In December 2010, the Obama administration released a bipartisan report from the National Commission on Fiscal Responsibility and Reform that, among other things, recommended the administration to establish a disaster fund to “budget honestly for catastrophes.” “Any given disaster may itself be unpredictable, but the need to pay for some level of disaster relief is not,” the commission found. “Yet federal budgets rarely set aside adequate resources in anticipation of such disasters, and instead rely on emergency supplemental funding requests.”
"The last-minute legislation approved by Congress last week [August 2] to raise the debt ceiling creates a disaster fund that will carry billions of dollars for recovery in hard-hit areas," Evan Lehmann of ClimateWire reported last week. As the government navigates the increasingly constrained fiscal environment, a disaster fund sounds like a practical solution. Lehmann noted that, “The fund could reduce stress on the deficit by preventing the need for emergency supplemental appropriations made in the wake of a crisis. Those unplanned expenses are not included in the budget, so it amounts to new debt.”
The challenge, though, is that the fund may be insufficient for providing relief to Americans reeling from climate-related disasters that today may be consider historical, but tomorrow may be more frequent. “The disaster fund budget authority (BA) will be limited to the rolling average of disaster spending in the most recent 10 years, excluding the highest and lowest year,” according to the commission report. “That rules out mega-outliers like Hurricane Katrina, which required an emergency outlay from Congress amounting to $122 billion,” Lehmann reported.
But these kinds of outliers could become more frequent in the years ahead according to climate scientists. Though Hurricane Katrina may not be attributed to climate change, scientists project that those types of occurrences could be more common. The U.S. Global Change Research Program, for example, notes that “The intensity of Atlantic hurricanes is likely to increase during this century with higher peak wind speeds, rainfall intensity, and storm surge height and strength.” It is not surprising then that some federal agencies responsible for coordinating first responder efforts are hedging against this by conducting scenario planning that use Hurricane Katrina as their baseline in order to understand and prepare for the scale of relief efforts that may need to be executed under these scenarios.
Critics of the disaster fund advocate for government reinsurance instead. “The federal premiums paid by homeowners in states that voluntarily establish state-based catastrophe reinsurance programs would reduce the cost of emergency funding on taxpayers who live in safer places,” Lehmann reported. “The state programs would cover smaller disasters, and federal reinsurance would pay out during the mega-catastrophes seen once every five or 10 years.” Such a program could be more sensitive to taking into account quickly changing environmental and climate trends and not negating relief for Americans reeling from more intense and more frequent storms that would yesterday be considered historical.
There are sensitive economic concerns that policymakers need to take stock of. How much the federal government is willing to payout for disasters could have an effect on private insurance premiums, and it is a challenge that government will need to grapple with. Skyrocketing insurance premiums as result of climate change could force individuals and businesses to make hard choices about whether they will live and operate in high risk zones. But on the flipside, they may portend economic chilling effects, especially for industry that must operate in high risk zones, like port, shipping and fishing businesses along vulnerable coastal areas.
The United States needs sound fiscal policy when it comes to disaster management. But that policy needs to be informed by accurate environment and climate change trends and evaluate a broad range of tradeoffs. As the debate continues, I hope we see a more robust effort to include these assessments.
This is part three of a three-part series on what the debt crisis and looming budget cuts could mean for U.S. natural security issues. Last week, Christine assessed the implications for DOD energy and foreign aid.
Photo: The Mayflower and Fellow Ship lying by the side of the road. Over 4,000 commercial vessels in the area were destroyed, damaged, and or washed on shore. Louisiana, Southeast coastal parishes. October 15, 2005. Courtesy of the Collection of Wayne and Nancy Weikel, FEMA Fisheries Coordinators and flickr user NOAA Photo Library.
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