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Initiatives

Disaster Relief: Proposed resources allow full funding of the Federal Emergency Management Agency's (FEMA's) disaster relief operations, including $1.4 billion in funds to be appropriated to FEMA for obligations from prior year disasters and base disaster support operations. An additional $1.2 billion has been allocated to the National Emergency Reserve to finance costs associated with significant new disasters.

Redirected Resources

Disaster Relief: The budget achieves savings associated with two disaster relief reforms. First, $83 million in savings are achieved by requiring that public buildings carry disaster insurance (assumes a three-year phase in of policy). Second, an additional $83 million in savings is obtained by reducing the Federal share of funding for hazard mitigation grants from 75 percent to 50 percent, the pre-1993 practice for this program. These changes will help to ensure that States and localities make a significant commitment to preparing for disasters before they happen.

Cerro Grande Fire Claims and Hurricane Floyd Buyout: Estimated savings of $208 million in excess appropriations are taken in the Cerro Grande Fire Claims Fund ("$150 million) and the Hurricane Floyd buyout program ("$58 million). If these estimates are correct and these appropriations are not needed for these claims, the funds will be returned to the Treasury Department.

Project Impact: $25 million in savings are achieved by canceling the Project Impact disaster preparedness campaign, which has not proven effective.

Fire Grant Program: An additional $100 million in savings are achieved by the non-renewal of a new fire grant program, which was authorized for only two years and which does not represent an appropriate responsibility of the Federal Government.

National Flood Insurance Program: Further, two cost saving reforms end preferential treatment of certain properties in the National Flood Insurance Program. First, flood insurance coverage would no longer be available for several thousand "repetitive loss" properties. These properties are located in the flood plain and are flooded regularly, but are not required to pay risk-based premiums. As a result, they have been rebuilt multiple times with the subsidized support of other flood insurance policy holders and U.S. taxpayers. The budget seeks to begin removing the worst offending repetitive loss properties from the program in 2002. Policyholders whom FEMA has identified as repetitive loss claimants will be allowed to make one more claim before having their policies terminated. Second, subsidized premium rates for vacation homes, rental properties, and other non-primary residences and businesses would be phased out. FEMA charges many of these policyholders less than actuarial rates, which undermines the financial stability of the insurance program. Savings from these proposals are estimated at $12 million in 2002.

Opportunities for Reform

Disaster Assistance Criteria: Neither the States nor the Federal Government currently have a clear definition of when and under what circumstances a Federal disaster declaration should be made. FEMA plans to develop improved guidelines for disaster assistance that provide States with meaningful criteria that must be met in order to become eligible for Federal disaster assistance. Without clear and consistent rules for Federal intervention and assistance following disasters, FEMA runs the risk of rewarding some States that do not need assistance while ignoring the legitimate needs of others. This reform effort will help to clarify the disaster declaration process, enabling both the States and the Federal Government to better delineate their respective roles in disaster recovery.