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What Would a Reformed FEMA Look Like?

Should it divorce itself from the Department of Homeland Security?

FEMA (2)
Disaster response used to be a state and local responsibility, with perhaps a sprinkling of federal assistance thrown in for good measure. These days, some will argue, the equation has been reversed, with national government in the form of FEMA increasingly stepping in to remedy what used to be local situations.

“We have federalized natural disasters over the last 25 years,” said Matt Mayer, a visiting fellow at the American Enterprise Institute, a public policy think tank. “If we look at the history of FEMA declarations, the federal authorities are taking on routine disasters that historically were dealt with by state and local government, with no federal assistance.”

Mayer’s not alone in making the case. Small-government advocates as well as many in the emergency management community have being saying there are systemic flaws in the way FEMA is organized and how disasters are funded. Calls for reform take many shapes. Some say the formula of the Stafford Act, which sets the threshold for federal disasters, needs to be revised. Some point to problems with the National Flood Insurance Program, while others say FEMA is suffocating in the shadow of the Department of Homeland Security.

“The fact is, FEMA participates in only a very small number of what the states and local authorities consider to be major emergencies and disasters,” said Jerry Quinn of emergency management consultancy Gerard Quinn and Associates.

Large or small, the number clearly has grown. Under President Ronald Reagan, FEMA averaged 28 federal disaster declarations a year. Then came the Stafford Act, whereby the federal government promised to pay for 75 percent or more of the cost related to disasters. States cashed in: In 2016 there were 102 federally declared disasters, making it a relatively slow year. Numbers have routinely been in the triple digits for two decades, sometimes topping 150 events a year.
But does a high number of federally declared disasters imply a need for FEMA reform?

While cries of over-federalization may be driving calls for reform, some in the emergency community point to other signs that fundamental change is needed. It’s not just the number of disasters, but rather the way in which disasters are defined and managed.

In Warren County, Ohio, Director of Emergency Services Michael Bunner said the state-based nature of emergency declarations is flawed. “They should be looking at the impact on the entire region,” he said. “Suppose something happens on the Kentucky-Indiana-Ohio border. Collectively that might meet the threshold, but no individual state has enough of an impact to get a declaration. Depending on the size and scope of the event, that would potentially be problematic.”

Bunner said the notion of doling out aid at the state level is inherently troublesome. “Because something happened at the northern tip of my state, should some county 300 miles away be able to automatically benefit from that mitigation grant? Maybe that doesn’t make sense.”

Geography lies at the heart of many calls for FEMA reform. When people talk about the federal government overstepping, it’s not just a question of how much money gets spent. “Texans or Ohioans shouldn’t subsidize events in Indiana that don’t have national impact, that don’t have a national flavor,” Quinn said.

The majority of disasters occur on the Gulf Coast, the Eastern Seaboard and in California. “On average Ohio gets two declarations a year and Florida gets 10, so the states in the middle subsidize the coasts,” he said.

FEMA officials agree the Stafford Act opened questions of logic and fairness that have perhaps not been satisfactorily resolved. Under the act, “all disasters are local, and most disasters are handled at the local and state level,” said FEMA Director of External Affairs Josh Batkin. “It is only those disasters that are beyond those capabilities that warrant a federal intervention, that warrant FEMA coming in.”

There’s the heart of the problem. “How to define what is ‘beyond the capability’ of a state or a tribe to handle on their own,” Batkin said. Right now a rigid formula kicks in: If the disaster costs more than about 1.43 times the number of people in the state, it should become federal. But there’s a lot of gray area in there. In 2016 FEMA rejected more than 27 percent of gubernatorial requests for disaster declarations. Clearly there’s room for interpretation.

Suppose we were to heed the cries for FEMA reform. What would a “reformed” agency look like?

Officials representing U.S. counties have put a few ideas on the table. Last spring, El Paso County, Colo., Commissioner Sallie Clark represented the National Association of Counties in a House of Representatives hearing on the rising cost of disasters. She urged legislators to think carefully about how the burden of disaster relief is portioned out across different levels of government.

“Federal disaster expenditures should decrease only as a result of disasters becoming less costly overall, rather than through cost shifts to state and local governments,” Clark said. She told representatives to be wary of proposals that “may achieve the goal of decreasing federal spending, but would do so at the expense of state and local governments and the residents they serve.”

Certainly one could adjust the Stafford Act, move that 1.43 threshold to push more crises off the federal plate and onto the backs of states. Some urge going even further. “There are things we need to remove entirely from declaration eligibility,” Mayer said. “There is not a fire or flood or severe storm or even a blizzard that should get FEMA coverage. Tornadoes below a certain scale, or an earthquake below a certain number: Those things should not be eligible, period, unless it hits a certain threshold of damage that is well above the norm.”

FEMA has a different idea. Last January it began seeking public comment for a Disaster Deductible plan, a new structure in which states would satisfy their obligation to cover the costs for their own emergencies by paying out a deductible prior to federal assistance kicking in.

“Our purpose is for the entire community to come together to develop a more productive option,” Batkin said. It’s productive in the sense that the level of the deductible would be determined in part based on the degree to which a state invests in its infrastructure.

“This would incentivize behavior change,” he said. “You can build up your own state emergency management capabilities, you can adopt up-to-date building codes and standards, you can have a rainy day fund, you can have more private insurance of facilities. We would incentivize people at all levels of government to take the steps they need to be better prepared for all disasters.”

FEMA isn’t offering numbers yet to show whether states would end up paying more or less than they do today. The agency says it wants to focus the discussion on preparedness.

Expert observers say the idea has merit. “It’s not a bad plan as long as they stick to it,” said Jerome Hauer, former commissioner of Homeland Security and Emergency Services for New York. “The problem with these things is that political pressure takes over and rules get bent. If they can hold the line on that, if FEMA can get states to start owning a bigger part of preparedness, if FEMA can impact how states look at communications and mitigation and other aspects of preparedness — that would be a good thing.”

An even better thing, he said, would be if FEMA could divorce itself from the Department of Homeland Security.

With almost a quarter-million employees, DHS is home to the Coast Guard, the Secret Service, customs, the Transportation Security Administration and diverse other federal entities. Some would contend that FEMA’s work makes it too important to be a little fish in such a big pond.

“FEMA needs to be a cabinet office,” Hauer said. “Any time you put someone between the FEMA administrator and the president it creates problems. When you are dealing with these types of issues, you need unfettered access to the senior person. You can’t worry about stepping on the secretary’s toes and whether that secretary is going to interject their own priorities and their own feelings.”

Poor interagency communications during Hurricane Katrina convinced Mayer that FEMA ought to break with the DHS. “There was an intentional lack of communication between FEMA and DHS that prevented the deployment of DHS assets,” he said. “FEMA believed it never should have become part of Homeland Security, and they acted as such.”

While the politics of the situation may have settled down a bit since then, the fundamentals still leave Mayer thinking the two ought to part ways.

“FEMA should be reporting to the president. During times of crisis it would be bolted together with DHS through cabinet gatherings and the interagency process, but FEMA would otherwise be on its own,” he said. “It would create less bureaucracy on a day-to-day basis, which would make it more effective as an entity.”

Although FEMA is ready to talk about some degree of structural change as far as the Stafford Act, on this score the agency is keeping mum. “That’s not really a debate that we are part of,” Batkin said. “Our focus is on making sure we can be an effective and efficient part of the department.”

An overhaul to the Stafford Act could potentially reshape the way an entire nation addresses disasters. Devolution from the DHS could radically reform both agencies. There’s one piece of FEMA reform, however, that some may see as easier to digest. The National Flood Insurance Program is $23 billion in the red, by FEMA’s count, and it loses money steadily.

Through the program, the federal government subsidizes the cost of insurance that, if left to the commercial insurers, would be so expensive that it would potentially inhibit commercial and residential development. Some call this a bad idea from the get-go, arguing that individual homeowners ought to be willing to accept the true cost of their own choices. “People in high-risk areas are going to have to pay more money to get their homes covered, and yes, that will cause a reduction of buildings in high-risk areas,” Mayer said.

“That’s not a bad thing. That’s the market working,” he said. “If someone wants to build on a beach, they shouldn’t have that subsidized by taxpayers who live in low-risk areas. Someone who wants a home on the beach should pay the full rate of what it costs to make sure that insurance will cover that home.”

Bunner said his own small-government ethos makes this one a no-brainer. “Build your house wherever you want, but you assume the risk,” he said. “Government shouldn’t be subsidizing individual property at all. It’s my property, it’s my problem. The government doesn’t owe you anything but public safety.”

That’s one approach to the problem of the flood fund losing money — but this assumes it’s even a problem, and that’s only true if the fund is supposed to break even. What if battling the tide isn’t an investment, but rather another expense? No one asks the Army to break even, or the sanitation department. Maybe this is just how much floods cost.

“At all levels of government, we have allowed development in coastal zones, and then they get flooded every few years. The issue is: Is this a public or private risk?” Quinn said. “You chose to build there, so it is private risk to some degree. But it’s a public risk because we permitted the development. We have taken property tax revenues and all the other economic benefits of those homes being there.”

In that case, Quinn suggests, a flood insurance program that runs in the red may be just a cost of doing business.

Political pressure created the flood fund and it would require significant political will to reshape it, in much the same way that retooling the Stafford Act or breaking off FEMA from DHS would demand a high degree of focus across all levels of government.

That’s not to say that such things are impossible. As the mounting cost of disasters puts additional strain on the federal budget, emergency management advocates and FEMA leaders alike find themselves incentivized to give careful scrutiny to the delicate interplay between state needs and federal support.

The same goes for flood insurance. Money is a fine motivator of political resolve. When the red ink has risen high enough to start lapping over the toes of Congress, someone will likely declare it time to take a new look at the flood situation.

“All this will require a recession, a real financial crisis. That’s when tough choices about FEMA become relevant,” Mayer said. “Until then we are dumb, fat and happy.”

Adam Stone is a contributing writer for Emergency Management magazine.