is considered one of the United States’ “high-risk” programs (GAO, 2017).

While emergency management is a cooperative effort between the federal, state, and local governments in the United States, the states tend to rely heavily on intergovernmental grants. Though many of the respondent states that have DSFs are actully budgeting ex ante for disaster through regular appropriations, few have dedicated revenue sources, and fund balances are likely too low to provide meaningful fiscal support in the event of a disaster. This highlights a dilemma for state governments. Given the degree of fiscal stresses placed on state and local governments, resources are increasingly constrained. However, ex ante budgeting represents a critical need that tends to have a high return on investment. How do state-level politicians advocate for additional support for a known-unknown like a disaster when citizens demand additional spending on services like K–12 education or Medicaid? These challenges are exacerbated by the knowledge that the federal government will bear the burden of most ex post disaster funding. Nevertheless, it is our contention that states would be better served by increasing their use of the ex ante budgeting tools we highlight here, as they allow states to better serve their communities when their communities need them the most.

References

Alexander, D. E. (2010). Rapid adaptation to threat: The London bombings of July 7, 2005. In L. K. Comfort, A. Boin, & C. C. Demchak (Eds.), Designing resilience: Preparing for extreme events (pp. 143–157). Pittsburgh: University of Pittsburgh Press.Find this resource:

Beam, D. R., & Conlan, T. J. (2002). Grants. In L. M. Salamon (Ed.), The tools of government: A guide to the new governance (pp. 340–380). Oxford: Oxford University Press.Find this resource:

Birkland, T. A. (2010). Federal disaster policy: Learning, priorities, and prospects for resilience. In L. K. Comfort, A. Boin, & C. C. Demchak (Eds.), Designing resilience: Preparing for extreme events (pp. 106–128). Pittsburgh, PA: University of Pittsburgh Press.Find this resource:

Boin, A. (2005). From crisis to disaster: Towards an integrative perspective. In R. W. Perry & E. L. Quarentelli (Eds.), What is a disaster?: New answers to old questions (pp. 153–172). Xlibris Corporation.Find this resource:

Boin, A. (2010). Designing resilience: Leadership challenges in complex administrative systems. In L. K. Comfort, A. Boin, & C. C. Demchak (Eds.), Designing resilience: Preparing for extreme events (pp. 129–141). Pittsburgh: University of Pittsburgh Press.Find this resource:

Comfort, L. K., Boin, A., & Demchak, C. C.. (2010). Resilience revisited. In L. K. Comfort, A. Boin, & C. C. Demchak (Eds.), Designing resilience: Preparing for extreme events (pp. 272–284). Pittsburgh: University of Pittsburgh Press.Find this resource:

Cutter, S. L., Ahearn, J. A., Amadei, B., Crawford, P., Galloway, G. E., Jr., Galloway, G. E., . . . Zoback, M. L. (2012). Disaster resilience: A national imperative. Washington, DC: National Academies Press.Find this resource:

Denison, D. (2006). Bond market reactions to Hurricane Katrina: An investigation of prices and trading activity of New Orleans bonds. Municipal Finance Journal, 27(2), 39–51.Find this resource:

Donahue, A. K., & Joyce, P. G. (2001). A framework for analyzing emergency management with an application to federal budgeting. Public Administrative Review, 61(6), 728–740.Find this resource:

Catalog of Federal Domestic Assistance (CFDA). (2017). Pre-disaster mitigation. CFDA Number 97.047.

Federal Emergency Management Agency (FEMA). (2014). A guide to the disaster declaration process and federal disaster assistance.

Federal Emergency Management Agency (FEMA). (2015, November). FEMA Disaster Fund Status Report.

Federal Emergency Management Agency (FEMA). (2016, December 19). FEMA Disaster Declarations.

Federal Emergency Management Agency (FEMA). (2016). Homeland Security grant program.

Federal Emergency Management Agency (FEMA). (2017a). Disaster declarations by year.

Federal Emergency Management Agency (FEMA). (2017b). Disaster declaration process.

Federal Emergency Management Agency (FEMA). (2017c). Hazard mitigation grant program.

Federal Emergency Management Agency (FEMA). (2017d). Pre-disaster mitigation grant program.

Federal Emergency Management Agency (FEMA). (2017e). Disaster declarations for states and counties.

Gall, M., Borden, K. A., Emrich, C. T., & Cutter, S. L. (2011). The unsustainable trend of natural hazard losses in the United States. Sustainability, 3(11), 2157–2181.Find this resource:

Government Accountability Office (GAO). (2017). High-risk series: Progress on many high-risk areas, while substantial efforts needed on others (GAO Publication No. GAO-17-317). Washington, DC: GAO.Find this resource:

Hildreth, W. B., Sewordor, E., & Miller, G. J. (2011). State government catastrophe risk financing and the capital markets. Proceedings. Annual Conference on Taxation and Minutes of the Annual Meeting of the National Tax Association, 104, 56–61.Find this resource:

Hochrainer, S. (2006). Macroeconomic risk management against natural disasters: Analysis focused on governments in developing countries. Wiesbaden, Germany: Deutscher Universitäts-Verlag.Find this resource:

Hou, Y. (2013). State government budget stabilization: Policy, tools, and impacts. New York: Springer.Find this resource:

Kunreuther, H. (1996). Mitigating disaster losses through insurance. Journal of Risk and Uncertainty, 12(2–3), 171–187.Find this resource:

Kunreuther, H. (2006). Has the time come for comprehensive natural disaster insurance? In R. Daniels, D. Kettl, & H. Kunreuther, (Eds.), On risk and disaster: Lessons from Hurricane Katrina (pp. 175–202), Philadelphia: University of Pennsylvania Press.Find this resource:

Kunreuther, H., & Pauly, M. (2004). Neglecting disaster: Why don't people insure against large losses?. Journal of Risk and Uncertainty, 28(1), 5–21.Find this resource:

Kunreuther, H., & Pauly, M. (2006). Rules rather than discretion: Lessons from Hurricane Katrina. Journal of Risk and Uncertainty, 33(1), 101–116.Find this resource:

Lindsay, B. R., Painter, W. L., & McCarthy, F. X. (2016). An examination of federal disaster relief under the Budget Control Act (Publication No. R42352). Washington, DC: Congressional Research Service.Find this resource:

McAneney, J., McAneney, D., Musulin, R., Walker, G., & Crompton, R. (2016). Government-sponsored natural disaster insurance pools: A view from down-under. International Journal of Disaster Risk Reduction, 15, 1–9.Find this resource:

Michel-Kerjan, E., & Kunreuther, H. (2011). Redesigning flood insurance. Science, 333(6041), 408–409.Find this resource:

National Association of State Budget Officers (NASBO). (2015). Budget process in the states.

NOAA National Centers for Environmental Information (NCEI). (2018). U.S. billion-dollar weather and climate disasters.

Oates, W. E. (1972). Fiscal federalism. New York: Harcourt Brace Jovanovich.Find this resource:

O'Hara, N. (2012). The fundamentals of municipal bonds. Hoboken, NJ: Wiley.Find this resource:

Perry, R. W., & Quarantelli, E. L. (2005). What is a disaster?: New answers to old questions. Xlibris Corporation.Find this resource:

Phaup, M., & Kirschner, C. (2010). Budgeting for disasters: Focusing on the good times. OECD Journal on Budgeting, 10(1), 21–42.Find this resource:

Quarentelli, E. L. (1998). What is a disaster?: A dozen perspectives on the question. London: Routledge.Find this resource:

Rose, A., Porter, K., Dash, N., Bouabid, J., Huyck, C., Whitehead, J., . . . Tobin, L. T. (2007). Benefit-cost analysis of FEMA hazard mitigation grants. Natural Hazards Review, 8(4), 97–111.Find this resource:

Sylves, R. (2015). Disaster policy and politics: Emergency management and homeland security. Washington, DC: CQ Press.Find this resource:

United Nations. (2010). Natural hazards, unnatural disasters: The economics of effective prevention. Washington, DC: The World Bank.Find this resource:

Wuebbles, D. J., Fahey, D. W., Hibbard, K. A., DeAngelo, B., Doherty, S., Hayhoe, K., . . . Weaver, C. P. (2017). Executive summary. In D. J. Wuebbles, D. W. Fahey, K. A. Hibbard, D. J. Dokken, B. C. Stewart, & T. K. Maycock (Eds.), Climate science special report: Fourth national climate assessment (Vol. 1, pp. 12–34). Washington, DC: U.S. Global Change Research Program.Find this resource:

Notes:

(1.) The definition of disaster has been discussed extensively in the academic literature. See Quarentelli (1998) and Perry and Quarantelli (2005) for discussion.

(2.) The Budget Control Act of 2011 signed into law a number of mechanisms to control the U.S. federal budget. Caps were put in place on discretionary spending beginning in federal FY 2012. Special accommodations were put in place to address the unpredictable nature of disaster relief spending. The result has allowed larger annual appropriations to the DRF without it counting against the allocation of discretionary spending. For more on how the Budget Control Act of 2011 changed the financing of the DRF, see Lindsay, Painter, and McCarthy (2016).