Sandy Shows Disaster-Relief Funding Is a Disaster

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By Evan Soltas

The Hurricane Sandy aid discussion has been noticeably lacking in common sense. On Jan. 4, the House of Representatives approved a scaled-back $9.7 billion aid package and promised to debate the additional $51 billion offered by the Senate on Jan. 15. But the most obvious solution to disaster-relief spending remains unexplored: budgeting for it ahead of time.

New Jersey Governor Chris Christie was in many ways right on Jan. 2 when he spoke out against the House’s inaction. The delay of relief -- making the Eastern Seaboard wait more than nine weeks after the storm for federal support -- was appalling. So was the paltry sum the House approved, which covers only National Flood Insurance Program claims and falls considerably short of the amounts other states have received after similar disasters.

Republicans are also right to protest the pork-barrel spending attached to the Sandy bill. The House’s delay on Sandy relief was as “disappointing and disgusting” as Christie said it was, but the decision to layer a relatively simple request with so much legislative pork was just as wrong.

One doesn’t have to be from New Jersey or hold rigid fiscal conservative views to see that the way the federal government funds disaster relief is a disaster unto itself. The U.S. can make sure that something like this never happens again. All it needs to do is treat natural disasters as predictable and do what every insurance company does: predict damage in advance and allocate sufficient money to cover the payments.

The federal government currently treats disasters as unanticipated emergencies because it chronically underbudgets the programs that are meant to do the insuring, such as the Federal Emergency Management Agency. After leaving these programs short of money, Congress is forced to provide additional relief funds whenever disaster strikes.

The first step in the right direction would be to reclassify FEMA spending as “mandatory” rather than “discretionary.” This is more than a semantic distinction: Mandatory spending is appropriated by commitments in pre-existing law, whereas discretionary spending comes from annual budget appropriations.

For a better policy, the government should consider two options. One is cost-sharing, which is how the federal government funds its share of Medicaid. The government would pledge to cover some portion of the states’ disaster-relief bills above a deductible. Half seems a  reasonable amount, given past policy.

The other option is for the federal government to issue block grants to states to cover all the disasters any state will have over some extended period, perhaps five or 10 years. The states would then be free to draw on that funding in federally declared emergencies as they see appropriate.

Either solution would be preferable to the current disaster-relief system. States would not have to wait on federal action, as the insurance coverage would be guaranteed in advance, a change that would please those who see actually relieving states as the most important goal of disaster-relief spending.

Individuals in Congress would not have the same opportunity to attach omnibus spending to “must-pass” legislation, a change that would please fiscal conservatives. And because the disaster-relief funds would be set in advance in the annual budget, conservatives could keep a lid on spending without having to ransack the budget with offsetting cuts every time a hurricane, tornado or earthquake hits.

All of these policy options have drawbacks. Extremely severe disasters, for example, will still require supplemental federal funds. But each option is a significant improvement on current policy. The main reason the federal government treats natural disasters as unexpected is that it simply isn’t planning for what can be foreseen.

(Evan Soltas is a contributor to the Ticker. Follow him on Twitter.)

Read more breaking commentary from Bloomberg View at the Ticker.

-0- Jan/09/2013 14:58 GMT