IEM Examines the Financial Implications of the FEMA Review Council Final Report

Added: 2026-05-10

[00:00:00]I am Brian president and CEO of I A E M. I'm here today to talk to you about the findings of the president's council to assess the Federal Emergency Management Agency, which released their final report yesterday on May 7th. The council spent over a year meeting with hundreds of stakeholders and collecting the comments of thousands of interested individuals across the country. And they consolidated all of their findings and recommendations into a roughly 75-page document and they came up with 10 recommended act 10 recommendations and many more recommended actions that they believe will help improve the Federal Emergency Management Agency and the way that the United States deals with natural and man-made disasters. So, I want to spend a few minutes today highlighting some of the recommendations in this document. Specifically, I'm going to spend time on the financial implications that are associated with some of their recommendations. I'm choosing to do that for a couple of reasons. One, it's a fairly significant shift in the way that the nation allocates disaster funding between the federal, state, territorial, tribal, and local government. It would recommend it would um if implemented, if everything in here were implemented, it would mark the largest shift in the way that the nation approaches disasters in decades. So, I think it's worthwhile to dive deeply into each of the parts here to highlight when it is that they are proposing to change and the impacts on state, local, tribal, and territorial governments because it's going to take a significant shift in the way that governments allocate their funding for this, the way they budget for it, and how they think about how disasters and emergencies are going to be treated going forward. So, let's dive right in.

[00:01:51]Before I begin, a couple of notes. One, although there are 10 key recommendations in this document, I'm only going to cover the ones that have significant financial implications. I'll be referencing both the final report and the addendum and we'll put the information on the screen to show you where I am in the document and then finally I'm only going to be presenting the information as it is here in the document. I'm not going to spend any time today talking about the potential for these changes to actually be put into effect. I'm not going to uh provide my opinion as to whether these are the way we should go or not. I'm simply trying to get the information about there about what the implications are to budgets and so that everybody can start thinking about how they would adapt to a new environment in which all of these were put into place.

[00:02:36]All right, let's start. Number one, equip state, local governments, tribes and territories to lead disaster response with the federal government in a supporting role. The this one not a great deal of implications. The biggest ones are uh they support the emergency management performance grant. That's a grant that uh many states and jurisdictions across the country utilize to fund their baseline emergency management programs. Uh the council recommends keeping those and in fact it suggests that perhaps with some of the savings generated from other uh recommendations in here that there could be a plus up to that a one-time plus up to fund some enhancement in capabilities. It does highlight a desire uh to focus that performance grant on things like mission-ready package development uh and some other outcomes of that. And finally there is one caveat on here. I'm going to read it. It says uh it should be limited to building new capability or capacity through capital outlay equipment once then SLTT should pick up the cost for maintaining that new capability or capacity. So that means no sustainment. Right now EMPG can often be used for sustaining a capability. Uh the council recommends that it be used to start a new capability but then uh that be maintained and sustained through local funding from that point forward.

[00:03:54]All right, now I'm going to jump into recommendation three, realign the criteria for federal disaster assistance. This is the first one that makes a pretty significant shift. So the first idea in here is to raise the disaster threshold from its current level to one that actually takes into account inflation during a period which that was not changed from 1986 to 1999.

[00:04:14]They feel that that will more closely realign what was the original intent of having that threshold in the first place to ensure that the federal government was stepping in when it exceeded the state and local capacity. So that's in this there's a it's a pretty short section here but it talks about changing that threshold. And then secondly, and it's I'm going to talk more about this in a little bit, it talks about an annual calendar year minimum expenditure. In other words, a deductible. All right, so back to the threshold. So current threshold today for state is a $1.94 per capita. In this they recommend going to $2.99 per capita. That's a 54% increase. For those of you at the county level, if it's commensurate, it's not highlighted here but a 54% increase at the county level takes it from $4.86 today to $7.48 per capita. We've talked as a nation about changing that threshold many many times over the years. In fact, last year there was a memo from FEMA to OMB that recommended potentially quadrupling the threshold, taking it from what was a $1.89 at the time to $7.56.

[00:05:18]So not a new issue. And it would make a change in the number of disasters declared across the country. The threshold that state territories would have to get to get a declaration would be higher and therefore you're going to have less disasters.

[00:05:34]In the report they talked with they would uh 29% of the disasters between 2012 and 2025 would not have been declared equaling about one and a half billion dollars or so in federal funding. And so it is that means averaging 16 per year and about 113 million per year. So, that's one of the first major shifts is those smaller disasters that today qualify for presidential disaster declaration would not be eligible in the future. And so you would see again just less federally declared disasters. The next thing it talks about in this section is with regards to individual assistance and simplifying and clarifying the threshold for that and really taking it down to from the multitude of factors that exist today to a much more streamlined number of homes that are damaged and or destroyed along with some community and public primarily driven on the home level.

[00:06:31]And third in here and I'm going to read it here from this minimum expenditures and annual calendar year minimum expenditure should be established for small, medium, and larger states prior to them being able to request a federal declaration. This in the past has been called a deductible model. And it's not new. It came out in fact from FEMA proposed that rule back in 2017. It was never adopted.

[00:06:53]But the idea is that in when you have a disaster instead of getting a declaration and the federal government coming back and funding you from zero on that you pay a deductible simply like you do for a car insurance or home insurance. And that deductible you pay all of it before you start receiving the federal insurance. Now, the document doesn't state what that number looks like.

[00:07:13]It does say small, medium, and large.

[00:07:16]If you go back and look at the rule and some of the documentation from 2017 essentially what they started at or they proposed starting at then was what the threshold was. So specifically I looked it up for Florida in 2016 and it was based on the 2010 population times the dollar one dollar 41 per capita index at the time it was about 26 million dollars. So in 2017 Florida would have had a would have had a 26 million dollar deductible. Meaning if you had a $100 million disaster, the first $26 million is coming straight out of Florida's pockets and then the federal government will start paying from that point forward and cover the $74 million after that. This doesn't state that, but that gives you some idea of where that deductible could be in the future. So, that's one big Well, two big changes there. One is, you know, less declared disasters and two, every state may have to pay essentially a deductible prior to receiving federal funds in the Okay, now move on to the recommendation number four, replace the hazard mitigation grant program with a two-phase funding structure. So, the the council pointed out, and rightly so, that the mitigation hazard mitigation grant program today is slow, bureaucratically burdensome, ineffective in that it it doesn't actually start funding things until sometimes two years or more past the disaster. And so, what it proposes is replacing the HMGP with a new program, which they have proposed calling the refined risk reduction program, the R3P program. It doesn't talk about in here about pre-disaster mitigation, doesn't talk about BRIC, doesn't talk about 406 mitigation, it's simply talking about HMGP. And so, what they recommend is a two-phase approach.

[00:08:52]One, you get an initial tranche of money within 30 days of the first part of the disaster, so 5%, and then an additional 10% of federal disaster costs within the first 6 months to a year following the disaster.

[00:09:06]So, some things associated with that.

[00:09:08]One, it proposes that a And this is the first time we see it, but we'll see it more in the document, a minimum 50% cost share. Right now, the Stafford Act has HMGP, along with PA, at a 75% minimum federal cost share, meaning the federal government's going to pay at least 75% of the total cost of the disaster or the mitigation. This proposes a floor of now 50%. And so, that means it could that the cost to the state could double. And let me just give you a quick scenario on that one. So, $100 million today federal government pays 75% of it, so they're paying 75 million, state's going to pay 25 million. If it goes to a 50% now the federal government's paying 50 million, the state pays 50 million.

[00:09:49]So, the state's gone from 25 million to 50 million, cost double, 100% increase in the cost to the state. Now, it also says that there can be incentives that the state can work its way back up towards 75% by doing a number of things to help increase the readiness of the state and its ability to help reduce and prevent impacts from natural disasters.

[00:10:11]And we'll talk more about them later.

[00:10:12]But it does again recommend changing the minimum cost share from the federal government from 75 to 25. It also doesn't address a few things which we also need to consider how they might play out. One is it doesn't talk about right now a number of states, 16 states are eligible for an enhanced mitigation program which means they get 20% post disaster. This doesn't talk about that anywhere. And so you have to assume that that program no longer exists under this structure and those extra mitigation funds will not be coming through.

[00:10:44]It also and this is something we will really need to dive into more and learn more about. The second part of the the 10% allocation here, they call it strategic mitigation allocation, but it ties it pretty significantly to the National Flood Insurance Program.

[00:10:57]One of the things in this document we'll get to later on is recommend changes to the National Flood Insurance Program. And I think in order to beat that section up what they're highlighting here is that that 10% should be tied to and I'm going to read here, mitigate mitigate repetitive or severe repetitive loss properties to improve NFIP performance or reduce risk to critical infrastructure with the intent of improving the performance of the NFIP as applicable, power, water, transportation, communications systems.

[00:11:22]It doesn't talk about what happens in state jurisdictions that don't have a huge footprint in the National Flood Insurance Program. Certain states of course do, Florida, Texas, California, Louisiana, large number of policies. But there's a number of states who have a relatively small amount of policies.

[00:11:39]You know, for example, Wyoming and Alaska uh have, you know, within you know, 1,600 or 2,000 policies. So, not sure exactly how it would align in states that don't have a large NFIP presence enough to certainly to justify some of the investment there. So, uh interesting recommendations in the mitigation side between the change in the percentage, the change in the minimum threshold, and the strategic use of it uh would recommend it would it would compromise a fairly significant change in the way the HMGP program works going forward.

[00:12:08]Okay, next up is uh streamlining the individual assistance program into a single direct payment uh program. One of the things that the the council talks about is that the individual assistance program as it exists today uh is opaque, confusing to both government and individuals who receive it, uh and far too complicated, and uh you're not sure what you're going to get it when you're going to get it. And so, what they'd recommend is streamlining the program to one that is based on solely on whether your home is uninhabitable or not, either whether you own it or rent it. Uh and everything else is based on that. So, uh what they're recommending is that if your home is uninhabitable post-disaster, you're eligible for individual assistance, and you can uh apply for it and receive funding based on either the value of your home if you own it, uh or the amount of rent that you're paying if you are a renter. Um and it's and it puts that at um 50% of assessed home value um up to a million dollars. So, maximum for house for your allocation would be 150,000 in that case. Uh it eliminates the difference between the individual uh the housing program and the other needs assistance and puts it all together. So, whatever money you get is going to cover what today is covered by those two separate programs. Um It's an interesting concept in here, a few things associate with it. One is um it would if you did just this uh it would do a few things. One it would create a higher cap overall but also reduce the number of potential recipients of individual assistance. So for those folks who had needs post disaster but whose home wasn't eligible for IA that means those needs are now going to have to be met by somebody else either state local government, charitable organizations, faith-based organizations, etc. Um it does create Although it creates a higher cap that doesn't necessarily mean that total individual assistance payouts are going to be greater going forward. Right now in the document it highlights some of the that the average housing payout today is about 4600 and the average other needs assistance is about uh 1600. Um so it's not great overall um but more people are getting it that wouldn't get it in the future. Another thing that it does is change the cost share methodology similar we saw with mitigation.

[00:14:23]Uh today the states pay 25% of the other needs assessment and so they pay a percent of basically a percent uh a fairly small amount. In the future with just this one thing they propose in the in the council report that states pay 25% of the entire thing. So you can see that in a larger payout uh so for example in that 150,000 max payout um the state's going to pay 37,500 of that.

[00:14:48]Now that's probably not going to happen that often but the state share the state cost share associated with the individual assistance program could be much higher in future disasters based on um this thing. So some of the costs again uh the the cost increase or cost shift that you could see under this system are one uh having to support survivors who are no longer covered under the individual assistance program and two uh an increased cost share associated with uh covering all of the costs and not just those with the other needs assistance.

[00:15:20]Okay, we're on now to number six reform the public assistance program to provide direct funding. The The PA program for FEMA is probably one of the the biggest complaints that state, local, tribal, territorial governments have with FEMA funding, the rigorous nature of them, the administrative burdens, the costs associated with running them, etc. Uh and so the council attacked this one head-on, and they recommend a new program um that they are calling here the uh the they write here they're reformed and partnered initiative for disasters, the RAPID program. So, how does the RAPID program differ than PA? So, one, uh it's going to be based on a parametric trigger. Now, that's probably a whole 'nother video, but the idea is that there are pre-established uh thresholds for disasters, and not not a dollar threshold, but a an impact threshold. So, a category of hurricane, amount of rainfall, amount of snowfall, amount of seismic event, uh tornado activity, you name it. Uh compared to what's going on in the state that then this aligns with that dollar's going to look like. But, there's a lot of work to be done yet on that piece of it.

[00:16:24]Um that's the first part of it. The second is, similar to what we saw in hazard mitigation, a change in the cost share methodology.

[00:16:30]Uh minimum 50% as opposed to what's in the Stafford Act today, a minimum 75% with the opportunity for the state through a number of programs to get that cost share back up to the 75% mark.

[00:16:43]Uh this the RAP under the RAPID program, money would come very quickly, up front.

[00:16:48]Uh it would be a direct grant versus a reimbursement model as it exists in the public assistance system today. So, the idea is to get the money out there quickly, uh so this the uh the state tribal territorial governments can make quick decisions uh and get the recovery going instead of having to put their own money up front and work on the reimbursement.

[00:17:07]Uh it also recommends that um in this they did this for the mitigation when I neglected to mention, that all open disasters shift to this new methodology as well. So, in the document it states there's about $54 billion worth of open disasters. There's also about $7 billion worth of unexpended mitigation funds.

[00:17:26]So, about $61 billion of hazard mitigation and PA systems could be shifted to a new model and really inject a lot of funding into disaster recovery across the country to help expedite some of the slow programs that we have seen today.

[00:17:42]Some of the other things associated with it, there are There is language in here which suggests that they're going to increase the the requirement for insurance coverage on public buildings. So, there could be some shifts to what is today called category E under the public assistance program.

[00:18:01]And going back to the the memo last year that FEMA sent to OMB, they suggested similar reductions on category G. So, you could you could see a shift in what FEMA is covering in future disasters. And so, as you review you all of this, pay attention to that and think about what may be or may not be eligible for FEMA declarations in the future.

[00:18:22]A couple of other things to note in here is that um They do One of the things they want to do is reduce the administrative costs of disasters and they want to do that by one, creating a much simpler program, allowing states to run everything using state laws and requirements, etc. It does actually suggest and call for the elimination of what is today called category Z or administrative funding. It doesn't say category Z in here, but basically it says the only administrative costs associated with this new program are for auditing and for the A&E, the architectural and engineering costs associated with projects themselves. So, today the system is it's the money for whatever needs to be rebuilt and improved plus the administrative costs associated with that grant, both the for the federal employees to do it and then the state local tribal territorial, there's additional funding on top of that as prescribed in DRCA I'm sorry that the Disaster Recovery Reform Act from 2018 that highlights specifically what that can be. This proposes eliminating administrative costs and any administrative costs simply coming out of the block grant, the direct grant that the state has received with the idea that if you're having to pay for it out of the direct grant itself, you'll be motivated to reduce those administrative costs as much as possible. So, pretty significant proposed changes in there.

[00:19:42]Again, that 75% to 50% cost share is a doubling a minimum of doubling of costs associated to the state tribal territorial government. It could be even more. You know, oftentimes post disaster the president will do 90% or 100% of costs for the first number of days or if it's large enough if you if you eliminated that and this doesn't say any that is going to happen, but if it did costs would go up four or five times or more to the state tribal territorial governments. But at at a minimum if you didn't meet any of the objectives in there, your costs to do the recovery piece of it would at least double and potentially more going forward. So, worth spending some time on this section and taking a look at how it could impact you. I'm going to spend a little time on number seven which is reform the National Flood Insurance Program.

[00:20:29]There aren't a great deal of direct costs to the state tribal territorial governments associated with reforming the National Flood Insurance Program.

[00:20:36]And here they do highlight the challenges the NFIP has had for decades which are it's underfunded and under performs. Congress you know, has to bail it out every few years.

[00:20:47]It doesn't collect enough premiums to pay the policies etc. etc. etc. And so they propose rectifying that in a number of ways privatizing as much of it as possible um charging actuarially sound rates based on the risk that the policy actually has and buy and doing buyouts on those repetitive loss properties that are are paying out every couple of years.

[00:21:10]Um all of them are interesting ideas.

[00:21:12]Now, the So, again, not a direct a great deal of direct impact financially on that. The There is indirect impact, however, though. When you change insurance rates and likely increase in insurance rates, there's some potential reduction here. But, if you increase insurance rates, a few things could happen. One is uh big property rate property uh values will decline because the cost of insurance will go up, and so homeowners will be able to pay less for the house. So, property values could decline, which could impact property taxes. So, revenue uh taken in by state, tribal, territorial governments uh could be reduced from that. You could also see a reduction in uh sales tax revenue because people are having to pay additional monies for flood insurance policies if that is the case, and then there's less sales tax revenue generated uh at state, tribal, territorial level as well. So, potential impacts, but those are indirect financial impacts, and uh we'll need to spend some time later on uh to figure out what that actually looks like. And moving on to number eight, maximize every dollar spent by reducing administrative costs. Uh covered already a little bit in the uh the change to the public assistance program where it talks about uh reducing and or eliminating that category Z administrative costs. Same thing kind of covered here uh where they're trying to streamline the programs so we as a nation have to spend less time uh running the programs, processing the programs, actually spending the money, and doing more with it. Um so, not a ton of direct changes to this.

[00:22:31]I will point out again that if you eliminate the administrative costs associated with these programs, um there's still work to be done, and still the recipient of that that uh direct grant uh either mitigation or public assistance or whatever you call it, is now going to have to use funds from that to administer the program, whereas today those funds were put on top of what is uh already designated to accomplish that. So, there will be some reduction in the amount of work to be done if you eliminate administrative costs altogether. Um so something again we need to start and figure out what the impact of that is going to be on the total amount of funding that states are going to have to pay to run these programs in the future.

[00:23:12]>> And then um the the 10th recommendation uh is uh skip number nine, there's no real impact financially. Number 10 uh a transformed agency highlights two some changes. One is that the transformed agency should deliver any cost savings uh through staffing efficiencies back to the state, tribes, and territories. So you know they suggest that additional funding that FEMA saves can be pushed back to the states. Uh and secondly uh there's a big push in here to have uh state, tribal, territorial governments do their own training instead of having FEMA do the training. So uh again not huge but there would be additional costs associated with those training having to be done out in the field instead of being provided from FEMA as it is today. So I've gone through the uh the 10 recommendations in the bigger financial implications associated with each other.

[00:23:59]I'm going to circle back to what are some of the incentivizations that are associated with this that would allow uh jurisdiction to move up on some of their allocation, right? So get from 50% back up to 75% or more. Um and there's a there's a graph there's a chart on page 17 of the document that highlights some of those.

[00:24:22]Uh some of them are not great, you know, they're preparedness related, response related, mitigation related, program related. Some of them however are specifically financial in nature. Um so I'm going to highlight some of those. Uh one of them is that the SDT entity uh maintains 100% insurance on past permanent work projects. Now that's required already. Uh so not likely a major change there but of course buying insurance, you know, is a is a financial cost. Uh second is that the entity has a minimum of 5% of their state budget in cash reserve. That's a pretty significant number. Uh you know so for example in Florida where I live the annual state budget is around $100 billion. So, this says that Florida, you know, has $5 billion in cash on hand. Uh, when you take that across the country, right now the total of all state budgets across the country is 2.9 trillion.

[00:25:10]Um, so 5% of 2.9 trillion is $145 billion. So, that would be $145 billion in cash reserves um, across all the states, uh, to be prepared for disasters. Uh, next the S STT entity has a disaster reserve uh, or relief fund uh, that the governor can use. Now, it is potential, it doesn't say in here that that fund could be associated with that cash reserve that I just talked about. But, basically the idea is that this each state has its own reserve fund, so they can pay things like the deductible, their cost share, uh, some of the other things associated with that. Uh, here's another one. The STT entity has 50% of their buildings and infrastructures covered by hazard insurance. Uh, so the idea here is that instead of relying upon the federal government to uh, reimburse you if a disaster occurs, you have flooded Are you have insurance, private insurance, uh, on your government buildings. Now, this this might be intuitive, you know, that having insurance is a good thing, uh, reduces the reliance on the federal government, but it is an enhanced cost to the STT and local governments who now have to pay, if they weren't before, insurance on their public facilities.

[00:26:13]Um, and so aggregated across the country, that's going to be a fairly significant number. It might be even more than FEMA what FEMA would have paid out if a disaster actually occurred. So, uh, we're going to need to take a look at as a as a nation. What is the cost of this private insurance? Does it make uh, you know, does the math on that uh, work for everybody? Um, the uh, this one is the STT has the ability to collect, validate, and report preliminary damage. So, uh, again, most of them have this at this point, but because of the accelerated timelines associated in this new document, they might need to be additional personnel, additional contract support, etc., to ensure that they they collect those damage numbers very quickly because, you know, in in this um, um unlike a reimbursement model where the state can fully capture all their costs associated with a disaster because of you say say price increases or undiscovered damages, etc. This proposes a one-time payout with a chance for a plus up but no guarantee that it's going to be reimbursed. So, you're going to need to make sure that you're really able to do that early on. Um and then finally a few other things that the SED has individual assistance program that includes temporary housing assistance, individual and family grant program that includes uh crisis counseling, disaster unemployment assistance, and disaster case management. So, again, programs that the state may or may not have today uh that they're going to need in order to help drive the uh the reimbursement up from 50 to 75%.

[00:27:38]Okay, so that was a lot of information in a short amount of time. I have a few recommendations for you. One, uh read the document. It's it's 75 pages, it's dense, but it's uh chock-full of really uh interesting suggestions.

[00:27:51]Uh and I want to encourage all stakeholders to to really understand what's in here so that we can have a conversation about how to what's the best way to utilize this document, how to implement it, and and what is the best agreed-upon solution for the country as a whole. So, spend some time with it. And I particularly want those who are responsible for budget. So, governor's office, uh state legislatures, county commissioners, state budget officers, uh League of Cities, mayors, think through what are the potential financial impacts to your jurisdiction based on these changes and how long it's going to take you within your own budget cycle to be prepared for that if they come to pass. Uh because the last thing you want is for the disaster to happen, these policies to have been implemented, and you were un you're not ready for them, and you're unable to meet the new challenges associated with paying for the response, recovery, and mitigation from those disasters. So, spend a lot of time taking a look at that. Second, uh we have put a simple calculator uh, on our website at iem.com.

[00:28:52]Again, that's iem.com. You'll find a calculator to help you uh, determine what the impact would be to your jurisdiction. So, you can see side by side uh, with the same disasters what the cost is to you today versus what the cost would be under these proposed changes. Now, it doesn't capture everything in here. It really captures the big stuff primarily the deductible and the cost share uh, and some changes to the IA. It does give you some sense of what your new costs could be. And I will tell you that in most cases it's going to be double uh, or more uh, to your jurisdiction. And that's really the point of this whole thing is to think through how you're going to be prepared for and fund these disasters in the future. Uh, so thanks for all of this.

[00:29:31]Uh, eager to hear comments, questions from all of you. And if you have ideas or feedback for how uh, we can improve our calculator or you want some analysis of other things in this document uh, by all means please let us know. Thanks.