State Financial Resiliency for Disaster Preparedness

“TEAM EMT” Matthew Baker, Mike Kahle, Brandon Key, Kelly McCoy, Adriana Valenciano

Trachtenberg School of Public Policy and Public Administration

Fall 2012 CAPSTONE

Project Background• Client: FEMA Office of External Affairs• Research Questions:

– What policy options best increase state financial resiliency to prepare for and respond to disasters?

– What policy options should the federal government consider that would encourage states to increase their financial resiliency to prepare for and respond to disasters?

• Key Definitions:– Resilience: the ability to recover system capacity while maintaining essential

capabilities of community services. – Financial resiliency: the ability to fund essential state and local level responses

and recovery efforts brought on by natural or man-made disasters.• Deliverables:

– State capacity building toolkit– Long term strategic planning recommendations for FEMA

The Problem

1956-1960

1961-1965

1966-1970

1971-1975

1976-1980

1981-1985

1986-1990

1991-1995

1996-2000

2001-2005

2006-2010

0

20

40

60

80

100

120

140

Average Number of Dec-larations

Quantity and cost of disaster declarations are increasing. Current response mechanism is unsustainable.

Underlying causes

Climate Change

Increased Development in Vulnerable Areas

Political Influence Moral Hazard

2005 – Peak Year for Post Disaster Aid

2011 – Peak Year for Disaster Declarations

President Reagan is only President to Reverse the Growth Trend

Methodology – Policy AnalysisLiterature Review

Interviews with Emergency Management Professionals, Private Industry, and Academia

Distilled Policy Options and Relevant Criteria

Analysis and Assigning Values to Options Based on Criteria

State and Federal Recommendations

Policy Options

• 11 options analyzed– 6 State / Near Term (1-2 Years)– 5 Federal / Long Term (10-20 Years)

• Criteria (rated -3 to 3):– State Financial Resiliency– Administrative Feasibility– Legal Feasibility– Political Feasibility

Defining the Criteria

• Change in State Financial Resilience represents the extent to which an option increases or decreases state financial resilience for disaster response, planning, preparedness, mitigation, and recovery.

• Administrative Feasibility represents the extent to which a policy option would increase or decrease the number and/or scope of responsibilities currently assigned to state or federal agencies.

Defining the Criteria• Legal Feasibility represents the scope of any change to state

or federal laws that would be needed to implement the policy option. A “3”indicates no legislative changes and easy to implement in current legal framework, while a “-3” indicates extensive and systematic legislative efforts.

• Political Feasibility represents odds that the option would be adopted given the political climate where the option would take effect. This takes into account cost, admin burden, & complexity of the policy (since each may impact electoral outcomes) for the policymakers.

State Policy Options

Policy Options(State)

StateFinancial

Resilience

Administrative Feasibility

Legal Feasibility

Political Feasibility

Unweighted Score

Weighted Score*

General Obligation Bonds 2 0 2 1 5 1.3

Phased Increase in Residual Market Rates 2 1 2 -1 4 0.9

Risk-Based Special Assessments 3 -1 2 0 4 1.1

System Development Charges 1 0 2 0 3 0.7

Implementation and Stronger Enforcement of Building Codes 3 -2 1 0 2 0.7

Reduce Basic Coverage Available Through Residual Market 1 0 2 -2 1 0.1

May be viable option in right political climate

Final Recommendations

Federal Policy Options

Policy Options(Federal)

State Financial Resiliency

Administrative Feasibility

Legal Feasibility

Political Feasibility

Unweighted Score

Weighted Score*

Change per Capita Damage Indicator 2 2 3 -2 5 1

More Accurate Capacity Indicators like Total Taxable Resources 3 1 3 -2 5 1.1

Increasing State Cost-Share Under the Stafford Act 3 1 0 -3 1 0.2

Clark/Mahul World Bank Model 3 -1 0 -3 -1 -0.2

Pure Savings out of State Budget 2 1 -2 -3 -2 -0.5

Final Recommendations

Final Recommendations

• State Options:– General Obligation Bonds– Increased State Insurance Rates – Risk Based Special Assessments – System Development Charges – Improved Building Codes

• Federal Options:– Improved State Capacity Indicator– Adjusted Per Capita Indicator

Challenges

• Low Initial Response Rate• Changing Methodology• Political Sensitivity• Time Constraints

• HURRICANE SANDY!

QUESTIONS?

Understanding Federal Financial Options for Post-Disaster Environments

Disaster Strikes!Governor Requests

Declaration

FEMA Recommendation

Presidential Disaster

Declaration

• Supplemental vs. Substitute• Cost Share• Grant Focus

Financial Considerations

THE STA

TUS QUO

Options Un-weighted WeightedGeneral Obligation Bonds 5 1.3

Increased State Insurance Rates 4 0.9

Risk Based Special Assessments 4 1.1

System Development Charges 3 0.7

Improved Building Codes 2 0.7

Reduced State Insurance Coverage 1 0.1

State Options

30%

20%20%

30%

Weighted Ratio

ResiliencyLegalAdministrativePolitical

Federal OptionsOption Un-weighted

ScoreWeighted Score

Improved State Capacity Indicator 5 1.1Adjusted Per Capita Damage Indicator 5 1Adjusted Cost-Share 1 0.2Clark/Mahul World Bank Model -1 -0.2Mandated State Budget Savings -2 -0.5