FEMA pleads for funding as municipalities clamor for relief

The Federal Emergency Management Agency's Disaster Relief Fund is running dry as Congress squabbles over appropriations, opening the possibility that the federal government's ability to respond to national disasters will be compromised and the burden will shift to state and local budgets. 

To avoid that scenario the agency is currently tapping its Immediate Needs Funding for the first time since 2017. The move prioritizes lifesaving and life sustaining disaster response, while delaying payments to municipalities.

"Each week creates additional financial burdens on state, local, tribal, territorial governments and eligible nonprofits who are waiting on reimbursements from the federal government," said Deanne Criswell, administrator, FEMA, in written testimony before the House Committee on Transportation and Infrastructure Tuesday. "These applicants represent communities across the country, including small, rural, and under resourced municipalities." 

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FEMA's resources have been taxed by a year of extreme weather punctuated by wildfires in Hawaii and hurricanes raking the coasts.  

The Biden administration has asked for a supplemental funding package that raises the price to $16 billion for the Disaster Relief Fund. The issue became more political when the funding was strapped to increased funding for the war in Ukraine.  

Rep. Scott Perry, R-Pa., chair of the subcommittee conducting the hearing, reprimanded FEMA for waiting until the last minute to ask for assistance, questioned the decision to include Ukraine aid in the discussion, and puzzled over disaster mitigation efforts. 

"We see FEMA under the administration significantly expanding its mitigation programs in ways that no longer require projects to demonstrate that they will in fact reduce costs are actually save lives, all in the name of equity and climate change," he said.  

The FEMA bottleneck is also gumming things up for the flow of infrastructure repair as the agency has shifted focus to focus on lifesaving measures. "The result is all other recovery projects, such as rebuilding roads, bridges, and schools are on hold indefinitely," said Rep. Rick Larsen, D-Wash. "FEMA has had to put out 1,610 recovery and mitigation projects on hold impacting nearly every state and every community in our country."

Larsen pointed out the importance of mitigation efforts tied into the Bipartisan Infrastructure Legislation that sent $7 billion flowing into FEMA's Building Resilient Infrastructure and Communities program.  

Municipal bond issuers have appealed to Congress about slow walking the restoration of FEMA funding. Last week the National Association of Counties contacted Congress by letter to call attention to the depleted DRF. The League of Cities sent their own letter in August.   

Other topics explored during the hearing included FEMA's Risk Rating 2.0 program which focuses flood insurance policy rates onto individual properties, the status of $30 billion in FEMA construction dollars obligated to Puerto Rico, and FEMA's efforts on the southern border related to housing migrants.    

Rep. Troy Carter D-La., pressed Criswell about the implications of a government shutdown or a continuing resolution. "Anything that would remain in our Disaster Relief Fund carryover balance would be moved forward," she said.  But given our current state it would be insufficient to cover all of our ongoing lifesaving operations. We would be legally able to incur obligations for activities necessary for life saving and human protection of human life."    

The ongoing effects of natural disasters on the muni world has attracted academic attention. Papers presented this year at the Brookings Institution Municipal Finance Conference explored the effects of extreme heat on higher yield spreads on various type of bonds and have estimated investor losses attributed to a natural disaster resulting from climate change to be as high as $10 billion.