Senate Homeland Security and Governmental Affairs Subcommittee on Emergency Management, Intergovernmental Relations, and the District of Columbia…
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Senate Homeland Security and Governmental Affairs Subcommittee on Emergency Management, Intergovernmental Relations, and the District of Columbia Hearing
Chairman Begich, Ranking Member Paul, and Members of the Subcommittee. Thank you for the invitation to discuss the need to make
The enormous generosity of Americans is never more evident than in the aftermath of natural disasters, and naturally some of this assistance will be channeled through the federal government. Stafford Act assistance to state and local governments and individuals must be allocated efficiently to ensure that intended beneficiaries receive maximum assistance possible. In addition,
Today I'd like to outline three recommendations that can help increase efficiency in the use of disaster funding:
First,
Second,
Third, a more thorough assessment of the potential for state and local governments to respond to disasters should inform the establishment of a new threshold for federal assistance.
An increase in the number of major disaster declarations, due to the designation of many "small" events being as major disasters, impedes
MINOR DISASTERS DISSIPATE FEMA RESOURCES
In addition to offending the commonsense meaning of major disaster, minor disasters dissipate federal resources and divert
THE PUBLIC ASSISTANCE DAMAGE THRESHOLD SHOULD BE REVISED
The proximate cause of excessive disaster declarations is the low damage threshold
The public assistance damage threshold could also be adjusted to a state's specific ability to pay for disaster losses. In essence, this would set a damage threshold for each state instead of one threshold for all states. State specific damage thresholds could be set based on state per capital personal income, Gross State Product, or Total Taxable Resources, consistent with matching rates for federal grant programs based on state income. nix The efficiency gains, however, will come from significantly raising the damage threshold and tying it to per capita personal income in the future; tailoring a significantly higher threshold for each state is secondary.
FEDERAL ASSISTANCE SHOULD BE BASED ON POTENTIAL STATE AND LOCAL RESPONSE ABILITY
Public assistance covers losses to property and equipment, the costs of debris removal, and emergency protective measures. Adequate insurance can cover much of state and local governments' property and equipment losses, increasing their ability to meet any given disaster.
Insurance must be maintained on a structure rebuilt using
New financial instruments like weather derivatives and catastrophe bonds have emerged since passage of the Stafford Act. Although primarily to date used by businesses or insurers to manage weather and catastrophe risk, these financial instruments could help state and local governments pay for personnel expenses, debris removal, and other response costs.
Establishing a damage threshold in consideration of the financial instruments now available to state and local governments would help ensure the availability of federal assistance when it is needed, namely for truly major or unexpected disasters. By avoiding the cost inflation due to third party payment and providing better incentives for state and local governments to prepare, a reduction in the federal role will also help stem rising disaster costs for the nation.
ni Communities often exhibit considerable resilience to natural disasters, as economists since Thomas Malthus and
nii Author's calculations based on
niii U.S.
niv GAO-12-838, p. 40.
nv GAO-12-838, Table 7, p. 41 notes that average administrative costs for disaster declarations have risen from 9% in 1989-1995 to 18% for 2004-2011.
nvi GAO-12-838, p. 11.
nvii Damage normalizations are conducted to allow losses from historical disasters to be projected into the present day, to provide perspective on contemporary disaster losses. Clearly past damage amounts must be adjusted for inflation, but the normalizations also adjust for changes in population and either wealth or per capita income. The damage normalization method has been applied to hurricanes (
nviii GAO-12-838, p.27.
nix GAO-12-838, pp. 31-32.
nx
Read this original document at: http://www.hsgac.senate.gov/download/?id=b8965afc-8087-4782-ab61-5dbf3e76900c
Copyright: | (c) 2010 Federal Information & News Dispatch, Inc. |
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