Congress Must Take Action to Curb Rising Disaster and Emergency Spending
Over the last 30 years the number of declared disasters and emergencies and the amount of money spent in response has been on the rise. While once used as a legitimate exercise to respond to natural disasters and other emergencies, it has turned into a way for Congress to evade spending caps and increase spending. To add to the problem, almost none of this new spending is being paid for but instead adds to the federal deficit.
The federal disaster and emergency process is broken, leaving the government unprepared when unforeseen events strike and cost taxpayers tens of billions of dollars in deficit spending. Congress must take steps to reform disaster and emergency spending so that it not only can function in a more effective manner but also do so without further deteriorating federal budget shortfalls.
History of Disaster and Emergency Spending
The Robert T. Stafford Emergency Relief and Disaster Assistance Act of 1988 gave the President the authority to issue disaster declarations for a variety of events. This can range from widespread national disasters to smaller localized events.
Typically disaster spending is provided in one of three ways. The first way is through annual appropriations. Most disaster declarations are funded through the Federal Emergency Management Agency’s (FEMA) Disaster Relief Fund (DRF). These funds are unique in that they are classified as “no-year” money, meaning that they do not expire and can be carried over from year to year. The DRF is intended to be used for non-catastrophic disasters, meaning that costs do not exceed $500 million per occurrence.
DRF funds can be distributed from three categories of disaster aid: individual assistance, public assistance, and hazard mitigation. It is left up to FEMA officials onsite to determine how the funds are distributed. FEMA and the President also have the authority to issue a disaster declaration for Fire Management Assistance Grants and make funding available for that purpose. In fiscal year (FY) 2018, the DRF received a regular appropriation of $535 million.
The second type of disaster spending is a product of the Budget Control Act of 2011 (BCA). While the BCA created caps on discretionary spending from 2012–2021, it created categorical adjustments that could be made each year to increase spending. One of those adjustments is for additional disaster relief spending. Money designated for a disaster spending cap adjustment can be used for purposes that would be carried out pursuant to the Stafford Act. To determine the amount of the annual cap adjustment, the Office of Management and Budget (OMB) calculates the average level of disaster funding over the previous 10 years. In FY 2018 disaster adjustment totaled $7.4 billion.
Finally, Congress has the ability to provide additional funding through an emergency supplemental appropriation. Whereas the DRF is used for non-catastrophic disasters, supplemental appropriations are intended to be used for events that breach the $500 million per incident threshold.
Unlike disaster funding which must adhere to the provisions of the Stafford Act, emergency designated spending has much broader authority. While they can be used for disaster response, Congress and the President can request emergency funding for any need determined to be too urgent to be postponed until the next regular enactment of appropriations. In recent years emergency funds have been used for purposes such as hurricane response, increasing security on America’s southwest border, and responding to the Ebola virus outbreak of 2014.
The funds are in addition to any other previously provided appropriations and like disaster designated spending are not subject to the BCA caps or the Statutory Pay-As-You-Go-Act of 2010 (PAYGO). PAYGO requires that any law changing taxes, fees, or mandatory spending must not increase projected deficits over five- and 10-year periods. It is enforced through automatic mandatory cuts known as sequestration. There is virtually no limit to how much money Congress can appropriate under the emergency designation. In FY 2018 Congress enacted $125.6 billion in emergency spending, mainly in response to three major hurricanes that impacted the southeastern U.S. and Puerto Rico as well as a small portion to fight wildfires on federal lands. However, much of the hurricane funding went to programs that are not equipped to, and do not provide, disaster aid.
The Rise of Disaster and Emergency Spending
Since the passage of the Stafford Act in 1988, the number of annual disaster declarations has steadily risen. In 1988 FEMA reported only 16 declared disasters. Over the eight-year term of President Reagan there were an average of 28 disaster declarations per year. Under Presidents George W. Bush and Barack Obama the average number of annual disaster declarations rose to 130 per year. For calendar year 2017 there were 137 declared disasters and through September of 2018 there had been 110.
The scale of those declarations has also been on the rise. In FY 1989 supplemental emergency appropriations totaled $1.2 billion, or about one-half of one percent of the entire federal budget. Over the 1990s, supplemental appropriations continued to rise with the discretionary portion totaling over $129 billion over the decade. Approximately $76 billion of that total went towards the Gulf War while the remaining $53 billion was used for nondefense purposes.
The trend has continued over the past 20 years, with $497 billion in nondefense supplemental appropriations and nearly $2 trillion more that has gone towards fighting the global war on terrorism.
Though the levels of spending are smaller, a similar pattern has developed in supplemental disaster appropriations to the DRF. From 2000–2011, additional appropriations to the DRF averaged $1.8 billion annually. Since the passage of the BCA, that average has risen to $6.7 billion per year, an increase of 272 percent.
While the rapid growth of emergency appropriations is concerning, another trend is equally troublesome. During the 1990s Congress paid for 40 percent of total supplemental spending by rescinding unspent funding from programs and agencies across the federal government. Since 2000, efforts of pay for emergency appropriations have been almost non-existent, with the exception of FY 2006 when approximately one-third of emergency appropriations were offset through rescissions.
Last year President Trump put forth a $44 billion emergency request in response to several hurricanes. The request included $59 billion in offsets that would have more than paid for the entire package, yet Congress ignored the request.
If all of the money being put towards disaster and emergency spending was being used for life-saving efforts and immediate response and recovery needs, then it could be argued that the designation is justified. That does not mean that Congress should not find ways to pay for the new spending.
Unfortunately, based on numerous examples from past events it is clear that a large amount of the funding being designated for disasters and emergency is not meeting that criteria.
Out of $125 billion in FY 2018 emergency funding, most of which was appropriated in direct response to three hurricanes, the DRF received less than $50 billion. The Department of Housing and Urban Development’s Community Development Block Grant (CDBG) fund received over $35 billion (about 10 times its regular appropriation) and the long troubled National Flood Insurance Program (NFIP) received a taxpayer funded bailout of $16 billion. The Small Business Administration’s Disaster Loan Program received $1.8 billion in emergency disaster relief funding.
The SBA disaster loan program is a government subsidy for private businesses. The program has a history of poor management and falls outside the proper scope of the federal government. Giving it the authority to provide grants to whomever it sees fit is an improper use of emergency funding and fails to prioritize aid to those who need it most.
The inclusion of emergency funding for the CDBG is inappropriate. It gives broad grant authority to the Department of Housing and Urban Development (HUD) to determine who is most deserving of the billions of dollars in federal aid. The program is not well-targeted to low-income communities and is not transparent, making it difficult to assess whether it is meeting its stated goals.
The Army Corps of Engineers received over $15 billion in emergency funding in response to the 2017 storms. This is against an annual appropriation of less than $7 billion in 2018. The influx of Army Corps of Engineers funding is less a response to natural disasters and more an effect of the congressional earmark moratorium that has been in place for the past eight years. Lawmakers are upset with the lack of progress on water infrastructure projects since the moratorium went into effect. Emergency funding provides a way to get around the earmark ban and send federal taxpayer dollars for infrastructure projects to lawmakers’ districts.
Recent natural disasters are not the only example of abuse of the emergency spending designation. Of the $50 billion in emergency Hurricane Sandy relief, $16 billion went to HUD’s CDBG fund. It received $4.5 billion more in emergency funding than FEMA’s DRF.
In response to Hurricanes Katrina, Rita, and Wilma in 2005, Congress provided nearly $95 billion in emergency appropriations as well as a $17 billion bailout to the NFIP. About half of that money went to FEMA’s response efforts and 92 percent was spent within two years of the storms.
However, there was also much waste and abuse. The Louisiana Road Home program received a $1 billion CDBG program grant. A Government Accountability Office report issued a year after the storms estimated that between $600 million to $1.4 billion in emergency funding was paid improperly or to fraudulent individuals. In one case, $20,000 was paid to an inmate that listed a post office box as his damaged property. In 2013, an inspector general’s report found that $700 million of the money could not be accounted for.
Tensions with the Budget Control Act
Perhaps the biggest reason for the recent rise in disaster and emergency spending is the enactment of the BCA. The act implemented discretionary spending caps from 2012–2021, among other provisions.
While the act was intended to reduce spending, it also allowed for certain annual adjustments to be made. These cap adjustments include: disasters, emergencies, overseas contingency operations (OCO, formerly designated as emergency spending), and program integrity initiatives.
In addition to Congress amending the caps to increase spending, they have also exploited these cap adjustments to circumvent the limits. Since the enactment of the BCA the average annual amount of supplemental disaster funding has more than quadrupled.
Supplemental emergency funding has been on an upswing as well. In the five years prior to the enactment of the BCA, emergency funding averaged $22.5 billion per year. From 2012–2018 that annual average increased to $29 billion per year.
Finally, there’s the issue of OCO funding. This category of uncapped funding was originally used in response to the 9/11 attacks. It was intended to serve as temporary funding to fight the spread of terrorism. What it has become is a slush fund that allows Congress to evade the BCA caps and increase spending more.
In FY 2018 Congress appropriated $65.2 billion in OCO for national defense and an additional $12 billion for state and foreign operations. Seventeen years after 9/11, instead of serving to fight terrorism, this money is increasingly going towards propping up the base Department of Defense and State Department budgets. The Pentagon has already put forth plans to transfer as much as $49 billion in OCO funding to its base budget in FY 2020.
The BCA caps created an uncomfortable situation for lawmakers. It forced Congress to prioritize spending, and under normal circumstances that would mean that to increase spending in one area, such as defense, another area has to be cut. But that creates a tension for lawmakers who neither want to raise taxes nor cut spending. Emergency spending and other cap adjustments provide another option. They allow Congress to increase spending without having to worry about offsetting it through cuts to other programs or new taxes.
Recommendations to Reform Disaster and Emergency Spending
In an effort to make the disaster and emergency spending more effective and more fiscally responsible, Congress should pursue a series of reforms:
Codify the Definition of Disaster and Emergency Spending and Have Strong Enforcement of the Definition. One of the problems with the emergency designation is that there is no clear definition of what that means and what qualifies. This leaves Congress and the President with much latitude in what qualifies as an emergency. As illustrated above, this has led to the growth of emergency spending and provides a way for lawmakers to evade spending restraints.
To add accountability and transparency to emergency spending, Congress should by statute define what qualifies as an emergency. To ensure that Congress cannot simply waive the statute as is done with some budget enforcement rules, it should be enforced through a point of order that requires a two-third majority vote to waive.
In 1991 the OMB issued guidance on emergency spending that included a definition. The definition stated that to qualify as emergency spending, a provision must meet five criteria:
- Necessary (essential or vital, not merely useful or beneficial);
- Sudden (coming into being quickly, not building up over time);
- Urgent (requiring immediate action);
- Unforeseen; and
- Not permanent.
Formalizing this definition would help ensure that emergency funding is being used for legitimate purposes. The end result could not only mean better response but also doing so in a more cost-effective way.
Put a Time Limit on How Long Emergency Designated Funding Can Be Spent. Currently, disaster and emergency funds are appropriated as “no-year money.” This means that the money is “available for obligation for an indefinite period.”
Of the $50 billion in emergency appropriations approved by Congress after Hurricane Sandy only $17 billion was allocated to “meet immediate and critical needs.” The remaining $33 million was for long-term recovery efforts and infrastructure improvements to help prevent damage caused by future disasters.
An emergency is defined as an event that requires immediate action. Six years after the storm there is still emergency funding that has not been spent. Moving forward, Congress should adopt time limits and more specific limitations for how the funds can be used. If money is left unspent, then it should be automatically rescinded by the OMB and returned to the treasury. Doing so would ensure that the funds are going toward true emergencies.
Budget for Recurring Disasters Within FEMA’s Base Budget. When tested according to the five criteria laid out by the OMB, FEMA’s DRF budget-cap adjustment would not meet the standard to qualify as disaster funding. Over the past five years the fund has on average received $6.7 billion in additional funding through the disaster designation. Money which is not subject to the BCA caps. Prior to the enactment of the BCA, the five-year average was $1.6 billion per year.
The disaster-cap adjustment has become a means for Congress to evade the BCA spending caps and supplement FEMA’s base budget. While Mother Nature is inherently unpredictable, history shows that there will be some amount of flooding, severe weather, wildfires, among others, each year in the U.S. The consistency in Congress providing additional disaster funding every year shows this. Because of the sharp increase in disaster declarations over the past 30 years, the DRF’s base budget of $535 million is not sufficient to handle even a low-end storm season.
Congress should stop providing a budget-cap adjustment for disaster-designated spending and budget for recurring expenses within regular agency budgets.
Modify the Stafford Act to Establish Clear Requirements that Limit the Situations in Which FEMA Can Issue Declarations. The growth in DRF is largely due to the spike in the number of federal disaster declarations which was a direct result of changes in policy and regulation under the Stafford Act.
The act shifts at least 75 percent of disaster-response costs to the federal government. In the event of a disaster, states normally have to pay for the costs of responding, but if the President declares a major disaster worthy of federal assistance, then the federal government covers at least 75 percent of response costs. The result has been that states now request federal help whenever they can, since it will bring significant federal dollars. This creates a vicious cycle as states respond to increased federalization of disasters by preparing less than they should. As a result, states are less prepared for disasters, they request more federal help, and the downward cycle is perpetuated.
To mitigate this problem, the Department of Homeland Security should reduce the number of disasters to which FEMA responds, leaving many smaller disasters fully in the hands of states and local governments.
Reduce the Federal Share for FEMA Declarations to 25 Percent. The Stafford Act made it much easier for states to request disaster assistance, leading to the spike in the number of declarations and amount of money spent. The act requires damages to top $1.46 per capita for states to receive aid. That’s less than $5 million for 16 states. By setting such a low bar to acquire federal assistance, FEMA is in high demand. This leaves FEMA’s budget and readiness unprepared when truly catastrophic disasters strike.
FEMA should reduce the federal share of disaster costs so that only the large disasters receive a 75 percent federal cost share. For most medium-severity disasters, FEMA would cover closer to 25 percent of disaster costs. By limiting disaster declarations and limiting cost sharing, FEMA will be able to put more money aside for catastrophic disasters, which is when federal disaster funding is most needed.
Such reform is not only better for disaster response—more prepared and invested state and local governments will improve overall disaster preparedness and response—it is also fairer. Taxpayers in states that do not have many disasters, or do a better job preparing for disasters, subsidize high-disaster-risk and low-preparedness states through the current federal model.
Stop Relying on Overseas Contingency Operations Funding to Pay for Base Defense Requirements. Like disaster and emergency spending, OCO funds are a category of spending that was explicitly exempted from being subject to the BCA caps.
Since 2001, an estimated $1.8 trillion has been appropriated to the Department of Defense, State Department, and U.S. Agency for International Development (USAID) for activities and operations in response to the 9/11 attacks and the continuing war on terrorism. There is no statutory limit to the amount of OCO funds that can be appropriated in a given year.
Unfortunately, rather than fulfilling their intended purpose, more and more OCO funds are being used to prop up the base budgets of the Department of Defense, the State Department, and USAID. Since 2014, the Pentagon has been shifting funding from base accounts into the OCO account. This provides a mechanism to increase base defense spending without violating the BCA caps.
Congress and the President should work together to phase out the use of OCO funding entirely. Instead, they should fund national defense through the base budget at the level fully needed to protect the nation from increasing threats across the globe and save additional spending for true emergencies and unforeseen threats.
Phase out the National Flood Insurance Program. The NFIP was established in 1968 to provide flood insurance for at-risk properties and to mitigate flood risks through land-use regulation. Congress noted at the time that ad hoc disaster relief was placing “an increasing burden on the nation’s resources,” which could be alleviated by insurance coverage.
Some five million properties are currently insured under the program. Property owners are eligible if their community adopts and enforces floodplain-management regulations that meet or exceed federal standards. FEMA has little discretion in issuing policies regardless of the degree of flood risk or repetitive claims.
Unsustainably low premiums have crowded out the private insurance market and have led to the NFIP being perpetually in debt. In 2018, the program’s most recent bailout totaled $16 billion.
Congress should release aggregated claims data necessary for private insurers to price private insurance and eliminate the subsidies and other giveaways that secure the government’s flood insurance monopoly.
Fix the Process, First
Disaster and emergency spending and response in its current form is broken. Too much of the funding is going towards purposes that do not represent true emergencies and too little of the spending is being offset, leaving taxpayers holding the bag to pay for events that do not impact many of them.
Congress must take steps to ensure that disaster and emergency funding is targeted to direct response and recovery needs of impacted individuals and communities. The country as a whole must do a better job of preparing for the unforeseen before it happens instead of relying on government bailouts afterwards. By putting reforms in place now, Congress can ensure better and more cost-effective response next time a disaster strikes.
Bruce Lindsay, “FEMA’s Disaster Relief Fund: Overview and Selected Issues,” Congressional Research Service Report for Congress No. 43537, May 7, 2014, https://www.fas.org/sgp/crs/homesec/R43537.pdf (accessed November 1, 2018).
U.S. Department of Homeland Security, “Disaster Relief Fund: Monthly Report as of September 30, 2018,” October 5, 2018, https://www.fema.gov/media-library-data/1539209875417-a4b69649b46045013de05466f8b19815/October2018DisasterReliefFundReport.pdf (accessed November 1, 2018).
Bruce Lindsay, William Painter, and Francis McCarthy, “An Examination of Federal Disaster Relief Under the Budget Control Act,” Congressional Research Service Report for Congress No. 42352, November 8, 2013, https://www.fas.org/sgp/crs/misc/R42352.pdf (accessed November 1, 2018).
Congressional Budget Office, “Discretionary Appropriations, Fiscal Year 2018, with Cap Adjustments,” October 5, 2018, https://www.cbo.gov/system/files?file=2018-10/FY%202018%20House%202018.9.30.pdf (accessed November 1, 2018).
Bruce Lindsay and Justin Murray, “Disaster Relief Funding and Emergency Supplemental Appropriations,” Congressional Research Service Report for Congress No. 40708, April 12, 2011, https://www.fas.org/sgp/crs/misc/R40708.pdf (accessed November 1, 2018).
Justin Bogie, “A Primer on Disaster and Emergency Appropriations,” Heritage Foundation Issue Brief No. 4524, March 2, 2016, https://www.heritage.org/budget-and-spending/report/primer-disaster-and-emergency-appropriations.
 Office of Management and Budget, “The Statutory Pay-As-You-Go Act of 2010: A Description”, https://obamawhitehouse.archives.gov/omb/paygo_description/ , (accessed November 1, 2018).
Veronique de Rugy and Allison Kasic, “The Never-Ending Emergency: Trends in Supplemental Spending,” working paper, Mercatus Center at Georgetown University, August 2011, http://mercatus.org/sites/default/files/publication/Emergency_Spending_de_Rugy_August2011_1.pdf (accessed November 1, 2018).
The Stafford Act of 1988 amended the Disaster Relief Act of 1974 by linking the presidential declaration of an emergency or disaster to a response of the Federal Emergency Management Agency (FEMA).
David Inserra, “FEMA Reform Needed: Congress Must Act,” Heritage Foundation Issue Brief No. 4342, February 4, 2015, http://www.heritage.org/research/reports/2015/02/fema-reform-needed-congress-must-act.
Congressional Budget Office, “Supplemental Appropriations in the 1980s,” February 1990, https://www.cbo.gov/system/files?file=2018-05/1980s.pdf (accessed November 1, 2018).
Congressional Budget Office, “Supplemental Appropriations in the 1990s,” March 2001, https://www.cbo.gov/system/files?file=2018-07/1990s.pdf (accessed November 1, 2018).
Congressional Budget Office, “Supplemental Appropriations 2000-Present,” October 5, 2018, https://www.cbo.gov/system/files?file=2018-10/Supplementalappropriations-2018-10-5.pdf (accessed November 1, 2018).
Bruce Lindsay, “FEMA’s Disaster Relief Fund: Overview and Selected Issues,” Congressional Research Service, May 7, 2014.
Congressional Budget Office, “Status of Appropriations FY 2015-2019,” https://www.cbo.gov/topics/budget/status-appropriations (accessed November 1, 2018).
Congressional Budget Office, “Supplemental Appropriations in the 1990s.”
Congressional Budget Office, “Supplemental Appropriations 2000-Present.”
Nicole Ogrysko, “Trump Asks Civilian Agencies for Help to Offset New $44 Billion Disaster Relief Package,” Federal News Network, November 20, 2017, https://federalnewsnetwork.com/budget/2017/11/trump-asks-civilian-agencies-for-help-to-offset-new-44-billion-disaster-relief-package/ (accessed October 24, 2018).
Congressional Budget Office, “CBO Estimate for Division B, Subdivision 1 of Senate Amendment 1930,” February 8, 2018, https://www.cbo.gov/system/files?file=115th-congress-2017-2018/costestimate/bipartisanbudgetactof2018.pdf (accessed November 1, 2018).
Congressional Budget Office, “Estimate for Senate Amendment 1930, The Bipartisan Budget Act of 2018,” February 8, 2018, https://www.cbo.gov/system/files?file=115th-congress-2017-2018/costestimate/bipartisanbudgetactof2018.pdf (accessed November 1, 2018).
Congressional Research Service, “Army Corps of Engineers FY 2018 Appropriations,” Congressional Research Service In Focus, April 2, 2018.
Justin Bogie, “Earmarks Won’t Fix the Broken Budget and Appropriations Process,” Heritage Foundation Backgrounder No. 3353, September 20, 2018, https://www.heritage.org/budget-and-spending/report/earmarks-wont-fix-the-broken-budget-and-appropriations-process.
William Painter and Jared Brown, “FY2013 Supplemental Funding for Disaster Relief,” Government Accountability Office, February 19, 2013, https://fas.org/sgp/crs/misc/R42869.pdf (accessed November 1, 2018).
Congressional Budget Office, “The Federal Government’s Spending and Tax Actions in Response to the 2005 Gulf Coast Hurricanes,” August 1, 2007, https://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/85xx/doc8514/08-07-hurricanes_letter.pdf (accessed November 1, 2018).
Government Accountability Office, “Hurricane Katrina and Rita Disaster Relief, Testimony Before the Subcommittee on Investigation, Committee on Homeland Security, House of Representatives,” June 14, 2006 https://www.gao.gov/assets/120/114055.pdf (accessed November 1, 2018).
Jeff Zeleny, “$700 Million in Katrina Relief Mission, Report Shows,” ABC News, April 3, 2013, https://abcnews.go.com/Politics/700-million-katrina-relief-funds-missing-report-shows/story?id=18870482 (accessed October 26, 2018).
Congressional Budget Office, “Funding for Overseas Contingency Operations and Its Impact on Defense Spending,” October 23, 2018, https://www.cbo.gov/system/files?file=2018-10/54219-oco_spending.pdf (accessed November 1, 2018).
 William Painter and Jared Brown, “FY 2013 Supplemental Funding for Disaster Relief”, Congressional Reseach Service, February 19, 2013, https://fas.org/sgp/crs/misc/R42869.pdf , (accessed November 1, 2018).
Bogie, “Earmarks Won’t Fix the Broken Budget and Appropriations Process.”
Calculations based on public U.S. Census Bureau data.
Lynn M. Williams and Susan B. Epstein, “Overseas Contingency Operations Funding: Background and Status,” Congressional Research Service, February 7, 2017, https://fas.org/sgp/crs/natsec/R44519.pdf (accessed November 1, 2018).
The National Flood Insurance Act of 1968, as amended, 42 U.S. Code 4001 et. seq.
Congressional Research Service, “Introduction the the National Flood Insurance Program,” Report for Congress No. 44593, August 16, 2016, https://fas.org/sgp/crs/homesec/R44593.pdf (accessed June 16, 2017).
U.S. Department of Homeland Security, Federal Emergency Management Agency, “Answers to Questions About the NFIP,” March 2011, https://www.fema.gov/media-library-data/20130726-1438-20490-1905/f084_atq_11aug11.pdf (accessed November 1, 2018).
Congressional Budget Office, “Estimate for Senate Amendment 1930, The Bipartisan Budget Act of 2018.”