Skip to content

Disaster Deductible

August 15, 2016


By Jake Unguren, DEM Recovery Program Manager

The cost of disasters is enormous. A 2014 Congressional Research Service (CRS) report about issues with FEMA’s Disaster Relief Fund states that, “Congress provided roughly $120 billion for Hurricane Katrina and $60 billion for Hurricane Sandy recovery, and even in years with relatively few major disasters, it is not uncommon for the federal government to annually appropriate between $2 billion and $6 billion to help pay for recovery projects.” For many years Members of Congress, the Government Accountability Office, and the Department of Homeland Security’s Office of the Inspector General have been calling for FEMA to change the way the federal government provides post-disaster assistance to states, especially to reduce the amount of funding the federal government provides.

2010 Flood St George


One alternative being considered to reduce the amount of federal disaster funding is to simply increase the per capita indicator (disaster damage threshold), which is currently $1.41 per person, or $3.9 million in Utah as explained here. While increasing the threshold would reduce the cost to the federal government, it would do so by passing the costs onto states and local governments, thus increasing the burden on them. This has already been a topic of conversation for several years, as the U.S. Government Accountability Office (GAO) released a 2012 study that states “the indicator is artificially low.” We recently published an article that discusses the high likelihood of the threshold seeing a significant increase in the near future.


FEMA is also currently exploring the concept of a Disaster Deductible, which has been proposed to incentivize states to be better prepared for disasters while reducing costs of future disasters for both states and the federal government. States could potentially receive credit toward their deductible requirement through proactive pre-event actions such as adopting enhanced building codes, establishing and maintaining a disaster relief fund or self-insurance plan, or adoption of other measures that reduce the risk from disaster events.

The Deductible Concept is considered a better approach to reduce disaster costs. Rather than waiting around for the next disaster to happen and anticipating post-disaster recovery funds from the federal government, the Deductible Concept would require states to take a more proactive approach. It encourages local and state governments to invest in pre-disaster mitigation and resilience using their own funds to essentially “buy down” the deductible.

Disasters occur at the local level, and citizens in the disaster area, their local governments, volunteer agencies, and other nearby local entities are normally the first to respond. Therefore, it makes sense for the Disaster Deductible to start at the local level. The Deductible aims to also put more responsibility of mitigation, resilience, prevention, and preparedness onto local citizens and governments.

This approach would be a significant change and FEMA is committed to a transparent stakeholder engagement effort to explore how and if it should be adopted. Earlier this year, FEMA requested ideas, comments, and questions from the public on the Deductible Concept through the Advance Notice of Proposed Rulemaking. The development of the Disaster Deductible Concept applies only to Public Assistance funding, and has no impact on FEMA’s funding to states through the Individual Assistance program. FEMA is not currently proposing to implement this concept, although local governments and State agencies should follow this discussion closely, as it has serious implications of shifting the responsibility of reducing the costs of disasters onto states and local communities.









No comments yet

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: