The Federal Emergency Management Agency (FEMA) has undertaken rulemaking to consider the establishment of a deductible for its Public Assistance Program. The proposed rule would establish a predetermined level of financial or other commitment (deductible) from state and local governments before FEMA provides public assistance authorized by a Presidential disaster declaration. Under the current cost-sharing formula, the federal share for public assistance is 75 percent, with state and local governments sharing the remaining 25 percent. The new rules would also permit states to “buy down” their deductible requirement through proactive measures, such as more stringent building codes, maintaining a disaster relief or insurance fund, or other measures that reduce the public's risk from disasters.
The proposed establishment of the deductible is in response to pressures from Congress to reduce federal spending on disaster assistance, and from the Obama administration to afford greater protection to people and property from the effects of storms, floods and climate change. The intent is to provide incentives to state and local governments to implement more meaningful and more effective hazard mitigation measures, and to more effectively manage taxpayer dollars.
Proponents argue that the proposed rule change will increase personal safety, reduce property damage, and decrease the cost of post-disaster federal aid for repairing and rebuilding public facilities and infrastructure following natural disasters. Opponents argue that it will be difficult for FEMA to place an accurate dollar value on a state or local government’s measures to mitigate future damage, and that states that do not have mandatory or strong building codes, or that have the greatest exposure, will bear greater costs since stricter codes would add to construction costs.
The proposed “buy down” provisions favor states like Florida that have strong building codes. After Hurricane Andrew devastated parts of south Florida in 1992, the state adopted a statewide building code that included more stringent structural requirements, particularly for construction in flood-prone and high-hazard coastal areas.
State officials have acted responsibly in making other changes to promote better building practices. Local governments are required to outline in their comprehensive plans principles for hazard mitigation, and to include provisions designed to protect human life and limit public expenditures in areas that are subject to destruction by natural disaster. The Florida Hurricane Catastrophe Fund (FHCF) was created to maintain insurance capacity in Florida by providing reimbursements to insurers for a portion of their catastrophic hurricane losses.
Although the proposed rule is potentially favorable to Florida, the devil is in the details. FEMA continues to work with state and local government associations to determine the proper scope of the deductible; how best to calculate the deductible; how to satisfy the deductible; and identify other implementation considerations and impacts.
Concerned taxpayers can submit comments and supporting materials via the federal e-rulemaking portal by following the instructions at www.regulations.gov.