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Pew Investigated How States Are Prepared to Meet Disaster Funding Obligations

The frequency and scope of large-scale disasters is increasing. So too are the costs.

by Eric Holdeman / May 12, 2020

Every state in the United States since 2013 has had a presidentially declared disaster. Pew Charitable Trusts just finished a study, How States Pay for Natural Disasters in an Era of Rising Costs.

I would note that states are going to be pinching every penny and scratching in the corners to come up with funding to meet the increased costs of COVID-19, plus the decline in revenues due to a significant recession. A conservative estimate is that tax revenues should be down a minimum of 20 percent. 

Forty-three states have some method of funding disaster costs, either through a general rainy day fund or one dedicated to disaster costs. Some have the fund only there to meet the 25 percent matching requirement that comes with getting a presidential declaration. Funding can come from a variety of sources. Five budgeting tools that the U.S. Government Accountability Office and previous Pew research had identified as common natural disaster-funding mechanisms: statewide disaster accounts, rainy day funds, supplemental appropriations, transfer authority and state agency budgets.  

I noted that New York state has a $200M fund and next in line to them was $100M for Texas. I was surprised to see Washington state at $77M. For Washington, I think the wildfire risk has been driving that level of investment in a fund. 

I was able to listen in to a media briefing on the study. In response to a question I asked about how state's supply disaster funds with revenue, I got the following answer, "When we requested information on states’ contributions to their statewide disaster accounts, some states also provided us with the source of that funding. At least 28 states fund their disaster accounts with general fund revenue, but several — including Florida, Nebraska, North Dakota and Wisconsin — draw on special sources of money, such as revenue from oil and gas taxes and fees on homeowner and commercial insurance. Several rely on a mix of general funds, trust funds and other sources."

In skimming the document, I did not see anything mentioned about how an investment in disaster mitigation could reduce the level of financial risk to those states that choose to prevent disasters rather than to only respond and recover. 

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