FEMA Proposed Rule Incorporates State Fiscal Capacity

In recent years, the Federal Emergency Management Agency (FEMA) has considered mechanisms to modify the state-federal fiscal relationship in responding to natural disasters. Specifically, the agency has explored ways to incorporate a state’s ability to pay when determining whether to approve financial assistance through its various programs.

In March 2019, FEMA finalized a rule to integrate ability-to-pay provisions in the determination process for recommending Individual Assistance under a major disaster declaration. FEMA recently proposed a similar rule for Public Assistance, which would reduce the number of eligible disasters. The proposed rule would:

• Increase the per capita indicator to account for increases in inflation from 1986 to 1999 because no inflation factor was applied during that period
• Adjust the per capita indicator by each state’s FEMA-adjusted total taxable resources (TTR) index to gauge fiscal capacity
• Increase the minimum damage threshold for authorizing public assistance from $1 million to $1.535 million to account for inflation since 1999, and adjust annually for inflation thereafter
• Use annual population estimates instead of the decennial census

The proposed rule would cost every state money because of the “catch up” inflation provision. However, its effects would be reduced in states with a low TTR index and exacerbated in high TTR states.

This brief discusses the proposed rule and provides background on FEMA disaster assistance.